0000074818-95-000008.txt : 19950815 0000074818-95-000008.hdr.sgml : 19950815 ACCESSION NUMBER: 0000074818-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 111826363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03936 FILM NUMBER: 95562728 BUSINESS ADDRESS: STREET 1: 80 CABOT CT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5164358300 MAIL ADDRESS: STREET 1: 80 CABOT COURT STREET 2: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: ORBIT INSTRUMENT CORP DATE OF NAME CHANGE: 19911015 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended to Commission file number 0-3936 Orbit International Corp. (Exact name of registrant as specified in its charter) Delaware ID # 11-1826363 (State or other jurisdiction (I.R.S. Employer Identification incorporation or organization) Number) 80 Cabot Court, Hauppauge, New York 11788 (Address of principal executive offices) (Zip Code) (516)435-8300 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 month (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: June 30, 1995 5,886,000 ORBIT INTERNATIONAL CORP. The financial information herein is unaudited. However, in the opinion of management, such information reflects all adjustments (consisting only of normal recurring accruals) necessary to a fair presentation of the results of operations for the periods being reported. Additionally, it should be noted that the accompanying condensed financial statements do not purport to contain complete disclosures in conformity with generally accepted accounting principles. The results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results of operations for the full fiscal year ending December 31, 1995. The condensed consolidated balance sheet as of December 31, 1994 was condensed from the audited consolidated balance sheet appearing in the 1994 annual report on Form 10-K. These condensed consolidated statements should be read in conjunction with the Company's financial statements for the fiscal year ended December 31, 1994. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1995 1994 (unaudited) A S S E T S Current assets: Cash and cash equivalents.............. $ 2,544,000 $ 815,000 Investment in marketable trading securities, at lower of amortized cost or market........................ 4,561,000 9,138,000 Accounts receivable - net of estimated doubtful accounts........... 3,875,000 5,277,000 Inventories - at lower of cost (first in, first out) or market (Notes 2 and 3).................................... 27,503,000 21,006,000 Other current assets................... 1,084,000 1,191,000 Total current assets................ 39,567,000 37,427,000 Property, plant and equipment - at cost less accumulated depreciation and amortization........................... 3,250,000 3,279,000 Excess of cost over the fair value of assets acquired - less accumulated amortization........................... 11,828,000 12,129,000 Restricted assets - marketable trading securities............................. 12,366,000 7,805,000 Other assets............................. 3,105,000 2,871,000 T O T A L .......................... $ 70,116,000 $ 63,511,000 Attention is directed to accompanying notes to condensed consolidated financial statements. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
June 30, December 31, 1995 1994 (unaudited) L I A B I L I T I E S Current liabilities: Notes payable (Note 6).................. $ 2,797,000 $ 2,602,000 Current portion of long-term obligations 2,682,000 3,096,000 Accounts payable........................ 4,685,000 3,734,000 Accrued expenses (Note 5)............... 3,889,000 2,367,000 Due to factor........................... 19,430,000 11,540,000 Taxes payable........................... 210,000 Total current liabilities............ 33,693,000 23,339,000 Long-term obligations (less current portion above).......................... 7,285,000 8,909,000 Total liabilities.................... 40,978,000 32,248,000 Commitments and contingencies (Notes 4 and 6) STOCKHOLDERS' EQUITY Capital stock - authorized 25,000,000 shares $.10 par value; issued 8,771,000 shares at June 30, 1995 and December 31, 1994................................ 877,000 877,000 Additional paid-in capital................ 23,285,000 23,170,000 Retained earnings......................... 15,781,000 18,227,000 Less treasury stock (2,885,000 and 2,844,000 shares at June 30, 1995 and December 31, 1994, respectively) at cost (9,588,000) (9,520,000) Less unearned portion of compensatory stock (148,000) Foreign currency translation adjustment.... (1,217,000) (1,343,000) Total stockholders' equity............ 29,138,000 31,263,000 T O T A L............................. $ 70,116,000 $ 63,511,000
Attention is directed to accompanying notes to condensed consolidated financial statements. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Six Months Ended Three Months Ended June 30, June 30, 1995 1994 1995 1994 Net sales............... $ 19,476,000 $ 16,248,000 $ 8,588,000 $ 5,691,000 Cost of sales (Note 2).. 15,013,000 11,504,000 7,002,000 4,002,000 Gross profit (Note 2)... 4,463,000 4,744,000 1,586,000 1,689,000 Other (income), costs and expenses: Selling, general and administrative....... 7,799,000 6,653,000 3,680,000 3,369,000 Interest.............. 1,286,000 425,000 631,000 225,000 Investment and other (income) (Note 5).... (2,176,000) (326,000) (592,000) (190,000) Equity in loss and write-down of investment in affiliate............ 13,687,000 6,909,000 20,439,000 3,719,000 3,404,000 (Loss) before tax (benefit)............. (2,446,000) (15,695,000) (2,133,000) (1,715,000) Tax (benefit)........... (3,299,000) (503,000) NET (LOSS).............. $ (2,446,000) $(12,396,000) $(2,133,000) $(1,212,000) NET (LOSS) PER SHARE (Note 1)............... $ (.42) $ (1.96) $ (.36) $ (.19)
Attention is directed to the accompanying notes to condensed consolidated financial statements ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended June 30, 1995 1994 Cash flows from operating activities: Net (loss)................................... $ (2,446,000) $(12,396,000) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Depreciation and amortization................. 184,000 271,000 Amortization of goodwill...................... 326,000 326,000 Provision for doubtful accounts............... 102,000 (79,000) Compensatory issuance of stock and options.... 263,000 263,000 Deferred tax (benefit)........................ (2,104,000) Gain on sale of fixed assets.................. (80,000) Equity in loss and write-down of investment in affiliate................................. 13,687,000 Imputed interest on acquisition note.......... 142,000 198,000 Change in value of marketable trading securities................................... (222,000) 142,000 Purchases of marketable trading securities.... (17,157,000) (17,339,000) Proceeds of sales of marketable trading securities................................... 17,395,000 14,538,000 Changes in operating assets and liabilities: Decrease in accounts receivable............. 1,380,000 2,762,000 (Increase) in inventory..................... (6,431,000) (5,280,000) (Increase) in prepaid and refundable taxes.. (840,000) (Increase) decrease in other current assets. 78,000 (100,000) Increase (decrease) in accounts payable..... 1,024,000 (477,000) Increase in accrued expenses................ 1,721,000 94,000 Net cash (used in) operating activities.... (3,721,000) (6,334,000) Cash flows from investing activities: Acquisitions of fixed assets................ (282,000) (293,000) Proceeds from sale of fixed assets.......... 217,000 (Increase) decrease in other assets......... (234,000) 164,000 Net cash (used in) investing activities... (299,000) (129,000)
(continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (unaudited) Six Months Ended June 30, 1995 1994 Cash flows from financing activities: Net advances from factor.................... $ 7,890,000 $ 3,773,000 Proceeds from debt.......................... 393,000 2,588,000 Repayments of debt.......................... (2,463,000) (2,001,000) Purchase of treasury stock.................. (68,000) (449,000) Net cash provided by financing activities.. 5,752,000 3,911,000 Effect of exchange rate changes on cash..... (3,000) 20,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 1,729,000 (2,532,000) Cash and cash equivalents - January 1......... 815,000 5,447,000 CASH AND CASH EQUIVALENTS - June 30........... $ 2,544,000 $ 2,915,000
Supplemental disclosures of cash flow information:
Three Months Ended June 30, 1995 1994 Cash paid for: Interest...................... $ 1,200,000 $ 375,000 Income taxes (net of $ 444,000 refund in 1994)............. $ 4,000 $ (390,000)
The accompanying notes to financial statements are an integral part hereof. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (NOTE 1) - Loss Per Share: Loss per share is based on the weighted average number of common and common equivalent shares (where appropriate) outstanding during each period. The average number of shares and equivalent shares outstanding for the six and three month periods ended June 30, 1995 and 1994 are as follows:
Six Months Ended Three Months Ended June 30, June 30, 1995 1994 1995 1994 Primary 5,886,000 6,311,000 5,886,000 6,282,000 Fully Diluted 5,886,000 6,311,000 5,886,000 6,282,000
(NOTE 2) - Cost of Sales: For interim periods, the Company estimates its inventory and related gross profit. (NOTE 3) - Inventories: Inventories are comprised of the following:
June 30, December 31, 1995 1994 Raw Materials........................ $ 3,707,000 $ 1,902,000 Work-in-process...................... 5,251,000 5,697,000 Finished goods....................... 18,545,000 13,407,000 T O T A L............... $ 27,503,000 $ 21,006,000 (NOTE 4) - Litigation:
On September 23, 1993, a class action was commenced by an alleged shareholder of USA Classic (formerly a subsidiary of the Company), against USA Classic and certain directors in the United States District Court for the Southern District of New York. (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) The action was commenced on behalf of shareholders, other than the defendants, who acquired their shares from November 20, 1992, the date of the initial offering, through September 22, 1993, and alleges violations of the Securities Act of 1993 in connection with the offering as well as violations of Section 10b of the Securities Exchange Act of 1934. The plaintiffs are seeking compensatory damages as well as fees and expenses. On February 1, 1994, a Consolidated Amended Complaint was filed in the class action. The amended Complaint adds the Company as a defendant and alleges that the Company is a "controlling person" of USA Classic and an "aider and abetter" of the alleged violations of the securities laws. The Amended Complaint was answered on March 21, 1994. On October 4, 1994, a Second Amended and Consolidated Complaint was filed in the Class Action. The Second Amended and Consolidated Complaint restated the allegations against the Company and added Paine Webber Incorporated and Ladenburg Thalmann & Co. Inc., the lead underwriters in the Offering, as additional defendants. On November 15, 1994, the Company and such underwriters moved to dismiss certain of the allegations in the Second Amended and Consolidated Complaint. Such motion was argued on March 17, 1995 and the parties are awaiting the court's decision. While the dismissal motion, if granted, will not dispose of all the claims asserted in the Second Amended and Consolidated Complaint, the Company intends to vigorously defend against any remaining claims. (NOTE 5) - Death of principal officer: On February 24, 1995, the Company's principal officer died. Pursuant to his employment contract, the Company will pay approximately $ 500,000 to the principal officer's estate in monthly installments over the next three years. The Company is a beneficiary of key-man policies aggregating $ 1,500,000 on the life of the principal officer. Such amounts reflected above have been recorded in the accompanying financial statements. (NOTE 6) - Debt: Under the various debt agreements, the Company and its subsidiaries are required to comply with certain covenants which specify minimum cash and cash equivalents to be on its balance sheet at all times, minimum working capital, and tangible net worth requirements and are precluded from declaring and paying dividends without the consent of such lenders. The Company is currently in compliance with all but one covenant and has been granted a waiver by its lender for the period ended June 30, 1995. The lending facilities of the Canadian Apparel Segment expired on December 31, 1993. During the current period, the Company opened up standby letters of credit totaling $ 3,610,000 for the beneficiary of the primary lender to its Canadian subsidiaries to secure a certain level of borrowings of such subsidiaries until a new lending arrangement is finalized. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS Liquidity, Capital Resources and Inflation: Working capital decreased by $ 8,214,000 to $ 5,874,000 during the six month period ended June 30, 1995 from the year ended December 31, 1994 principally due to $ 3,610,000 of marketable securities which was pledged to secure standby letters of credit issued to the Company's lender to its Canadian Apparel Segment as security for borrowings of the Segment under a temporary banking arrangement and to a net loss of $ 2,446,000 incurred by the Company for the six months ended June 30, 1995. The Company expects to finalize a new banking arrangement during the third quarter of 1995. In addition, the Company pledged $ 1,700,000 of its marketable securities as security for the Factoring Agreement between its wholly owned subsidiary, East End Apparel Group Ltd and its primary lender. The Company's working capital ratio as at June 30, 1995 was 1.2 to 1 compared to 1.6 to 1 at December 31, 1994. In July 1993, East/West entered into a Restated and Amended Factoring Agreement with its primary lender. Advances by the factor prior to the maturity date of receivables sold bear interest at a rate of prime plus 1.50%. As security for its obligations under such amended facility, the Company has pledged approximately $ 5,000,000 of its marketable securities. In September, 1994 East End entered into a Factoring Agreement with the Company's primary lender under the same terms and conditions as East/West. The facility is guaranteed by the Company and as security for its obligations under such facility, the Company has pledged approximately $ 2,200,000 of its marketable securities including $ 500,000 subsequent to June 30, 1995. Between November, 1993 and January, 1995 the Company repurchased 750,700 shares of its common stock in the open market at an average price of $3.57 per share. In October, 1994, the Company announced that it planned to purchase up to an additional 300,000 shares of its common stock in the open market or in privately negotiated or block transactions. The Company has purchased 166,200 shares under this program. The Company's existing capital resources (including its bank credit facilities) and its cash flow from operations are expected to be adequate to cover the Company's cash requirements for the foreseeable future. The lending facilities of the Canadian Apparel Segment expired on December 31, 1993 and it is currently holding discussions with a subsidiary of the Company's primary lender and expects to finalize a new lending arrangement by the third quarter of 1995. The Canadian Apparel Segment continues to borrow from its current lender. The facility is guaranteed by the Company, and, as security for its obligations under this temporary arrangement, the Company has provided such lender with standby letters of credit equal to or above the level of borrowings. Inflation has not materially impacted the operations of the Company. Results of Operations: Six month period ended June 30, 1995 v. June 30, 1994 Consolidated net sales for the six month period ended June 30, 1995 increased to $ 19,476,000 from $ 16,248,000 from the comparable period of the prior fiscal year due principally to increases in sales from each of its business segments. Consolidated net loss for the six months ended June 30, 1995 significantly decreased to $ 2,446,000 from $ 12,396,000 from the comparable period of the prior fiscal year due to a non cash charge in the prior period of $ 13,687,000 (exclusive of tax benefit) reflecting the Company's write-off of its 43% equity interest in USA Classic, Inc., subordinated debt approximating $ 2,400,000 and approximately $ 2,200,000 of related costs. Exclusive of the non-cash charge, the pre-tax loss increased to $ 2,446,000 for the six month period ended June 30, 1995 compared to $ 2,008,000 from the comparable period of the prior fiscal year due principally to increased operating losses at the Company's United States Apparel Segment. Revenues for the United States Apparel Segment for the six months ended June 30, 1995 increased to $ 7,695,000 from $ 5,186,000 from the comparable period of the prior year principally due to revenues recorded by the Company's new East End Apparel Group Ltd. ("Campton Place") subsidiary. Revenues also increased at the Company's East/West division. The operating loss for the six month period ended June 30, 1995 increased to $ 3,406,000 from $ 1,806,000 from the comparable period of the prior year due to a lower gross profit recorded by the Segment due to several factors related to a significantly weak retail environment. Revenues for the Canadian Apparel Segment for the six months ended June 30, 1995 increased to $ 3,606,000 from $ 3,214,000 from the comparable period of the prior year due to increased revenue from its Apparel Image Marketing ("A.I.M.") division. The operating loss for the six month period significantly decreased to $ 598,000 from $ 1,137,000 in the prior period due to improved gross margin on sales and a reduction in selling general and administrative costs. The results for the current six month period include $ 353,000 of one- time restructuring consisting of product line and personnel termination charges related to the Segment. Revenues for the Electronics Segment for the six months ended June 30, 1995 slightly increased to $ 8,175,000 from $ 7,848,000 from the comparable period of the prior year. Despite the slight increase in revenues, operating income for the six months ended June 30, 1995 slightly decreased to $ 2,255,000 from $ 2,277,000 from the comparable period of the prior fiscal year. Included in the current period results is a provision of approximately $ 875,000 taken in anticipation of costs to be incurred to repair and/or refurbish certain units that have been already shipped to one of the Segment's customers. Management will monitor these costs in subsequent periods. Consolidated gross profit as a percentage of sales for the six months ended June 30, 1995 decreased to 22.9% from 29.2% for the comparable period of the prior fiscal year due principally to a lower gross profit realized by the Company's United States Apparel Segment and Electronics Segment and despite a higher gross profit realized by the Company's Canadian Apparel Segment. Selling, general and administrative expenses as a percentage of sales for the six months ended June 30, 1995 decreased to 40.0% of sales from 40.9% from the comparable period of the prior fiscal year due to increased revenues. Selling, general and administrative expenses increased to $ 7,799,000 for the six months ended June 30, 1995 from $ 6,653,000 from the comparable period of the prior fiscal year. These increases were principally due to selling, general and administrative costs incurred by the Company's new Campton Place subsidiary and were partially offset by reduced selling, general, and administrative costs at the Company's Canadian Apparel Segment. Interest expense significantly increased for the six months ended June 30, 1995 to $ 1,286,000 from $ 425,000 from the prior comparable period principally due to interest charges associated with the financing of the United States Apparel Segment's higher inventory levels in the current period. Investment and other income for the six months ended June 30, 1995 significantly increased to $ 2,176,000 from $ 326,000 from the comparable period of the prior year primarily due to (i) insurance proceeds due the Company resulting from the death of the Company's principal officer net of accrued costs due to the officer's estate, (ii) to the reduction in the unrealized loss on marketable securities due to a decrease in interest rates and (iii) increased commission income earned by the Company's U.S. Apparel Segment. The Company did not record any tax benefit on the current pre-tax loss because of the uncertainty of future realization. Three month period ended June 30, 1995 v. June 30, 1994 Consolidated net sales for the three month period ended June 30, 1995 increased to $ 8,588,000 from $ 5,691,000 from the prior period of the comparable year due principally to increased revenues from each of its business segments. Consolidated net loss for the three months ended June 30, 1995 increased to $ 2,133,000 from $ 1,212,000 from the comparable period of the prior fiscal year due principally to increased operating losses at the Company's United States Apparel Segment. The second quarter is historically the weakest operating quarter for the Company's apparel segments. The increased net loss was also due to the Company not recording an income tax benefit in the current period as it did in the prior period because it is uncertain whether such benefit will be realized in future periods. Revenues for the United States Apparel Segment for the three months ended June 30, 1995 increased to $ 2,613,000 from $ 1,602,000 from the comparable period of the prior year principally due to revenues recorded by the Company's new Campton Place subsidiary. Revenues also increased at the Company's East/West division. The operating loss for the three month period ended June 30, 1995 increased to $ 2,221,000 from $ 1,231,000 from the comparable period of the prior year principally due to an operating loss recorded by the new Campton Place subsidiary. Revenues for the Canadian Apparel Segment for the three months ended June 30, 1995 increased to $ 1,906,000 from $ 980,000 from the comparable period of the prior year due to increased revenue from its A.I.M. division. The operating loss for the period decreased to $ 259,000 from $ 748,000 in the prior period due principally to increased revenues and gross profit and to a reduction in selling general and administrative expenses. The results for the current six month period include $ 353,000 of one-time restructuring costs related to the Segment. Revenues for the Electronics Segment for the three months ended June 30, 1995 increased to $ 4,069,000 from $ 3,109,000 from the comparable period of the prior year due to the billing for the reimbursement of certain engineering costs during the period that were expensed in previous periods. Despite the increase in sales, operating income slightly decreased to $ 952,000 for the period from $ 959,000 in the prior period due principally to a provision of approximately $ 875,000 taken during the period in anticipation of costs to be incurred to repair and/or refurbish certain units that have been already shipped to one of the Segment's customers. Management will monitor these costs in subsequent periods. Consolidated gross profit as a percentage of sales for the three months ended June 30, 1995 decreased to 18.5% from 29.7% for the comparable period of the prior fiscal year due principally to a lower gross profit realized by the Company's United States Apparel Segment and Electronics Segment and despite a higher gross profit realized by the Company's Canadian Apparel Segment. Selling, general and administrative expenses as a percentage of sales for the three months ended June 30, 1995 decreased to 42.9% from 59.2% from the prior period of the comparable year due principally to an increase in revenues. Selling, general and administrative expenses increased to $ 3,680,000 from $ 3,369,000 for the prior comparable period. This increase was principally due to higher expenses incurred by the Company's United States Apparel Segment, particularly those incurred by the new Campton Place subsidiary and despite lower selling and general and administrative expenses incurred by the Company's Canadian Apparel and Electronics segment and lower corporate expenses. Interest expense significantly increased for the three months ended June 30, 1995 to $ 631,000 from $ 225,000 from the prior comparable period principally due to interest charges associated with the financing of the United States Apparel Segment's higher inventory levels in the current period. Investment and other income for the three months ended June 30, 1995 significantley increased to $ 592,000 from $ 190,000 from the comparable period of the prior year primarily due to the reduction in the unrealized loss on marketable securities due to a decrease in interest rates and increased commission income earned by the Company's U.S. Apparel Segment. The Company did not record any tax benefit on the current pre-tax loss because of the uncertainty of future realization. Certain Material Trends: Despite continued profitability into 1995, the Company's Electronic Segment continues to face a difficult business environment marked by increasing pressure on the Company's prices for its sole source sales and a general reduction in the level of funding for the defense sector. Based on its planned delivery schedules, the Company expects a reduction in Electronic Segment revenues in 1995 and 1996. The Company's Electronic Segment is continuing to seek new contracts which require up-front design, engineering, prototype and preproduction costs. While the Segment attempts to negotiate contract awards for reimbursement of product development, there is no assurance that sufficient monies will be set aside by the government for such effort. In addition, even if the government agrees to reimburse development costs, there is still a significant risk of cost overrun which may not be reimbursable. Furthermore, once the Company has completed the design and preproduction stage, there is no assurance that funding will be provided for future production. The Electronics Segment is heavily dependent upon military spending as a source of revenues and income. World events have led the government of the United States to reevaluate the level of military spending necessary for national security. Any significant reductions in the level of military spending by the Federal Government could have a negative impact on the Electronics Segment's future revenues and earnings. A majority of the business of both the United States and the Canadian Apparel Segment is associated with the sale of outerwear. The third and fourth quarters are generally the primary selling seasons for outerwear sales. Furthermore, where sale of outerwear constitutes a significant percentage of such segment's business, the first and second quarters are historically weak periods since its customers do not generally request shipment of merchandise during this time. Despite the continued market acceptance of its established lines, a weakened economy in the United States and Canada could have an adverse impact on the Apparel Segments' revenues and earnings. The Apparel Segments' large customers include many of the major department stores which may be vulnerable in a weakened economy. Furthermore, many published reports have indicated that the apparel industry has not yet participated in the nation's recent economic recovery and the share of consumer personal spending devoted to apparel has dropped to record lows. Finally, warm weather throughout many regions of the United States and Canada created sluggish outerwear sales for retailers during the third and fourth quarters of 1994. In addition to the negative impact this had on the Company's fourth quarter sales and gross profit in 1994, it is uncertain what impact this may have on the buying capabilities of the major retailers in 1995. The lending facilities of the Canadian Apparel Segment expired on December 31, 1993. The Segment is currently holding discussions with a subsidiary of the Company's primary lender and expects to finalize a new lending arrangement by the third quarter of 1995. If the Segment experiences any significant delay in finalizing a new lending arrangement, timely delivery of products to customers during its primary selling season could be impaired. Furthermore, in the event that the Segment is unable to consummate any such banking transaction, it will be forced to significantly decrease its ongoing operations. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned therunto duly authorized. ORBIT INTERNATIONAL CORP. Registrant Dated: August 14, 1995 /s/ Dennis Sunshine Dennis Sunshine, President, Chief Executive Officer and Director Dated: August 14, 1995 /s/ Mitchell Binder Mitchell Binder, Vice President- Finance, Chief Financial Officer and Director PART II OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits. None (b) Reports on Form 8-K. No reports on form 8-K were filed by Registrant for the quarter for which this report is filed. EX-27 2
5 6-MOS DEC-31-1995 JUN-30-1995 2544000 4561000 4962000 1087000 27503000 1084000 5676000 2426000 70116000 33693000 7285000 877000 0 0 28261000 70116000 19476000 19476000 15013000 15013000 7799000 0 1286000 (2446000) 0 (2446000) 0 0 0 (2446000) (.42) (.42)