-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MC3wtE+4K6wuRDFcpFELe+vyE6fDuJPOZsOL6QOkLehzNslOnETsOTKP6Zprv9AF kC/Ld94pIviQ4g3t9Nh1Bg== 0000074818-96-000017.txt : 19961031 0000074818-96-000017.hdr.sgml : 19961031 ACCESSION NUMBER: 0000074818-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961030 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] 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: 96650576 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 September 30, 1996 . 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: September 30, 1996. 6,186,000 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 nine months ended September 30, 1996 are not necessarily indicative of the results of operations for the full fiscal year ending December 31, 1996. The consolidated balance sheet as of December 31, 1995 was condensed from the audited consolidated balance sheet appearing in the 1995 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, 1995. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 1996 1995 (unaudited) A S S E T S Current assets: Cash and cash equivalents.............. $ 2,102,000 $ 2,274,000 Investment in marketable securities (Note 5)................... 662,000 7,495,000 Accounts receivable - net of estimated doubtful accounts........... 3,018,000 854,000 Inventories - at lower of cost (first in, first out) or market (Notes 2 and 3).................................... 6,433,000 13,124,000 Other current assets................... 147,000 1,669,000 Assets held for sale including restricted investments in marketable securities (Notes 5 and 6)............ 8,171,000 . Total current assets................ 20,533,000 25,416,000 Property, plant and equipment - at cost less accumulated depreciation and amortization........................... 2,350,000 3,069,000 Excess of cost over the fair value of assets acquired - less accumulated amortization........................... 1,069,000 834,000 Restricted investment in marketable securities (Note 5).................... 7,567,000 Investment in marketable securities (Note 5).................... 1,176,000 795,000 Other assets............................. 404,000 347,000 T O T A L .......................... $ 25,532,000 $ 38,028,000 Attention is directed to the accompanying notes to condensed consolidated financial statements. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) September 30, December 31, 1996 1995 (unaudited) L I A B I L I T I E S Current liabilities: Current portion of long-term obligations $ 956,000 $ 2,292,000 Accounts payable........................ 883,000 3,860,000 Accrued expenses........................ 2,624,000 4,090,000 Due to factor........................... 15,294,000 Liabilities associated with assets held for sale including amounts due to factor (Note 6)....................... 11,319,000 . Total current liabilities.......... 15,782,000 25,536,000 Long-term liabilities associated with assets held for sale (Note 6)........... 3,230,000 Long-term obligations (less current portion above).......................... 1,346,000 1,097,000 Other liabilities......................... 2,077,000 Total liabilities.................... 20,358,000 28,710,000 STOCKHOLDERS' EQUITY Capital stock - authorized 25,000,000 shares $.10 par value; issued 9,071,000 shares at September 30, 1996 and 8,771,000 at December 31, 1995, respectively........................... 907,000 877,000 Additional paid-in capital .............. 23,518,000 23,285,000 (Deficit)................................ ( 9,447,000) (4,026,000) Unrealized holding (loss) in marketable securities (Note 5).................... (22,000) Less treasury stock ( 2,885,000 shares at September 30, 1996 and December 31, 1995, respectively) at cost ........... (9,588,000) (9,588,000) Unearned portion of performance shares... (194,000) Foreign currency translation adjustment.. (1,230,000) Total stockholders' equity.......... 5,174,000 9,318,000 T O T A L........................... $ 25,532,000 $ 38,028,000 Attention is directed to the accompanying notes to condensed consolidated financial statements. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Nine Months Ended Three Months Ended September 30, September 30, 1996 1995 1996 1995 Net sales............... $12,568,000 $10,026,000 $ 4,798,000 $ 1,851,000 Cost of sales (Note 2).. 7,024,000 6,265,000 2,648,000 1,309,000 Gross profit (Note 2)... 5,544,000 3,761,000 2,150,000 542,000 Other (income), costs and expenses: Selling, general and administrative....... 4,115,000 3,367,000 1,462,000 1,172,000 Interest.............. 73,000 193,000 49,000 63,000 Investment and other (income) (Note 5)... (1,224,000) (2,104,000) ( 102,000) (292,000) 2,964,000 1,456,000 1,409,000 943,000 Earnings from continuing operations before taxes on income.... ......... 2,580,000 2,305,000 741,000 (401,000) Taxes on income......... . Earnings from continuing operations............. 2,580,000 2,305,000 741,000 (401,000) (Loss) from discontinued operations (Note 6).... (4,200,000) (20,039,000) (14,887,000) (Loss) from disposal of discontinued operations (Note 6)............... (3,801,000) . (8,001,000) (20,039,000) (14,887,000) NET EARNINGS (LOSS)..... $(5,421,000) (17,734,000) $ 741,000 (15,288,000) EARNINGS(LOSS)PER SHARE (Note 1): Earnings from continuing operations $ .41 $ .39 $ .12 $ (.07) (Loss) from discontinued operations (1.28) (3.40) (2.53) NET EARNINGS (LOSS)..... $ ( .87) $ (3.01) $ .12 $ (2.60) Attention is directed to the accompanying notes to condensed consolidated financial statements.
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30, 1996 1995 Cash flows from operating activities: Net (loss)................................... $(5,421,000) $(2,446,000) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization............... 90,000 184,000 Amortization of goodwill.................... 86,000 326,000 Write-off of goodwill....................... 793,000 Write-off of foreign currency translation... 1,234,000 Provision for doubtful accounts............. 102,000 Compensatory issuance of stock and options.. 39,000 263,000 Gain on sale of fixed assets................ (80,000) Imputed interest on Acquisition Note........ 142,000 Change in value of marketable trading securities................................. 22,000 (222,000) Purchases of marketable trading securities................................. (17,157,000) Proceeds of sales of marketable trading securities................................. 17,395,000 Disposal of discontinued operations......... 3,008,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable. (2,896,000) 1,380,000 (Increase) decrease in inventory........... 1,138,000 (6,431,000) Decrease in other current assets........... 1,032,000 78,000 Increase in accounts payable............... 625,000 1,024,000 Increase (decrease) in accrued expenses.... (555,000) 1,721,000 Change in assets held for sale............. 2,206,000 (Increase) in other assets................. (151,000) (234,000) Net cash provided by (used in) operating activities.............................. 1,250,000 (3,955,000) (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (unaudited) Nine Months Ended September 30, 1996 1995 Cash flows from investing activities: Purchase of net assets of acquired company... (3,779,000) Acquisitions of fixed assets................. (141,000) (282,000) Proceeds from sale of fixed assets........... 217,000 Purchase of marketable securities............ (14,547,000) Proceeds of sales of marketable securities... 25,143,000 . Net cash provided by (used in) investing activities................................. 6,676,000 (65,000) Cash flows from financing activities: Proceeds from issuance of performance shares 30,000 Net advances from factor.................. 7,890,000 Net payments to factor.................... (8,118,000) Proceeds from debt........................ 2,417,000 393,000 Repayments of debt........................ (2,427,000) (2,463,000) Purchase of treasury stock................ (68,000) Net cash provided by (used in) financing activities............................... (8,098,000) 5,752,000 Effect of exchange rate changes on cash... (3,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ (172,000) (1,729,000) Cash and cash equivalents - January 1....... 2,274,000 815,000 CASH AND CASH EQUIVALENTS - September 30 ... $ 2,102,000 $ 2,544,000 (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (unaudited) Supplemental disclosures of cash flow information: Nine Months Ended September 30, 1996 1995 Cash paid for: Interest........................ $ 1,364,000 $ 1,977,000 Income taxes.................... $ 29,000 $ 4,000 Supplemental schedule of noncash and financing activities: [1] In February 1996, the Company acquired the operating assets and business of Behlman Electronics, Inc. The fair value of the net assets as of the date of acquisition is presented below: Inventory $ 2,560,000 Property, plant and equipment 115,000 Excess of cost over the fair value of assets acquired 1,104,000 $ 3,779,000 Attention is directed to the accompanying notes to condensed consolidated financial statements ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (NOTE 1) - Earnings (Loss) Per Share: Net earnings (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 nine month and three month periods ended September 30, 1996 and 1995 are as follows: Nine Months Ended Three Months Ended September 30, September 30, 1996 1995 1996 1995 Primary 6,005,000 5,886,000 6,072,000 5,886,000 Fully Diluted 6,252,000 5,886,000 6,343,000 5,886,000 (NOTE 2) - Cost of Sales: For interim periods, the Company estimates its inventory and related gross profit based on management's estimates of costs associated with units sold. (NOTE 3) - Inventories: Inventories are comprised of the following: September 30, December 31, 1996 1995 Raw Materials................ $ 2,240,000 $ 1,594,000 Work-in-process.............. 4,193,000 4,756,000 Finished goods............... 6,774,000 T O T A L....... $ 6,433,000 $ 13,124,000 (NOTE 4) - Acquisition: On February 6, 1996, the Company, through a wholly-owned subsidiary acquired certain assets subject to certain liabilities of Astrosystems, Inc. and Behlman Electronics, Inc. ("Behlman"). The assets are primarily used in the business of manufacturing and selling various power supply and power source products. (continued) ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) The purchase price for the assets, which includes inventory, equipment and other physical property, was $3,700,000, subject to a final valuation of said assets as of the closing date. The transaction was partially financed pursuant to a bridge loan in the amount of $500,000 from the Company's primary lender which was replaced by a term loan and revolving credit facility. The term loan is secured with a mortgage on the Company's corporate facility. Had the acquisition been made on January 1, 1995 (unaudited) proforma sales, income and earnings per share from continuing operations would have been $17,501,000, $1,960,000 and $.33 per share respectively, for the nine month period ended September 30, 1995. (NOTE 5) - Available-For-Sale Securities: On December 31, 1995 the Company transferred its marketable securities to the available for sale category of investments. Available-for-sale securities are carried at fair value, with the net unrealized gains and losses, net of income taxes, reported as a separate component of stockholders' equity. The cost of marketable securities was determined by the specific identification method. Interest earned on securities classified as available-for-sale are included in investment and other income in the accompanying financial statements. Under the terms of certain credit facilities, the Company's investment portfolio and certain cash balances must be maintained at a minimum collateral value. On September 30, 1996, this collateral requirement amounted to approximately $3,401,000 of marketable securities. The following is a summary of available-for-sale securities as of September 30, 1996: ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Cost or Estimated Gross Gross Amortized Fair Unrealized Unrealized Cost Value Gains (Losses) U.S. Treasury bills maturing September 1997 $4,018,000 $4,018,000 $ $ Debt securities issued by other government agencies, maturing September 1997......... 45,000 45,000 . Total maturing within 1 year..... 4,063,000 4,063,000 . Corporate debt securities, maturing October 1997 to Septemer 2002.......... 506,000 500,000 (6,000) Total maturing after 1 year through 5 years... 506,000 500,000 (6,000) Corporate debt securities, maturing October 2002 to September 2007......... 357,000 358,000 1,000 . Total maturing after 5 years through 10 years.. 357,000 358,000 1,000 . Corporate debt securities, maturing September 2007 and thereafter............. 335,000 318,000 (17,000) Total maturing after 10 years.... 335,000 318,000 (17,000) Total maturing after 1 year...... 1,198,000 1,176,000 1,000 (23,000) Total marketable securities........ $5,261,000 5,239,000 $ 4,000 $(23,000) Less amounts included in assets held for sale... (3,401,000) Less non-current marketable securities.. (1,176,000) Total current marketable securities........ $ 662,000
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) (Note 6) - Discontinued Operations: On August 6, 1996, the Board of Directors of the Company adopted a plan to sell its apparel segments. The plan of disposal anticipates a sale of these segments by the end of 1996. The Company estimated the loss on the discontinuance of the segments to be approximately $8,000,000, including approximately $3,800,000 of estimated losses on the disposal of the segments. Such costs include monies owed pursuant to operating lease agreements, professional fees and other contractual obligations. Accordingly, the historical results for the apparel segments have been classified as discontinued operations for all periods presented in the consolidated statements of operations. Sales of the apparel segments were $19,017,000 and $30,805,000 for the nine month periods ended September 30, 1996 and September 30, 1995, respectively. At September 30, 1996, the assets of the segments to be sold consist primarily of inventories, property, plant and equipment and investment in marketable securities securing the Company's guarantees under the segments' financing arrangements. Liabilities of the segments to be sold consist of monies due to the segments' lenders, accounts payable, accrued expenses and other obligations. The consolidated balance sheet at December 31, 1995 has not been restated. ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS Results of Operations Nine month period ended September 30, 1996 v. September 30, 1995 In August, 1996, the Company adopted a plan to sell its apparel segments. The plan of disposal anticipates a sale of these segments by the end of 1996. The company estimated the loss on the disposal of the apparel segments to the expected disposal date to be approximately $3,801,000 and charged 1996 operations with such amount. Such costs include monies owed pursuant to operating lease arrangements, professional fees and other contractual obligations. The plan of disposal of the Company's apparel operations leaves the Company with solely its Electronic Segment which consists of the Orbit Instrument Division and the new Behlman subsidiary. Consolidated net sales for the nine month period ended September 30, 1996 increased to $12,568,000 from $10,026,000 from the comparable period of the prior year due principally to $4,671,000 of revenues recorded by the Company's new Behlman subsidiary which was acquired in February, 1996 offset by a decrease in the number units shipped by the Orbit Instrument division. The net loss for the nine month period ended September 30, 1996, decreased to $5,421,000 from $17,734,000 from the comparable period of the prior year. The loss for the current year was principally due to operating losses from the Company's apparel segments and to the estimated loss of $3,801,000 resulting from reserves taken on an expected loss on the disposal of such segments. The loss in the prior year was principally due to non cash charges of $13,216,000 reflecting the Company's write-off of goodwill and other intangible costs related to its U.S. Apparel Segment as well as $2,000,000 of inventory write-downs taken by the same segment. Net earnings from continuing operations for the nine month period ended September 30, 1996 increased to $2,580,000 from $2,305,000 from the comparable period of the prior year due principally to earnings recorded during the period by the Company's new Behlman subsidiary. Gross profit, as a percentage of sales for the nine months ended September 30, 1996 increased to 44.1% from 37.5% from the comparable period of the prior year due to greater efficiencies resulting from the Behlman acquisition. Selling, general and administrative expenses for the nine months ended September 30, 1996 increased to $4,115,000 from $3,367,000 principally due to selling, general and administrative expenses incurred by the Company's new Behlman subsidiary and offset by lower corporate expenses and lower selling, general and administrative expenses incurred by the Orbit Instrument division. Selling, general and administrative expenses, as a percentage of sales decreased to 32.7% from 33.6% due to additional sales and greater efficiencies derived from the Behlman acquisition and lower corporate expenses. Interest expense for the period decreased to $73,000 from $193,000 from the comparable period of the prior year due to a reduction in the average amounts owed during the period. Investment and other income for the nine months ended September 30, 1996 decreased to $1,224,000 from $2,104,000 from the prior period due principally to interest earned on higher cash balances in the prior period. Both the current and prior period included non recurring income resulting from, in the current period, the realization of approximately $800,000 representing the final payment of royalty income from Orbit Semiconductor, Inc., pursuant to a Stock Purchase Agreement signed in November, 1991 and, in the prior period, $869,000 of insurance proceeds resulting from the death of the Company's former chief executive officer net of accrued costs to the officers estate. 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 September 30, 1996 v. September 30, 1995 Consolidated net sales for the three month period ended September 30, 1996 increased to $4,798,000 from $1,851,000 from the comparable period of the prior year due principally to sales generated by the Company's new Behlman subsidiary and to increased sales recorded by the Orbit Instrument division. Net earnings from continuing operations for the three months ended September 30, 1996 increased to $741,000 from a loss of $401,000 from the comparable period of the prior year due principally to increased sales and earnings from the Orbit Instrument division, earnings from the new Behlman subsidiary and offset by lower investment and other income than the prior year. Gross profit, as a percentage of sales for the three months ended September 30, 1996 increased to 44.8% from 29.3% from the comparable period of the prior year due to higher sales and greater efficiencies derived from the transition of the Behlman operation into the Company's facility. Selling, general and administrative expenses for the three months ended September 30, 1996 increased to $1,462,000 from $1,172,000 but decreased as a percentage of sales to 30.5% from 63.3% due to significantly increased sales and greater efficiencies derived from the Behlman acquisition. Interest expense for the three months ended September 30, 1996 decreased to $49,000 from $63,000 in the prior period due to a reduction in amounts owed during the period. Investment and other income for the three months ended September 30, 1996 decreased to $102,000 from $292,000 from the prior period due to interest earned on higher cash balances in the prior period. The Company did not record any tax benefit on the current pre- tax loss because of the uncertainty of future realization. Liquidity, Capital Resources and Inflation: Working capital increased by $4,871,000 to $4,751,000 for the nine month period ended September 30, 1996 from a working capital deficit of $120,000 for the year ended December 31, 1995 principally due to approximately $7,567,000 of long term restricted assets which were used either to reduce amounts owed under certain lending facilities or reclassified as short term due to the Company's adoption of a plan to dispose of its apparel segments. The increase in working capital was offset by a net loss of approximately $1,620,000 incurred by the Company during the nine month period (exclusive of $3,801,000 of reserves taken on an expected loss on the disposal of the apparel segments) and by approximately $1,104,000 related to the acquisition of Behlman which was allocated to goodwill. The Company's working capital ratio at September 30, 1996 was 1.3 to 1 compared to 1.0 to 1 at December 31, 1995. Assets held for sale and liabilities associated with assets held for sale (related to the discontinued Apparel Segments) decreased during the quarter due to the fulfillment of order backlog with the sale of inventory and the liquidation of certain marketable securities, both of which were used to reduce amounts owed under respective lending facilities. Under the Company's factoring arrangements related to the discontinued apparel segments, the Company has pledged marketable securities or provided standby letters of credit as security for its guarantees under these arrangements. As of September 30, 1996, the Company has pledged approximately $590,000 in marketable securities and provided $3,000,000 in standby letters of credit (see Certain Material Trends). Between January and September, 1996 the Company used approximately $7,577,000 of marketable securities to reduce the amount owed under two of the facilities. In February 1996, the Company, through a wholly-owned subsidiary, purchased from Astrosystems, Inc. substantially all of the assets of its wholly-owned subsidiary, Behlman and substantially all of the assets of its Military Electronics Division. The purchase price of $3,750,000 was substantially funded by the Company's cash and a $500,000 bridge loan from BNY Financial Corporation ("BNY"). In June, 1996, the Company completed a $2,000,000 Term Loan and $2,000,000 Revolving Credit facility with BNY. The proceeds were used to pay off the bridge loan and to provide working capital for the Company's Electronic Segment. The Term Loan is payable in 36 monthly installments and bears interest at prime plus 1.50%. The Revolving Credit facility bears interest at prime plus 1.0%. In March 1996, the Company entered into an agreement with the sellers of East/West whereby the purchase price for the assets under the asset purchase agreement dated July 1993 (the "Asset Purchase Agreement") was reduced from $15,000,000 to $8,850,000 plus other consideration. Accordingly, the $8,000,000 promissory note to the sellers was reduced to $1,850,000. The amended note is payable as follows: (i) $500,000 paid upon the execution of the agreement, (ii) two $250,000 installments due July 1, 1996 (which has been paid) and January 1, 1997, respectively and (iii) $750,000 payable in quarterly installments over a five year period commencing March 31, 2002. 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. Inflation has not materially impacted the operations of the Company. Certain Material Trends Despite continued profitability in 1996, the Company's Electronic Segment continues to face a difficult business environment with continuing 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 current delivery schedules and as a result of the acquisition of Behlman, however, revenues for the Electronics Segment should increase from those levels recorded in the prior year although there can be no assurance that such increased revenues will actually be sustained. The Company's Electronic Segment continues 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 Electronic 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. The acquisition of Behlman, however, has given the Company some diversity with its commercial products subsidiary which is not affected by fluctuations in military spending. In August, 1996, the Company adopted a plan to dispose of its Apparel Segments. As part of its divestiture plan, the Company is seeking buyers to assume its guarantees under various lending arrangements and thereby relieving certain marketable securities and standby letters of credit pledged to secure such guarantees. As an alternative, the Company is also seeking to enter into exclusive licencing arrangements for the trademarks in the Apparel Segments. However, there is no assurance that the sales or licencing arrangements will be completed by the end of 1996 or the Company will be successful in relieving its guarantees under its lending arrangements 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 thereunto duly authorized. ORBIT INTERNATIONAL CORP. Registrant Dated: October 30, 1996 /s/ Dennis Sunshine Dennis Sunshine, President, Chief Executive Officer and Director Dated: October 30, 1996 /s/ Mitchell Binder Mitchell Binder, Vice President- Finance, Chief Financial Officer and Directo PART II OTHER INFORMATION Item 1. Legal Proceedings Venture Garments, Ltd. v. East End Apparel Group, Ltd. and Orbit International Corp.: In December 1995, Venture Garments, Ltd., a supplier of East End commenced an action in Supreme Court, New York County for goods had and received and related equitable relief against both East End and the Company. In February 1996, the Company answered the complaint, asserted counterclaims against Venture and impleaded East End's former president, Gary Jacobs. Gary Jacobs v. East End Apparel Group, Ltd. and Orbit International Corp.: In December 1995, Gary Jacobs, former president of East End, commenced an action against the Company in connection with his termination. Jacobs' complaint alleged that he was wrongfully terminated in violation of his employment agreement with the Company. The complaint sought damages in the amount of $2,000,000. In February 1996, the Company answered the complaint and asserted a counterclaim against Jacobs and his personal counsel for breach of the contract, breach of fiduciary duty, tortious interference of the contract and other related relief seeking damages in the aggregate amount of $30,400,000. In August 1996, the Company reached a joint settlement with the plaintiffs in both actions whereby the Company and East End agreed to pay $475,000 to Venture Garments Ltd. ("Venture") payable as follows: i) $250,000 upon execution of the settlement ii) $200,000 in fifteen equal installments commencing September 1, 1996 and iii) $25,000 in three equal installments commencing December 1, 1997. The Company and East End also agreed to return certain inventory to Venture previously held on consignment. Item 6. Exhibits and reports on Form 8-K (a) Exhibit 11. Computation of earnings per share. (b) Reports on Form 8-K. An Item 5 Form 8-K dated August 8, 1996 was filed by the Company to announce that it has entered into a letter of intent for the sale of its East/West Division and announced its plan to sell its Canadian Apparel Segment. EXHIBIT 11 ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE NINE MONTHS ANDED SEPTEMBER 30, 1996 (unaudited) Pimary Fully Diluted Computation of adjusted net earnings: Net earnings from continued operations.. $ 2,580,000 $ 2,580,000 (Loss) from discontinued operations..... (8,001,000) (8,001,000) Net (loss).............................. (5,421,000) (5,421,000) Reduction of interest expense (net of tax effect) or interest earned (net of tax effect) attributable to utilization of assumed proceeds from exercise of options in excess of amount required to repurchase 20% of the outstanding common stock at applicable market value . Adjusted net (loss)...................... (5,421,000) (5,421,000) Shares used for computation: Weighted average number of shares outstanding............................ 5,936,000 5,936,000 Common shares issuable upon assumed exercise of options in excess of assumed repurchase of outstanding common shares.......................... 69,000 316,000 Shares used for computation.............. 6,005,000 6,252,000 Earnings per common share: Earnings from continuing operations..... $ .43 $ .41 (Loss) from discontinued operations..... (1.33) (1.28) Net (loss).............................. $ ( .90) $ ( .87) EXHIBIT 11 ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ANDED SEPTEMBER 30, 1996 (unaudited) Pimary Fully Diluted Computation of adjusted net earnings: Net earnings............................ $ 741,000 $ 741,000 Reduction of interest expense (net of tax effect) or interest earned (net of tax effect) attributable to utilization of assumed proceeds from exercise of options in excess of amount required to repurchase 20% of the outstanding common stock at applicable market value 1,000 Adjusted net (loss)...................... 741,000 742,000 Shares used for computation: Weighted average number of shares outstanding............................ 5,936,000 5,936,000 Common shares issuable upon assumed exercise of options in excess of assumed repurchase of outstanding common shares.......................... 136,000 407,000 Shares used for computation.............. 6,072,000 6,343,000 Earnings per common share................ $ .12 $ .12 EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 2,102,000 662,000 3,287,000 269,000 6,433,000 20,533,000 4,403,000 2,053,000 25,532,000 15,782,000 1,346,000 0 0 907,000 4,267,000 25,532,000 12,568,000 12,568,000 7,024,000 7,024,000 4,115,000 0 73,000 2,580,000 0 2,580,000 (8,001,000) 0 0 (5,421,000) (.90) (.87)
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