Orbit International Corp. Reports 2019 Third Quarter Results

Published

Third Qtr. 2019 Net Income of $25,000 ($0.01 per diluted share) v. $588,000 ($0.16 per diluted share) in Prior Year Period

Nine Months 2019 Net Income of $679,000 ($0.19 per diluted share) v. $1,753,000 ($0.49 per diluted share) in Prior Year Period

Both Current Three-Month and Nine-Month Periods Include $131,000 ($0.04 per diluted share) in Acquisition Costs Related to Q-Vio Acquisition

Nine-Month Prior Year Period Includes a $573,000 ($0.16 per diluted share) Deferred Tax Benefit Resulting From Refundable AMT Credit Under New Tax Law 

Backlog at 9/30/19 at $20,498,000

HAUPPAUGE, N.Y., Nov. 07, 2019 (GLOBE NEWSWIRE) -- Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2019.

Third Quarter 2019 vs. Third Quarter 2018

  • Net sales were $6,100,000, as compared to $6,329,000.
  • Gross margin was 29.2%, as compared to 34.6%.
  • Net income was $25,000 ($0.01 per diluted share), as compared to net income of $588,000 ($0.16 per diluted share).
  • Earnings before interest, taxes, depreciation and amortization and stock-based compensation (EBITDA, as adjusted) was $58,000 ($0.02 per diluted share), as compared to EBITDA of $640,000 ($0.18 per diluted share).

Nine Months 2019 vs. Nine Months 2018

  • Net sales were $19,503,000, as compared to $16,710,000.
  • Gross margin was 29.3%, as compared to 36.6%.
  • Net income was $679,000 ($0.19 per diluted share), as compared to net income of $1,753,000 ($0.49 per diluted share).
  • Earnings before interest, taxes, depreciation and amortization and stock-based compensation (EBITDA, as adjusted) was $809,000 ($0.23 per diluted share), as compared to EBITDA of $1,333,000 ($0.37 per diluted share).
  • Backlog at September 30, 2019 was $20.5 million as compared to $19.5 million at June 30, 2019 and $20.6 at December 31, 2018.

Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our net income for the nine months ended September 30, 2019 was $679,000 compared to $1,753,000 for the prior comparable period.  Our net income for the prior period was positively impacted by a $573,000 deferred tax benefit resulting from a refund of our AMT credit pursuant to the Tax Cuts and Jobs Act of 2017.  Our net income for the current period was adversely affected by $131,000 of one-time charges in connection with our acquisition of Q-Vio, Corp. (“Q-Vio”) in August 2019, including the closing of their facility in San Diego, CA and the integration of their operation into our facility in Hauppauge, NY. Exclusive of these items, net income for the nine months ended September 30, 2019 was $810,000 compared to $1,180,000 for the prior comparable period. Furthermore, the integration slowed the shipment of Q-Vio products during the third quarter, but shipment of products has been restored and deliveries of most of these products are expected to be made in the fourth quarter and beyond.  Net income for the current third quarter was also adversely affected by lower sales from our OEG due to the timing of delivery schedules.”

Mr. Binder added, “Our sales for the nine months ended September 30, 2019 increased from the comparable period of the prior year due to our OPG’s increased shipments of CAATS units.  Sales from our OEG for the third quarter decreased from the second quarter due to delivery schedules and a request from a large customer to accelerate deliveries on one of its products during the prior quarter.  Despite higher sales, our gross margin for the nine months ended September 30, 2019 decreased to 29.3% compared to 36.6% in the prior year.  This decrease was expected due to the shipment of a high percentage of CAATS units, which have a lower gross margin than our other products.  In addition, third quarter gross margins decreased from the second quarter because of lower revenues from our OEG which, historically have higher gross margins that increase further during periods of higher sales due to our operating leverage.  In addition, our selling and general and administrative costs continue to be tightly managed.”

Mr. Binder continued, “Our backlog at September 30, 2019 was approximately $20,498,000 compared to approximately $20,566,000 at December 31, 2018.  Our backlog at September 30, 2019 includes approximately $1,062,000 of backlog from our new Q-Vio subsidiary.  The slight decrease in the backlog from the prior year-end was principally due to a lower backlog from our OEG (exclusive of Q-Vio) due to a delay in the receipt of orders on two significant follow-on programs.  Negotiations are on-going with our customers and these awards are expected to be received in the current fourth quarter although timing on the receipt of government contracts is always an uncertainty.”

Binder further added, “Our OPG completed a previously announced solid booking month in October of approximately $1,380,000, which came on the heels of a strong third quarter of bookings which totaled approximately $4,300,000.  In addition to a continuation of orders utilizing our VPX technology, our OPG has realized a significant increase in bookings for its commercial products in the past several months, highlighted by power supplies used for oil and gas exploration, which has resulted in an increase in commercial bookings of 27.8% over the prior comparable period.  Furthermore, in addition to the significant follow-on orders expected by our OEG, Q-Vio received a $300,000 award at the beginning of the current quarter from a large military contractor and is expecting an additional relatively significant award from another military contractor before the end of the quarter.  Both awards have follow-on potential awards that are expected to be received in 2020.”     

David Goldman, Chief Financial Officer, noted, “At September 30, 2019, our cash and cash equivalents increased from the second quarter to approximately $3.9 million and our financial condition remained strong as evidenced by our 6.3 to 1 current ratio. Our cash position should be positively impacted in the fourth quarter as we expect to receive a federal tax refund of approximately $302,000 (primarily attributable to a refund of approximately 50% of our AMT credit).”

Mr. Goldman concluded, “Our tangible book value per share at September 30, 2019 was $4.65 (excluding the contingent liability relating to the Q-Vio acquisition it would be $4.78) as compared to $4.66 at June 30, 2019 and $4.52 at December 31, 2018. (Note-tangible book value per share does not include any additional value for our remaining reserved deferred tax asset.) To offset future federal and state taxes resulting from profits, we have approximately $7.6 million and $0.7 million in available federal and New York State net operating loss carryforwards, respectively.”

Mr. Binder concluded, “Because our revenue is tied to the delivery schedules specified in our contracts, it often is difficult to judge our performance on a quarterly basis.  Although our third quarter results were relatively weak, this was attributable to lower sales from our OEG which has been the strength of our Company over the past several years.  We expect that OEG delivery schedules will improve in 2020 as large follow-on orders are received as expected.  We are encouraged by the improvement in business from our OPG and the acquisition during the quarter of Q-Vio will position our OEG for additional sales. Because our Q-Vio operations have been integrated into our existing Hauppauge facility, the additional sales from these operations will require minimal additional overhead costs. Our backlog still remains strong and deliveries of the CAATS units will continue through 2020. Consequently, we are confident that our Company is well positioned for improved operating performance in 2020.  Furthermore, our financial condition remains strong and we will continue to make opportunistic purchases of our common stock in the marketplace.” 

Orbit International Corp., through its Electronics Group, including its recently acquired Q-Vio subsidiary, is involved in the development and manufacture of custom electronic device and subsystem solutions for military, industrial and commercial applications through its production facility in Hauppauge, New York.  Orbit’s Power Group, also located in Hauppauge, NY, designs and manufactures a wide array of power products including AC power supplies, frequency converters, inverters, uninterruptible power supplies, VME/VPX power supplies as well as various COTS power sources.  The Company also has a sales office in Bradenton, FL.

Certain matters discussed in this news release and oral statements made from time to time by representatives of the Company including, statements regarding our expectations of Orbit’s operating plans, deliveries under contracts and strategies generally; statements regarding our expectations of the performance of our business; expectations regarding costs and revenues, future operating results, additional orders, future business opportunities and continued growth, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although Orbit believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.  Many of these factors are beyond Orbit International's ability to control or predict.  Important factors that may cause actual results to differ materially and that could impact Orbit International and the statements contained in this news release can be found in Orbit's reports posted with the OTC Disclosure and News service. For forward-looking statements in this news release, Orbit claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Orbit assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.

CONTACT David GoldmanChief Financial Officer 631-435-8300                                                                

(See Accompanying Tables)

Orbit International Corp.Consolidated Statements of Income (in thousands, except per share data)(unaudited)

    Three Months Ended September 30,   Nine Months Ended September 30,
      2019       2018       2019       2018  
                 
Net sales   $ 6,100     $ 6,329     $ 19,503     $ 16,710  
                 
Cost of sales     4,318       4,138       13,785       10,590  
                 
Gross profit     1,782       2,191       5,718       6,120  
                 
Selling general and administrative expenses     1,638       1,595       4,914       4,901  
                         
Acquisition costs     131       -       131       -  
                 
Interest expense     -       6       -       11  
                 
Investment and other (income) expense     (14 )     (7 )     (38 )     (5 )
                 
Income before taxes     27       597       711       1,213  
                 
Income tax provision (benefit)     2       9       32       (540 )
                 
Net income   $ 25     $ 588     $ 679     $ 1,753  
                 
                 
Basic earnings per share   $ 0.01     $ 0.16     $ 0.19     $ 0.49  
                 
Diluted earnings per share   $ 0.01     $ 0.16     $ 0.19     $ 0.49  
                 
Weighted average number of shares outstanding:                
Basic     3,550       3,594       3,552       3,594  
Diluted     3,556       3,603       3,557       3,603  
                                 

Orbit International Corp.Consolidated Statements of Income(in thousands, except per share data)(unaudited)

    Three Months Ended September 30,   Nine Months Ended September 30,
      2019       2018       2019       2018  
                 
EBITDA (as adjusted) Reconciliation                
Net income   $ 25     $ 588     $ 679     $ 1,753  
Interest expense     -       6       -       11  
Income tax expense (benefit)     2       9       32       (540 )
Depreciation and amortization     20       27       65       80  
Stock-based compensation     11       10       33       29  
EBITDA (as adjusted) (1)   $ 58     $ 640     $ 809     $ 1,333  
                 
EBITDA (as adjusted) Per Diluted Share Reconciliation                
Net income   $ 0.01     $ 0.16     $ 0.19     $ 0.49  
Interest expense     0.00       0.00       0.00       0.00  
Income tax expense (benefit)     0.00       0.00       0.01       (0.15 )
Depreciation and amortization     0.01       0.01       0.02       0.02  
Stock-based compensation     0.00       0.01       0.01       0.01  
EBITDA (as adjusted), per diluted share (1)   $ 0.02     $ 0.18     $ 0.23     $ 0.37  

(1) The EBITDA (as adjusted) tables presented are not determined in accordance with accounting principles generally accepted in the United States of America.  Management uses EBITDA (as adjusted) to evaluate the operating performance of its business.  It is also used, at times, by some investors, securities analysts and others to evaluate companies and make informed business decisions.  EBITDA (as adjusted) is also a useful indicator of the income generated to service debt.  EBITDA (as adjusted) is not a complete measure of an entity's profitability because it does not include costs and expenses for interest, depreciation and amortization, income taxes and stock-based compensation. EBITDA (as adjusted) as presented herein may not be comparable to similarly named measures reported by other companies.

    Nine Months Ended September 30,
Reconciliation of EBITDA (as adjusted) to cash flows (used in) provided by operating activities (1)     2019       2018  
         
EBITDA (as adjusted)   $ 809     $ 1,333  
Interest expense     -       (11 )
Income tax expense      (32 )     (33 )
Loss on sale of marketable securities     -       6  
Gain on sale of fixed asset      -     (7 )
Net change in operating assets and liabilities      (1,058 )     (768 )
Cash flows (used in) provided by operating activities   $ (281 )   $ 520  
                 

Orbit International Corp.Consolidated Balance Sheets

  September 30, 2019(unaudited)   December 31, 2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 3,910,000     $ 4,506,000  
Accounts receivable, less allowance for doubtful accounts   2,683,000       2,105,000  
Inventories   10,275,000       10,127,000  
Contract assets   775,000       296,000  
Other current assets   517,000       345,000  
Income tax receivable   304,000       -  
       
Total current assets   18,464,000       17,379,000  
       
Property and equipment, net   253,000       266,000  
Right of use assets, operating leases   1,025,000       -  
Goodwill   881,000       868,000  
Deferred tax asset   834,000       1,123,000  
Other assets   31,000       30,000  
       
Total assets $ 21,488,000     $ 19,666,000  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 1,034,000     $ 1,273,000  
Accrued expenses   1,112,000       1,175,000  
Lease liabilities, operating leases   446,000       -  
Dividend payable   36,000       36,000  
Customer advances   291,000       171,000  
       
Total current liabilities   2,919,000       2,655,000  
       
Contingent liability   463,000       -  
Lease liabilities, operating leases   647,000       -  
       
        Total liabilities   4,029,000       2,655,000  
       
Stockholders’ Equity      
Common stock   361,000       361,000  
Additional paid-in capital   17,656,000       17,623,000  
Treasury stock   (276,000 )     (227,000 )
Accumulated deficit   (282,000 )     (746,000 )
       
    Stockholders’ equity   17,459,000       17,011,000  
       
    Total liabilities and stockholders’ equity $ 21,488,000     $ 19,666,000  
       

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