Orbit International Corp. Reports 2020 Third Quarter Results

Third Quarter 2020 Net Income of $864,000 ($0.25 per diluted share) v. Net Income of $25,000 ($0.01 per diluted share) in Prior Year Period

Third Quarter 2020 EBITDA, As Adjusted was $923,000 ($0.26 per diluted share) v. $58,000 ($0.02 per diluted share) in Prior Year Period

Nine Months 2020 Net Income of $488,000 ($0.14 per diluted share) v. Net Income of $679,000 ($0.19 per diluted share) in Prior Year Period

Nine months 2020 EBITDA, As Adjusted was $685,000 ($0.19 per diluted share) v. $809,000 ($0.23 per diluted share) in Prior Year Period

HAUPPAUGE, N.Y., Nov. 11, 2020 (GLOBE NEWSWIRE) — Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2020.

Third Quarter 2020 vs. Third Quarter 2019

  • Net sales were $7,887,000, as compared to $6,100,000.
  • Gross margin was 31.3%, as compared to 29.2%.
  • Net income was $864,000 ($0.25 per diluted share), as compared to a net income of $25,000 ($0.01 per diluted share).
  • Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liability and stock-based compensation (EBITDA, as adjusted) was $923,000 ($0.26 per diluted share), as compared to $58,000 ($0.02 per diluted share).

Nine Months 2020 vs. Nine Months 2019

  • Net sales were $19,504,000, as compared to $19,503,000.
  • Gross margin was 27.3%, as compared to 29.3%.
  • Net income was $488,000 ($0.14 per diluted share), as compared to net income of $679,000 ($0.19 per diluted share).
  • Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liability and stock-based compensation (EBITDA, as adjusted) was $685,000 ($0.19 per diluted share), as compared to $809,000 ($0.23 per diluted share).
  • Backlog at September 30, 2020 was $19.8 million as compared to $21.8 million at June 30, 2020 and $20.8 at December 31, 2019.

Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our net income for the nine months ended September 30, 2020 was $488,000 compared to net income of $679,000 from the prior comparable period. Our income for the current nine-month period was primarily a result of a solid current operating quarter with net income of $864,000 which more than offset the $396,000 loss we incurred in the second quarter due to a reduction in productivity as a result of changes we made to our manufacturing operation. This change was in response to the PAUSE executive order issued by the Governor of New York State to safeguard the health and safety of our employees during the COVID-19 pandemic. During the current quarter, our manufacturing team returned to normal working hours which greatly improved our operating efficiencies. In addition, our net income for the current quarter was positively affected by a reduction in selling, general and administrative expenses because of the cancellation of trade shows and reduced travel and other selling costs related to the pandemic. Net income for the prior period was adversely affected by $131,000 of one-time charges in connection with the 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. ”

Mr. Binder continued, “Our strong net income for the current quarter also resulted from increased sales from our Orbit Electronics Group (“OEG”), which was offset by slightly lower sales from our Orbit Power Group (“OPG”). The increase in sales from our OEG was primarily due to the inclusion of Q-Vio for the full current period whereas the prior comparable period only included Q-Vio for a part of the period. Our gross margin slightly improved over the prior comparable quarter due to our operating leverage from higher revenue. This was slightly offset by a significant shipment delivered during the quarter by Q-Vio which was manufactured by our vendor in China and included a tariff, a portion of which we absorbed, that reduced our margins.”

Mr. Binder added, “On May 5, 2020, we announced that we closed on a $1,606,000 loan from Peoples United Bank under the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”). Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of such loans based on the use of such loan proceeds for payment of payroll costs, mortgage interest, rent and utilities.  As previously mentioned, we have made several changes throughout our organization to deal with the health and safety of our employees and productivity, particularly during the second quarter, suffered as a result.  In addition, bookings and revenue have been impacted, particularly from our OPG’s commercial division, whose customer base has been especially hurt by the pandemic, and Q-Vio, which is also experiencing delays for some of its commercial and industrial opportunities and also facing pricing pressure.  Despite these challenges, we are extremely grateful for the efforts of our employees as well as their resilience under difficult conditions that enabled us to remain open for business and fulfill the needs of our customers while New York State was under significant stress during the early stages of this pandemic. The PPP loan enabled us to preserve our workforce with full employment during this entire period and will hopefully mitigate the pandemic’s impact on our business.”

Mr. Binder continued, “Our backlog at September 30, 2020 was approximately $19,816,000 compared to approximately $20,834,000 at December 31, 2019. The reduction in backlog was due to lower backlog at the OPG which was partially offset by a higher backlog at the OEG. The reduction in the backlog at the OPG, however, reflects a reduction in CAATS backlog at September 30, 2020 of approximately $6,600,000 as compared to year end. As mentioned in previous releases, CAATS units have a lower gross margin than our other products. Consequently, we have replaced lower margin CAATS units with new bookings during the year that have much higher gross margins which we expect should lead to higher gross margins in 2021.”

David Goldman, Chief Financial Officer, noted, “At September 30, 2020, our cash and cash equivalents increased by approximately $1.3 million from the prior quarter to approximately $5.7 million and our financial condition remained strong as evidenced by our 5.1 to 1 current ratio. Our tangible book value per share at September 30, 2020 was $4.65 which compares to $4.41 at June 30, 2020 and $4.57 at December 31, 2019 (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 $8.0 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. We endured a difficult period beginning in mid-March that lasted through most of the second quarter. During that timeframe, when it became evident that the pandemic was going to affect our business, our Board of Directors decided to suspend our share repurchase program as well as our future quarterly dividend payments. Despite significantly improved operating results in the third quarter, it remains difficult to predict the full extent of what the short and long-term impact on our business will be. We remain concerned about any unforeseen events that may take place, including a possible second wave of the pandemic. Other countries throughout the world are experiencing a second wave and are facing new lockdown restrictions. If similar lockdown restrictions are imposed here, this could again affect our operating performance. Nevertheless, with the receipt of the PPP loan and barring any further adverse effects of COVID-19, we are confident that our financial condition will remain intact and our operating efficiencies will be maintained.”

Orbit International Corp., through its Electronics Group including its new 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, VME/VPX power supplies as well as various COTS power sources.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The Company was classified as an essential business by New York State and therefore was exempt from the state’s mandate that all non-essential businesses close their business locations until further notice. In addition, as a member of the Defense Industrial Base (“DIB”), the Company is mandated by the Secretary of Defense to continue to provide the essential products and services required to meet national security commitments to the Federal Government and the U.S. Military. The Company remains open while following guidance from the Centers for Disease Control (“CDC”) to best protect our employees. At this time, the length and severity of the COVID-19 pandemic is still unknown.

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 Goldman                        
Chief 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,
      2020       2019       2020     2019  
                 
Net sales   $ 7,887     $ 6,100     $ 19,504   $ 19,503  
                 
Cost of sales     5,420       4,318       14,180     13,785  
                 
Gross profit     2,467       1,782       5,324     5,718  
                 
Selling general and administrative expenses      1,568       1,638       4,717     4,914  
                               
Acquisition costs           131           131  
                 
Interest expense     4             7      
                 
Investment and other expense (income)     46       (14 )     98     (38 )
                 
Income before taxes     849       27       502     711  
                 
Income tax (benefit) provision     (15 )     2       14     32  
                 
Net income   $ 864     $ 25     $ 488   $ 679  
                 
                 
Basic earnings per share   $ 0.25     $ 0.01     $ 0.14   $ 0.19  
                 
Diluted earnings per share   $ 0.25     $ 0.01     $ 0.14   $ 0.19  
                 
Weighted average number of shares outstanding:                
        Basic     3,511       3,550                       3,515                     3,552  
        Diluted                     3,511       3,556                       3,515                     3,557  

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

    Three Months Ended
September 30,

  Nine Months Ended
September 30,
      2020       2019     2020     2019
                 
EBITDA (as adjusted) Reconciliation                
Net income   $ 864     $ 25   $ 488   $ 679
Interest expense     4           7    
Income tax (benefit) expense     (15 )     2     14     32
Depreciation and amortization     23       20     69     65
Fair value adj-contingent liability     47           107    
Stock-based compensation           11         33
EBITDA (as adjusted) (1)   $ 923     $ 58   $ 685   $ 809
                 
EBITDA (as adjusted) Per Diluted Share Reconciliation                
Net income   $ 0.25     $ 0.01   $ 0.14   $ 0.19
Interest expense                  
Income tax (benefit) expense                   0.01
Depreciation and amortization           0.01     0.02     0.02
Fair value adj-contingent liability     0.01           0.03    
Stock-based compensation                   0.01
EBITDA (as adjusted), per diluted share (1)   $ 0.26     $ 0.02   $ 0.19   $ 0.23
                 

(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 provided by (used in) operating activities (1)
   

2020

     

2019

 
         
EBITDA (as adjusted)                   $ 685     $ 809  
Interest expense     (7 )      
Income tax expense     (14 )     (32 )
Fair value adj-contingent liability     (107 )      
Net change in operating assets and liabilities     539       (1,058 )
Cash flows provided by (used in) operating activities   $ 1,096     $ (281 )

Orbit International Corp.
Consolidated Balance Sheets

  September 30, 2020
(unaudited)
  December 31, 2019

 
ASSETS        
Current assets:        
Cash and cash equivalents $ 5,726,000   $ 3,569,000  
Accounts receivable, less allowance for doubtful accounts   2,965,000     2,851,000  
Inventories   9,992,000     10,542,000  
Contract assets   770,000     632,000  
Income tax receivable   289,000     306,000  
Other current assets   351,000     265,000  
         
    Total current assets   20,093,000     18,165,000  
                                       
Property and equipment, net   349,000     273,000  
Right of use assets, operating leases   609,000     923,000  
Goodwill   901,000     905,000  
Deferred tax asset   545,000     834,000  
Other assets   30,000     31,000  
         
            Total assets $ 22,527,000   $ 21,131,000  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $ 1,462,000   $ 1,436,000  
Accrued expenses   909,000     919,000  
Notes payable, PPP loan   741,000      
Lease liabilities, operating leases    472,000     453,000  
Contingent liability   232,000     148,000  
Dividend payable       36,000  
Customer advances   143,000     225,000  
         
    Total current liabilities   3,959,000     3,217,000  
         
Notes payable, PPP loan, net of current portion   865,000      
Contingent liability, net of current portion   290,000     268,000  
Lease liabilities, operating leases   175,000     531,000  
    Total liabilities   5,289,000     4,016,000  
         
Stockholders’ Equity        
Common stock   361,000     361,000  
Additional paid-in capital   17,667,000     17,667,000  
Treasury stock   (569,000 )   (380,000 )
Accumulated deficit   (221,000 )   (533,000 )
         
    Stockholders’ equity   17,238,000     17,115,000  
         
    Total liabilities and stockholders’ equity $ 22,527,000   $ 21,131,000  

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