Orbit International Corp. (NASDAQ:ORBT) today announced results for the first quarter ended March 31, 2014.
First Quarter 2014 vs. First Quarter 2013
- Net sales were $5,007,000, as compared to $6,447,000.
- Gross margin was 30.0%, as compared to 38.6%.
- Net loss was $1,062,000 ($0.24 loss per share), as compared to a net loss of $80,000 ($0.02 loss per share). The increase in net loss was attributable to lower revenue and profitability from both our Electronics and Power Groups.
- Net loss for the first quarter of 2014 includes a $728,000 operating loss associated with the consolidation of our Quakertown facility into our Hauppauge, NY facility. Beginning June 2014, we will no longer be incurring any costs associated with our Quakertown facility.
- Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA, as adjusted) was a loss of $761,000 ($0.17 loss per share), as compared to earnings of $59,000 ($0.01 per diluted share).
Mitchell Binder, President & Chief Executive Officer, stated, “In the first quarter of 2014 we continued our efforts to restructure our business to significantly reduce our costs in order to offset the effect of challenging industry conditions. We have taken advantage of two expiring leases and since April 1, 2014 our ICS facility is operating out of a 4,500 square foot facility compared to its underutilized 23,000 square foot facility. In addition, we are near completing the consolidation of our Quakertown facility into our Hauppauge, NY facility.
“With respect to this consolidation:
- Our 2014 first quarter loss reflects a $728,000 operating loss from our Quakertown facility, which included $161,000 in accelerated non-cash depreciation and amortization expense. All leasehold improvements at our Quakertown facility were fully amortized as of March 31, 2014.
- We kept the majority of our workforce in Quakertown through the end of March to complete the manufacturing of certain WIP inventory and to assist in the transfer of assets to our Hauppauge facility. A smaller staff was kept through April 30, 2014 to complete engineering efforts and the transfer of assets.
- All inventories and equipment have been transferred from Quakertown to our Hauppauge facility and new contracts for TDL received since the beginning of 2014 are now being manufactured in our Hauppauge operation.
- We will no longer be incurring any costs from our Quakertown operation beginning June 2014. We should begin benefitting from the approximately $2 million in annual cost savings from the Quakertown facility starting in the 2014 third quarter, although these savings will be partially offset by lower revenues due to general business conditions.”
Mitchell Binder, added, “Our operating performance for the first quarter of 2014 continued to be affected by challenging business conditions in the defense industry, which have been particularly difficult for small defense subcontractors such as Orbit. We reported an operating loss at our ICS subsidiary and reduced profitability from our Power Group as a result of lower revenues. We expect operating performance at our Power Group, which had been a significant contributor to our profitability for the last several years, to improve beginning in the second quarter of 2014.”
Mr. Binder continued, “Our 2014 first quarter gross margin of 30.0% was affected by the costs related to the consolidation of our Quakertown and Hauppauge facilities and by reduced sales at our Power Group. Exclusive of the Quakertown operation, our gross margin was 35.1%, which was lower than recent historical standards. Nevertheless, our cost cutting measures give us the confidence that our margins will improve due to our operating leverage as business improves. That said, we still expect that the benefit of our significant cost cutting measures will be offset somewhat due to continued reduced revenues as we remain cautious that budget constraints have affected the timing and values of our expected legacy awards.”
Mr. Binder added, “Our backlog at March 31, 2014 was $9.6 million as compared to $10.1 million at December 31, 2013 due principally to reduced backlog at our ICS subsidiary. Our March 31, 2014 backlog for the remainder of our Electronics Group and our Power Group was comparable to the backlog at 2013 year end.”
David Goldman, Chief Financial Officer, noted, “Our financial condition remains strong. At March 31, 2014, total current assets were approximately $17.0 million versus total current liabilities of approximately $1.95 million for an 8.7 to 1 current ratio. Cash, cash equivalents and marketable securities as of March 31, 2014, aggregated approximately $1.7 million. To offset future federal and state taxes resulting from profits, we have approximately $8 million and $7 million in available federal and state net operating loss carryforwards, respectively, which should enhance future cash flow. We anticipated the operating loss for the current quarter when we recently negotiated the amendment to our banking agreement with our primary lender. Consequently, we were in compliance with our financial covenants at March 31, 2014 and as a result our Line of Credit was reclassified as a non-current liability at March 31, 2014.”
Mr. Goldman added, “During the quarter, we continued to pay down our debt and repurchase our shares. Since January 1, 2012, we have repurchased in excess of 368,000 shares of our stock in the marketplace at an average price of $3.55 per share. Our tangible book value at March 31, 2014 was $3.09 as compared to $3.32 per share at December 31, 2013 (this does not include any value for the potential deferred tax asset from our operating loss carryforwards that could offset future taxable income).”
Mr. Binder concluded, “We are confident that our new VPX technologies will gain traction in the marketplace. Our industry-leading VPXtra power supplies, GUI driven health monitors as well as backplanes and related items can be found on our recently launched web portal – vmevpx.com. Additionally, our Instrument Division currently has three new products going through a qualification stage with existing customers. We hope this new business will be added to our existing legacy business although the timing of awards, particularly in this environment, remains uncertain. We continue to operate our business in a very conservative manner and remain very cautious of challenging business conditions. We will continue our efforts to reduce costs, improve our operating margins and develop new products to layer onto our legacy business.”
Orbit International Corp., through its Electronics Group, is involved in the manufacture of customized electronic components and subsystems for military and nonmilitary government applications through its production facility in Hauppauge, New York and designs and manufactures combat systems and gun weapons systems, provides system integration and integrated logistics support and documentation control at its facility in Louisville, Kentucky. The Power Group, through its Behlman Electronics, Inc. subsidiary, manufactures and sells high quality commercial power units, AC power sources, frequency converters, uninterruptible power supplies and inverters. The Behlman COTS division designs, manufactures and sells highly reliable power units for industrial and military applications.
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 filings with the Securities and Exchange Commission including quarterly reports on Form 10-Q, current reports on Form 8-K, annual reports on Form 10-K and its other periodic reports. 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.