ORBIT INTERNATIONAL CORP. REPORTS 2018 THIRD QUARTER RESULTS
Third Qtr. 2018 Net Income of $588,000 ($0.16 per diluted share) v. $699,000 ($0.19 per diluted share) in Prior Year Period
Nine Months 2018 Net Income of $1,753,000 ($0.49 per diluted share) v. $1,236,000 ($0.31 per diluted share) in Prior Year Period
Current Nine Month Period Includes $573,000 ($0.16 per diluted share) Deferred Tax Benefit Resulting From Refundable AMT Credit Under New Tax Law
Prior Third Quarter and Nine Month Period Includes $250,000 ($.07 and $.06 respectively) Deferred Tax Benefit
Three Months and Nine Months EBITDA Up 26.7% and 15.7% Respectively Over Comparable Prior Year Periods
CAATS Deliveries Push Third Quarter Sales Up 26.5% Over Prior Comparable Period
Additional CAATS Order Expected By First Quarter 2019
Backlog at 9/30/18 at $22,523,000 v. $26,630,000 at 12/31/17, as adjusted
Hauppauge, New York, November 8, 2018 – Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2018.
Third Quarter 2018 vs. Third Quarter 2017
- Net sales were $6,329,000, as compared to $5,004,000.
- Gross margin was 34.6%, as compared to 41.5%.
- Net income was $588,000 ($0.16 per diluted share), as compared to net income of $699,000 ($0.19 per diluted share).
- Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA, as adjusted) was $640,000 ($0.18 per diluted share), as compared to $505,000 ($0.13 per diluted share).
Nine Months 2018 vs. Nine Months 2017
- Net sales were $16,710,000, as compared to $15,254,000.
- Gross margin was 36.6%, as compared to 39.1%.
- Net income was $1,753,000 ($0.49 per diluted share), as compared to net income of $1,236,000 ($0.31 per diluted share).
- Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA, as adjusted) was $1,333,000 ($0.37 per diluted share), as compared to $1,152,000 ($0.29 per diluted share).
- Backlog at September 30, 2018 was $22.5 million compared to $25.9 million at June 30, 2018 and $26.6 million at December 31, 2017, as adjusted.
Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our third quarter results were highlighted by strong operating performance from our Orbit Electronics Group (OEG) and improving performance from our Orbit Power Group (OPG). Our net income for the nine months ended September 30, 2018 was $1,753,000 compared to $1,236,000 for the prior comparable period. Our net income for the current period was positively impacted by a $573,000 deferred tax benefit resulting from a future cash refund of our alternative minimum tax credit (AMT) credit pursuant to the Tax Cuts and Jobs Act of 2017. Our prior period net income was positively impacted by a $250,000 deferred tax benefit. Our EBITDA for the nine months ended September 30, 2018 was $1,333,000 compared to $1,152,000 for the prior comparable period, an increase of 15.7% which was attributable to an increase in sales and overall tight management of costs.”
Mr. Binder added, “Our sales for the nine months ended September 30, 2018 increased from the comparable period of the prior year due to an increase in sales from both our OEG and OPG. Shipments of the OPG’s Common Aircraft Armament Test Sets (CAATS) for the U.S. Navy increased as expected during the quarter. Based on delivery schedules, shipments of these CAATS units should further increase in the fourth quarter. In addition, pursuant to delivery schedules, shipments of CAATS units should continue throughout 2019. .”
Mr. Binder further added, “Our gross margin for the nine months ended September 30, 2018 was 36.6% compared to 39.1% for the comparable period of the prior year. Our lower gross margin was attributable to a lower gross profit from our OPG due to the increase in sales of CAATS units which have a lower gross margin than our other products. The lower gross margin from the OPG was partially offset by a higher gross margin from the OEG due to higher revenues, operating efficiencies and product mix. Selling, general and administrative costs decreased during the nine months ended September 30, 2018 due to our tight management of costs.”
Binder continued, “Our backlog at September 30, 2018 was approximately $22,523,000 compared to approximately $26,630,000 at December 31, 2017, as adjusted. Backlog, as initially reported at December 31, 2017, was reduced by approximately $1,255,000 pursuant to the new revenue recognition rules promulgated by ASC 606. The decrease in our backlog from year end was expected as shipments on the CAATS units increased during the quarter per our delivery schedule with the U.S. Navy. Backlog for the OEG also decreased at quarter end due to firm shipments in the third quarter which exceeded bookings. However, several follow-on orders on existing programs are expected in the fourth quarter. These follow-on orders include the recently announced order for approximately $780,000 for a suite of our equipment that is used on a major military aviation program. This order is included in total October OEG bookings, which exceeded $1,200,000 for the month.”
Mr. Binder further continued, “Our outlook for bookings for the remainder of 2018 and 2019 remains positive. As mentioned, the OEG recently booked in excess of $1,200,000 for the month of October and several other follow-on opportunities are expected to be received during this quarter. In addition, the OEG is working with its customer on an opportunity regarding the incorporation of its product in a significant foreign military sale. Furthermore, our OPG has commenced discussions with the U.S. Navy for a follow-on award for its CAATS units under the IDIQ contract. Although the timing of these awards is always an uncertainty, we are expecting the award, estimated at approximately $3,000,000 to be received no later than the end of the first quarter of 2019. In addition, bookings for our VPX products through October 2018 is up 62% from the prior comparable period. We continue to receive pre-production awards on several new programs and new opportunities utilizing our VPX technology are accelerating. We are confident that our engineering team will remain at the forefront of this technology, thereby positioning us to increase our market share in a growing segment of the defense marketplace.”
David Goldman, Chief Financial Officer noted, “Our tangible book value per share at September 30, 2018 was $4.41 as compared to $4.25 at June 30, 2018 and $3.83 at December 31, 2017 (Note-tangible book value per share does not include any additional value for our remaining reserved deferred tax asset). Our financial condition continues to be strong. At September 30, 2018, total current assets were approximately $16.9 million versus total current liabilities of approximately $2.4 million for a 7.0 to 1 current ratio. Cash and cash equivalents as of September 30, 2018, aggregated approximately $1.6 million. In addition, we paid off the $500,000 outstanding balance under our line of credit. To offset future federal and state taxes resulting from profits, we have approximately $8.4 million and $0.6 million in available federal and New York State net operating loss carryforwards, respectively.”
Mr. Goldman, concluded, “As previously reported, during the nine months ended September 30, 2018, we reduced the entire valuation allowance that we placed on our AMT credit, which resulted in a $573,000 increase to our net deferred tax assets and a corresponding deferred tax benefit. The new tax law changes eliminated the AMT credit but allows for any unused credits to be refunded. We estimate that the $573,000 of unused AMT credit will be refunded to us in 2019 and 2020 when we expect to file our 2018 and 2019 federal tax returns.
Mr. Binder concluded, “Because our revenue is tied to our delivery schedules stated in our contracts, it is difficult to judge our performance on a quarterly basis. However, we are pleased with our performance for the first nine months of 2018 which we expect we can build upon, particularly with deliveries of the CAATS units picking up in the fourth quarter and into 2019. As previously stated, we are working with a customer on a significant opportunity for our OEG and our OPG is expecting a new CAATS order over the next few months. We continue to strive to sustain the continued growth of our VPX technology and to capture new opportunities for our COTS power supplies. We are confident we are well positioned to obtain good operating performance for the remainder of 2018 and into 2019.”
Orbit International Corp., through its Electronics Group, is involved in the development and manufacture of custom electronic device and subsystem solutions for military and nonmilitary government 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 Thousand Oaks, CA.
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.
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