Orbit International Corp. Reports 2018 Year End Results
2018 Net Income of $2,225,000 ($0.62 per diluted share) v. $1,797,000 ($0.47 per diluted share) in Prior Year
Fourth Qtr. 2018 Net Income of $472,000 ($0.13 per diluted share) v. $561,000 ($0.16 per diluted share) in Prior Yr. Period
Current Full Year Earnings Include $573,000 ($0.16 per diluted share) Deferred Tax Benefit
Prior Full Year Earnings Include $250,000 ($0.07 per diluted share) Deferred Tax Benefit
Backlog at 12/31/18 at $20,566,000
Company Repurchases 47,557 of its common shares during 2018; 610,810 shares repurchased since 1/1/17 (14.6% of outstanding shares)
Company Announces Special Annual Cash Dividend of $0.03 Per Common Share
Company Announces Cash Dividend of $0.01 Per Common Share for the First Quarter of 2019
Hauppauge, New York, March 6, 2019 – Orbit International Corp. (OTC PINK:ORBT) today announced results for the fourth quarter and year ended December 31, 2018.
The Company also announced that its Board of Directors, based on the Company’s 2018 financial performance and current cash position, declared a special annual cash dividend of $0.03 per share. In addition, the Company’s Board of Directors also declared a quarterly cash dividend of $0.01 per share. Both declared dividends are payable to shareholders of record at March 29, 2019 with a cash payment date of April 5, 2019.
Fourth Quarter 2018 vs. Fourth Quarter 2017
• Net sales were $7,948,000, as compared to $5,597,000.
• Gross margin was 25.5%, as compared to 38.8%.
• Net income was $472,000 ($0.13 per diluted share), as compared to net income of $561,000 ($0.16 per diluted share).
• Earnings before interest, taxes, depreciation and amortization and stock-based compensation (EBITDA, as adjusted) was $514,000 ($0.14 per diluted share), as compared to $602,000 ($0.17 per diluted share).
Full Year 2018 vs. Full Year 2017
• Net sales were $24,658,000, as compared to $20,851,000.
• Gross margin was 33.0%, as compared to 39.0%.
• Net income was $2,225,000 ($0.62 per diluted share) as compared to $1,797,000 ($0.47 per diluted share). Net income for the current and prior year periods include a deferred tax benefit of $573,000 ($0.16 per diluted share) and $250,000 ($0.07 per diluted share), respectively.
• Earnings before interest, taxes, depreciation and amortization and stock-based compensation (EBITDA, as adjusted) was $1,847,000 ($0.51 per diluted share), as compared to $1,754,000 ($0.46 per diluted share).
• Backlog at December 31, 2018 was $20.6 million as compared to $22.5 million at September 30, 2018 and $26.6 million at December 31, 2017, as adjusted.
Mitchell Binder, President and CEO of Orbit International Corp. commented, “Once again, we had strong operating performance in 2018. Our net income for the twelve months ended December 31, 2018 increased to $2,225,000, an approximately 24% increase from the prior year. Our net income for the current period was positively impacted by a $573,000 deferred tax benefit resulting from a future tax refund of our alternative minimum tax credit pursuant to the Tax Cuts and Jobs Act of 2017. Our prior year net income was positively impacted by a $250,000 deferred tax benefit. Furthermore, our pretax income for the year increased by 8.1%. This was accomplished through higher sales with expected lower gross margins, along with tight management of costs and operating efficiencies.”
Mr. Binder added, “Our sales for the twelve months ended December 31, 2018 increased from the comparable period of the prior year due to an increase in sales from our Orbit Power Group (OPG), which was partially offset by lower sales from our Orbit Electronics Group (OEG). The increase in sales from our OPG was due principally to the shipment of Common Aircraft Armament Test Sets (CAATS), which commenced at the end of the second quarter of 2018. The decrease in sales from our OEG was due to lower revenues in the fourth quarter based on delivery schedules.”
Binder further added, “Our gross margin for the full year ended December 31, 2018 decreased to 33.0% compared to 39.0% in the prior year. This decrease was expected due to the shipment of CAATS units, which commenced during the year and which have a lower gross margin than our other products. Furthermore, despite higher sales, our gross margin in the current fourth quarter decreased to 25.5% from 38.8% in the comparable period of the prior year principally due to a significant percentage of CAATS units accounting for our current fourth quarter sales as well as lower sales from our OEG during the quarter, which have historically higher gross margins. Gross margin for the OEG also decreased in the fourth quarter from the prior comparable period due to lower sales, although margins remained strong for the full year at the segment.”
Mr. Binder continued, “Our backlog at December 31, 2018 was $20,566,000 compared to $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 backlog from the prior year was expected and principally due to shipments of the CAATS units which commenced in the second half of 2018 per our delivery schedule with the U.S. Navy.”
Mr. Binder added, “We ended 2018 with a strong booking quarter which approximated $6,000,000 and was highlighted by firm bookings by our OEG. Our outlook for 2019 for our OEG again looks strong with significant bookings expected in the second half of the year. In addition to our expected follow-on contracts, we are expecting one significant order for a new opportunity that we have been pursuing since the second half of 2018. In addition, our OPG is currently in discussions with the U.S. Navy for an additional award of CAATS units, estimated at approximately $3,000,000, which we hope to receive in the second quarter of 2019, although timing is always an uncertainty. In addition, demand for our power supplies incorporating our VPX technology remains promising as our VPX orders increased in 2018 by more than 90% over orders received in the prior year. We continue to receive an increasing number of pre-production orders as our sales and engineering teams are working very aggressively to remain at the forefront of this technology. We are hopeful that the value of orders for these VPX products will further increase in 2019 as programs move to the production stage.”
David Goldman, Chief Financial Officer, noted, “At December 31, 2018, our cash and cash equivalents aggregated approximately $4.5 million and our financial condition remained strong as evidenced by our 6.5 to 1 current ratio. Our cash and cash equivalent balance at December 31, 2018 was positively impacted by our net income for the current period as well as a change in working capital components. The increase in our accounts payable balance was primarily due to the purchase of inventory relating to the OPG’s CAATS units. To offset future federal and state taxes resulting from profits, we have approximately $8.1 million and $0.6 million in available federal and New York State net operating loss carryforwards, respectively, which should enhance future cash flow.”
Mr. Goldman concluded, “Our tangible book value at December 31, 2018 was $4.52 as compared to $4.41 at September 30, 2018 and $3.83 at December 31, 2017. (Note that tangible book value does not include any additional value for the remaining reserved deferred tax asset).
Mr. Binder concluded, “Because our revenue is tied to the delivery schedules stated in our contracts, it is difficult to judge our performance on a quarterly basis. However, we completed another successful year in 2018 with improved profitability and excellent operating cash flow. We instituted the first quarterly cash dividend in our history during 2018 and our Board also declared our first special annual cash dividend to our shareholders. We currently have no bank debt. We also repurchased 47,557 shares in 2018 and 610,810 shares since January 1, 2017, approximately 14.6% of the outstanding shares. We believe our backlog is firm and we are well positioned with our customers for future opportunities. Consequently, we remain very encouraged by our business outlook and expected operating performance for 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.
President & Chief Executive Officer