Orbit International Corp. Reports 2017 Third Quarter Results
Third Qtr. 2017 Net Income of $699,000 ($.19 per diluted share) v. $455,000 ($.11 per diluted share) in Prior Year Period
Nine Months 2017 Net Income of $1,236,000 ($.31 per diluted share) v. $564,000 ($.13 per diluted share) in Prior Yr. Period
Third Quarter and Nine Months Earnings Include $250,000 ($.07 and $.06 per share, respectively) Deferred Tax Benefit
Backlog at 9/30/17 at $24,183,000; up 86% over Year-End Backlog
Company Repurchases 563,253 of its common shares year-to-date in 2017; 13.5% of outstanding shares
Hauppauge, New York, November 9, 2017 - Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2017.
Third Quarter 2017 vs. Third Quarter 2016
• Net sales were $5,004,000, as compared to $5,484,000.
• Gross margin was 41.5%, as compared to 36.6%.
• Net income was $699,000 ($0.19 per diluted share), as compared to net income of $455,000 ($0.11 per diluted share).
• Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA, as adjusted) was $505,000 ($0.13 per diluted share), as compared to $507,000 ($0.12 per diluted share).
Nine Months 2017 vs. Nine Months 2016
• Net sales were $15,254,000, as compared to $15,204,000.
• Gross margin was 39.1%, as compared to 35.6%.
• Net income was $1,236,000 ($0.31 per diluted share), as compared to net income of $564,000 ($0.13 per diluted share).
• Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA, as adjusted) was $1,152,000 ($0.29 per diluted share), as compared to $736,000 ($0.17 per diluted share).
Backlog at September 30, 2017 was $24.2 million compared to $13.4 million at September 30, 2016. Backlog at December 31, 2016 was $13.0 million.
Mitchell Binder, President and CEO of Orbit International Corp. commented, “Once again, we had a strong operating quarter which was due to operating efficiencies, product mix and cost containment. These results were attained despite product shipment delays in excess of $1,100,000, due to technical issues that surfaced near the end of the quarter. These technical issues, however, have now been resolved and shipment of these products commenced in October 2017. We expect almost all of these shipments will be layered onto our scheduled deliveries for the fourth quarter. As a result, we expect higher revenues in the fourth quarter.”
Mr. Binder added, “Due to the large contract received by our Power Group in the third quarter, we expect it will have a positive impact on revenue and profitability through 2020 (although, as noted previously, our margins on this contract will be considerably lower than our historical margins). Consequently, we further reduced the valuation allowance on our deferred tax asset during the quarter which resulted in a $250,000 deferred tax benefit and an increase to our deferred tax asset to $550,000.”
Mr. Binder further added, “Our gross margin for the third quarter improved to 41.5% compared to gross margin of 36.6% from the comparable period of the prior year. Our higher gross profit was attributable to a higher gross margin from our Electronics Group due to higher revenues, product mix and operating efficiencies and despite a lower gross margin from our Power Group principally due to lower revenues. In addition to our improved gross margins, we continue to tightly manage our selling, general and administrative costs. These costs were only slightly higher than the prior comparable period despite incurring additional selling costs associated with our effort to drive our bid pipeline and revenues higher.”
Mr. Binder continued, “Our backlog at September 30, 2017 was $24,183,000 compared to $13,017,000 at December 31, 2016. However, our backlog at September 30, 2017 includes two letter subcontracts totaling $891,000 received by our Electronics Group out of the expected $2,321,000 in related purchase orders. Had the total purchase orders been placed during the quarter, backlog would have been approximately $25,613,000 at September 30, 2017, an increase of approximately 96.8% compared to year end. We expect these orders to be placed no later than the end of the fourth quarter (once negotiations are completed) and deliveries to commence in the first quarter of 2018. Furthermore, our Electronics Group continues to have a firm bid pipeline including several contracts that we expect to be received prior to the end of the year.”
Mr. Binder added, “Aside from the $21,709,300 IDIQ contract received by our Power Group in the third quarter, our bid pipeline for our COTS and VPX products is growing. There continues to be accelerating demand for our VPX technology as we continue to receive pre-production orders for our power supplies. We continue to make strategic alliances with several prime contractors utilizing our technology and are hopeful that the value of orders for these VPX products will steadily increase as programs move to their production stage in 2018.”
David Goldman, Chief Financial Officer, noted, “Our financial condition remains strong. At September 30, 2017, total current assets were approximately $14.4 million versus total current liabilities of approximately $1.8 million for a 7.8 to 1 current ratio. Cash, cash equivalents and marketable securities as of September 30, 2017, aggregated approximately $1.1 million, which amount reflects the purchase of 563,253 shares (approximately $2.3 million) of our common stock during the first nine months of 2017. To offset future federal and state taxes resulting from profits, we have approximately $9.4 million and $0.7 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 September 30, 2017 was $3.68 as compared to $3.54 at June 30, 2017 and $3.42 at December 31, 2016. (Note that tangible book value does not include any additional value for the remaining reserved deferred tax asset). During the quarter ending September 30, 2017, we purchased approximately 349,000 shares (approximately $1,498,000) of our common stock at an average price of $4.29 per share.”
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. As stated earlier, product technical issues resulted in certain shipments being delayed from the third to the fourth quarter. Consequently, we are expecting higher revenue levels in the fourth quarter. We currently have no bank debt and we are therefore able to use our operating cash flow to repurchase our shares. We have purchased a total of 563,253 shares of our stock since January 1, 2017 which is approximately 13.5% of our outstanding shares. Finally, the recent large award by our Power Group, combined with the strong operating performance from our Electronics Group over the past several quarters puts our Company on a positive track to further enhance our operating performance in 2018.”
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. 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 and a facility in Louisville, KY dedicated to the design and manufacture of gun weapons systems.
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 as well as Orbit’s prior 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.
President & Chief Executive Officer