-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uge2QQiif+OR3MZuWtK0d2P8WVPoEP6YsWeG11fvbdImDRU/4Mn2nHSbLRUcNU+M v157syD23mOhMGYr9HVS0w== /in/edgar/work/20000628/0000950133-00-002717/0000950133-00-002717.txt : 20000920 0000950133-00-002717.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950133-00-002717 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 20000628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBITAL SCIENCES CORP /DE/ CENTRAL INDEX KEY: 0000820736 STANDARD INDUSTRIAL CLASSIFICATION: [3812 ] IRS NUMBER: 061209561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-14279 FILM NUMBER: 663560 BUSINESS ADDRESS: STREET 1: 21700 ATLANTIC BLVD CITY: DULLES STATE: VA ZIP: 20166 BUSINESS PHONE: 7034065000 MAIL ADDRESS: STREET 1: 21700 ATLANTIC BLVD STREET 2: 21700 ATLANTIC BLVD CITY: DULLES STATE: VA ZIP: 20166 FORMER COMPANY: FORMER CONFORMED NAME: ORBITAL SCIENCES CORP II DATE OF NAME CHANGE: 19900212 10-Q/A 1 e10-qa.txt FORM 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended JUNE 30, 1996 ORBITAL SCIENCES CORPORATION Commission file number 0-18287
DELAWARE 06-1209561 - ------------------------------------------------- ------------------------------------------ (State of Incorporation) (IRS Identification number) 21700 ATLANTIC BOULEVARD DULLES, VIRGINIA 20166 (703) 406-5000 - ------------------------------------------------- ------------------------------------------ (Address of principal executive offices) (Telephone number)
The registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. As of July 31, 1996, 26,974,891 shares of the registrant's common stock were outstanding. 1 2 EXPLANATORY NOTE Orbital Sciences Corporation ("Orbital") has determined to restate its annual consolidated financial statements and its condensed consolidated quarterly financial statements for 1996 and 1995. This amendment includes in Item 1 such restated condensed consolidated financial statements for the three and six months ended June 30, 1996, and other information relating to such restated condensed consolidated financial statements. Item 2 includes Orbital's amended and restated discussion and analysis of financial condition and results of operations. Except for Items 1 and 2 and Exhibits 11 and 27, no other information included in the original report on Form 10-Q is amended by this amendment. For current information regarding risks, uncertainties and other factors that may affect Orbital's future performance, please see "Outlook: Issues and Uncertainties" included in Item 7 of Orbital's Annual Report on Form 10-K for the year ended December 31, 1999. 2 3 PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1996 1995 --------------- --------------- (RESTATED) (RESTATED) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 14,112 $ 15,317 Short-term investments, at market 10,113 19,713 Receivables, net 126,506 116,761 Inventories, net 38,475 38,527 Deferred income taxes and other assets 5,817 6,886 --------------- --------------- TOTAL CURRENT ASSETS 195,023 197,204 PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $59,074 and $53,067, respectively 94,850 91,538 SATELLITE SYSTEMS, AT COST, LESS ACCUMULATED depreciation of $958 and $547, respectively 19,667 14,363 INVESTMENTS IN AFFILIATES 84,137 75,020 GOODWILL, less accumulated amortization of $15,203 and $13,697, respectively 74,660 75,395 DEFERRED INCOME TAXES AND OTHER ASSETS 18,458 19,380 --------------- --------------- TOTAL ASSETS $ 486,795 $ 472,900 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Short-term borrowings and current portion of long-term obligations $ 42,513 $ 11,907 Accounts payable 18,548 25,903 Accrued expenses 34,798 36,563 Payable to subcontractors 5,592 11,552 Deferred revenues 31,659 32,501 --------------- --------------- TOTAL CURRENT LIABILITIES 133,110 118,426 LONG-TERM OBLIGATIONS, net of current portion 92,351 96,990 OTHER LIABILITIES 17,359 19,740 --------------- --------------- TOTAL LIABILITIES 242,820 235,156 NON-CONTROLLING INTERESTS IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES (875) (422) COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred Stock, par value $.01; 10,000,000 shares authorized: Series A Special Voting Preferred Stock, 1 share authorized and outstanding Class B Preferred Stock, 10,000 shares authorized and outstanding -- -- Common Stock, par value $.01; 40,000,000 shares authorized, 26,926,758 and 26,766,029 shares outstanding, after deducting 15,735 shares held in treasury 269 268 Additional paid-in capital 248,738 247,580 Unrealized gains (losses) on short-term investments (12) 68 Cumulative translation adjustment (3,771) (3,356) Accumulated deficit (374) (6,394) --------------- --------------- TOTAL STOCKHOLDERS' EQUITY 244,850 238,166 --------------- --------------- $ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 486,795 472,900 =============== ===============
See accompanying notes to condensed consolidated financial statements. 3 4 ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE THREE MONTHS ENDED JUNE 30, --------------------------------- 1996 1995 --------------- -------------- (RESTATED) (RESTATED) Revenues $ 115,063 $ 81,994 Costs of goods sold 82,727 61,205 --------------- -------------- Gross Profit 32,336 20,789 Research and development expenses 5,534 5,282 Selling, general and administrative expenses 19,829 15,660 Amortization of goodwill 782 819 --------------- -------------- Income (loss) from operations 6,191 (972) Net interest expense (444) (818) Equity in earnings (losses) of affiliates (2,696) (65) Non-controlling interests in (earnings) losses of consolidated subsidiaries 341 -- --------------- -------------- Income (loss) before provision (benefit) for income taxes 3,392 (1,855) Provision (benefit) for income taxes 338 (423) --------------- -------------- Net income (loss) $ 3,054 $ (1,432) =============== ============== Net income (loss) per common and common equivalent share $ 0.11 $ (0.06) =============== ============== Shares used in computing net income (loss) per common and common equivalent share 27,378,722 25,307,950 =============== ============== Net income (loss) per common share, assuming dilution $ 0.11 $ (0.06) =============== ============== Shares used in computing net income (loss) per common share, assuming dilution 31,303,789 25,307,950 =============== ==============
See accompanying notes to condensed consolidated financial statements. 4 5 ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE SIX MONTHS ENDED JUNE 30, --------------------------------- 1996 1995 --------------- -------------- (RESTATED) (RESTATED) Revenues $ 219,864 $ 171,197 Costs of goods sold 154,464 124,836 --------------- -------------- Gross Profit 65,400 46,361 Research and development expenses 12,438 10,334 Selling, general and administrative expenses 39,731 30,827 Amortization of excess of purchase price over net assets acquired 1,580 1,558 --------------- -------------- Income from operations 11,651 3,642 Net interest expense (622) (1,359) Equity in earnings (losses) of affiliates (4,938) 362 Non-controlling interests in (earnings) losses of consolidated subsidiaries 598 -- --------------- -------------- Income before provision for income taxes and cumulative effect of accounting changes 6,689 2,645 Provision for income taxes 669 2,688 --------------- -------------- Income (loss) before cumulative effect of accounting changes 6,020 (43) Cumulative effect of accounting changes, net of taxes -- (2,377) --------------- -------------- Net income (loss) $ 6,020 $ (2,420) =============== ============== Net income (loss) per common and common equivalent share: Income (loss) before cumulative effect of accounting changes $ 0.22 $ (0.00) Cumulative effect of accounting changes -- (0.10) --------------- -------------- $ 0.22 $ (0.10) =============== ============== Shares used in computing net income (loss) per common and common equivalent share 27,270,385 25,041,485 =============== ============== Net income (loss) per common share, assuming dilution: Income (loss) before cumulative effect of accounting changes $ 0.22 $ (0.00) Cumulative effect of accounting changes -- (0.10) --------------- -------------- $ 0.22 $ (0.10) =============== ============== Shares used in computing net income (loss) per common share, assuming dilution 31,260,083 25,041,485 =============== ==============
See accompanying notes to condensed consolidated financial statements. 5 6 ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED; IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30, --------------------------------- 1996 1995 --------------- -------------- (RESTATED) (RESTATED) CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 6,020 $ (2,420) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Depreciation and amortization expenses 11,628 10,370 Equity in (earnings) losses of affiliates 4,938 74 Non-controlling interests in earnings (losses) of consolidated subsidiaries (598) -- Gain (loss) on sale of fixed assets and investments (17) -- Cumulative effect of accounting change -- 2,377 Foreign currency translation adjustment (415) 994 CHANGES IN ASSETS AND LIABILITIES: (Increase) decrease in current and non-current assets (8,409) 14,480 (Increase) decrease in current and non-current liabilities (19,189) (28,502) --------------- -------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,042) (2,627) --------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (12,908) (10,275) Investments in Satellite Systems (5,715) -- Proceeds from sales of fixed assets -- 125 Purchases, sales and maturities of investment securities, net 9,569 (8,773) Investments in affiliates (13,235) (9,689) --------------- -------------- NET CASH USED IN INVESTING ACTIVITIES (22,289) (28,612) --------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings net of (repayments) 30,200 (16,435) Principal payments on long-term obligations (4,114) (2,933) Proceeds from issuance of long-term obligations -- 21,143 Net proceeds from issuances of common stock 1,040 33,246 Adjustment to recast pooled companies' year end -- (1,050) --------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 27,126 33,971 --------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,205) 2,732 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 15,317 27,919 --------------- -------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,112 $ 30,651 =============== ==============
See accompanying notes to condensed consolidated financial statements. 6 7 ORBITAL SCIENCES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 AND 1995 (UNAUDITED) BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation thereof. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the Securities and Exchange Commission (the "Commission"). Although the Company believes that the disclosures provided are adequate to make the information presented not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1995. Operating results for the three- and six-month periods ended June 30, 1996 are not necessarily indicative of results expected for the full year. Orbital Sciences Corporation is hereafter referred to as "Orbital" or the "Company." (1) RESTATEMENT Management has determined to restate its previously issued consolidated financial statements for 1996 and 1995 with respect to its accounting treatment for certain matters, including among other things, its accounting for equity method investments, capitalized costs and certain other matters. For a full description of the restatements matters, refer to Notes 1A and 14 to the Company's consolidated financial statements included in the Company's 1996 Annual Report on Form 10-K/A previously filed with the Commission. The effect of the restatement matters on the Company's previously reported revenues, gross profit, income (loss) from operations, net income (loss) and net income (loss) per common and dilutive share for the periods is as follows:
QUARTER ENDED SIX MONTHS ENDED (in thousands, except share data) JUNE 30, JUNE 30, --------------------- --------------------- 1996 RESTATED: Revenues $ 115,063 $ 219,864 Gross profit 32,336 65,400 Income from operations 6,191 11,651 Net income 3,054 6,020 Net income per common share 0.11 0.22 Net income per common share, assuming dilution 0.11 0.22
7 8
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- --------------------- 1996 AS PREVIOUSLY REPORTED: Revenues $ 116,512 $ 221,406 Gross profit 32,888 65,200 Income from operations 7,324 13,196 Net income 3,839 6,967 Net income per common share 0.14 0.26 Net income per common share, assuming dilution 0.14 0.26 1995 RESTATED: Revenues $ 81,994 $ 171,197 Gross profit 20,789 46,361 Income (loss) from operations (972) 3,642 Net loss (1,432) (2,420) Net loss per common and dilutive share (0.06) (0.10) 1995 AS PREVIOUSLY REPORTED: Revenues $ 81,766 $ 170,741 Gross profit 20,730 46,243 Income (loss) from operations (972) 3,642 Net loss (1,626) (2,768) Net loss per common and dilutive share (0.07) (0.11)
(2) INVENTORIES Inventories consist of components inventory, work-in-process inventory and finished goods inventory and are generally stated at the lower of cost or net realizable value on a first-in, first-out or specific identification basis. Components inventory consists primarily of components and raw materials purchased to support future production efforts. Work-in-process inventory consists primarily of (i) costs incurred under U.S. Government fixed-price contracts accounted for using the percentage of completion method of accounting applied on a units of delivery basis and (ii) partially assembled commercial products, and generally includes direct production costs and certain allocated indirect costs (including an allocation of general and administrative costs). Work-in-process inventory has been reduced by contractual progress payments received. Finished goods inventory consists of fully assembled commercial products awaiting shipment. (3) COMMON STOCK AND INCOME PER SHARE Income per common and common equivalent share is calculated using the weighted average number of common and common equivalent shares, to the extent dilutive, outstanding during the periods. Income per common share assuming full dilution is calculated using the weighted average number of common and common equivalent shares outstanding during the periods plus the effects of an assumed conversion of the Company's 6 3/4% convertible subordinated debentures (the "Convertible Debentures"), 8 9 after giving effect to all net income adjustments that would result from the assumed conversion. Any reduction of less than three percent in the aggregate has not been considered dilutive in the calculation and presentation of income per common share assuming full dilution. (4) INCOME TAXES The Company has recorded its interim income tax provision based on estimates of the Company's effective tax rate expected to be applicable for the full fiscal year. Estimated effective rates recorded during interim periods may be periodically revised, if necessary, to reflect current estimates. (5) STOCKHOLDERS' EQUITY AND COMMON STOCK On July 25, 1996, the Company called all its outstanding Convertible Debentures for redemption on August 14, 1996. Pursuant to the terms of the indenture governing the Convertible Debentures, the holders of the Convertible Debentures may redeem their Debentures for a cash payment of (i) $1,000 in principal, plus (ii) a premium of $47.25, plus (iii) $30.56 of interest accrued from March 1, 1996 to the date of redemption for each $1,000 principal amount of Convertible Debentures. Alternatively, at their option, the holders may convert their Convertible Debentures into Orbital Common Stock at a price of $14.375 per share, or approximately 69.565 shares for each $1,000 principal amount of Convertible Debentures. The Company has entered into a standby underwriting agreement with an investment bank whereby the investment bank has agreed, subject to certain customary conditions, to purchase from the Company shares of its Common Stock to provide proceeds to the Company to satisfy any redemption by the holders of the Convertible Debentures. In June 1996, Magellan Corporation ("Magellan"), a wholly owned subsidiary of the Company, adopted its 1996 Stock Option Plan (the "Magellan Plan"), pursuant to which options to purchase up to 12.3% of Magellan's common stock (on a fully diluted basis) may be granted to Magellan and Orbital employees. In July 1996, options were granted for approximately six million shares of Magellan common stock under the Magellan Plan. (6) INVESTMENTS IN AFFILIATES On August 7, 1996, ORBCOMM Global, L.P. ("ORBCOMM Global") completed a private financing involving the issuance and sale of $170,000,000 Senior Notes (the "Notes") to certain institutional investors. Net proceeds from the sale of the Notes (approximately $164,500,000) will be applied to (i) the design, construction, launch, operation and marketing of ORBCOMM Global's satellite-based, two-way data communications network (the "ORBCOMM System") and related development, operating and management expenses (including cost contingencies) and (ii) the first two years of fixed interest on the Notes. The obligations of ORBCOMM Global under the Notes are nonrecourse to the Company. 9 10 The Notes have a term of eight years and generally may not be redeemed prior to August 15, 2001. The Notes bear interest at the fixed rate of 14% per annum. In addition, the Notes provide for revenue participation interest in an aggregate amount of 5% of the ORBCOMM System revenues, payment of which may be deferred by ORBCOMM Global to the extent that certain fixed charge ratios are not met. The obligations under the Notes are guaranteed, jointly and severally, by the Company's majority-owned subsidiary, Orbital Communications Corporation ("OCC"), Teleglobe Mobile Partners ("Teleglobe"), ORBCOMM USA, L.P. and ORBCOMM International, L.P. Such guarantees are also nonrecourse to the Company. Upon closing of the financing, OCC and Teleglobe contributed the balance of their capital commitments in ORBCOMM Global for an aggregate equity investment of approximately $160 million. The Company and Teleglobe have agreed to commit additional capital in an amount up to $15 million each in the event of certain limited contingencies in the future. (7) DEBT The Company maintains several short-term borrowing arrangements to meet working capital requirements. During the quarter ended June 30, 1996, the Company modified two of these agreements to provide for additional borrowing capacity. Orbital's demand line of credit was increased from $7 million to $25 million and remains unsecured. Magellan's existing line of credit was increased from approximately $5 million to $10 million and remains collateralized by all of Magellan's assets. Orbital's $20 million unsecured loan agreement with The Northwestern Mutual Life Insurance Company was amended as of July 31, 1996 to waive non-compliance with a financial ratio requirement, as well as to amend certain financial covenants and to permit the completion of the ORBCOMM System financing (see Note (4) above). In connection with this amendment, the interest rate on the note was increased from 10 1/2% to 11 1/2% effective July 1, 1996. (8) RECLASSIFICATIONS Certain reclassifications have been made to the 1995 condensed consolidated financial statements to conform to the 1996 condensed consolidated financial statement presentation. The November 1995 acquisition of MacDonald, Dettwiler and Associates Ltd. was recorded using the pooling of interests method of accounting for business combinations and, accordingly, Orbital's 1995 historical financial statements have been restated to reflect this transaction. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 Certain statements included in this discussion constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, factors such as general economic and business conditions, product performance, market acceptance of products and technologies, and dependence upon long-term contracts with commercial and government customers impact the Company's revenues, expenses and gross profit from period to period. (Refer to Exhibit 99, previously filed, for further discussion of some of these factors.) The Company's products and services are grouped into three business sectors: Space Infrastructure Systems, Satellite Access Products, and Satellite-Provided Services. Space Infrastructure includes Launch Systems, Satellites and Space Systems, Electronics and Sensor Systems, and Ground Systems and Software. The Company's Satellite Access Products sector consists of satellite-based navigation and communications products. The Company's Satellite-Provided Services sector includes satellite-based, two-way mobile data communications services and Earth imagery remote sensing services. Certain of the 1996 and 1995 financial information has been restated. See Note 1 to the condensed consolidated financial statements. REVENUES. Orbital's revenues for the three-month periods ended June 30, 1996 and 1995 were $115,063,000 and $81,994,000, respectively. Revenues for the six-month periods ended June 30, 1996 and 1995 were $219,864,000 and $171,197,000, respectively. SPACE INFRASTRUCTURE SYSTEMS Revenues from the Company's space infrastructure systems totaled $96,050,000 and $66,729,000 for the three months ended June 30, 1996 and 1995, respectively, and $177,618,000 and $140,219,000 for the six months ended June 30, 1996 and 1995, respectively. Space infrastructure revenues include sales to ORBCOMM Global, L.P. ("ORBCOMM") of $15,762,000 and $3,395,000 for the second quarter of 1996 and 1995, respectively. Infrastructure sales to ORBCOMM for the six month periods ended June 30, 1996 and June 30, 1995 were $29,470,000 and $3,395,000, respectively. 11 12 Revenues from the Company's launch systems increased to $26,089,000 in the second quarter of 1996, from $17,549,000 in the second quarter of 1995. Launch systems revenues were $45,329,000 for the six months ended June 30, 1996 as compared to $34,638,000 for the comparable 1995 period. The significant increase in revenues in 1996 is attributable primarily to the resumption of production and launch of the Company's Pegasus XL launch vehicle. Orbital has successfully completed all three of its Pegasus launches to date in 1996, consisting of two Pegasus XL launches and one standard Pegasus launch. Additionally, revenues generated from the Company's Taurus launch vehicle also increased as a result of work performed on two orders received subsequent to June 30, 1995. For the three months ended June 30, 1996, satellite systems revenues increased to $28,000,000 from $14,382,000 in the 1995 quarter. Satellite systems revenues were $50,541,000 for the six months ended June 30, 1996 as compared to $28,901,000 for the comparable 1995 period. The increase in satellite systems sales is primarily due to additional revenues generated from new satellite orders from government and commercial customers, including 1996 sales to ORBCOMM. Revenues from electronics and sensors systems were approximately $21,367,000 for the three months ended June 30, 1996 as compared to $17,621,000 for the comparable 1995 period. Electronics and sensors systems revenues were $37,849,000 for the six months ended June 30, 1996 as compared to $38,869,000 for the comparable 1995 period. The increase in revenues for the quarter ending June 30, 1996 as compared to the quarter ending June 30, 1995 is primarily a result of work performed on defense electronics and transportation management systems orders received during 1996. Revenues from the Company's satellite ground systems and other software products were $20,594,000 in the second quarter of 1996 as compared to $17,177,000 for the comparable 1995 period. Satellite ground systems revenues were $43,899,000 for the six months ended June 30, 1996 as compared to $37,811,000 for the comparable 1995 period. The 1996 increase in revenues reflects work performed on new contract awards received in 1995. SATELLITE ACCESS PRODUCTS Revenues from sales of navigation and communications products increased to $18,688,000 for the second quarter of 1996 as compared to $12,341,000 for the comparable 1995 period, primarily due to a substantial increase in unit sales offset, in part, by lower unit prices, for GPS navigators. Satellite access product revenues were $41,456,000 for the six months ended June 30, 1996 as compared to $23,927,000 for the comparable 1995 period. SATELLITE-PROVIDED SERVICES The Company's satellite-based services include communications and information services. Orbital's subsidiary, Orbital Imaging Corporation ("ORBIMAGE"), is seeking 12 13 to develop and market a broad range of satellite remote sensing-based information services. The Company's ORBCOMM USA, L.P. and ORBIMAGE start-up businesses generated service revenues of approximately $325,000 in the 1996 second quarter, and $790,000 for the six months ended June 30, 1996. GROSS PROFIT. Gross profit depends on a number of factors, including the Company's mix of contract types and costs incurred thereon in relation to estimated costs. The Company's gross profit for the second quarter of 1996 was $32,336,000, as compared to $20,789,000 for the comparable 1995 period. Gross profit margin as a percentage of sales for those periods was approximately 28% and 25%, respectively. The Company's gross profit for the first half of 1996 was $65,400,000, as compared to $46,361,000 for the first half of 1995. Gross profit margin as a percentage of sales for those periods was approximately 30% and 27%, respectively. During 1996, the Company recognized an increase in gross profit of $2,523,000 related to the write-off or expiration of certain Canadian development loans no longer required or not expected to be repaid. The increased gross profit margin as a percentage of sales in 1996 is also attributable to the resumption of Pegasus production after launch failures in June 1994 and June 1995. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses represent Orbital's self-funded product development activities, and exclude direct customer-funded development. Research and development expenses during the three-month periods ended June 30, 1996 and 1995 were $5,534,000 and $5,282,000, respectively. Research and development expenses during the six-month periods ended June 30, 1996 and 1995 were $12,438,000 and $10,334,000, respectively. Research and development expenses in 1996 relate primarily to the development of new or improved navigation and communications products, improved launch vehicles and new satellite programs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses include the costs of marketing, advertising, promotional and other selling expenses as well as the costs of the finance, administrative and general management functions of the Company. Selling, general and administrative expenses for the second quarters of 1996 and 1995 were $19,829,000 (or 17% of revenues) and $15,660,000 (or 19% of revenues), respectively. Selling, general and administrative expenses for the first half of 1996 and 1995 were $39,731,000 (or 18% of revenues) and $30,827,000 (or 18% of revenues), respectively. INTEREST INCOME AND INTEREST EXPENSE. Net interest expense was $444,000 and $818,000 for the three months ended June 30, 1996 and 1995, respectively. Net interest expense was $622,000 and $1,359,000 for the six months ended June 30, 1996 and 1995, respectively. Interest income for the periods reflects interest earnings on short-term investments. Interest expense is primarily for outstanding amounts on Orbital's revolving credit facility, on the Company's Convertible Debentures and on secured and unsecured debt. Interest expense for the first half of 1996 and 1995 has been reduced by capitalized interest of $4,056,000 and $2,533,000, respectively. 13 14 EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of affiliates and non-controlling interests in (earnings) losses of consolidated subsidiaries for the second quarters of 1996 and 1995 were ($2,355,000) and ($65,000), respectively. Equity in earnings (losses) of affiliates and non-controlling interests in (earnings) losses of consolidated subsidiaries for the six-month periods ended June 30, 1996 and 1995 were ($4,340,000) and $362,000, respectively. These amounts primarily represent (i) elimination of 50% of the profits on sales to ORBCOMM Global, (ii) the Company's pro rata share of ORBCOMM Global's and ORBCOMM International Partners L.P.'s ("ORBCOMM International") current period earnings and losses and (iii) non-controlling shareholders' pro rata share of ORBCOMM USA L.P.'s ("ORBCOMM USA") current period earnings and losses. ORBCOMM International and ORBCOMM USA are marketing partnerships for the ORBCOMM System. PROVISION FOR INCOME TAXES. The Company recorded an income tax provision of $338,000 and $669,000 for the three- and six-month periods ended June 30, 1996. The Company recorded an income tax benefit of $423,000 for the three-month period ended June 30, 1995 and an income tax provision of $2,688,000 for the six-month period ended June 30, 1995. The Company records its interim income tax provisions based on estimates of the Company's effective tax rate expected to be applicable for the full fiscal year. Estimated effective rates recorded during interim periods may be periodically revised, if necessary, to reflect current estimates. LIQUIDITY AND CAPITAL RESOURCES The Company's growth has required substantial capital to fund both an expanding business base and significant research and development and capital expenditures. Additionally, the Company has historically made strategic acquisitions of businesses and routinely evaluates potential acquisition candidates. The Company expects to continue to pursue potential acquisitions that it believes would augment its marketing, technical, manufacturing or financial capabilities. The Company has funded these requirements to date, and expects to fund its requirements in the future through cash generated by operations, working capital loan facilities, asset-based financings, joint venture arrangements, and private and public equity and debt offerings. Cash, cash equivalents and short-term investments were $24,225,000 at June 30, 1996, and the Company had short-term and long-term debt obligations outstanding of approximately $134,864,000. The outstanding debt relates primarily to advances under the Company's lines of credit facilities, secured and unsecured notes, fixed asset financings and the Convertible Debentures. On July 25, 1996, the Company called all its outstanding 6 3/4% convertible subordinated debentures (the "Convertible Debentures") for redemption on August 14, 1996. Pursuant to the terms of the indenture governing the Convertible Debentures, the holders of the Convertible Debentures may redeem their Debentures for a cash payment of (i) $1,000 in principal, plus (ii) a premium of $47.25, plus (iii) $30.56 of interest 14 15 accrued from March 1, 1996 to the date of redemption for each $1,000 principal amount of Convertible Debentures. Alternatively, at their option, the holders may convert their Convertible Debentures into Orbital Common Stock at a price of $14.375 per share, or approximately 69.565 shares for each $1,000 principal amount of Convertible Debentures. The Company has entered into a standby underwriting agreement with an investment bank whereby the investment bank has agreed, subject to customary conditions, to purchase from the Company shares of its Common Stock to provide proceeds to the Company to satisfy any redemption by the holders of the Convertible Debentures. Orbital's $20,000,000 unsecured loan agreement with The Northwestern Mutual Life Insurance Company was amended as of July 31, 1996 to waive non-compliance with a financial ratio requirement, as well as to amend certain financial covenants and to permit the completion of the ORBCOMM System financing. In connection with this amendment, the interest rate on the note was increased from 10 1/2% to 11 1/2% effective July 1, 1996. The Company's primary revolving credit facility provides for total borrowings from an international syndicate of six banks of up to $65,000,000, subject to a defined borrowing base comprised of certain contract receivables. Approximately $21,000,000 of borrowings were outstanding under the facility at June 30, 1996, and the available facility limit was approximately $25,000,000. At June 30, 1996, the average interest rate on outstanding borrowings under this facility was approximately 9%. Borrowings are secured by contract receivables and certain other assets. The facility restricts the payment of dividends and contains certain covenants with respect to the Company's working capital, fixed charge ratio, leverage ratio and tangible net worth, and expires in September 1997. The Company (or its subsidiaries) also maintains two additional, smaller revolving credit facilities, under which approximately $14,200,000 was outstanding at June 30, 1996. During the quarter ended June 30, 1996, the Company modified the two additional agreements to increase borrowing capacity from approximately $12,000,000 to approximately $35,000,000. The Company's operations used net cash of approximately $6,042,000 in the first half of 1996. The Company also invested approximately $13,235,000 in ORBCOMM Global, incurred $5,715,000 in capital expenditures related to ORBIMAGE satellite remote sensing systems, and incurred approximately $12,908,000 in capital expenditures for various spacecraft production and test equipment. On August 7, 1996, ORBCOMM Global completed a private financing involving the issuance and sale of $170,000,000 Senior Notes (the "Notes") to certain institutional investors. Net proceeds from the sale of the Notes (approximately $164,500,000) will be applied to (i) the design, construction, launch, operation and marketing of the ORBCOMM System and related development, operating and management expenses (including cost contingencies) and (ii) the first two years of fixed interest on the Notes. The obligations of ORBCOMM Global under the Notes are nonrecourse to the Company. 15 16 The Notes have a term of eight years and generally may not be redeemed prior to August 15, 2001. The Notes bear interest at the fixed rate of 14% per annum. In addition, the Notes provide for revenue participation interest in an aggregate amount of 5% of the ORBCOMM System revenues, payment of which may be deferred by ORBCOMM Global to the extent that certain fixed charge ratios are not met. The obligations under the Notes are guaranteed, jointly and severally, by OCC, Teleglobe, ORBCOMM USA and ORBCOMM International. Such guarantees also are nonrecourse to the Company. Upon closing of the financing, OCC and Teleglobe contributed the balance of their capital commitments in ORBCOMM Global for an aggregate equity investment of approximately $160 million. The Company and Teleglobe have agreed to commit additional capital in an amount up to $15,000,000 each in the event of certain limited contingencies in the future. Orbital expects to invest up to $15,000,000 in various ORBIMAGE satellite remote sensing projects for all of 1996. Orbital expects that its capital needs for the second half of 1996, including its planned investment in its ORBIMAGE projects, will in part be provided by working capital, cash flows from operations, credit facilities, asset-based financings, customer financings and operating lease arrangements. Orbital believes that it is likely to require additional equity and/or debt financing to fully fund its currently planned operations and capital requirements in 1997. 16 17 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS NOT APPLICABLE. ITEM 2. CHANGES IN SECURITIES NOT APPLICABLE. ITEM 3. DEFAULTS UPON SENIOR SECURITIES NOT APPLICABLE. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS NOT APPLICABLE. ITEM 5. OTHER INFORMATION NOT APPLICABLE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - A complete listing of exhibits required is given in the Exhibit Index that precedes the exhibits filed with this report. (b) NOT APPLICABLE. 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q/A to be signed on its behalf by the undersigned thereunto duly authorized. ORBITAL SCIENCES CORPORATION DATED: June 27, 2000 By: /s/ Jeffrey V. Pirone ------------------------- Jeffrey V. Pirone, Executive Vice President and Chief Financial Officer 18 19 EXHIBIT INDEX THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT. EXHIBIT DESCRIPTION NO. 10.1 Amendment No. 5 to Credit Agreement among Orbital Sciences Corporation, Orbital Imaging Corporation, Fairchild Space and Defense Corporation, the Banks (listed on the signature pages), Morgan Guaranty Trust Company of New York and J.P. Morgan Delaware, dated July 19, 1996 (previously filed). 10.2 Third Amendment to Note Agreement between Orbital Sciences Corporation and The Northwestern Mutual Life Insurance Company, dated July 31, 1996 (previously filed). 10.3 Magellan Corporation 1996 Stock Option Plan (previously filed). 11 Statement re: Computation of Earnings Per Share (transmitted herewith). 27 Financial Data Schedule (such schedule is furnished for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Form 10-Q, or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted herewith). 99 Important Factors Regarding Forward-Looking Statements (previously filed). 19 EX-11 2 ex11.txt COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
THREE MONTH PERIOD ENDED JUNE 30, 1996 (Restated) - ------------------------------------------------------- ----------------------------------------- ASSUMING PRIMARY FULL DILUTION ---------------- ------------------- WEIGHTED AVERAGE OF OUTSTANDING SHARES 26,888,775 26,888,775 COMMON EQUIVALENT SHARES: OUTSTANDING STOCK OPTIONS 489,947 527,710 OTHER POTENTIALLY DILUTIVE SECURITIES: CONVERTIBLE DEBENTURES N/A 3,887,304 --- ---------- SHARES USED IN COMPUTING NET INCOME PER SHARE 27,378,722 31,303,789 ========== =========== NET INCOME $3,054,000 $ 3,054,000 ADJUSTMENTS ASSUMING FULL DILUTION: INTEREST EXPENSE, NET OF TAXES N/A 681,000 --- -------- NET INCOME, ASSUMING FULL DILUTION $3,054,000 $ 3,735,000 ========== ============= NET INCOME PER SHARE $ 0.11 $ 0.11 DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -6.976% --- ---------- NET INCOME PER SHARE $ 0.11 $ 0.11 ========== ============= SIX MONTH PERIOD ENDED JUNE 30, 1996 (Restated) - ------------------------------------------------------- ----------------------------------------- ASSUMING PRIMARY FULL DILUTION ---------------- ------------------- WEIGHTED AVERAGE OF OUTSTANDING SHARES 26,838,407 26,838,407 COMMON EQUIVALENT SHARES: OUTSTANDING STOCK OPTIONS 431,978 534,372 OTHER POTENTIALLY DILUTIVE SECURITIES: CONVERTIBLE DEBENTURES N/A 3,887,304 -------------- ---------------- SHARES USED IN COMPUTING NET INCOME PER SHARE 27,270,385 31,260,083 ========== =========== NET INCOME $6,020,000 $ 6,020,000 ADJUSTMENTS ASSUMING FULL DILUTION: INTEREST EXPENSE, NET OF TAXES N/A 1,065,000 -------------- ----------- NET INCOME, ASSUMING FULL DILUTION $6,020,000 $ 7,085,000 ========== ============= NET INCOME PER SHARE $ 0.22 $ 0.23 DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -2.672 -------------- ---------------- NET INCOME PER SHARE $ 0.22 $ 0.22 ========== =============
NOTES: (1) - PROVIDED THAT DILUTION IS GREATER THAN 3%, THE CONVERTIBLE DEBENTURES ARE CONSIDERED DILUTIVE IN THE CALCULATION AND PRESENTATION OF PER SHARE DATA. 20 EX-27 3 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 14,112 10,113 127,449 (943) 38,017 195,023 153,924 (59,074) 486,795 133,110 92,351 0 0 269 244,581 486,795 219,864 219,864 154,464 154,464 0 54 1,065 6,689 669 6,020 0 0 0 6,020 0.22 0.22
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