-----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, Kzzqb9W8ZgO65iEhOXDW/xtCg4PUqx/7TfPc8PzlLVQmwM/itq5ZYFfEPC+c+oc1 79g5tW7yISuYP/ZM28+dVg== 0000950133-99-000561.txt : 19990222 0000950133-99-000561.hdr.sgml : 19990222 ACCESSION NUMBER: 0000950133-99-000561 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19990219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBITAL SCIENCES CORP /DE/ CENTRAL INDEX KEY: 0000820736 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [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: 99546106 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 FORM 10-Q/A DATED 3/31/98 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended MARCH 31, 1998 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 April 30, 1998, 36,688,497 shares of the registrant's common stock were outstanding. 2 PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
A S S E T S ----------- RESTATED MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 29,458 $ 12,553 Short-term investments, at market 2,998 2,573 Receivables, net 210,061 190,204 Inventories, net 47,082 50,925 Deferred income taxes and other assets 9,816 8,190 --------- --------- TOTAL CURRENT ASSETS 299,415 264,445 PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED depreciation and amortization of $92,937 and $79,347, respectively 139,158 137,498 INVESTMENTS IN AND ADVANCES TO AFFILIATES, NET 181,258 159,230 EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, less accumulated amortization of $21,938 and $19,794, respectively 180,412 181,955 DEFERRED INCOME TAXES AND OTHER ASSETS 27,457 28,511 --------- --------- TOTAL ASSETS $ 827,700 $ 771,639 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Short-term borrowings and current portion of long-term obligations $ 40,320 $ 29,317 Accounts payable 50,874 36,217 Accrued expenses 99,466 100,274 Deferred revenues 41,847 46,138 --------- --------- TOTAL CURRENT LIABILITIES 232,507 211,946 LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION 223,998 198,394 OTHER LIABILITIES 757 2,443 --------- --------- TOTAL LIABILITIES 457,262 412,783 NON-CONTROLLING INTERESTS IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES 875 3,755 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred Stock, par value $.01; 10,000,000 shares authorized: Series A Special Voting Preferred Stock, one share authorized and outstanding -- -- Common Stock, par value $.01; 80,000,000 shares authorized, 33,332,436 and 32,481,719 shares outstanding, respectively after deducting 20,877 shares held in treasury 332 325 Additional paid-in capital 335,790 326,187 Unrealized gains on short-term investments 136 272 Cumulative translation adjustments (4,700) (4,943) Retained earnings 38,005 33,260 --------- --------- TOTAL STOCKHOLDERS' EQUITY 369,563 355,101 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 827,700 $ 771,639 ========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 2 3 ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, RESTATED ---------------------------- 1998 1997 ------------ ------------ REVENUES $ 186,159 $ 122,112 COSTS OF GOODS SOLD 134,785 88,434 ------------ ------------ GROSS PROFIT 51,374 33,678 RESEARCH AND DEVELOPMENT EXPENSES 8,565 7,012 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 27,484 19,878 AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED 1,960 741 ------------ ------------ INCOME FROM OPERATIONS 13,365 6,047 NET INVESTMENT INCOME (EXPENSE) 260 260 EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (10,677) (1,268) NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES OF CONSOLIDATED SUBSIDIARIES 2,880 621 ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 5,828 5,660 PROVISION FOR INCOME TAXES 1,083 566 ------------ ------------ NET INCOME $ 4,745 $ 5,094 ============ ============ NET INCOME PER COMMON SHARE $ 0.14 $ 0.16 SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE 32,819,641 32,819,432 ============ ============ NET INCOME PER COMMON SHARE, ASSUMING DILUTION $ 0.13 $ 0.16 SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE, ASSUMING DILUTION 37,721,780 32,819,432 ============ ============
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 4 ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED March 31, RESTATED -------------------------- 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 4,745 $ 5,094 ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Depreciation and amortization expense 8,685 6,461 Equity in losses of affiliates 10,677 1,268 Non-controlling interests in losses of consolidated subsidiaries (2,880) (621) Foreign currency translation adjustment 243 (184) CHANGES IN ASSETS AND LIABILITIES: (Increase) decrease in current and other non-current assets (17,029) (6,050) Increase (decrease) in current and other non-current liabilities 1,334 7,579 -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,775 13,547 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (8,503) (4,733) Purchases, sales and maturities of available-for-sale investment securities, net -- (4,215) Investments in and advances to affiliates (26,584) (1,304) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (35,087) (10,252) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowings (repayments) 15,461 3,350 Principal payments on long-term obligations (6,318) (4,697) Proceeds from issuance of long-term obligations 27,464 -- Net proceeds from issuances of common stock 9,610 442 -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,217 (905) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,905 2,390 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,553 26,859 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,458 $ 29,249 ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 5 ORBITAL SCIENCES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 AND 1997 (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 "SEC"). 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 for the year ended December 31, 1997. Operating results for the three-month period ended March 31, 1998 are not necessarily indicative of the results expected for the full year. Orbital Sciences Corporation is hereafter referred to as "Orbital" or the "company." (1) RESTATEMENT The accompanying condensed consolidated financial statements for the three months ended March 31, 1998 have been restated. Based on accounting decisions made in connection with the preparation of the company's consolidated year-end financial statements, the company has restated the aforementioned financial statements to consistently apply accounting policies to certain transactions recorded in the three month period ended March 31, 1998, as summarized below. The company recorded $1,500,000 of additional research and development expenses related to certain product enhancements at its Magellan subsidiary in the Satellite Access sector that had been previously capitalized (before considering the associated minority interests of $510,000). The company recorded $1,200,000 of additional general and administrative expenses in the Space and Ground Infrastructure Systems sector (the "SGIS sector") for estimated post-retirement health benefit obligations related to a plan acquired in a prior business combination. In addition, the company reduced net interest expense by approximately $800,000 in the SGIS sector to reflect the appropriate amount of interest capitalized on certain assets in process. Lastly, the company revised its tax provision to reflect the impact of these adjustments and to reflect the company's revised estimate of its effective tax rate for the year. 5 6
Three Months Ended March 31, 1998 As Reported As Restated ----------- ----------- Retained Earnings $39,779,000 $38,005,000 Net Income $ 6,519,000 $ 4,745,000 Diluted Earnings Per Share $ 0.20 $ 0.13
The restatement noted above is included in the accompanying condensed consolidated financial statements. (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 and raw materials are purchased to support future production efforts. Work-in-process inventory consists primarily of (i) costs incurred under long-term 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-progress inventory has been reduced by contractual progress payments received. Finished goods inventory consists of fully assembled commercial products awaiting shipment. (3) EARNINGS PER SHARE Net income per common share is calculated using the weighted average number of common shares outstanding during the periods. Net income per common share assuming dilution is calculated using the weighted average number of common and dilutive common equivalent shares outstanding during the periods, plus the effects of an assumed conversion of the company's $100,000,000, 5%, convertible notes due 2002, after giving effect to all net income adjustments that would result from the assumed conversion. (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) RECLASSIFICATIONS Certain reclassifications have been made to the 1997 condensed consolidated financial statements to conform to the 1998 condensed consolidated financial statement presentation. (6) COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income." Disclosure requirements with respect to comprehensive income are as follows (in thousands): 6 7
MARCH 31, 1998 1997 ------- ------- Comprehensive income: Net income, as reported $ 4,745 $ 5,094 Unrealized losses on short-term investments (136) (20) Translation adjustments 243 (184) ------- ------- Total $ 4,852 $ 4,890 ======= ======= Accumulated other comprehensive income: Beginning of period $(4,671) $(3,667) ======= ======= End of period $(4,564) $(3,871) ======= =======
(7) SUBSEQUENT EVENTS Equity Offering: On April 20, 1998, the company sold 3,450,000 shares of its common stock in a public offering at $45.81 per share, generating net proceeds to the company of approximately $150,000,000 after deducting approximately $8,000,000 of underwriters' discounts and other estimated offering expenses. The following table sets forth the cash and cash equivalents and short-term investments, total debt and total stockholders' equity of the company as of March 31, 1998, as reported and as adjusted as if the net proceeds from the sale of common stock were used to pay down existing borrowings under the company's credit facility and line of credit and the remainder were invested in short-term interest-bearing securities (in thousands):
MARCH 31, 1998 ACTUAL AS ADJUSTED ------ ----------- Cash and cash equivalents and short-term investments $ 29,458 $ 90,208 ======== ======== Total debt $264,318 $175,068 ======== ======== Total stockholders' equity $369,563 $520,238 ======== ========
Investments: On May 4, 1998, the company signed a non-binding letter of intent with CCI International N.V. ("CCI"). Under the terms of this preliminary agreement, Orbital will receive a satellite construction and launch contract, valued at approximately $450,000,000, and will provide up to $150,000,000 in equity capital and vendor financing to CCI, subject to negotiation of definitive documentation. In addition, the company terminated discussions regarding a satellite procurement agreement and a potential investment in the Ellipso satellite network of Mobile Communications Holdings, Inc. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 Certain statements included in this discussion relating to future revenues, sales, expenses, growth rates, net income, new business, operational performance, schedules, sources and uses of funds, and the performance of the company's affiliates, Orbital Imaging Corporation ("ORBIMAGE") and ORBCOMM Global L.P. ("ORBCOMM") are forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or investments of the company to differ materially from any future results, performance, achievements, or investments expressed or implied by such forward-looking statements. Such factors include, among others, general and economic business conditions, launch success, product performance, risks associated with government contracts, the introduction of products and services by competitors, risks associated with acquired businesses, availability of required capital, market acceptance of new products and technologies and other factors more fully described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Outlook: Issues and Uncertainties" incorporated in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The company's products and services are grouped into three business sectors: Space and Ground Infrastructure Systems, Satellite Access Products and Satellite Services. Space and Ground Infrastructure Systems include launch vehicles, satellites, electronics and sensor systems, and satellite ground systems. The company's Satellite Access Products sector consists of recreational, professional and automotive satellite-based navigation products, satellite communications products and transportation management systems. The company's Satellite Services sector includes satellite-based, two-way mobile data communications services and satellite-based imagery services, conducted through the company's ORBCOMM and ORBIMAGE affiliates. The company does not control the operational and financial affairs of ORBCOMM and ORBIMAGE and, consequently, their financial results are not consolidated with the company's and are not reported on herein. RECENT DEVELOPMENTS. On April 21, 1998, ORBCOMM Corporation ("ORBCOMM Corp.") announced that it has filed a registration statement with the Securities and Exchange Commission for an initial public offering of $125,000,000 of its common stock. ORBCOMM Corp. was organized for the sole purpose of investing in and acting as a general partner of ORBCOMM. The registration statement has not yet become effective. On April 20, 1998, the company sold 3,450,000 shares of its common stock in a public offering at $45.81 per share, generating net proceeds of approximately $150,000,000 (see Liquidity and Capital Resources). On May 4, 1998, the company signed a non-binding letter of intent with CCI International N.V. ("CCI"). Under the terms of this preliminary agreement, Orbital will receive a satellite construction and launch contract, valued at approximately $450,000,000, and will provide up to 8 9 $150,000,000 in equity capital and vendor financing to CCI, subject to negotiation of definitive documentation. In addition, the company terminated discussions regarding a satellite procurement agreement and a potential investment in the Ellipso satellite network of Mobile Communications Holdings, Inc. REVENUES. Orbital's revenues for the three-month periods ended March 31, 1998 and 1997 were $186,159,000 and $122,112,000, respectively. Space and Ground Infrastructure Systems. Revenues from the company's Space and Ground Infrastructure Systems sector totaled $156,341,000 and $106,199,000 for the three months ended March 31, 1998 and 1997, respectively. Revenues from the company's launch vehicles increased to $46,040,000 in the first quarter of 1998, from $29,894,000 in the first quarter of 1997. The increase in revenues in 1998 as compared to a year ago is attributable to increased revenues from the company's Pegasus and Taurus launch vehicle programs, and from its suborbital launch vehicle programs. Additionally, the company generated more revenues in the 1998 first quarter for contractual work performed on the X-34 reusable launch vehicle. For the three months ended March 31, 1998, satellite revenues increased to $61,532,000 from $30,803,000 in the first quarter of 1997. The increase in satellite sales is primarily due to additional revenues generated from new satellite orders received in 1997. Revenues in 1998 also include approximately $16,590,000 of sales generated by the satellite business acquired from CTA INCORPORATED in August 1997. Revenues from electronics and sensor systems of approximately $27,348,000 for the three months ended March 31, 1998 were generally consistent with the revenues of $28,066,000 in the comparable 1997 period. Revenues from the company's ground systems products were $21,421,000 in the first quarter of 1998 as compared to $17,436,000 in the comparable 1997 quarter. The increase in revenues in 1998 is due to contractual work performed on 1997 new orders for new satellite ground systems and system upgrades. Revenues for the three months ended March 31, 1998 include sales to ORBCOMM and ORBIMAGE of $16,277,000 and $27,324,000, respectively, as compared to first quarter 1997 sales to ORBCOMM of $11,500,000. Since the company consolidated ORBIMAGE's results of operations through May 8, 1997, no revenue was recorded on sales to ORBIMAGE during the first quarter of 1997. Satellite Access Products. Revenues from sales of navigation, communications and transportation management systems and products increased to $29,754,000 for the 1998 first quarter as compared to $15,646,000 for the comparable 1997 period. The first quarter of 1998 includes approximately $11,000,000 of sales generated by the company's industrial navigation operations that were acquired as a result of the December 1997 merger of Ashtech Inc. with the company's subsidiary, Magellan Corporation ("Magellan"). 9 10 GROSS PROFIT/COSTS OF GOODS SOLD. Costs of goods sold include the costs of personnel, materials, subcontracts and overhead related to commercial products and under the company's various development and production contracts. 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 first quarter of 1998 was $51,374,000 as compared to $33,678,000 in the 1997 first quarter. Gross profit as a percentage of sales was approximately 28% in both periods. Space and Ground Infrastructure Systems. Gross profit from the company's Space and Ground Infrastructure Systems totaled $42,840,000 (or 27.4% of revenues) and $28,592,000 (or 26.9% of revenues) for the three months ended March 31, 1998 and 1997, respectively. Gross profit margins from the company's launch vehicles were 26.7% for the first quarter of 1998 as compared to 32% for the first quarter of 1997. The decrease in launch vehicle gross margins in 1998 is primarily due to completing work on certain less profitable launch vehicle contracts. Satellites contributed gross margins of 27.7% during the first quarter of 1998 as compared to 23.0% during the first quarter of 1997. The increase is due to work performed on more profitable new contracts received in the second half of 1997. For the three months ended March 31, 1998 and 1997, electronics and sensor systems had gross margins of 27.9% and 25.6%, respectively. Gross margins for ground systems were 27.4% and 27.1% for each of the first quarters in 1998 and 1997. Satellite Access Products. Gross margins for satellite access products were 34.0% for the first quarter of 1998 and 35.8% for the first quarter of 1997. This decrease in gross margin percentage is due to lower unit sales prices for satellite navigation recreational products in the 1998 period. 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 March 31, 1998 and 1997 were $8,565,000 (or 4.6% of revenues) and $7,012,000 (or 5.7% of revenues), respectively. Research and development expenses in both quarters relate primarily to the development of new or improved satellite navigation, communications and automotive products and new satellite initiatives. 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 first quarters of 1998 and 1997 were $27,484,000 (or 14.8% of revenues) and $19,878,000 (or 16.3% of revenues), respectively. The decrease in selling, general and administrative expenses as a percentage of revenues during 1998 as compared to 1997 was primarily attributable to substantial revenue growth, particularly in launch vehicles and satellite systems, with only a modest growth in selling, general and administrative expenses. 10 11 INTEREST INCOME AND INTEREST EXPENSE. Net interest income was $260,000 for each of the three months ended March 31, 1998 and 1997. Interest income for the periods reflects interest earnings on short-term investments. Interest expense in 1998 is primarily for outstanding amounts on Orbital's convertible subordinated notes, revolving credit facilities and on other secured and unsecured debt. Interest expense has been reduced by capitalized interest of $3,663,000 and $1,313,000 in 1998 and 1997, respectively. EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES OF CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of affiliates net of non-controlling interests in (earnings) losses of consolidated subsidiaries for the first quarters of 1998 and 1997 were ($7,797,000) and ($647,000), respectively. These amounts primarily represent (i) elimination of proportionate profits or losses on sales of infrastructure products to ORBCOMM and ORBIMAGE, (ii) the company's pro rata share of current period earnings and losses of each of ORBCOMM, ORBCOMM International Partners, L.P. and ORBIMAGE and (iii) non-controlling stockholders' pro rata share of ORBCOMM USA, L.P.'s and Magellan's current period earnings and losses. The increase in losses during the first quarter of 1998 is due to increased losses at ORBCOMM and the fact that subsequent to May 8, 1997, the company used the equity method to account for its investment in ORBIMAGE when it had previously consolidated ORBIMAGE's operations during the first quarter of 1997. PROVISION FOR INCOME TAXES. The company recorded an income tax provision of $1,083,000 and $566,000 for the three month periods ended March 31, 1998 and 1997, respectively. 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. At December 31, 1997, Orbital had approximately $150,000,000 of U.S. Federal net operating loss carryforwards and $3,000,000 of U.S. Federal research and experimental tax credit carryforwards, which are available to reduce future income tax obligations, subject to certain annual limitations and other restrictions. NET INCOME (LOSS). Space and Ground Infrastructure Systems provided net income of approximately $15,184,000 for the three months ended March 31, 1998 as compared to net income of $8,069,000 in the first quarter of 1997. The company's satellite access products sector reported a net loss in the first quarter of 1998 of $1,766,000 as compared to net income of $718,000 in the 1997 first quarter. LIQUIDITY AND CAPITAL RESOURCES The company's growth has required substantial capital to fund expanding working capital needs, investments in ORBCOMM and ORBIMAGE, certain business acquisitions, new business initiatives, research and development and capital expenditures. 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. The company expects to continue to pursue potential acquisitions and equity investments that it believes would enhance its businesses and to 11 12 fund such transactions through cash generated by operations, existing loan facilities, the issuance of equity and/or debt securities and asset-based financings. On April 20, 1998, the company sold 3,450,000 shares of its common stock in a public offering, generating net proceeds of approximately $150,000,000 (the "Offering"). Orbital plans to use the net proceeds from this Offering principally to support further business expansion in its Space and Ground Infrastructure Systems sector as a result of higher than expected new orders in 1997 and 1998 for satellites and launch vehicles, including working capital and capital expenditures for facilities and production test equipment. Additionally, a portion of the net proceeds may be used for investments in new projects or emerging space-related businesses (such as CCI), expanded research and development for new products, or acquisitions of businesses and/or product lines complementary to the company's existing businesses, and for other general corporate purposes. Pending the foregoing uses and as discussed below, the company paid down existing borrowings under its credit facility and line of credit and invested the remainder in short-term interest-bearing securities. Cash, cash equivalents and short-term investments were $32,456,000 at March 31, 1998, and the company had total debt obligations outstanding of approximately $264,318,000. At March 31, 1998, the outstanding debt is comprised primarily of the company's convertible subordinated notes, advances under the company's line of credit facilities, secured and unsecured notes, and asset-based financings. The company's primary revolving credit facility provides for total borrowings from an international syndicate of six banks of up to $100,000,000. Approximately $64,750,000 of borrowings were outstanding under the facility at March 31, 1998 at a weighted average interest rate of approximately 7.25%. Borrowings are secured by contract receivables, and the facility prohibits the payment of cash dividends, contains certain covenants with respect to the company's working capital, fixed charge ratio, leverage ratio and consolidated net worth, and expires in August 2001. The company (or its subsidiaries) also maintains two additional, smaller revolving credit facilities, under which approximately $25,528,000 was outstanding at March 31, 1998 at a weighted average interest rate of 6.28%. Additional borrowing capacity on the two additional agreements is approximately $500,000 at March 31, 1998. The company used approximately $94,250,000 of proceeds from the Offering to pay down outstanding borrowings on these credit facilities. The company's operations provided net cash of approximately $5,775,000 in the first quarter of 1998. The company was committed to provide up to an additional $15,000,000 in capital to ORBCOMM, of which $10,000,000 has been funded to date, $7,500,000 during the three months ended March 31, 1998. The company has also provided to ORBCOMM approximately $26,000,000 in vendor financing, $12,690,000 during the three months March 31, 1998 (one-half of which has been advanced to Orbital by an affiliate of Teleglobe Inc.). The company anticipates that ORBCOMM will require additional vendor financing during 1998, pending completion of ORBCOMM Corp.'s initial public offering of its common stock. In addition, during the first quarter of 1998, the company incurred $8,503,000 in capital expenditures for various satellite, launch vehicle and other production, manufacturing, test and office equipment. 12 13 Orbital expects that its capital needs for the remainder of 1998 will in part be provided by working capital, cash flows from operations, existing credit facilities, customer financings and operating lease arrangements. 13 14 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) Reports on Form 8-K (i) On February 26, 1998, the company filed a Current Report on Form 8-K, dated February 5, 1998, disclosing the financial results of the company for the fiscal year ending December 31, 1997. (ii) On March 27, 1998, the company filed a Current Report on Form 8-K, dated March 26, 1998, disclosing that it proposed to make a public offering of shares of its common stock. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ORBITAL SCIENCES CORPORATION DATED: February 19, 1999 By: /s/ David W. Thompson ------------------------------------------------ David W. Thompson, President and Chief Executive Officer DATED: February 19, 1999 By: /s/ Jeffrey V. Pirone ------------------------------------------------ Jeffrey V. Pirone, Executive Vice President and Chief Financial Officer 15 16 EXHIBIT INDEX The following exhibits are filed as part of this report.
Exhibit No. Description - ----------- ----------- 10.16 Orbital Sciences Corporation 1997 Stock Option and Incentive Plan, as amended (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/A, or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted herewith).
16 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11. STATEMENT re: COMPUTATION OF EARNINGS PER SHARE
THREE MONTH PERIOD ENDED MARCH 31, 1998 - -------------------------------------------------------------------------- RESTATED RESTATED ASSUMING BASIC DILUTION (2) ---------- ------------ WEIGHTED AVERAGE OF OUTSTANDING SHARES 32,819,641 32,819,641 COMMON EQUIVALENT SHARES: OUTSTANDING STOCK OPTIONS N/A 1,330,710 OTHER POTENTIALLY DILUTIVE SECURITIES: CONVERTIBLE NOTES (1) N/A 3,571,429 ---------- ----------- SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE 32,819,641 37,721,780 ========== =========== NET INCOME $4,745,000 $ 4,745,000 ADJUSTMENTS ASSUMING DILUTION: INTEREST EXPENSE ADJUSTMENT, NET OF TAXES N/A 169,000 ---------- ----------- NET INCOME $4,745,000 $ 4,914,000 ========== =========== NET INCOME PER COMMON SHARE $ 0.14 $ 0.13 ========== ===========
NOTES: (1)- On September 16, 1997, the company sold $100 million of 5% convertible subordinated notes due October 2002. The notes are convertible at the option of the holders into Orbital common stock at a conversion price of $28.00 per share. (2)- Subsidiary stock options that enable holders to obtain subsidiary's common stock pursuant to effective stock option plans are included in computing the subsidiary's earnings per share, to the extent dilutive. Those earnings per share data are included in the company's per share computations based on the company's holdings of the subsidiary's stock. For the three months ended March 31, 1998, all such subsidiary stock options were anti-dilutive. EX-27 3 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 THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000820736 ORBITAL SCIENCES CORP/DE/ 1000 YEAR DEC-31-1998 JAN-01-1998 MAR-31-1998 29,458 2,998 218,638 (8,577) 47,082 299,415 232,095 (92,937) 827,700 232,507 233,998 0 0 332 369,231 827,700 186,159 186,159 134,785 134,785 0 500 169 5,828 1,083 4,745 0 0 0 4,745 0.14 0.13
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