SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended
March 31, 1995
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 (Telephone number)
executive offices)
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 May 3, 1995, 20,357,661 shares of the registrant's common
stock were outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share data)
<CAPTION>
A S S E T S
March 31, December 31,
<S> 1995 1994
<C> <C>
CURRENT ASSETS:
Cash and cash equivalents $4,371 $21,156
Short-term investments, at market 9,427 12,426
Receivables, net 100,394 94,236
Inventories 23,809 26,098
Deferred income taxes and other assets 8,161 5,914
Total current assets 146,162 159,830
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated
depreciation and amortization of $35,274 and $33,432, 101,854 102,061
respectively
INVESTMENTS IN AFFILIATES 55995 54721
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $10,646 and $10,042, 68,244 68,878
respectively
DEFERRED INCOME TAXES AND OTHER ASSETS 16,981 17,238
$389,236 $402,728
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term obligations $27,866 $28,160
Accounts payable 15,330 14,961
Accrued expenses 26,724 37,439
Payable to subcontractors 9,576 13,695
Deferred revenue 14,066 13,272
Total current liabilities 93,562 107,527
LONG-TERM OBLIGATIONS, net of current portion 79,711 81163
DEFERRED INCOME TAXES AND OTHER LIABILITIES 11353 11992
184,626 200,682
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; 10,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, par value $.01; 40,000,000 shares authorized,
20,233,408 and 20,170,196 shares outstanding,
after deducting 15,735 shares held in treasury 203 202
Additional paid-in capital 201,862 201,328
Unrealized gains (losses) on short-term investments (400) (462)
Retained earnings 2,945 978
Total stockholders' equity 204,610 202,046
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $389,236 $402,728
See accompanying notes to condensed consolidated financial statements.
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<CAPTION>
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited; in thousands, except share data)
March 31,
1995 1994
<S> <C> <C>
REVENUES $68,341 $50,310
COSTS OF GOODS SOLD 49,487 36,029
GROSS PROFIT 18,854 14,281
RESEARCH AND DEVELOPMENT EXPENSES 3,831 3,698
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,209 7,257
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 661 423
INCOME FROM OPERATIONS 3,153 2,903
NET INTEREST INCOME (EXPENSE) (769) 511
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES 426 (423)
INCOME BEFORE PROVISION FOR INCOME TAXES 2,810 2,991
PROVISION FOR INCOME TAXES 843 816
NET INCOME $1,967 $2,175
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $0.10 $0.12
SHARES USED IN COMPUTING NET INCOME
PER COMMON AND COMMON EQUIVALENT SHARE 20,654,907 17,864,089
NET INCOME PER COMMON SHARE, ASSUMING FULL DILUTION $0.10 $0.08
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE, ASSUMING FULL DILUTION 24,774,814 22,017,976
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<CAPTION?>
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Three Months
Ended
March 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,967 $2,175
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization expense 4,239 2,093
Equity in (earnings) loss of affiliates 427 422
Change in assets and liabilities:
(Increase) decrease in contract receivables (6,158) (2,972)
(Increase) decrease in components inventory 2,289 (7)
(Increase) decrease in other current assets (2,389) (235)
(Increase) decrease in deposits and other assets (292) (9)
Increase (decrease) in payables and accrued expenses (14,465) (5,407)
Increase (decrease) in deferred revenue 378 (7,240)
Increase (decrease) in deferred income taxes and other (639) (260)
Net cash provided by (used in) operating activities (14,643) (11,440)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,527) (2,986)
Proceeds from sales of fixed assets 125 -
Purchase of investment securities - (3,356)
Sale of investment securities 3,061 -
Investments in affiliates (1590) (602)
Interest capitalized on investments in affiliates 0 -
Payment for business acquisition - -
Net cash used in investing activities (931) (6,944)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (901) (2,458)
Principal payments on long-term obligations (845) (315)
Proceeds from issuance of long-term obligations - -
Costs of issuance of long-term obligations - -
Net proceeds from issuances of common stock 535 979
Adjustment to recast pooled company's year end - (1,138)
Net cash provided by (used in) financing activities (1,211) (2,932)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,785) (21,316)
CASH AND CASH EQUIVALENTS, beginning of period 21,156 49,458
CASH AND CASH EQUIVALENTS, end of period $4,371 $28,142
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(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.
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, 1994. Operating results for the three-month periods ended
March 31, 1995 and 1994 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) 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 ("FIFO") 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.
(2) Investments in Affiliates
The Company's majority-owned subsidiary, Orbital
Communications Corporation ("OCC"), and Teleglobe
Mobile Partners, an affiliate of Teleglobe Inc., formed
a partnership, ORBCOMM Development Partners, L.P.
("ORBCOMM Development"), for the two-phased design,
development, construction, integration, test and
operation of a 26-satellite low-Earth orbit satellite
communications system (the "ORBCOMM System"). Pursuant
to the terms of the partnership agreement, OCC and
Teleglobe Mobile Partners are each 50% general partners
in ORBCOMM Development. Teleglobe Mobile has an option
to invest an additional $70,000,000 in the next phase
of the ORBCOMM System implementation.
Orbital and OCC are the primary suppliers of
communications satellites, launch vehicles, ground
tracking systems, system software and integration
services to ORBCOMM Development, and successfully
launched the first two ORBCOMM System satellites in
April 1995. Preliminary test results from the initial
phases of planned comprehensive on-orbit testing of the
satellites indicate that the major spacecraft support
systems on both satellites, including electrical power,
flight computer, attitude control and thermal control,
are operating as expected. Several anomalies have been
discovered on the spacecraft, including a problem with
the gateway communication subsystem that controls one
satellite's response to uplink commands, and a problem
with the other satellite's subscriber communications
subsystem that is responsible for communications with
subscriber terminals. While no assurances can be given
that the anomalies will be successfully resolved, a
comprehensive anomaly review and potential corrective
actions are currently being pursued.
Based on its current assessment of the overall business
prospects of ORBCOMM Development and the ORBCOMM
System, the Company currently believes its investment
in ORBCOMM Development of approximately $56,000,000 is
fully recoverable. If, in the future, implementation
of the ORBCOMM System is significantly delayed,
significantly restricted or abandoned, the Company may
be required to expense part or all of its investment.
(3) Equity in Earnings (Losses) of Affiliates
During the three months ended March 31, 1995 and for
the years ended December 31, 1994 and 1993, Orbital
recorded contract revenues on sales to ORBCOMM
Development of approximately $6,000,000, $30,000,000
and $38,000,000, respectively, and eliminated as equity
in earnings of affiliate 50% of its profits on those
sales. At March 31, 1995, Orbital had approximately
$7,900,000 in unbilled receivables from ORBCOMM
Development.
During the construction phase of the project and prior
to the commencement of planned operations, ORBCOMM
Development is capitalizing substantially all
construction-related costs and is expensing as incurred
all selling, general and administrative costs as period
costs.
(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) 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 _% convertible subordinated debentures,
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.
(6) Hercules Incorporated
In November 1988, Orbital and Hercules Incorporated
("Hercules") entered into a joint venture agreement
relating to the development and production of the
Pegasus space launch vehicle (the "Joint Venture
Agreement"). In 1995, Alliant Techsystems Inc.
("Alliant") acquired the assets of Hercules Aerospace
Company (a division of Hercules) and, in
connection therewith, assumed the rights and
responsibilities of Hercules with respect to the Joint
Venture Agreement. Effective May 3, 1995, Orbital and
Alliant replaced the Joint Venture Agreement with a
joint teaming agreement to provide for the continuation
of joint performance on the Pegasus and Taurus space
launch vehicle programs (the "Joint Teaming
Agreement"). The Joint Teaming Agreement provides,
among other things, that Orbital will perform as the
system prime contractor for all present and future
Pegasus and Taurus missions and Alliant will perform as
a solid rocket motor and payload fairing subcontractor
to Orbital on the Pegasus program and as a solid rocket
motor subcontractor to Orbital on the Taurus program.
As a subcontractor, Alliant will receive firm-fixed
prices for its subcontracts and will no longer share in
Pegasus contract profits and losses, but will share in the
costs and benefits associated with certain defined
outstanding issues on current Pegasus contracts. The Joint
Teaming Agreement will continue through December 31, 2005,
unless terminated earlier by mutual agreement.
Orbital and Alliant also have agreed to a final
dismissal with prejudice of all present and future
claims and litigation related to the Joint Venture
Agreement, including (i) the January 1994 lawsuit filed
by Hercules against Orbital alleging breaches of
certain representations and warranties by Orbital in
the 1988 stock purchase agreement between Hercules and
Orbital, and (ii) the July 1994 lawsuit filed by
Hercules against Orbital alleging breach of fiduciary
duty and breach of contract in the determination of
Orbital's recoverable costs pursuant to the Joint
Venture Agreement.
(7) Reclassifications
Certain reclassifications have been made to the 1994
condensed consolidated financial statements to conform
to the 1995 condensed consolidated financial statement
presentation. The December 1994 acquisition of
Magellan Corporation was recorded using the pooling of
interests method of accounting for business
combinations and, accordingly, Orbital's 1994
historical financial statements have been restated to
reflect this transaction.
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,
1995 AND 1994
The ORBCOMM System. The Company's majority-owned subsidiary,
Orbital Communications Corporation ("OCC"), and Teleglobe Mobile
Partners, an affiliate of Teleglobe Inc., formed a partnership,
ORBCOMM Development Partners, L.P. ("ORBCOMM Development"), for
the two-phased design, development, construction, integration,
test and operation of a 26-satellite low-Earth orbit satellite
communications system (the "ORBCOMM System"). Pursuant to the
terms of the partnership agreement, OCC and Teleglobe Mobile
Partners are each 50% general partners in ORBCOMM Development.
Teleglobe Mobile has an option to invest an additional
$70,000,000 in the next phase of the ORBCOMM System
implementation.
Orbital and OCC are the primary suppliers of communications
satellites, launch vehicles, ground tracking systems, system
software and integration services to ORBCOMM Development, and
successfully launched the first two ORBCOMM System satellites in
April 1995. Preliminary test results from the initial phases of
planned comprehensive on-orbit testing of the satellites indicate
that the major spacecraft support systems on both satellites,
including electrical power, flight computer, attitude control and
thermal control, are operating as expected. Several anomalies
have been discovered on the spacecraft, including a problem with
the gateway communication subsystem that controls one satellite's
response to uplink commands, and a problem with the other
satellite's subscriber communications subsystem that is
responsible for communications with subscriber terminals. While
no assurances can be given that the anomalies will be
successfully resolved, a comprehensive anomaly review and
potential corrective actions are currently being pursued.
Based on its current assessment of the overall business prospects
of ORBCOMM Development and the ORBCOMM System, the Company
currently believes its investment in ORBCOMM Development of
approximately $56,000,000 is fully recoverable. If, in the
future, implementation of the ORBCOMM System is significantly
delayed, significantly restricted or abandoned, the Company may
be required to expense part or all of its investment.
Revenues. Orbital's revenues for the three-month periods ended
March 31, 1995 and 1994 were $68,341,000 and $50,310,000,
respectively. Revenues from the Company's space launch vehicle
products decreased to $6,658,000 during the 1995 three-month
period from $15,610,000 during the comparable 1994 period,
although revenues increased from the fourth quarter of 1994 by
over 40%. The significant decrease is attributable primarily to
the continuing effects of production delays caused by the
Company's failed first launch of its new Pegasus XL launch
vehicle in June 1994, which required additional research and
development efforts to prepare for the next launch. The Company
completed the research and development activities early in 1995,
and the next launch is currently scheduled for the second quarter
of 1995. Sales of space launch vehicles to ORBCOMM Development
were $92,000 and $2,076,000 during the 1995 and 1994 three-month
periods, respectively. The Company successfully launched its
Pegasus vehicle for ORBCOMM Development on April 3, 1995.
Revenues from suborbital launch vehicle products decreased to
$5,720,000 in the 1995 three-month period as compared to
$7,097,000 in the 1994 period, although revenues were level with
fourth quarter 1994 revenues of $5,284,000. While suborbital
revenues have decreased significantly during the past few years
as U.S. Government defense spending has been reduced, the Company
expects 1995 revenues to remain approximately consistent with, or
to slightly increase from, revenue levels achieved in 1994.
In the three months ended March 31, 1995, spacecraft systems
revenues increased to $14,519,000 from $6,978,000 in the 1994
period, primarily as a result of additional revenues generated
from the Company's wholly-owned subsidiary Fairchild Space and
Defense Corporation ("Fairchild"), acquired in August 1994. The
1995 and 1994 periods included $1,860,000 and $3,082,000,
respectively, in sales of MicroStar spacecraft to ORBCOMM
Development. Revenues generated from sales of space sensors and
instruments of $3,485,000 during the 1995 quarter were consistent
with first quarter 1994 sales of $3,387,000 and are expected to
remain approximately consistent with 1994 levels throughout 1995.
Revenues from defense electronics and avionics products were
approximately $15,463,000 for the three-month period ended March
31, 1995 as compared to $3,220,000 in the 1994 period. These
products were acquired as part of the 1994 Fairchild acquisition
and the September 1993 acquisition of the Applied Science
Operations of The Perkin-Elmer Corporation ("ASO").
Revenues from sales of navigation and positioning products
increased to $13,886,000 for the three months ended March 31,
1995 as compared to $8,922,000 for the 1994 period, primarily due
to increased unit sales offset, in part, by lower unit prices for
GPS navigators. Satellite-based services revenues in the first
quarter of 1995 were approximately $4,126,000 as compared to
$2,223,000 of first quarter 1994 sales, reflecting revenues from
sales of services to ORBCOMM Development. The Company expects
these revenues to decrease significantly during the remainder of
1995 as its contract with ORBCOMM Development is completed.
Revenues from the Company's newly-established Advanced Projects
Group were $3,564,000 during the first quarter of 1995 as a
result of work performed on two research and development projects
for ARPA and NASA.
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 three-month periods ended March 31, 1995 and 1994
were $18,854,000 and $14,281,000, respectively. Gross profit
margin as a percentage of sales for those periods was
approximately 27.6% and 28.4%, respectively. The decreased gross
profit margin during 1995 was primarily attributable to cost
growth on the Pegasus program as a result of the 1994 Pegasus XL
failure. The Company believes that its gross profit margin for
the remainder of 1995 will increase slightly as compared to 1994
as a result of a full year of operations from Fairchild, among
other factors.
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, 1995 and 1994 were $3,831,000 and $3,698,000,
respectively. Research and development expenses in the first
quarter of 1995 related primarily to the development of new or
improved navigation products, completion of development efforts
on the Company's Pegasus program and new spacecraft programs.
The Company expects its research and development expenditures for
the rest of 1995 to be consistent with 1994 expenditures.
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 three months ended March 31, 1995 and 1994 were
$11,209,000 (or 16.4% of revenues) and $7,257,000 (or 14.4% of
revenues), respectively. The increase in selling, general and
administrative expenses during the first quarter of 1995 was
primarily attributable to expanded marketing efforts related to
the Company's ORBCOMM project and various remote sensing systems,
and to the Fairchild acquisition. The Company expects selling,
general and administrative expenses as a percentage of revenues
during the remainder of 1995 to be less than or approximately
equal to those in the first quarter of 1994, and expects the
dollar amount of these costs to remain above 1994 levels.
Interest Income and Interest Expense. Net interest expense was
$769,000 for the three months ended March 31, 1995 as compared to
net interest income of $511,000 during the 1994 quarter.
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 public debentures and, during the 1995 quarter, on
acquisition debt incurred for the Fairchild acquisition.
Interest expense has been reduced by capitalized interest of
$1,188,000 and $1,287,000, respectively, for the 1995 and 1994
three-month periods.
Equity in Earnings (Losses) of Affiliates. Equity in earnings
(losses) of affiliates for the three-month periods ended March
31, 1995 and 1994 of $426,000 and ($423,000), respectively,
represents elimination of 50% of the profits on sales to ORBCOMM
Development, as well as the Company's pro-rata share of ORBCOMM
Development's current period earnings and losses. During the
construction phase of the project and prior to the commencement
of planned operations, ORBCOMM Development is capitalizing
substantially all construction-related costs and is expensing as
incurred all selling, general and administrative costs as period
costs.
Provision for Income Taxes. The Company recorded an income tax
provision of $843,000 and $816,000 during the three-month periods
ended March 31, 1995 and 1994, respectively. The Company's
expected 1995 effective tax rate of 30% is primarily a result of
non-tax deductible goodwill amortization related to its
acquisition of Space Data Corporation in 1988 and Fairchild in
1994, offset by anticipated tax-exempt interest earnings and
research and experimental tax credits.
At December 31, 1994, Orbital had approximately $50,000,000 and
$900,000 of net operating loss and tax credit carryforwards,
respectively, which are available to reduce future income tax
obligations, subject to certain annual limitations and other
restrictions.
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 investment 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.
Orbital issued secured notes totaling approximately $24,200,000
to eight financial institutions, to support its acquisition of
Fairchild in 1994. The notes have an average interest rate of
approximately 8 3/4% and generally mature on a monthly basis over
a three- to five-year period.
Cash, cash equivalents and short-term investments were
$13,798,000 at March 31, 1995, and the Company had short-term and
long-term debt obligations outstanding of approximately
$107,003,000. The outstanding debt relates primarily to advances
under the Company's line of credit facility, secured notes issued
in connection with the Fairchild acquisition, fixed asset
financings and the Company's public debentures.
The Company's 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 $21,600,000 of
borrowings were outstanding under the facility at March 31, 1995,
against an available facility limit of approximately $23,800,000.
The available facility limits were approximately $33,900,000 at
April 30, 1995. At March 31, 1995, the average interest rate
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's operations used net cash of approximately
$14,643,000 in the three months ended March 31, 1995. The
Company also incurred approximately $1,590,000 of investment
related to its ORBCOMM project and $2,527,000 in capital
expenditures related primarily to spacecraft production and test
equipment.
Orbital's capital expenditures for 1995 are expected to
approximate 1994 and 1993 levels, including continued investments
in space launch vehicle and spacecraft production, test, and
airborne and ground support equipment. Additionally, Orbital
expects to invest up to $10,000,000 in various ORBIMAGE remote
sensing projects. Assuming that Teleglobe Mobile exercises its
option to invest in the next phase of the ORBCOMM System, Orbital
intends to invest approximately $10,000,000 in the ORBCOMM
System. In the event Teleglobe Mobile chooses not to exercise
its option to invest in the next phase of the project and Orbital
desires to proceed, Orbital's investment or that of other
potential partners could exceed $80,000,000 over the next two
years.
Orbital expects that its 1995 capital needs for its existing
operations, including its planned $10,000,000 investment in the
ORBCOMM project, will in part be provided by working capital,
cash flows from operations, credit facilities, asset-based
financings, customer financings and operating lease arrangements.
Additionally, as part of a joint venture partially funded by NASA
and Rockwell International Corporation, Orbital has committed to
invest at least $50,000,000 in the development of a new reusable
launch vehicle, which investment will be required over the next
four years, including approximately $5,000,000 in 1995. Orbital
believes that it will require equity and/or debt financing in
1995 to fully fund its currently planned operations and capital
requirements, to meet its potential increased investment in the
ORBCOMM System and to meet its investment requirements for the
new launch vehicle.
On May 3, 1995, the Company entered into a $12,500,000 90-day
bridge loan with a bank syndicate that includes certain of the
existing lenders under its revolving credit facility. Borrowings
are secured by contract receivables, and have an interest rate of
the higher of prime or the Federal funds rate, plus 1%. The
Company is currently seeking the private placement of
approximately $20,000,000 of unsecured debt, the
proceeds of which will fund, among other things, the repayment of
existing borrowings under the bridge loan and revolving credit
facility.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 6 to the Company's Unaudited Condensed Consolidated Financial
Statements for the three months ended March 31, 1995,
provided in Item 1 of Part I of this Form 10-Q,
regarding the settlement of all outstanding litigation
between the Company and Alliant Techsystems Inc., which
recently acquired Hercules Aerospace Company, a division
of Hercules Incorporated, is incorporated herein by
reference.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES 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) On January 11, 1995, the Company filed Amendment
No. 2 on Form 8-K/A reporting the consummation of
its acquisition of Magellan Corporation. The
Company filed a report on Form 8-K on February 8,
1995 and on March 15, 1995, in each case reporting
events under Item 5.
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: May 5, 1995 By: /s/ David W. Thompson
David W. Thompson, President
and Chief Executive Officer
DATED: May 5, 1995 By: /s/ Carlton B. Crenshaw
Carlton B. Crenshaw, Senior
Vice President and Principal
Financial Officer
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this report.
Exhibit Description
No.
10.1 Amendment No. 4 to System Design, Development and
Operations Agreement dated March 17, 1995 (transmitted
herewith).
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).
EXHIBIT 10.1
AMENDMENT NO. 4
TO
ORBCOMM SYSTEM DESIGN, DEVELOPMENT,
AND OPERATIONS AGREEMENT
This Amendment No. 4 to the ORBCOMM System Design,
Development and Operations Agreement ("Amendment No. 4") is made
and entered into as of this 17th day of March 1995 by and between
Orbital Communications Corporation ("ORBCOMM") and ORBCOMM
Development Partners, L.P. ("ORBCOMM Development").
W I T N E S S E T H
WHEREAS, ORBCOMM Development and ORBCOMM previously entered
into the ORBCOMM System Design, Development, and Operations
Agreement dated as of June 30, 1993, as such agreement has been
amended by Amendment No. 1 dated as of the 1st day of March 1994,
Amendment No. 2 dated as of the 1st day of March 1994 and
Amendment No. 3 dated as of the 1st day of April 1994 (as
amended, the "Agreement"); and
WHEREAS, ORBCOMM Development and ORBCOMM desire to amend and
modify the Agreement as set forth herein.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein
shall have the meanings attached thereto in the Agreement.
SECTION 2. Section 8.3 of the Agreement is deleted in
its entirety and replaced with the following:
Section 8.3 Acceptance of Launch Vehicles and
Spacecraft under Section 2.3 and 2.10(c). Final acceptance
of the hardware and transfer of title of the launch vehicles
shall be made at separation of the launch vehicle from the
carrier aircraft. Acceptance for each plane of satellites
(CLINs 001, and CLINs 003, 004, 005 and 006, if exercised)
shall occur upon successful on-orbit insertion and
completion of check-out of the satellites and on-orbit
satellite acceptance testing. Transfer of title and risk of
loss for such satellites shall occur upon expiration of the
30-day warranty period set forth in Attachment 4 to the
Satellite and Launch Services Agreement referred to in
Article 11 hereof. The satellite control center shall be
accepted concurrently with acceptance of the FM-1 and FM-2
spacecraft.
IN WITNESS WHEREOF, the parties have caused this Amendment
No. 4 to be executed as of the day and year first written above.
ORBITAL COMMUNICATIONS CORPORATION ORBCOMM DEVELOPMENT PARTNERS,
L.P.
By: /s/ Alan L. Parker By: Orbital Communications Corporation,
Name: Alan L. Parker General Partner
Title: President
By: /s/ Alan L. Parker
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investments Inc.
its Managing Partner
By: /s/ Guthrie J. Stewart
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
<TABLE>
<CAPTION>
Exhibit 11.
Statement re: Computation of Earnings Per Share
Three Month Period Ended March 31, 1995 Three Month Period Ended March 31, 1995
Primary Assuming Primary Assuming
Full Full
Dilution Dilution
<S> <C> <C> <S> <C> <C>
Weighted average Weighted average
of outstanding shares 20,197,095 20,197,095 of outstanding shares 20,197,095 20,197,095
Common equivalent shares: Common equivalent shares:
outstanding stock options <F2> 457,812 473,384 outstanding stock options 457,812 473,384
Other potentially dilutive securities: Other potentially dilutive securities:
Convertible debentures N/A 4,104,335 convertible debentures N/A 4,104,335
Shares used in computing Shares used in computing net
net income per share 20,654,907 24,774,814 income per share 20,654,907 24,774,814
Net income $1,967,397 $1,967,397 Net income $ 1,967,397 $1,967,397
Adjustments assuming full dilution: Adjustments assuming full dilution:
Interest expense, net of taxes N/A 696,938 interest expense, net of taxes N/A 696,938
Net income, assuming full Net income, assuming
dilution $1,967,397 $2,664,335 full dilution $ 1,967,397 $2,664,335
Net income per share $ 0.095 $ 0.108 Net income per share $ 0.095 $ 0.108
Dilution percentage Dilution percentage
assuming full dilution <F1> N/A (12.904)% assuming full dilution <F1> N/A (12.904)%
Net income per share used $ 0.10 $ 0.10 Net income per share used $ 0.10 $ 0.10
<FN>
Notes:
<F1> Provided that dilution is greater than 3%, the convertible debentures are considered
dilutive in the calculation and presentation of per share data.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000820736
<NAME> ORBITAL SCIENCES CORP /DE/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,371
<SECURITIES> 9,427
<RECEIVABLES> 101,086
<ALLOWANCES> (692)
<INVENTORY> 23,809
<CURRENT-ASSETS> 146,162
<PP&E> 137,128
<DEPRECIATION> (35,274)
<TOTAL-ASSETS> 389,236
<CURRENT-LIABILITIES> 93,562
<BONDS> 79,711
<COMMON> 203
0
0
<OTHER-SE> 204,407
<TOTAL-LIABILITY-AND-EQUITY> 389,236
<SALES> 68,341
<TOTAL-REVENUES> 68,341
<CGS> 49,487
<TOTAL-COSTS> 49,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 1,014
<INCOME-PRETAX> 2,810
<INCOME-TAX> 843
<INCOME-CONTINUING> 1,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,967
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
