<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K/A
AMENDMENT NO. 1
to Annual Report on Form 10-K for the fiscal year ended December 31, 1996
Commission file number 0-18287
ORBITAL SCIENCES CORPORATION
(exact name of Registrant as
specified in charter)
Delaware 06-1209561
(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization
of Registrant)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
(Address of principal executive offices)
(703) 406-5000
(Registrant's telephone number)
------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 (listed on The Nasdaq National Market System)
------------------------
<PAGE> 2
Part IV - Item 14 of Orbital Sciences Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 is hereby amended in its
entirety to include the financial statements of ORBCOMM Global, L.P.:
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) Documents filed as part of this Report:
1. FINANCIAL STATEMENTS. The following financial
statements, together with the report of KPMG Peat
Marwick LLP, appearing in the portions of the Annual
Report, filed as Exhibit 13, are filed as a part of this
report:
A. Independent Auditors' Report (Annual Report
page 37)
B. Consolidated Statements of Earnings (Annual
Report page 38)
C. Consolidated Balance Sheets (Annual Report page
39)
D. Consolidated Statements of Stockholders' Equity
(Annual Report page 40)
E. Consolidated Statements of Cash Flows (Annual
Report page 41)
F. Notes to Consolidated Financial Statements
(Annual Report pages 42 through 57)
2. FINANCIAL STATEMENTS OF 50-PERCENT OWNED SUBSIDIARY AND
FINANCIAL STATEMENT SCHEDULES.
The financial statements of ORBCOMM Global, L.P. are
transmitted with this report.
The following additional financial data are transmitted
with this report and should be read in conjunction with
the Consolidated Financial Statements in the Annual
Report. Schedules other than those listed below have
been omitted because they are inapplicable or are not
required.
Independent Auditors' Report on
Consolidated Financial Statement
Schedule
II Valuation and Qualifying Accounts
3. 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
On December 23, 1996, the Company filed a Current Report on Form 8-K
reporting, pursuant to Item 9, its sale of 1.2 million shares of
common stock on December 13, 1996, in a transaction exempt from
registration pursuant to Regulation S under the Securities Act.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
DATED: April 8, 1997 By /s/ David W. Thompson
---------------------
David W. Thompson, Chairman of the Board,
President and Chief Executive Officer
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM Global, L.P.:
We have audited the accompanying balance sheets of ORBCOMM Global, L.P.
("ORBCOMM") (a development stage enterprise) as of December 31, 1996 and 1995,
and the related statements of income and expenses, partners' capital, and cash
flows for each of the years in the three year period ended December 31, 1996 and
for the period from June 30, 1993 (date of inception) through December 31, 1996.
These financial statements are the responsibility of ORBCOMM's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ORBCOMM (a development stage
enterprise) as of December 31, 1996 and 1995, and the results of its income and
expenses, partners' capital and cash flows for each of the years in the three
year period ended December 31, 1996 and for the period from June 30, 1993 (date
of inception) through December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Washington, DC
January 31, 1997
25
<PAGE> 5
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 1,784,950 $ 56,870,424
Short-term available-for-sale investments..................... 0 31,433,390
Short-term held-to-maturity investments....................... 0 23,335,992
Receivable -- Orbital Communications Corporation.............. 0 114,784
Receivables -- other.......................................... 0 637,727
Inventory..................................................... 446,684 1,751,270
------------ ------------
Total Current Assets....................................... 2,231,634 114,143,587
LONG TERM ASSETS:
Long-term available-for-sale investments...................... 0 20,364,987
Long-term held-to-maturity investments........................ 0 21,478,072
Receivables -- other.......................................... 0 517,370
Mobile Communications Satellite System, net of accumulated
depreciation............................................... 106,989,940 170,033,722
Other assets, net............................................. 0 6,137,567
Investments in and advances to affiliates..................... (191,916) (3,166,091)
------------ ------------
TOTAL ASSETS.......................................... $109,029,658 $329,509,214
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Current portion of long-term debt............................. $ 904,811 $ 991,652
Accounts payable.............................................. 4,037,675 4,610,786
Accrued expenses.............................................. 6,116,314 13,687,255
Deferred revenue.............................................. 100,000 0
------------ ------------
Total Current Liabilities.................................. 11,158,800 19,289,693
Long-term debt................................................ 3,269,619 172,277,967
------------ ------------
Total Liabilities.......................................... 14,428,419 191,567,660
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Teleglobe Mobile Partners..................................... 33,517,008 73,595,777
Orbital Communications Corporation............................ 61,084,231 64,345,777
------------ ------------
Total Partners' Capital.................................... 94,601,239 137,941,554
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL............... $109,029,658 $329,509,214
============ ============
</TABLE>
(See accompanying notes to the financial statements)
26
<PAGE> 6
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
STAGE
YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------- DECEMBER 31,
1994 1995 1996 1996
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME:
Product sales.......................... $ 0 $ 0 $ 268,350 $ 268,350
Distribution fees...................... 0 900,000 100,000 1,000,000
Other.................................. 0 0 52,410 52,410
------- --------- ------------ ------------
Total Income........................ 0 900,000 420,760 1,320,760
EXPENSES:
Cost of product sales.................. 0 0 268,350 268,350
Depreciation........................... 0 0 6,198,519 6,198,519
Engineering expenses................... 0 0 5,453,299 5,453,299
Marketing, administrative and other
expenses............................ 9,062 49,943 6,932,862 6,991,867
------- --------- ------------ ------------
Total Expenses...................... 9,062 49,943 18,853,030 18,912,035
------- --------- ------------ ------------
Income (loss) from operations....... (9,062) 850,057 (18,432,270) (17,591,275)
OTHER INCOME AND EXPENSES:
Interest income (expenses), net........ 0 58,415 3,554,188 3,612,603
Equity in earnings (losses) of
affiliates.......................... 0 (853,270) (4,602,096) (5,455,366)
------- --------- ------------ ------------
EXCESS (DEFICIENCY) OF INCOME
OVER EXPENSES.......................... $(9,062) $ 55,202 $(19,480,178) $(19,434,038)
======= ========= ============ ============
</TABLE>
(See accompanying notes to the financial statements)
27
<PAGE> 7
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ORBITAL
TELEGLOBE MOBILE COMMUNICATIONS
PARTNERS CORPORATION TOTAL
---------------- -------------- --------------
<S> <C> <C> <C>
Capital contributions........................ $ 10,000,000 $ 38,148,997 $ 48,148,997
Excess (deficiency) of income over
expenses.................................. 0 0 0
Financing fees............................... (241,739) (241,739) (483,478)
------------ ------------ -------------
PARTNERS' CAPITAL, DECEMBER 31, 1993........... 9,758,261 37,907,258 47,665,519
Capital contributions........................ 0 10,852,961 10,852,961
Excess (deficiency) of income over
expenses.................................. (4,531) (4,531) (9,062)
------------ ------------ -------------
PARTNERS' CAPITAL, DECEMBER 31, 1994........... 9,753,730 48,755,688 58,509,418
Capital contributions........................ 24,750,000 13,315,265 38,065,265
Excess (deficiency) of income over
expenses.................................. 27,601 27,601 55,202
Financing fees............................... (1,014,323) (1,014,323) (2,028,646)
------------ ------------ -------------
PARTNERS' CAPITAL, DECEMBER 31, 1995........... 33,517,008 61,084,231 94,601,239
Capital contributions........................ 49,775,000 12,957,777 62,732,777
Excess (deficiency) of income over
expenses.................................. (9,740,089) (9,740,089) (19,480,178)
Unrealized gains on available-for-sale
investments............................... 43,858 43,858 87,716
------------ ------------ -------------
PARTNERS' CAPITAL, DECEMBER 31, 1996........... $ 73,595,777 $ 64,345,777 $ 137,941,554
============ ============ =============
</TABLE>
(See accompanying notes to the financial statements)
28
<PAGE> 8
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TOTAL CASH
FLOWS DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
------------------------------------------- DECEMBER 31,
1994 1995 1996 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Excess (deficiency) of income over expenses... $ (9,062) $ 55,202 $ (19,480,178) $ (19,434,038)
ADJUSTMENTS TO RECONCILE EXCESS (DEFICIENCY)
OF INCOME OVER EXPENSES TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation................................ 0 0 6,198,519 6,198,519
Amortization of financing fees.............. 0 0 306,594 306,594
Equity in losses of affiliates.............. 0 833,670 4,602,096 5,435,766
Increase in receivable -- Orbital
Communications Corporation................ 0 0 (114,784) (114,784)
Increase in receivables -- other............ 0 0 (1,155,097) (1,155,097)
Increase in inventory....................... 0 (446,684) (1,304,586) (1,751,270)
Increase in accounts payable................ 2,270,775 1,786,500 573,111 4,630,386
Increase (decrease) in deferred revenue..... 0 100,000 (100,000) 0
Increase (decrease) in accrued expenses..... 7,866,668 (1,750,354) 7,570,941 13,687,255
Decrease in prepaid contract costs.......... 3,740,802 0 0 0
------------ ------------ ------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................. 13,869,183 578,334 (2,903,384) 7,803,331
------------ ------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (24,722,144) (38,343,079) (69,242,301) (176,232,241)
Increase in amount due from affiliates........ 0 (661,354) (1,608,321) (2,269,675)
Purchase of available-for-sale investments.... 0 0 (91,717,823) (91,717,823)
Proceeds from sale of available-for-sale
investments................................. 0 0 40,007,162 40,007,162
Purchase of held-to-maturity investments...... 0 0 (44,814,064) (44,814,064)
------------ ------------ ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES..... (24,722,144) (39,004,433) (167,375,347) (275,026,641)
------------ ------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term
debt........................................ 5,000,000 0 164,475,000 169,475,000
Repayment of long-term debt................... 0 (825,570) (904,811) (1,730,381)
Partners' contributions....................... 10,852,961 38,065,265 62,732,777 159,800,000
Financing fees paid........................... 0 (2,028,646) (938,761) (3,450,885)
------------ ------------ ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES............................. 15,852,961 35,211,049 225,364,205 324,093,734
------------ ------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 5,000,000 (3,215,050) 55,085,474 56,870,424
CASH AND CASH EQUIVALENTS:
Beginning of period........................... 0 5,000,000 1,784,950 0
------------ ------------ ------------- -------------
CASH AND CASH EQUIVALENTS:
End of period................................. $ 5,000,000 $ 1,784,950 $ 56,870,424 $ 56,870,424
============ ============ ============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid................................. $ 0 $ 425,765 $ 346,526 $ 772,291
============ ============ ============= =============
</TABLE>
(See accompanying notes to the financial statements)
29
<PAGE> 9
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM" or the
"Company"), a Delaware limited partnership.
Pursuant to the terms of the Agreement of Limited Partnership of the
Company between OCC and Teleglobe Mobile (the "Partnership Agreement"), action
by the Company generally requires the approval of General Partners holding a
majority of the Participation Percentages held by the General Partners. OCC and
Teleglobe Mobile each holds 50% of the Participation Percentages in the Company,
with the result that the approval of both OCC and Teleglobe Mobile is generally
necessary for the Company to act.
The Company is a 98% noncontrolling General Partner in ORBCOMM USA, L.P.
("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"), two partnerships formed to market services using the ORBCOMM
low-Earth orbit satellite communications system (the "ORBCOMM System") in the
United States and internationally, respectively.
The ORBCOMM System Description
The Company was created for the design, development, construction,
integration, testing and operation of the ORBCOMM System. The Company intends to
construct and implement the initial 28 satellite ORBCOMM System in two phases:
the ORBCOMM Phase 1A System, consisting of the worldwide network control center
(including the satellite management system), the U.S. Gateway control center,
four U.S. Earth stations and two satellites; and the ORBCOMM Phase 1B System
consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight satellites and one plane consisting of two high-inclination
satellites.
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the ORBCOMM Phase 1A
System satellites in April 1995. The ORBCOMM Phase 1A System began commercial
intermittent service in early 1996.
The System Charge
OCC is obligated to pay quarterly to the Company a System Charge in
consideration of the construction and financing of the ORBCOMM System assets by
the Company. Teleglobe Mobile is obligated to pay quarterly to the Company a
System Charge in consideration of the Company's grant to Teleglobe Mobile of the
right to market, sell, lease and franchise all ORBCOMM System output capacity
outside the United States.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission (the "FCC").
OCC has been granted full operational authority for the ORBCOMM System by the
FCC. Similar licenses are required from foreign regulatory authorities to permit
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
entities who become International Licensees.
30
<PAGE> 10
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company is in its development stage, devoting substantially all of its
efforts to establishing a new communications business. The Company's planned
principal operations are expected to commence in 1998. The accompanying
financial statements have been prepared on the accrual basis of accounting in
conformity with generally accepted accounting principles in the United States.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Recoverability of Long-Lived Assets
Depreciation is provided over an asset's estimated economic useful life
using the straight-line method as follows:
<TABLE>
<S> <C>
Space Segment Assets: lesser of five years or estimated life of the satellite
Ground Segment Assets: 10 years
Furniture and Equipment: three to 10 years
</TABLE>
The Company anticipates depreciating the ORBCOMM System over the estimated
economic useful lives of the various ORBCOMM System components once the ORBCOMM
System is placed in service. The Phase 1A System, which includes the worldwide
network control center (including the satellite management system), the U.S.
Gateway control center, four U.S. Earth stations and two satellites, was placed
in service at the beginning of 1996, at which time the Company began
depreciating those assets. The Company anticipates that the ORBCOMM Phase 1B
System will become fully operational in 1998.
The Company's policy is to review its long-lived assets, including its
satellite systems, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company recognizes impairment losses when the sum of the expected future cash
flows is less than the carrying amount of the asset. Given the inherent
technical and commercial risks within the space communications industry, it is
possible that the Company's current estimate for recovery of the carrying amount
of its assets may change.
Investments in Affiliates
Pursuant to the terms of ORBCOMM USA's and ORBCOMM International's
partnership agreements, OCC controls the operational and financial affairs of
ORBCOMM USA and Teleglobe Mobile controls the operational and financial affairs
of ORBCOMM International. The Company, however, significantly influences both
marketing partnerships. Accordingly, the Company is accounting for its
investments in ORBCOMM USA and ORBCOMM International using the equity method.
Pursuant to the equity method of accounting, the Company's carrying amount
of an investment is initially recorded at cost and is increased to reflect its
share of the affiliate's income, and is reduced to reflect its share of the
affiliate's losses. The Company's investment is also increased to reflect
contributions to, and reduced to reflect distributions from, such affiliates.
31
<PAGE> 11
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
Investments
The Company maintains two investment portfolios characterized by
management's intentions as to future investment activity. Investments classified
as "held-to-maturity" are not intended to be sold prior to maturity and are
carried at cost. Investments not intended to be held until maturity are
classified as "available-for-sale" and carried at fair value with temporary
unrealized gains (losses) charged directly to partners' capital. Investments
with maturities of less than one year are classified as short-term investments.
Investments maturing after one year are classified as long-term investments. The
Company uses the average cost method in determining the basis of investments
sold when computing realized gains (losses).
Inventory
Inventory is stated at the lower of cost, determined on the specific
identification basis, or market and represents subscriber communicators
available for sale to customers.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash equivalents, receivables,
and accounts payables approximates fair value since all such instruments are
short-term in nature. Fair value for the Company's long-term debt is determined
based on current rates offered for debt of similar remaining maturities. At
December 31, 1995 and 1996, the fair value for the long-term debt approximated
carrying value.
Mobile Communications Satellite System Under Construction
During the construction of the ORBCOMM System, the Company is capitalizing
substantially all such construction costs. The Company is capitalizing a portion
of the engineering direct labor costs that relate to hardware and system design
development and coding of the software products that enhance the operation of
the ORBCOMM System. As of December 31, 1996, approximately $1,244,000 of such
costs have been capitalized (none for the year ended December 31, 1995).
Additionally, interest costs of approximately $426,000 and approximately
$10,030,000 have been capitalized as part of the historical cost of the ORBCOMM
System for the years ended December 31, 1995 and December 31, 1996,
respectively. Additionally, approximately $9,500 of Revenue Participation
Interest (see Note 6, "Long-Term Debt") at the rate of 5% of ORBCOMM System
revenue has been capitalized as of December 31, 1996.
Partners' Capital
In accordance with the Partnership Agreement, Teleglobe Mobile and OCC are
both general and limited partners in the Company. Therefore, limited and general
partner accounts are combined into one single capital account and presented as
such in the balance sheet and statements of Partners' Capital.
32
<PAGE> 12
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue Recognition
The Company provided subscriber communicator hardware to ORBCOMM USA and
ORBCOMM International at cost. Revenue is recognized when products are shipped
or when customers have accepted the products or services, depending on
contractual terms. Contract revenues and receivables are recognized and accrued
as contract costs are incurred. Related contract expenses incurred in providing
marketing services in the United States are recognized on the accrual basis of
accounting. The Company generally recognizes distribution fees ratably over the
term of the agreement, or when the Company's obligations under the agreement are
substantially complete.
Reclassification of Prior Years Balances
Certain amounts in the prior year's financial statements have been
reclassified to conform with the current year presentation.
(3) INVESTMENTS
Included in cash and cash equivalents is approximately $54,527,000 of
commercial paper as of December 31, 1996. The fair value of commercial paper
approximates carrying value.
The following table sets forth the aggregate cost and fair values and gross
unrealized gains (losses) of available-for-sale securities as of December 31,
1996 (none for the year ended December 31, 1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS (LOSSES) FAIR VALUE
------------------------------------------- ----------- -------------- -----------
<S> <C> <C> <C>
Short-Term
U.S. Treasury Notes...................... $21,152,137 $ 53,788 $21,205,925
Commercial Paper......................... 10,229,101 (1,636) 10,227,465
----------- -------- -----------
Total short-term investments.......... 31,381,238 52,152 31,433,390
----------- -------- -----------
Long-Term
U.S. Treasury Notes, maturing 2-5
years................................. 20,329,423 35,564 20,364,987
----------- -------- -----------
Total available-for-sale
investments......................... $51,710,661 $ 87,716 $51,798,377
=========== ======== ===========
</TABLE>
The following table sets forth the aggregate cost and fair values of
held-to-maturity as of December 31, 1996 (none for the year ended December 31,
1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS FAIR VALUE
--------------------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
Short-Term
U.S. Treasury Notes........................ $23,335,992 $ 524,909 $23,860,901
Long-Term
U.S. Treasury Notes, maturing 2-5 years.... 21,478,072 541,807 22,019,879
----------- ---------- -----------
Total held-to-maturity investments...... $44,814,064 $1,066,716 $45,880,780
=========== ========== ===========
</TABLE>
Unrealized gains on held-to-maturity investments represent accrued interest
income and unrealized holding gains.
33
<PAGE> 13
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) RELATED PARTY TRANSACTIONS
The Company paid Orbital approximately $11,000,000, $38,000,000, and
$56,000,000 for the years ended December 31, 1994, 1995 and 1996, respectively,
and approximately $48,000,000 for the period June 30, 1993 (date of inception)
through December 31, 1993. Payments were made for work performed pursuant to the
ORBCOMM System Design, Development, and Operations Agreement (for the Phase 1A
System), the ORBCOMM System Procurement Agreement (for the Phase 1B System) and
the Administrative Services Agreement (for provision of ongoing support to the
Company).
In 1995, pursuant to the terms of the ORBCOMM System Design, Development
and Operations Agreement, the Company reimbursed OCC $1,375,000 for previous
costs incurred in obtaining the FCC License and other related costs. The Company
capitalized such costs as part of its Mobile Communications Satellite System.
At December 31, 1996, the Company had a receivable of approximately
$112,000 for a bonus payment to the Company's employees paid on behalf of OCC
for employees previously employed by OCC (none for the year ended December 31,
1995).
Certain provisions of the Partnership Agreement require the Company to
reimburse OCC for OCC's repurchase of shares of OCC common stock acquired
pursuant to the OCC 1992 Stock Option Plan ("Stock Option Plan"). During 1996,
the Company reimbursed OCC approximately $1,100,000 under the Stock Option Plan.
Orbital contributed approximately $100,000 to OCC to repurchase such shares.
Therefore, the net cash paid to third parties on repurchase of OCC common stock
was no greater than $1,000,000 per annum as required by the terms of the
Indenture.
(5) MOBILE COMMUNICATIONS SATELLITE SYSTEM
The Company's Mobile Communications Satellite System comprises the
following assets:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Space segment................................... $ 76,643,128 $140,999,409
Ground segment.................................. 29,799,853 33,554,094
Software........................................ 546,959 1,678,738
------------ ------------
Total fixed assets.............................. 106,989,940 176,232,241
Less accumulated depreciation................... 0 (6,198,519)
------------ ------------
Total fixed assets, net of depreciation......... $106,989,940 $170,033,722
============ ============
</TABLE>
(6) LONG-TERM DEBT
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Old Notes"). Revenue Participation Interest
represents an aggregate amount equal to 5% of the ORBCOMM System revenue and is
payable on the Old Notes on each interest payment date subject to certain
covenant restrictions. Interest on the Old Notes accrues at the rate of 14% per
annum and will be payable semi-annually in arrears on February 15 and August 15
each year, commencing on February 15, 1997.
All of the Old Notes have been exchanged for an equal principal amount of
registered 14% Series B Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Notes"). The Notes are substantially similar to the
Old Notes except that the Notes are registered under the Securities Act of 1933,
as amended, and do not bear legends restricting the transfer thereof. The Notes
are fully and unconditionally
34
<PAGE> 14
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA
and ORBCOMM International (each a "Guarantor" and collectively the
"Guarantors"), except that the guarantees are non-recourse to the shareholders
and/or partners of the Guarantors, limited only to the extent necessary for each
such guarantee not to constitute a fraudulent conveyance under applicable law.
The guarantee of each Guarantor ranks pari passu in right of payment with all
senior indebtedness of such Guarantor and senior in right of payment to all
indebtedness expressly subordinated to the guarantee of such Guarantor. The
guarantees are non-recourse to the shareholders and/or partners of each
Guarantor and no shareholders or partners of any Guarantors will have any
liability for any claim under the Notes.
On closing, the Company used a portion of the net proceeds from the sale of
the Old Notes, approximately $44,800,000, to purchase a portfolio of U.S.
Government securities to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998 (see Note 3, "Investments").
The Company also has a $5,000,000 secured note outstanding with a financial
institution, which bears interest at 9.2% per annum and is due in monthly
principal and interest installments of $104,278 through December 1999. The note
is secured by equipment located at certain of the U.S. Earth stations, network
control center and satellite control center, and is guaranteed by Orbital.
Included in other assets is unamortized financing fees incurred for the
issuance of the Old Notes of approximately $6,138,000 net of approximately
$307,000 amortization cost for the year ended December 31, 1996 (none for the
year ended December 31, 1995). Such costs are being amortized over an eight-year
period.
35
<PAGE> 15
EXHIBIT INDEX
The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement or
report, such statement or report is identified in parentheses.
Exhibit
No. Description
23.2 Consent of KPMG Peat Marwick LLP with respect to financial
statements of ORBCOMM Global, L.P.
<PAGE> 1
Exhibit 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Orbital Sciences Corporation:
We consent to the incorporation by reference in the registration statements on
Forms S-8 (Nos. 33-47789, 33-84296, 33-62277, 33-64517) of Orbital Sciences
Corporation of our report dated January 31, 1997, relating to the balance
sheets of ORBCOMM Global, L.P. (a development stage enterprise) as of December
31, 1996 and 1995, and the related statements of income and expenses, partners'
capital and cash flows for each of the years in the three-year period ended
December 31, 1996, and for the period from June 30, 1993 (inception) to
December 31, 1996, which report appears in the annual report on Form 10-K/A of
Orbital Sciences Corporation for the fiscal year ended December 31, 1996.
KPMG Peat Marwick LLP
Washington, D.C.
April 8, 1997
