<PAGE> 1
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
SEPTEMBER 30, 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 preceing 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
As of November 4, 1998, 36,826,023 shares of the registrant's common stock were
outstanding.
<PAGE> 2
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
A S S E T S
-----------
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 39,482 $ 12,553
Short-term investments, at market 225 2,573
Receivables, net 224,078 190,204
Inventories, net 40,133 50,925
Deferred income taxes and other assets 10,673 8,190
-------------- --------------
TOTAL CURRENT ASSETS 314,591 264,445
PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED
depreciation and amortization of $98,241 and $79,347, respectively 153,534 137,498
INVESTMENTS IN AND ADVANCES TO AFFILIATES, NET 222,400 159,230
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $25,567 and $19,794, respectively 183,831 181,955
DEFERRED INCOME TAXES AND OTHER ASSETS 28,995 28,511
-------------- --------------
TOTAL ASSETS $ 903,351 $ 771,639
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term obligations $ 40,065 $ 29,317
Accounts payable 43,605 36,217
Accrued expenses 82,698 100,274
Deferred revenues 49,054 46,138
-------------- --------------
TOTAL CURRENT LIABILITIES 215,422 211,946
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION 152,803 198,394
OTHER LIABILITIES 436 2,443
-------------- --------------
TOTAL LIABILITIES 368,661 412,783
NON-CONTROLLING INTERESTS IN
NET ASSETS OF CONSOLIDATED SUBSIDIARIES (2,661) 3,755
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01; 10,000,000 shares authorized:
Series A Special Voting Preferred Stock, none and one share
authorized and outstanding, respectively -- --
Common Stock, par value $.01; 80,000,000 shares authorized,
36,955,050 and 32,481,719 shares outstanding, respectively
after deducting 20,877 shares held in treasury 370 325
Additional paid-in capital 486,919 326,187
Unrealized gains on short-term investments 387 272
Cumulative translation adjustments (6,134) (4,943)
Retained earnings 55,809 33,260
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 537,351 355,101
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 903,351 $ 771,639
============== ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-2-
<PAGE> 3
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------------
1998 1997
-------------------- -----------------
<S> <C> <C>
REVENUES $ 193,488 $ 164,670
COSTS OF GOODS SOLD 141,195 118,655
-------------------- -----------------
GROSS PROFIT 52,293 46,015
RESEARCH AND DEVELOPMENT EXPENSES 11,739 6,476
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 22,468 26,334
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 1,983 956
-------------------- -----------------
INCOME FROM OPERATIONS 16,103 12,249
NET INVESTMENT INCOME (EXPENSE) 777 1,007
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (9,465) (6,929)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 2,152 533
-------------------- -----------------
INCOME BEFORE PROVISION FOR INCOME TAXES 9,567 6,860
PROVISION FOR INCOME TAXES 956 730
-------------------- -----------------
NET INCOME $ 8,611 $ 6,130
==================== =================
NET INCOME PER COMMON SHARE $ 0.23 $ 0.18
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE 36,757,055 33,347,734
==================== =================
NET INCOME PER COMMON SHARE, ASSUMING DILUTION $ 0.21 $ 0.18
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE, ASSUMING DILUTION 41,172,222 34,492,637
==================== =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 4
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------------
1998 1997
-------------------- -----------------
<S> <C> <C>
REVENUES $ 564,163 $ 429,008
COSTS OF GOODS SOLD 409,645 309,642
-------------------- -----------------
GROSS PROFIT 154,518 119,366
RESEARCH AND DEVELOPMENT EXPENSES 29,255 18,170
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 77,754 69,456
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 5,921 2,439
-------------------- -----------------
INCOME FROM OPERATIONS 41,588 29,301
NET INVESTMENT INCOME (EXPENSE) 611 1,317
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (28,355) (13,590)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 6,417 1,717
GAIN ON SALE OF SUBSIDIARY STOCK 4,793 --
-------------------- -----------------
INCOME BEFORE PROVISION FOR INCOME TAXES 25,054 18,745
PROVISION FOR INCOME TAXES 2,505 1,918
-------------------- -----------------
NET INCOME $ 22,549 $ 16,827
==================== =================
NET INCOME PER COMMON SHARE $ 0.64 $ 0.51
SHARES USED IN COMPUTING NET INCOME PER SHARE 35,199,984 32,941,540
==================== =================
NET INCOME PER COMMON SHARE, ASSUMING DILUTION $ 0.62 $ 0.50
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE, ASSUMING DILUTION 39,925,234 33,960,724
==================== =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE> 5
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 22,549 $ 16,827
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 27,344 18,435
Equity in losses of affiliates 28,355 13,590
Non-controlling interests in losses of consolidated subsidiaries (6,417) (1,717)
Gain on sale of subsidiary stock (4,793) --
Foreign currency translation adjustment (1,191) (528)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in current and other non-current assets (34,533) (2,656)
Increase (decrease) in current and other non-current liabilities (12,528) (15,715)
----------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 18,786 28,236
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,659) (31,757)
Proceeds from sales of fixed assets -- 34,699
Payments for business combinations -- (44,116)
Purchases, sales and maturities of available-for-sale investment securities, net 2,348 (14,028)
Investments in and advances to affiliates (82,480) (104,394)
----------------- ----------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (117,791) (159,596)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net of (repayments) 17,440 (14,712)
Principal payments on long-term obligations (79,283) (22,690)
Net proceeds from issuance of long-term obligations 27,000 159,223
Net proceeds from issuances of common stock 160,777 1,803
----------------- ----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 125,934 123,624
----------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,929 (7,736)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,553 26,859
----------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 39,482 $ 19,123
================= ================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
<PAGE> 6
ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed consolidated 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, 1997. Operating results for the three- and nine-month
periods ended September 30, 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) PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The preparation of condensed consolidated 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 and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Management periodically assesses and
evaluates the sufficiency and/or deficiency of estimated liabilities recorded
for various operational and business risks and uncertainties. Actual results
could differ from these estimates.
Certain reclassifications have been made to the 1997 financial statement to
conform to the 1998 financial statement presentation. All financial amounts
are stated in U.S. dollars unless otherwise indicated.
(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,
net of allowances for estimated obsolescence.
6
<PAGE> 7
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-process inventory has been
reduced by contractual progress payments received. Finished goods inventory
consists of fully assembled commercial products awaiting shipment.
(3) INVESTMENTS IN AND ADVANCES TO AFFILIATES AND EXCESS OF PURCHASE PRICE
OVER NET ASSETS ACQUIRED
The company provided $22,500,000 in cash and $53,737,000 in vendor financing
(approximately one-half of the vendor financing has been advanced to Orbital by
an affiliate of Teleglobe Inc.) to its affiliate ORBCOMM Global, L.P.
("ORBCOMM") during the first nine months of 1998.
In August 1998, the company entered into a Stock Purchase Agreement (the
"Agreement") with CCI International N.V. ("CCI") pursuant to which the company
agreed, subject to the satisfaction by CCI of certain conditions and
achievement of certain milestones, to purchase up to $50,000,000 of CCI's
nonvoting Series A Convertible Preferred Stock (the "Preferred Shares"), with
an option to purchase an additional $50,000,000 of Preferred Shares. In
addition, the company agreed to provide vendor financing contingent on CCI
meeting such milestones. Concurrently with the execution of the Agreement,
the company and CCI entered into a satellite and launch vehicle procurement
contract valued at approximately $480,000,000 for the satellites and a price
for the launch vehicles to be determined. As of September 30, 1998, the
company had purchased $22,000,000 of the Preferred Shares and had not provided
any vendor financing.
During 1998, as a result of additional information becoming available with
respect to the fair value of the acquired assets and liabilities, increases
were made to the excess of purchase price over net assets acquired related to
the 1997 acquisition of certain assets of CTA Incorporated.
(4) 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
common equivalent shares outstanding during the periods, plus the effects of an
assumed conversion of the company's convertible notes, after giving effect to
all net income adjustments that would result from the assumed conversion. Net
income and outstanding shares of common stock used in calculating earnings per
share differed from those amounts reported in the consolidated financial
statements as follows:
7
<PAGE> 8
<TABLE>
<CAPTION>
Net Income Per Net Income Per Common
Common Share Share, Assuming Dilution
-------------- ------------------------
<S> <C> <C>
Three months ended September 30, 1998:
Net income $ 8,611,000 $ 8,611,000
Assuming conversion of convertible notes N/A 224,000
------------- -------------
Net income, as adjusted $ 8,611,000 $ 8,835,000
============= =============
Outstanding common shares 36,955,050 36,955,050
Effect of weighting outstanding shares (197,995) (197,995)
Stock options (treasury method) N/A 843,738
Convertible notes N/A 3,571,429
------------- ---------------
Adjusted shares 36,757,055 41,172,222
============= =============
Nine months ended September 30, 1998:
Net income $ 22,549,000 $ 22,549,000
Assuming conversion of convertible notes N/A 2,264,000
------------- -------------
Net income, as adjusted $ 22,549,000 $ 24,813,000
============= =============
Outstanding common shares 36,955,050 36,955,050
Effect of weighting outstanding shares (1,755,066) (1,755,066)
Stock options (treasury method) N/A 1,153,821
Convertible notes N/A 3,571,429
------------- ---------------
Adjusted shares 35,199,984 39,925,234
============= =============
</TABLE>
<TABLE>
<CAPTION>
Net Income Per Net Income Per Common
Common Share Share, Assuming Dilution
-------------- ------------------------
<S> <C> <C>
Three months ended September 30, 1997:
Net income $ 6,130,000 $ 6,130,000
Assuming conversion of convertible notes N/A N/A
------------- -------------
Net income, as adjusted $ 6,130,000 $ 6,130,000
============= =============
Outstanding common shares 32,269,326 32,269,326
Effect of weighting outstanding shares 1,078,408 40,083
Stock options (treasury method) N/A 1,587,990
Convertible notes N/A 595,238
------------- -------------
Adjusted shares 33,347,734 34,492,637
============= =============
Nine months ended September 30, 1997:
Net income $ 16,827,000 $ 16,827,000
Assuming conversion of convertible notes N/A N/A
------------- -------------
Net income, as adjusted $ 16,827,000 $ 16,827,000
============= =============
Outstanding common shares 32,269,326 32,269,326
Effect of weighting outstanding shares 672,214 (26,686)
Stock options (treasury method) N/A 1,519,671
Convertible notes N/A 198,413
------------- -------------
Adjusted shares 32,941,540 33,960,724
============= =============
</TABLE>
8
<PAGE> 9
(5) 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.
(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, as of and for the
nine months ended September 30, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Differences between net income, as
reported, and comprehensive income:
Net income, as reported $ 22,549,000 $ 16,827,000
Unrealized gains on short-term investments 115,000 30,000
Translation adjustments (1,191,000) (528,000)
------------- ------------
Comprehensive income $ 21,473,000 $ 16,329,000
============= ============
Accumulated differences between net income,
as reported, and comprehensive income:
Beginning of period $ (4,671,000) $ (3,667,000)
Unrealized gains (losses)
on short-term investments (115,000) (30,000)
Translation adjustments (1,191,000) (528,000)
------------- ------------
End of period $ (5,747,000) $ (4,165,000)
============= ============
</TABLE>
(7) COMMON STOCK
In April 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 underwriters' discounts and other
offering expenses.
(8) SUBSEQUENT EVENT
In October 1998, the company's Board of Directors adopted a stockholder rights
plan in which preferred stock purchase rights will be granted as a dividend at
the rate of one right for each share of common stock to stockholders of record
on November 13, 1998. The plan is designed to deter coercive or unfair
takeover tactics. The rights become exercisable only if a person or group in
the future becomes the beneficial owner of 15% or more of Orbital's common
stock, or announces a tender or exchange offer that would result in its
ownership of 15% or more of the Company's common stock. The rights are
generally redeemable by the Company's Board of Directors at a redemption price
of $0.005 per right and expire on October 31, 2008.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
Certain statements included in this discussion relating to future revenues,
expenses, growth rates, net income, new business, operational performance,
schedules, sources and uses of funds, "Year 2000" issues, 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 and achievements of the company to differ
materially from any future results, performance, achievements expressed or
implied by such forward-looking statements. Such factors include: general and
economic business conditions, launch results, product performance, risks
associated with government contracts, market acceptance of consumer products,
the introduction of products and services by competitors, risks associated with
acquired businesses including their successful integration into the Company in
terms of operating efficiencies, among other things, availability of required
capital, the ability of the company itself, customers and suppliers to assess
and correct timely and accurately "Year 2000" issues, market acceptance of new
products and technologies, and other factors that are described more fully 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 consumer,
high-precision 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, respectively. The company does
not control the operational and financial affairs of ORBCOMM or ORBIMAGE, and
consequently their financial results are not consolidated with the company's
results.
RECENT DEVELOPMENTS. In July 1998, the company's stock began trading on the
New York Stock Exchange under the ticker symbol "ORB." The company's stock had
previously traded on the Nasdaq National Market under the symbol "ORBI." In
April 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).
10
<PAGE> 11
In July 1998, ORBCOMM Corporation announced that it elected to postpone its
proposed initial public offering of common stock. ORBCOMM Corporation was
organized for the sole purpose of investing in and acting as a general partner
of ORBCOMM. Orbital, through its subsidiary Orbital Communications
Corporation, and Teleglobe Mobile Partners, an affiliate of Teleglobe Inc., the
existing fifty-percent partners in ORBCOMM, each has reaffirmed its commitment
to provide funding to ORBCOMM while considering options for future financing at
ORBCOMM (see Liquidity and Capital Resources).
In August 1998, the company entered into a Stock Purchase Agreement (the
"Agreement") with CCI International, N.V. ("CCI") pursuant to which the company
agreed, subject to the satisfaction by CCI of certain conditions prior to
December 31, 1998, including meeting certain milestones, to purchase up to
$50,000,000 of CCI's nonvoting Series A Convertible Preferred Stock (the
"Preferred Shares"), with an option to purchase an additional $50,000,000 of
Preferred Shares. Concurrently with the execution of the Agreement, the
company and CCI entered into a satellite and launch vehicle procurement
contract valued at approximately $480,000,000 for the satellites and a price to
be determined for the launch vehicles. In addition, Orbital agreed to
provide vendor financing contingent on CCI meeting such milestones. As of
September 30, 1998, the company had purchased $22,000,000 of the Preferred
Shares and had not provided any vendor financing. Should CCI not ultimately
achieve its financial or operational milestones, some of which entail raising
capital, Orbital may be required to write-off all, or a portion of, its
investment.
In October 1998, the company adopted a stockholder rights plan in which
preferred stock purchase rights will be granted as a dividend at the rate of
one right for each share of common stock to stockholders of record on November
13, 1998. The plan is designed to deter coercive or unfair takeover tactics.
The rights become exercisable only if a person or group in the future becomes
the beneficial owner of 15% or more of Orbital's common stock, or announces a
tender or exchange offer that would result in its ownership of 15% of more of
the Company's common stock. The rights are generally redeemable by the
Company's Board of Directors at a redemption price of $0.005 per right and
expire on October 31, 2008. For more information regarding Orbital's
stockholders rights plan, refer to the Company's Form 8-K filed with the
Securities and Exchange Commission on October 22, 1998.
REVENUES. Orbital's revenues for the three-month periods ended September 30,
1998 and 1997 were $193,488,000 and $164,670,000, respectively. Revenues for
the nine-month periods ended September 30, 1998 and 1997 were $564,163,000 and
$429,008,000, respectively.
Space and Ground Infrastructure Systems. Revenues from the company's Space and
Ground Infrastructure Systems sector totaled $166,386,000 and $149,387,000 for
the three months ended September 30, 1998 and 1997, respectively. Revenues
from this sector totaled $478,428,000 and $378,109,000 for the nine months
ended September 30, 1998 and 1997, respectively.
11
<PAGE> 12
Revenues from the company's launch vehicles increased to $34,636,000 in the
third quarter of 1998 from $29,905,000 in the third quarter of 1997, and to
$128,063,000 for the nine months ended September 30, 1998 from $87,022,000 for
the nine months ended September 30, 1997. The increase in revenues in 1998 as
compared to 1997 is attributable to a number of factors, including (i)
increased work performed under contracts received for the company's Taurus
launch vehicle, (ii) a significant increase in new orders received during 1997
for the company's Pegasus and suborbital launch vehicles and (iii) increased
work performed on the X-34 reusable launch vehicle.
For the three months ended September 30, 1998, satellite revenues were
$75,529,000 as compared to $74,485,000 for the three months ended September 30,
1997. Satellite revenues were $194,112,000 for the nine months ended September
30, 1998 as compared to $161,679,000 for the nine months ended September 30,
1997. Revenues included sales generated by the satellite business acquired
from CTA Incorporated ("CTA") in August 1997 of approximately $21,903,000 and
$51,775,000, respectively, for the three- and nine-month periods ended
September 30, 1998, and of approximately $21,964,000 for the three-month period
ended September 30, 1997. The company periodically assesses and evaluates the
recoverability of the related excess of purchase price over net assets acquired
based on current facts and circumstances and the operational performance of the
acquired CTA business.
Revenues from electronics and sensor systems were $25,715,000 for the three
months ended September 30, 1998 as compared to $26,915,000 for the three months
ended September 30, 1997, and increased to $82,527,000 for the nine months
ended September 30, 1998 from $77,108,000 for the nine months ended September
30, 1997. Although consistent on a quarter-to-quarter basis, the increase in
overall 1998 revenues is primarily due to work performed in 1998 on new orders
for defense electronics products received during the second half of 1997 and in
early 1998.
Revenues from the company's ground systems products increased to $30,506,000
for the three months ended September 30, 1998 from $18,802,000 for the three
months ended September 30, 1997. Ground systems products revenues increased to
$73,726,000 for the nine months ended September 30, 1998 from $52,210,000 for
the nine months ended September 30, 1997. The increase in 1998 revenues is
primarily due to work performed on orders received in 1997 and in early 1998,
including work on a new remote imaging system.
Although overall infrastructure revenues increased, revenues under procurement
agreements with ORBCOMM and ORBIMAGE for the three months ended September 30,
1998 decreased significantly to $28,299,000 from $45,408,000 for the three
months ended September 30, 1997. Revenues from sales to ORBCOMM and ORBIMAGE
were $109,077,000 for the nine months ended September 30, 1998 as compared to
$108,062,000 for the nine months ended September 30, 1997. The decrease in the
current quarter's revenues is primarily due to reduced work under the ORBCOMM
procurement agreement as it nears completion.
12
<PAGE> 13
Satellite Access Products. Revenues from sales of satellite-based navigation,
communications and transportation management systems and products increased to
$26,963,000 for the three months ended September 30, 1998 from $15,261,000 for
the three months ended September 30, 1997. Satellite access products revenues
were $85,273,000 for the nine months ended September 30, 1998 as compared to
$50,796,000 for the nine months ended September 30, 1997. The three- and
nine-month periods ended September 30, 1998 included approximately $10,654,000
and $32,557,000, respectively, of sales generated by the company's
high-precision navigation products that were acquired as a result of the
December 1997 merger of Ashtech Inc. ("Ashtech") with the company's subsidiary,
Magellan Corporation ("Magellan").
Although 1998 revenues from satellite access products were greater than 1997
revenues, revenues are below management's expectations due to increased
competition in consumer products and slower sales of automotive navigation
products. Such revenue levels, combined with costs associated with the
integration and restructuring of Ashtech and Magellan, have led to operating
losses within this segment for the 1998 periods. While the company expects this
trend to continue for the next several months, Magellan believes the trend will
reverse with the introduction of new products and the implementation of
further cost-related efficiencies during the same period.
GROSS PROFIT/COSTS OF GOODS SOLD. Costs of goods sold include the costs of
personnel, materials, subcontracts and overhead related to sales of commercial
products and revenue earned under various long-term 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 third quarter of 1998 was $52,293,000 as compared to $46,015,000
in the third quarter of 1997. The company's gross profit for the first nine
months of 1998 was $154,518,000 as compared to $119,366,000 for the first nine
months of 1997. Gross profit as a percentage of revenues was between 27% and
28% for all periods.
Space and Ground Infrastructure Systems. Gross profit from the company's Space
and Ground Infrastructure Systems sector was $46,007,000 and $41,820,000 for
the three months ended September 30, 1998 and 1997, respectively (or
approximately 28% of revenues for each period). Gross profit for this sector
was $130,836,000 and $104,182,000 for the nine months ended September 30, 1998
and 1997, respectively (or approximately 27.5% of revenues for each period).
Gross profit margins from the company's space and ground infrastructure systems
for the three- and nine-month periods ended September 30, 1998 were generally
consistent with comparable 1997 periods. Gross profit margins for the
company's launch vehicles decreased to 25% for the nine months ended September
30, 1998 from 29% for the nine months ended September 30, 1997, primarily due
to work performed on a lower margin Taurus contract and increased activity on
the lower margin X-34 contract.
13
<PAGE> 14
Satellite Access Products. Gross profit for satellite access products was
$7,184,000 (or 27% of revenues) and $4,271,000 (or 28% of revenues) for the
three months ended September 30, 1998 and 1997, respectively, and $26,875,000
(or 32% of revenues) and $15,321,000 (or 30% of revenues) for the nine months
ended September 30, 1998 and 1997, respectively. The overall increase in gross
margins for the nine-month period is due to the inclusion of higher margin
high-precision navigation product lines acquired from Ashtech offset, in part,
by lower margins achieved on consumer and automotive navigation product sales.
During the nine months ended September 30, 1998, Magellan disposed of
approximately $12,500,000 of certain obsolete inventory for which reserves had
been previously provided. Magellan continues to face changing market
conditions, which places significant pressure on inventory components and
individual product lifetimes and inventory levels. Accordingly, during the
three months ended September 30, 1998, Orbital further increased its reserves
related to inventory by $1,600,000.
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 for the three
months ended September 30, 1998 and 1997 were $11,739,000 (or 6% of revenues)
and $6,476,000 (or 4% of revenues), respectively. Research and development
expenses were $29,255,000 (or 5% of revenues) and $18,170,000 (or 4% of
revenues) for the nine months ended September 30, 1998 and 1997, respectively.
Research and development expenses for the three and nine months ended September
30, 1998 included approximately $3,000,000 and $5,000,000, respectively, of
costs related to identifying and addressing technical issues arising on certain
ORBCOMM advanced data communications satellites. Current year expenses also
include increased research and development efforts for satellite access
products.
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 September 30,
1998 and 1997 were $22,468,000 (or 12% of revenues) and $26,334,000 (or 16% of
revenues), respectively. Selling, general and administrative expenses for the
nine months ended September 30, 1998 and 1997 were $77,754,000 (or 14% of
revenues) and $69,456,000 (or 16% 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 operational efficiencies
gained as a result of the acquisition of CTA's space business.
INTEREST INCOME AND INTEREST EXPENSE. Interest income for the periods reflects
interest earnings on cash equivalents and short-term investments. Interest
expense includes the cost of borrowings on Orbital's convertible subordinated
notes, revolving credit facilities and other secured and unsecured debt.
Interest income and interest expense, net of
14
<PAGE> 15
amounts capitalized, were $1,026,000 and $249,000, respectively, for the three
months ended September 30, 1998 as compared to interest income of $1,007,000
(there was no interest expense) for the three months ended September 30, 1997.
The company's interest income and interest expense for the first nine months of
1998 were $3,127,000 and $2,516,000, respectively, while for the first nine
months of 1997, the company earned interest income and incurred interest
expense of $1,405,000 and $88,000, respectively. Interest expense has been
reduced by capitalized interest of $3,928,000 and $4,052,000 for the three
months ended September 30, 1998 and 1997, respectively, and by $12,527,000 and
$7,024,000 for the nine months ended September 30, 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 were ($7,313,000) and ($6,396,000) for the three
months ended September 30, 1998 and 1997, respectively, and were ($21,938,000)
and ($11,873,000) for the nine months ended September 30, 1998 and 1997,
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 ORBCOMM's, ORBCOMM
International Partners, L.P.'s and ORBIMAGE's current period earnings and
losses 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
total losses during 1998 is primarily due to increased start-up expenses and
resulting losses at ORBCOMM.
PROVISION FOR INCOME TAXES. The company recorded an income tax provision of
$956,000 and $730,000 for the three months ended September 30, 1998 and 1997,
respectively, and of $2,505,000 and $1,918,000 for the nine months ended
September 30, 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.
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 future requirements, through cash generated by operations, working
capital, loan facilities, asset-based
15
<PAGE> 16
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
fund such transactions through existing cash and loan facilities, joint
ventures or the issuance of equity and/or debt securities, asset-based
financings, and cash generated by operations.
In April 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 continue to use the net proceeds from the
Offering for (i) investments in ORBCOMM, new projects or emerging space-related
businesses, such as CCI, (ii) expanded research and development for new
products, (iii) acquisitions of businesses and/or product lines complementary
to the company's existing businesses, and (iv) for other general corporate
purposes.
In July 1998, ORBCOMM Corporation announced that it elected to postpone its
proposed initial public offering of common stock. The company provided
$22,500,000 in cash and $53,737,000 in vendor financing (approximately one-half
of the vendor financing has been advanced to Orbital by an affiliate of
Teleglobe Inc.) to ORBCOMM during the first nine months of 1998. Orbital,
through its subsidiary Orbital Communications Corporation, and Teleglobe Mobile
Partners, an affiliate of Teleglobe Inc., the existing fifty-percent partners
in ORBCOMM, each has reaffirmed its commitment to provide funding to ORBCOMM
while considering options for future financing at ORBCOMM. The company
currently estimates that its additional funding obligation could be as much as
$10,000,000 through the remainder of 1998. Orbital expects to fund its share
of ORBCOMM's capital needs through existing resources, including credit
facilities.
Cash, cash equivalents and short-term investments were $39,482,000 at September
30, 1998, and the company had total debt obligations outstanding of
approximately $192,868,000 at September 30, 1998. The outstanding debt is
comprised 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. No
borrowings were outstanding under the facility at September 30, 1998.
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 is currently in discussions
with its lead bank to amend and restate its primary credit facility, and to
increase the amount of total borrowings. The company (or its subsidiaries)
also maintains additional, smaller revolving credit facilities, under which
approximately $25,940,000 was outstanding at September 30, 1998 at a weighted
average interest rate of approximately 7%. Additional borrowing capacity on
these other agreements was approximately $5,100,000 at September 30, 1998.
16
<PAGE> 17
The company's operations provided net cash of approximately $18,786,000 during
the first nine months of 1998. Also during the first nine months of
1998, in addition to its investment in ORBCOMM, the company invested
approximately $22,000,000 in CCI and $37,659,000 in capital expenditures for
various satellite and launch vehicle equipment and other production,
manufacturing, test and office equipment.
Orbital plans to expand its offices and its satellite-related engineering,
manufacturing and operations facilities adjacent to its Dulles, Virginia
headquarters. The company anticipates that the new construction will be
conducted in two phases during 1999 and 2000-2001. To finance the expansion,
Orbital is currently pursuing various financing alternatives, including
third-party debt financings and "built-to-suit" agreements. Consequently, the
company does not expect to use existing resources to finance this expansion.
Orbital expects that its capital needs for the remainder of 1998 will be
provided by working capital, cash flows from operations, existing credit
facilities, and operating lease arrangements.
YEAR 2000 ISSUES
The company has developed a plan to prepare for potential "Year 2000" issues
with respect to various operational, technical and financial computer-related
systems. The plan has been designed to minimize risk to the company and its
customers using a standard industry five-phase approach. The five phases are
awareness, assessment, renovation, validation and implementation. The company
has substantially completed the awareness and assessment phases, including a
comprehensive inventory of potentially affected systems. In many cases
renovation work is well underway and validation testing has begun with respect
to certain critical systems.
The company currently plans to achieve its overall goal of Year 2000 readiness
in mid-1999. During the remainder of 1998, the company expects to complete the
assessment phase, and the first half of 1999 will be devoted to renovating,
validating and implementing its corrective action plan by (i) reprogramming
affected software when appropriate and feasible, (ii) obtaining vendor-provided
software upgrades when available and (iii) completely replacing affected
systems when necessary.
The total costs to implement the plan, which costs include the already planned
replacement of existing systems to support the company's overall growth, are
estimated to be well less than one percent of anticipated 1998 annual revenues.
This estimate includes the planned costs of replacing existing systems to
support the company's overall growth that are also impacted by the Year 2000
problem. Approximately 70% of the estimated costs to implement the plan have
been incurred to date and the remaining costs are expected to be incurred over
the remainder of 1998 and 1999. All costs, including the cost of internal
personnel, outside consultants, system replacements and other equipment, will
be expensed as incurred, except for long-lived assets, which will be
capitalized in accordance with the
17
<PAGE> 18
company's capitalization policies. The company has not postponed the
implementation or upgrade of other systems as a result of focusing on the Year
2000 plan.
As part of the plan, formal communication with the company's suppliers,
customers and other service providers has been initiated. To date, however, the
company has not determined whether "Year 2000" issues affecting key suppliers,
significant customers (including the U.S. government), or critical service
providers will materially impact the company's cash flows or operating results.
A "reasonably likely worst case" scenario of the Year 2000 issue for Orbital
could include: isolated performance problems with engineering, financial and
administrative systems; isolated interruption of deliveries from critical
suppliers; product liability or warranty issues; and the temporary inability of
key customers to pay amounts due to the company. Contingency plans are being
prepared, and will be implemented if necessary, including having sufficient
liquidity available to sustain a temporary interruption of cash receipts during
early 2000 and the identification of alternative suppliers for critical
components. There can be no assurance that the company has identified, or will
identify, all "Year 2000" affected systems, suppliers, customers and service
providers, or that its corrective action plan will be timely and successful.
18
<PAGE> 19
ORBITAL SCIENCES CORPORATION
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 July 2, 1998, the Company
filed a Current Report on Form
8-K, dated July 2, 1998,
disclosing ORBCOMM Corporation's
election to postpone its
proposed initial public offering
of common stock.
(ii) On July 23, 1998, the Company
filed a Current Report on Form
8-K, dated July 21, 1998,
disclosing the financial results
of the Company for the quarter
ended June 30, 1998.
19
<PAGE> 20
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: November 13, 1998 By: /s/ David W. Thompson
--------------------------------
David W. Thompson, President
and Chief Executive Officer
DATED: November 13, 1998 By: /s/ Jeffrey V. Pirone
------------------------------
Jeffrey V. Pirone, Executive Vice
President and Principal Financial Officer
21
<PAGE> 21
EXHIBIT INDEX
The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.2.6 Sixth Amendment to Note Agreement dated as of August
14, 1998 between Orbital Sciences Corporation and The
Northwestern Mutual Life Insurance Company (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 10Q,
or otherwise subject to the liabilities of
Section 18 of the Securities Act of 1934)
(transmitted herewith).
</TABLE>
22
<PAGE> 1
SIXTH AMENDMENT TO NOTE AGREEMENT
THIS SIXTH AMENDMENT to Note Agreement dated as of August 14, 1998 ("Sixth
Amendment") is entered into between Orbital Sciences Corporation, a Delaware
corporation (the "Company") and The Northwestern Mutual Life Insurance Company
(the "Purchaser").
R E C I T A L S:
A. The Company and the Purchaser have heretofore entered into the Note
Agreement dated as of June 1, 1995, the First Amendment to Note Agreement dated
as of June 30, 1995, the Second Amendment to Note Agreement dated as of March
15, 1996, the Third Amendment to Note Agreement dated as of July 31, 1996, the
Fourth Amendment to Note Agreement dated as of March 31, 1997, and the Fifth
Amendment to Note Agreement dated as of December 23, 1997 (as amended, the
"Note Agreement").
B. The Company and the Purchaser now desire to further amend,
effective on and as of August 14, 1998 (the "Effective Date"), certain of the
terms of the Note Agreement.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Sixth Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.
NOW, THEREFORE, the Company and the Purchaser, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, do
hereby agree as follows:
Section 1. AMENDMENT.
Section 1.1. Section 8.1 of the Note Agreement shall be and is hereby
amended as follows:
(a) The definition of "Restricted Investments," Clause (h) is
hereby amended by deleting the word "and" at the end thereof;
(b) The definition of "Restricted Investments," Clause (i) is
hereby amended by substituting a semicolon for the period and adding the
word "and" at the end thereof; and
(c) The definition of "Restricted Investment" is hereby amended
by adding a new Clause (j) to read in its entirety as follows:
<PAGE> 2
(j) Investments by the Company or any of its Subsidiaries
made on or after June 30, 1998 in an aggregate amount not
to exceed $50,000,000 and consisting of debt or shares of
capital stock of CCI International N.V., a company formed
and existing under the laws of the Netherlands Antilles.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1. To induce the Purchaser to execute and deliver this
Sixth Amendment, the Company represents and warrants to the Purchaser (which
representations shall survive the execution and delivery of this Sixth
Amendment) that:
(a) this Sixth Amendment has been duly authorized, executed
and delivered by it and constitutes the legal, valid and binding
obligation, contract and agreement of the Company, enforceable against it
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally;
(b) the Note Agreement, as amended by this Sixth Amendment,
constitutes the legal, valid and binding obligation, contract and
agreement of the Company, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this Sixth Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body or
agency, and (iii) will not (A) violate (1) any provision of law, statute,
rule or regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other agency or
government binding upon it, or (3) any provision of any material
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, or (B) result in a
breach or constitute (alone or with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to in
clause (iii)(A)(3) of this Section 2.1(c); and
(d) as of the date hereof and after giving effect to this
Sixth Amendment, no Default or Event of Default has occurred which is
continuing.
Section 3. CONDITIONS TO EFFECTIVENESS OF SIXTH AMENDMENT.
Section 3.1. This Sixth Amendment shall not become effective
until, and shall become effective when, each and every one of the following
conditions shall have been satisfied:
(a) executed counterparts of this Sixth Amendment, duly
executed by the Company and the Purchaser, shall have been delivered to
the Purchaser; and
<PAGE> 3
(b) the representations and warranties of the Company set
forth in Section 2 hereof shall be true and correct on and with respect to
the date hereof.
Upon receipt of all of the foregoing, this Sixth Amendment shall on the
Effective Date become effective.
Section 4. MISCELLANEOUS.
Section 4.1. Except as modified and expressly amended by this Sixth
Amendment, the Note Agreement is in all respects ratified, confirmed and
approved and all of the terms, provisions and conditions hereof shall be and
remain in full force and effect.
Section 4.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Sixth Amendment may refer to the Note Agreement without making specific
reference to this Sixth Amendment but nevertheless all such references shall
include this Sixth Amendment unless the context otherwise requires.
Section 4.3. This Sixth Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
Section 4.4. This Sixth Amendment may be executed and delivered in any
number of counterparts, each of such counterparts constituting an original, but
all together only one Sixth Amendment.
<PAGE> 4
IN WITNESS WHEREOF, the Company and the Purchaser have caused this instrument
to be executed, all as of the day and year first above written.
ORBITAL SCIENCES CORPORATION
By: /s/ Jeffrey V. Pirone
Name: Jeffrey V. Pirone
Title: Executive Vice President and
Chief Financial Officer
Accepted and Agreed to:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ A Kipp Koester
Name: A Kipp Koester
Title: Its Authorized Representative
<PAGE> 1
EXHIBIT 11.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
- ----------------------------------------------------------------------------------------------------
ASSUMING
BASIC DILUTION (2)
------------------ -----------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING SHARES 36,757,055 36,757,055
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS N/A 843,738
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE NOTES (1) N/A 3,571,429
------------------ -----------------
SHARES USED IN COMPUTING
NET INCOME PER COMMON SHARE 36,757,055 41,172,222
================== =================
NET INCOME $ 8,611,000 $ 8,611,000
ADJUSTMENTS ASSUMING DILUTION:
INTEREST EXPENSE ADJUSTMENT, NET OF APPLICABLE TAXES N/A 224,000
------------------ -----------------
NET INCOME $ 8,611,000 $ 8,835,000
================== =================
NET INCOME PER COMMON SHARE $ 0.23 $ 0.21
================== =================
</TABLE>
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
- ----------------------------------------------------------------------------------------------------
ASSUMING
BASIC DILUTION (2)
----------------- -----------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING SHARES 35,199,984 35,199,984
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS N/A 1,153,821
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE NOTES (1) N/A 3,571,429
----------------- -----------------
SHARES USED IN COMPUTING
NET INCOME PER COMMON SHARE 35,199,984 39,925,234
================= =================
NET INCOME $ 22,549,000 $ 22,549,000
ADJUSTMENTS ASSUMING DILUTION:
INTEREST EXPENSE ADJUSTMENT, NET OF APPLICABLE TAXES N/A 2,264,000
----------------- -----------------
NET INCOME $ 22,549,000 $ 24,813,000
================= =================
NET INCOME PER COMMON SHARE $ 0.64 $ 0.64
================= =================
</TABLE>
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 AND SIX MONTHS ENDED JUNE 30, 1998, ALL SUCH SUBSIDIARY
STOCK OPTIONS WERE ANTI-DILUTIVE.
<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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 39,482
<SECURITIES> 225
<RECEIVABLES> 232,179
<ALLOWANCES> (8,101)
<INVENTORY> 40,133
<CURRENT-ASSETS> 314,591
<PP&E> 251,775
<DEPRECIATION> 98,241
<TOTAL-ASSETS> 903,351
<CURRENT-LIABILITIES> 215,422
<BONDS> 152,803
0
0
<COMMON> 370
<OTHER-SE> 536,981
<TOTAL-LIABILITY-AND-EQUITY> 903,351
<SALES> 564,163
<TOTAL-REVENUES> 564,163
<CGS> 409,645
<TOTAL-COSTS> 409,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 721
<INTEREST-EXPENSE> 249
<INCOME-PRETAX> 25,054
<INCOME-TAX> 2,505
<INCOME-CONTINUING> 22,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,549
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.62
</TABLE>
