<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
MARCH 31, 1998
ORBITAL SCIENCES CORPORATION
COMMISSION FILE NUMBER 0-18287
DELAWARE 06-1209561
- --------------------------------- --------------------------------
(State of Incorporation) (IRS Identification number)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 (703) 406-5000
- --------------------------------- --------------------------------
(Address of principal executive offices) (Telephone number)
The registrant has (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
As of April 30, 1998, 36,688,497 shares of the registrant's common stock were
outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
A S S E T S
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 29,458 $ 12,553
Short-term investments, at market 2,998 2,573
Receivables, net 210,061 190,204
Inventories, net 47,082 50,925
Deferred income taxes and other assets 9,816 8,190
---------------- ---------------
TOTAL CURRENT ASSETS 299,415 264,445
PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED
depreciation and amortization of $92,937 and $79,347, respectively 140,658 137,498
INVESTMENTS IN AND ADVANCES TO AFFILIATES, NET 180,501 159,230
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $21,938 and $19,794, respectively 180,412 181,955
DEFERRED INCOME TAXES AND OTHER ASSETS 27,457 28,511
---------------- ---------------
TOTAL ASSETS $ 828,443 $ 771,639
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term obligations $ 40,320 $ 29,317
Accounts payable 50,874 36,217
Accrued expenses 98,283 100,274
Deferred revenues 41,847 46,138
---------------- ---------------
TOTAL CURRENT LIABILITIES 231,324 211,946
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION 223,998 198,394
OTHER LIABILITIES 399 2,443
---------------- ---------------
TOTAL LIABILITIES 455,721 412,783
NON-CONTROLLING INTERESTS IN
NET ASSETS OF CONSOLIDATED SUBSIDIARIES 1,385 3,755
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01; 10,000,000 shares authorized:
Series A Special Voting Preferred Stock, one share authorized - -
and outstanding
Common Stock, par value $.01; 80,000,000 shares authorized,
33,332,436 and 32,481,719 shares outstanding, respectively,
after deducting 20,877 shares held in treasury 332 325
Additional paid-in capital 335,790 326,187
Unrealized gains on short-term investments 136 272
Cumulative translation adjustments (4,700) (4,943)
Retained earnings 39,779 33,260
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 371,337 355,101
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 828,443 $ 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
MARCH 31,
---------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
REVENUES $ 186,159 $ 122,112
COSTS OF GOODS SOLD 134,785 88,434
------------------ -----------------
GROSS PROFIT 51,374 33,678
RESEARCH AND DEVELOPMENT EXPENSES 7,065 7,012
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 26,302 19,878
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 1,960 741
------------------ -----------------
INCOME FROM OPERATIONS 16,047 6,047
NET INVESTMENT INCOME (EXPENSE) (497) 260
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (10,677) (1,268)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 2,370 621
------------------ -----------------
INCOME BEFORE PROVISION FOR INCOME TAXES 7,243 5,660
PROVISION FOR INCOME TAXES 724 566
------------------ -----------------
NET INCOME $ 6,519 $ 5,094
================== =================
NET INCOME PER COMMON SHARE $ 0.20 $ 0.16
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE 32,819,641 32,819,432
================== =================
NET INCOME PER COMMON SHARE, ASSUMING DILUTION $ 0.20 $ 0.16
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE, ASSUMING DILUTION 37,721,780 32,819,432
================== =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 4
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 6,519 $ 5,094
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 8,685 6,461
Equity in losses of affiliates 10,677 1,268
Non-controlling interests in losses of consolidated subsidiaries (2,370) (621)
Foreign currency translation adjustment 243 (184)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in current assets and other non-current assets (17,029) (6,050)
Increase (decrease) in current and other liabilities (207) 7,579
--------------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 6,518 13,547
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,003) (4,733)
Purchases, sales and maturities of available-for-sale investment securities - (4,215)
Investments in and advances to affiliates (25,827) (1,304)
--------------- ---------------
NET CASH PROVIDED TO (USED IN) INVESTING ACTIVITIES (35,830) (10,252)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) 15,461 3,350
Principal payments on long-term obligations (6,318) (4,697)
Net proceeds from issuance of long-term obligations 27,464 --
Net proceeds from issuances of common stock 9,610 442
--------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,217 (905)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,905 2,390
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,553 26,859
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,458 $ 29,249
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
<PAGE> 5
ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to instructions, rules and regulations prescribed by the Securities and Exchange
Commission (the "SEC"). Although the company believes that the disclosures
provided are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the footnotes
thereto included in the company's Annual Report on Form 10-K for the year ended
December 31, 1997. Operating results for the three-month period ended March 31,
1998 are not necessarily indicative of the results expected for the full year.
Orbital Sciences Corporation is hereafter referred to as "Orbital" or
the "company."
(1) Inventories
Inventories consist of components inventory, work-in-process inventory and
finished goods inventory and are generally stated at the lower of cost or
net realizable value on a first-in, first-out or specific identification
basis.
Components and raw materials are purchased to support future production
efforts. Work-in-process inventory consists primarily of (i) costs
incurred under long-term fixed-price contracts accounted for using the
percentage-of-completion method of accounting applied on a units of
delivery basis, and (ii) partially assembled commercial products, and
generally includes direct production costs and certain allocated indirect
costs (including an allocation of general and administrative costs).
Work-in-progress inventory has been reduced by contractual progress
payments received. Finished goods inventory consists of fully assembled
commercial products awaiting shipment.
(2) Earnings Per Share
Net income per common share is calculated using the weighted average
number of common shares outstanding during the periods. Net income per
common share assuming dilution is calculated using the weighted average
number of common and dilutive common equivalent shares outstanding
5
<PAGE> 6
during the periods, plus the effects of an assumed conversion of the
company's $100,000,000 5% convertible notes due 2002, after giving effect
to all net income adjustments that would result from the assumed
conversion.
(3) 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.
(4) Reclassifications
Certain reclassifications have been made to the 1997 condensed
consolidated financial statements to conform to the 1998 condensed
consolidated financial statement presentation.
(5) Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income."
Disclosure requirements with respect to comprehensive income are as
follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Comprehensive income:
Net income, as reported $6,519 $5,094
Unrealized losses on
short-term investments (136) (20)
Translation adjustments 243 (184)
------ --------
Total $6,626 $ 4,890
====== ========
Accumulated other comprehensive income:
Beginning of period $(4,671) $(3,667)
======= =======
End of period $(4,564) $(3,871)
======= =======
</TABLE>
(6) Subsequent Events
Equity Offering: On April 20, 1998, the company sold 3,450,000 shares of
its common stock in a public offering at $45.81 per share, generating net
proceeds to the company of approximately $150,000,000 after deducting
approximately $8,000,000 of underwriters' discounts and other estimated
offering expenses.
6
<PAGE> 7
The following table sets forth the cash and cash equivalents and
short-term investments, total debt and total stockholders' equity of the
company as of March 31, 1998, as reported and as adjusted as if the net
proceeds from the sale of common stock were used to pay down existing
borrowings under the company's credit facility and line of credit and the
remainder were invested in short-term interest-bearing securities:
<TABLE>
<CAPTION>
March 31, 1998
Actual As Adjusted
(in thousands)
<S> <C> <C>
Cash and cash equivalents and
short-term investments $ 29,458 $ 90,208
========= =========
Total debt $ 264,318 $ 175,068
========= ========
Total stockholders' equity $ 371,337 $ 522,012
========= =========
</TABLE>
Investments: On May 4, 1998, the company signed a non-binding letter of
intent with CCI International N.V. ("CCI"). Under the terms of this
preliminary agreement, Orbital will receive a satellite construction and
launch contract, valued at approximately $450,000,000, and will provide up
to $150,000,000 in equity capital and vendor financing to CCI, subject to
negotiation of definitive documentation. In addition, the company
terminated discussions regarding a satellite procurement agreement and a
potential investment in the Ellipso satellite network of Mobile
Communications Holdings, Inc.
7
<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1998
AND 1997
Certain statements included in this discussion relating to future revenues,
sales, expenses, growth rates, net income, new business, operational
performance, schedules, sources and uses of funds, and the performance of the
company's affiliates, Orbital Imaging Corporation ("ORBIMAGE") and ORBCOMM
Global, L.P. ("ORBCOMM") are forward-looking statements that involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance, achievements or investments of the company to differ
materially from any future results, performance, achievements, or investments
expressed or implied by such forward-looking statements. Such factors include,
among others, general and economic business conditions, launch success, product
performance, risks associated with government contracts, the introduction of
products and services by competitors, risks associated with acquired businesses,
availability of required capital, market acceptance of new products and
technologies and other factors more fully described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Outlook: Issues
and Uncertainties" incorporated in the company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
The company's products and services are grouped into three business sectors:
Space and Ground Infrastructure Systems, Satellite Access Products and Satellite
Services. Space and Ground Infrastructure Systems include launch vehicles,
satellites, electronics and sensor systems, and satellite ground systems. The
company's Satellite Access Products sector consists of recreational,
professional and automotive satellite-based navigation products, satellite
communications products and transportation management systems. The company's
Satellite Services sector includes satellite-based, two-way mobile data
communications services and satellite-based imagery services, conducted through
the company's ORBCOMM and ORBIMAGE affiliates. The company does not control the
operational and financial affairs of ORBCOMM and ORBIMAGE and, consequently,
their financial results are not consolidated with the company's and are not
reported on herein.
RECENT DEVELOPMENTS. On April 21, 1998, ORBCOMM Corporation ("ORBCOMM Corp.")
announced that it has filed a registration statement with the Securities and
Exchange Commission for an initial public offering of $125,000,000 of its common
stock. ORBCOMM Corp. was organized for the sole purpose of investing in and
acting as a general partner of ORBCOMM. The registration statement has not yet
become effective.
8
<PAGE> 9
On April 20, 1998, the company sold 3,450,000 shares of its common stock in a
public offering at $45.81 per share, generating net proceeds of approximately
$150,000,000 (see Liquidity and Capital Resources).
On May 4, 1998, the company signed a non-binding letter of intent with CCI
International N.V. ("CCI"). Under the terms of this preliminary agreement,
Orbital will receive a satellite construction and launch contract, valued at
approximately $450,000,000, and will provide up to $150,000,000 in equity
capital and vendor financing to CCI, subject to negotiation of definitive
documentation. In addition, the company terminated discussions regarding a
satellite procurement agreement and a potential investment in the Ellipso
satellite network of Mobile Communications Holdings, Inc.
REVENUES. Orbital's revenues for the three-month periods ended March
31, 1998 and 1997 were $186,159,000 and $122,112,000, respectively.
Space and Ground Infrastructure Systems. Revenues from the company's Space and
Ground Infrastructure Systems sector totaled $156,341,000 and $106,199,000 for
the three months ended March 31, 1998 and 1997, respectively.
Revenues from the company's launch vehicles increased to $46,040,000 in the
first quarter of 1998, from $29,894,000 in the first quarter of 1997. The
increase in revenues in 1998 as compared to a year ago is attributable to
increased revenues from the company's Pegasus and Taurus launch vehicle
programs, and from its suborbital launch vehicle programs. Additionally, the
company generated more revenues in the 1998 first quarter for contractual work
performed on the X-34 reusable launch vehicle.
For the three months ended March 31, 1998, satellite revenues increased to
$61,532,000 from $30,803,000 in the first quarter of 1997. The increase in
satellite sales is primarily due to additional revenues generated from new
satellite orders received in 1997. Revenues in 1998 also include approximately
$16,590,000 of sales generated by the satellite business acquired from CTA
INCORPORATED in August 1997.
Revenues from electronics and sensor systems of approximately $27,348,000 for
the three months ended March 31, 1998 were generally consistent with the
revenues of $28,066,000 in the comparable 1997 period.
Revenues from the company's ground systems products were $21,421,000 in the
first quarter of 1998 as compared to $17,436,000 in the comparable 1997 quarter.
The increase in revenues in 1998 is due to contractual work performed on 1997
new orders for new satellite ground systems and system upgrades.
Revenues for the three months ended March 31, 1998 include sales to ORBCOMM and
ORBIMAGE of $16,277,000 and $27,324,000, respectively, as compared to first
quarter 1997 sales to ORBCOMM of $11,500,000. Since the company consolidated
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<PAGE> 10
ORBIMAGE's results of operations through May 8, 1997, no revenue was recorded on
sales to ORBIMAGE during the first quarter of 1997.
Satellite Access Products. Revenues from sales of navigation, communications and
transportation management systems and products increased to $29,754,000 for the
1998 first quarter as compared to $15,646,000 for the comparable 1997 period.
The first quarter of 1998 includes approximately $11,000,000 of sales generated
by the company's industrial navigation operations that were acquired as a result
of the December 1997 merger of Ashtech Inc. with the company's subsidiary,
Magellan Corporation ("Magellan").
GROSS PROFIT/COSTS OF GOODS SOLD. Costs of goods sold include the costs of
personnel, materials, subcontracts and overhead related to commercial products
and under the company's various development and production contracts. Gross
profit depends on a number of factors, including the company's mix of contract
types and costs incurred thereon in relation to estimated costs. The company's
gross profit for the first quarter of 1998 was $51,374,000 as compared to
$33,678,000 in the 1997 first quarter. Gross profit as a percentage of sales was
approximately 28% in both periods.
Space and Ground Infrastructure Systems. Gross profit from the company's Space
and Ground Infrastructure Systems totaled $42,789,000 (or 27.4% of revenues) and
$28,592,000 (or 26.9% of revenues) for the three months ended March 31, 1998 and
1997, respectively.
Gross profit margins from the company's launch vehicles were 26.7% for the first
quarter of 1998 as compared to 32% for the first quarter of 1997. The decrease
in launch vehicle gross margins in 1998 is primarily due to completing work on
certain less profitable launch vehicle contracts. Satellites contributed gross
margins of 27.7% during the first quarter of 1998 as compared to 23.0% during
the first quarter of 1997. The increase is due to work performed on more
profitable new contracts received in the second half of 1997. For the three
months ended March 31, 1998 and 1997, electronics and sensor systems had gross
margins of 27.9% and 25.6%, respectively. Gross margins for ground systems were
27.4% and 27.1% for each of the first quarters in 1998 and 1997.
Satellite Access Products. Gross margins for satellite access products were
34.0% for the first quarter of 1998 and 35.8% for the first quarter of 1997.
This decrease in gross margin percentage is due to lower unit sales prices for
satellite navigation recreational products in the 1998 period.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses represent
Orbital's self-funded product development activities, and exclude direct
customer-funded development. Research and development expenses during the
three-month periods ended March 31, 1998 and 1997 were $7,065,000 (or 3.8% of
revenues) and $7,012,000 (or 5.7% of revenues), respectively. Research and
development expenses in both quarters
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relate primarily to the development of new or improved satellite navigation,
communications and automotive products and new satellite initiatives.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include the costs of marketing, advertising, promotional
and other selling expenses as well as the costs of the finance, administrative
and general management functions of the company. Selling, general and
administrative expenses for the first quarters of 1998 and 1997 were $26,302,000
(or 14.1% of revenues) and $19,878,000 (or 16.3% of revenues), respectively. The
decrease in selling, general and administrative expenses as a percentage of
revenues during 1998 as compared to 1997 was primarily attributable to
substantial revenue growth, particularly in launch vehicles and satellite
systems, with only a modest growth in selling, general and administrative
expenses.
INTEREST INCOME AND INTEREST EXPENSE. Net interest expense was $497,000 for the
three months ended March 31, 1998 as compared to net interest income of $260,000
in the 1997 first quarter. Interest income for the periods reflects interest
earnings on short-term investments. Interest expense in 1998 is primarily for
outstanding amounts on Orbital's convertible subordinated notes, revolving
credit facilities and on other secured and unsecured debt. Interest expense has
been reduced by capitalized interest of $2,906,000 and $1,313,000 in 1998 and
1997, respectively.
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN
(EARNINGS) LOSSES OF CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of
affiliates net of non-controlling interests in (earnings) losses of consolidated
subsidiaries for the first quarters of 1998 and 1997 were ($8,307,000) and
($647,000), respectively. These amounts primarily represent (i) elimination of
proportionate profits or losses on sales of infrastructure products to ORBCOMM
and ORBIMAGE, (ii) the company's pro rata share of current period earnings and
losses of each of ORBCOMM, ORBCOMM International Partners, L.P. and ORBIMAGE and
(iii) non-controlling stockholders' pro rata share of ORBCOMM USA L.P.'s and
Magellan's current period earnings and losses. The increase in losses during the
first quarter of 1998 is due to increased losses at ORBCOMM and the fact that
subsequent to May 8, 1997, the company uses the equity method to account for its
investment in ORBIMAGE when it had previously consolidated ORBIMAGE's operations
during the first quarter of 1997.
PROVISION FOR INCOME TAXES. The company recorded an income tax provision of
$724,000 and $566,000 for the three month periods ended March 31, 1998 and 1997,
respectively. The company records its interim income tax provisions based on
estimates of the company's effective tax rate expected to be applicable for the
full fiscal year. Estimated effective rates recorded during interim periods may
be periodically revised, if necessary, to reflect current estimates.
At December 31, 1997, Orbital had approximately $150,000,000 of U.S. Federal net
operating loss carryforwards and $3,000,000 of U.S. Federal research and
experimental
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<PAGE> 12
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 requirements in the future, through cash generated by operations,
working capital, loan facilities, asset-based financings, joint venture
arrangements and private and public equity and debt offerings. The company
expects to continue to pursue potential acquisitions and equity investments that
it believes would enhance its businesses and to fund such transactions through
cash generated by operations, existing loan facilities, the issuance of equity
and/or debt securities and asset-based financings.
On April 20, 1998, the company sold 3,450,000 shares of its common stock in a
public offering, generating net proceeds of approximately $150,000,000 (the
"Offering"). Orbital plans to use the net proceeds from this Offering
principally to support further business expansion in its Space and Ground
Infrastructure Systems sector as a result of higher than expected new orders in
1997 and 1998 for satellites and launch vehicles, including working capital and
capital expenditures for facilities and production test equipment. Additionally,
a portion of the net proceeds may be used for investments in new projects or
emerging space-related businesses (such as CCI), expanded research and
development for new products, or acquisitions of businesses and/or product lines
complementary to the company's existing businesses, and for other general
corporate purposes. Pending the foregoing uses and as discussed below, the
company paid down existing borrowings under its credit facility and line of
credit and invested the remainder in short-term interest-bearing securities.
Cash, cash equivalents and short-term investments were $32,456,000 at March 31,
1998, and the company had total debt obligations outstanding of approximately
$264,318,000. At March 31, 1998, the outstanding debt is comprised primarily of
the company's convertible subordinated notes, advances under the company's line
of credit facilities, secured and unsecured notes, and asset-based financings.
The company's primary revolving credit facility provides for total borrowings
from an international syndicate of six banks of up to $100,000,000.
Approximately $64,750,000 of borrowings were outstanding under the facility at
March 31, 1998 at a weighted average interest rate of approximately 7.25%.
Borrowings are secured by contract receivables, and the facility prohibits the
payment of cash dividends, contains certain covenants with respect to the
company's working capital, fixed charge ratio, leverage ratio and consolidated
net worth, and expires in August 2001. The company (or its subsidiaries) also
maintains two additional, smaller revolving credit facilities, under which
approximately $25,528,000 was outstanding at March 31, 1998 at a weighted
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<PAGE> 13
average interest rate of 6.28%. Additional borrowing capacity on the two
additional agreements is approximately $500,000 at March 31, 1998. The company
used approximately $94,250,000 of proceeds from the Offering to pay down
outstanding borrowings on these credit facilities.
The company's operations provided net cash of approximately $6,518,000 in the
first quarter of 1998. The company was committed to provide up to an additional
$15,000,000 in capital to ORBCOMM, of which $10,000,000 has been funded to date,
$7,500,000 during the three months ended March 31, 1998. The company has also
provided to ORBCOMM approximately $26,000,000 in vendor financing, $12,690,000
during the three months March 31, 1998 (one-half of which has been advanced to
Orbital by an affiliate of Teleglobe Inc.). The company anticipates that ORBCOMM
will require additional vendor financing during 1998, pending completion of
ORBCOMM Corp.'s initial public offering of its common stock. In addition, during
the first quarter of 1998, the company incurred $10,003,000 in capital
expenditures for various satellite, launch vehicle and other production,
manufacturing, test and office equipment.
Orbital expects that its capital needs for the remainder of 1998 will in part be
provided by working capital, cash flows from operations, existing credit
facilities, customer financings and operating lease arrangements.
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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 SECURITYHOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - A complete listing of exhibits required is given in
the Exhibit Index that precedes the exhibits filed with this
report.
(b) Reports on Form 8-K.
(i) On February 26, 1998, the company filed a Current Report
on Form 8-K, dated February 5, 1998, disclosing the financial
results of the company for the fiscal year ending December 31,
1997. (ii) On March 27, 1998, the company filed a Current
Report on Form 8-K, dated March 26, 1998, disclosing that it
proposed to make a public offering of shares of its common
stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
DATED: May 14, 1998 By: /s/ David W. Thompson
----------------------------
David W. Thompson, President
and Chief Executive Officer
DATED: May 14, 1998 By: /s/ Jeffrey V. Pirone
------------------------
Jeffrey V. Pirone, Executive Vice President
and Principal Financial Officer
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EXHIBIT INDEX
The following exhibits are filed as part of this report.
Exhibit No. Description
----------- -----------
10.19 Orbital Sciences Corporation 1997 Stock Option and
Incentive Plan, as amended.
11 Statement re: Computation of Earnings Per Share
(transmitted herewith).
27 Financial Data Schedule (such schedule is furnished for the
information of the Securities and Exchange Commission and is
not to be deemed "filed" as part of the Form 10-Q, or
otherwise subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934) (transmitted herewith).
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EXHIBIT 10.19
ORBITAL SCIENCES CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN, AS AMENDED
1. PURPOSE OF PLAN
The purpose of this 1997 Stock Option and Incentive Plan (the "Plan") is
to advance the interests of Orbital Sciences Corporation and its stockholders by
enabling Orbital and Participating Companies (as defined below) to attract and
retain highly talented employees, directors, consultants and advisers who are in
a position to make significant contributions to the success of Orbital, to
reward them for their contributions to the success of Orbital, and to encourage
them, through stock ownership, to increase their proprietary interest in Orbital
and their personal interest in its continued success and progress.
The Plan provides for the award of Orbital stock options and Orbital
common stock. Options granted pursuant to the Plan may be incentive or
nonstatutory stock options. Options granted pursuant to the Plan shall be
presumed to be nonstatutory options unless expressly designated as incentive
options at the time of grant.
2. DEFINITIONS
For the purposes of this Plan and related documents, the following
definitions apply:
"Award Agreement" means the stock option agreement, restricted stock
agreement or other written agreement between Orbital and a Grantee that
evidences and sets out the terms and conditions of a Grant.
"Board" means the Board of Directors of the Company.
"Committee" means a committee of, and designated from time to time by
resolution of the Board, which shall consist of no fewer than two members of the
Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and until
such time as the Board shall determine otherwise, the Committee shall be the
Human Resources and Nominating Committee of the Board.
"Company" or "Orbital" means Orbital Sciences Corporation, a Delaware
corporation, or any successor thereof.
"Effective Date" means January 24, 1997.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing sale price of Stock on the national
securities exchange on which the Stock is then principally traded or, if that
measure of price is not available, on a composite index of such exchanges or, if
that measure of price is not available, in a national market system for
securities on the date of the option grant (or such other date as is specified
herein). In the event that there are no sales of Stock on any such exchange or
market on date of the option grant (or such other date as is specified herein),
the fair market value of Stock on the date of the grant (or such other date as
is specified herein) shall be deemed to be the closing sales price on the next
preceding day on which Stock was sold on any such exchange or market. In the
event that the Stock is not listed on any such market or exchange on the
applicable date, a reasonable valuation of the fair market value of the Stock on
such date shall be made by the Board.
"Grant" means an award of an option or Restricted Stock under the Plan.
"Grantee" means a person who receives or holds an option or Restricted
Stock under the Plan.
"I.R.C." means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Incentive Option" means any option granted under the Plan intended to
satisfy the requirements under I.R.C. Section 422(b) as an incentive stock
option.
"Nonstatutory Option" means any option granted under the Plan that does
not qualify as an Incentive Option.
"Old Option Plans" shall mean Orbital's 1990 Stock Option Plan and
Orbital's 1990 Stock Option Plan for Non-Employee Directors.
"Option Termination Date" is defined in Section 11(c) below.
"Outside Director" means a member of the Board who is not an officer or
employee of the Company.
"Parent" means a parent corporation as defined in I.R.C. Section 424(e).
"Participating Company" means the Company, any Parent of the Company, and
any subsidiary (as defined in Rule 405 under the Securities Act of 1933, as
amended) of the Company or its Parent.
"Plan" means this 1997 Stock Option and Incentive Plan.
"Restricted Stock" means shares of Stock awarded to a Grantee pursuant to
Section 13 hereof.
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"Stock" means shares of the Company's authorized Common Stock, $.01 par
value per share.
"Subsidiary" means a subsidiary corporation as defined in I.R.C.
Section 424(f).
"Terminating Transaction" means any of the following events: (a) the
dissolution or liquidation of the Company; (b) a reorganization, merger or
consolidation of the Company with one or more other persons in which the Company
is not the surviving corporation or becomes a subsidiary of another corporation
other than a corporation that was a Participating Company immediately prior to
such event; (c) a sale of substantially all the Company's assets to a person or
entity other than a corporation that was a Participating Company immediately
prior to such event; or (d) a person (or persons acting as a group or otherwise
in concert) owning equity securities of the Company that represent a majority or
more of the aggregate voting power of all outstanding equity securities of the
Company. As used herein or elsewhere in this Plan, the word "person" shall mean
an individual, corporation, partnership, association or other person or entity,
or any group of two or more of the foregoing that have agreed to act together.
"Total Disability" means a "total and permanent disability" as defined
in I.R.C. Section 22(e)(3).
3. ADMINISTRATION OF PLAN
(a) Administration by Board. The Plan shall be administered by the
Board. The Board shall have authority, not inconsistent with the express
provisions of the Plan, to:
(i) award Grants consisting of options or Restricted Stock, or
both, to such eligible persons as the Board may select;
(ii) determine the timing of Grants and the number of shares of
Stock subject to each Grant;
(iii) determine the terms and conditions of each Grant, including
whether an option is an Incentive Option or a Nonstatutory Option
(consistent with the requirements of the I.R.C.) and the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting or forfeiture of a Grant;
(iv) adopt such rules and regulations as the Board may deem
necessary or appropriate to carry out the purposes of the Plan; and
(v) interpret the provisions of the Plan and of any Grants made
hereunder and decide any questions and settle all controversies and
disputes that may arise in connection with the Plan.
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All decisions, determinations, interpretations or other actions by the Board
with respect to the Plan shall be final, conclusive and binding on all persons,
including the Company, Participating Companies and Grantees and their respective
legal representatives, their successors in interest and permitted assigns and
upon all other persons claiming by, through, under or against any of them.
(b) Administration and Delegation by Committee. The Board, in its sole
discretion, may delegate some or all of its powers with respect to the Plan to a
Committee (in which case references to the Board in this Plan shall be deemed to
refer to the Committee, where appropriate) except for interpreting or making
changes to Section 9 or Section 11(b) and except with respect to any grants to
directors of the Company under Sections 8 and 13. The Committee, in its sole
discretion, may delegate to the Chairman, the President and the Chief Executive
Officer, or any of them, while any such officer is a member of the Board,
authority to award Grants under the Plan. Such authority shall be on such terms
and conditions, and subject to such limitations, as the Committee shall specify
in its delegation of authority. Except to the extent otherwise specified by the
Committee in such delegation, the delegated authority to grant awards of options
and Restricted Stock shall include the power to:
(i) award Grants consisting of options or Restricted Stock, or
both, to such eligible persons as the authorized officer may select;
(ii) determine the timing of Grants and the number of shares of
Stock subject to each award; and
(iii) determine the terms and conditions of each Grant, including
whether an option is an Incentive Option or a Nonstatutory Option
(consistent with the requirements of the I.R.C.) and the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting or forfeiture of a Grant.
Except to the extent otherwise specified by the Committee in such delegation,
the authority so delegated shall be in addition to, and not in lieu of, the
authority of the Committee to make awards under the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Availability. Subject to adjustment as provided in Section 4(c)
below, the maximum aggregate number of shares of Stock available for issuance
under the Plan shall be 3,200,000.
(b) Reavailability of Options; Stock to be Delivered. If any Stock covered
by a Grant is not purchased or is forfeited, or if a Grant otherwise terminates
without delivery of any Stock subject thereto, then the number of shares of
Stock so terminated or forfeited shall again be
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available for making Grants under the Plan. In the event that Stock that was
previously issued by the Company is reacquired by the Company as part of the
consideration received (in accordance with Section 12(b) below) upon the
subsequent exercise of an option, such reacquired Shares shall again be
available for the granting of options hereunder. Stock delivered under the Plan
shall be authorized but unissued shares or, at the Board 's discretion,
previously issued Stock acquired by the Company and held in its treasury. No
fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, exchange of shares, distribution payable in capital
stock, recapitalization or other change in Orbital's capital stock, the number
and kind of shares of Stock subject to Grants then outstanding or subsequently
awarded under the Plan, the exercise price of any outstanding option, the
maximum number of shares of Stock that may be delivered under the Plan, and
other relevant provisions shall be appropriately adjusted by the Board, so that
the proportionate interest of the Grantee immediately following such event
shall, to the extent practicable, be the same as immediately before such event.
5. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date by Orbital's shareholders.
Upon approval of the Plan by the stockholders of Orbital as set forth above, all
Grants made under the Plan on or after the Effective Date shall be fully
effective as if Orbital's stockholders had approved the Plan on the Effective
Date. If the stockholders fail to approve the Plan within one year of the
Effective Date, any Grants made hereunder shall be null and void and of no
effect.
6. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
to be executed by Orbital and by the Grantee, in such form or forms as the Board
shall from time to time approve. Each Award Agreement evidencing a Grant of
options shall specify whether such options are intended to be Nonstatutory
Options or Incentive Options.
7. OPTION EXERCISE PRICE
The option exercise price for shares of Stock to be issued under the Plan
shall be the Fair Market Value of the Stock on the Grant date (or 110% of the
Fair Market Value in the case of an Incentive Option granted to a ten-percent
shareholder).
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8. DISCRETIONARY OPTION GRANTS. Grants may be made under the Plan to any
employee or director of any Participating Company as the Board shall determine
and designate from time to time. Grants of options may be made under the Plan to
any consultant or adviser to any Participating Company whose participation in
the Plan is determined by the Board to be in the best interests of the Company
and is so designated by the Board. Notwithstanding the foregoing, grants to
persons who are not employees of the Company or any Parent or Subsidiary of the
Company shall not be Incentive Options.
9. OUTSIDE DIRECTOR OPTION GRANTS
(a) Automatic Grants. On January 2 of each year, each Outside
Director shall automatically be awarded a Grant of a Nonstatutory Option to
purchase 3,000 shares of Stock.
(b) Grants in Lieu of Annual Fee. Each Outside Director shall be entitled
to receive a Nonstatutory Option to purchase a specified number of shares of
Stock in lieu of his or her annual Board retainer fee. Such specified number (i)
shall be calculated by the Chief Financial Officer of the Company, using a
Black-Scholes (or other generally accepted) valuation method based on the Fair
Market Value of the Stock on January 15 of the applicable year (or the next
business day, if January 15 falls on a weekend), assuming a ten-year option term
and (ii) shall be adjusted upward by 10% to take into account the one-year
vesting term. The exercise price of such option shall be equal to the Fair
Market Value of Shares on January 15 (or the next business day, if January 15
falls on a weekend), which shall also be the Grant date. Any Outside Director
desiring to receive an option in lieu of cash shall notify the Company of this
election, which shall be irrevocable, by submitting a written notice to the
Corporate Secretary in accordance to procedures as determined by the Board.
10. LIMITATIONS ON GRANTS
(a) Limitation on Shares of Stock Subject to Grants. The maximum number of
shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 8 hereof is 750,000 shares of Stock
during the first ten (10) calendar years of the Plan, and 100,000 per year
thereafter. The "per individual" limitations described in this paragraph shall
be construed and applied consistent with the rules and regulations under I.R.C.
Section 162(m).
(b) Limitations on Incentive Options. Incentive Options may only be
granted to employees of the Company or any Parent or Subsidiary of the
Company.
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<PAGE> 7
11. VESTING AND TERMINATION OF OPTIONS
(a) Vesting of Discretionary Options. Subject to the other provisions of
this Section 11, Options granted pursuant to Section 8 shall vest and become
exercisable at such time and in such installments as the Board shall provide in
each individual Award Agreement. Notwithstanding the foregoing, the Board may,
in its sole discretion, accelerate the time at which all or any part of an
option may be exercised.
(b) Vesting of Outside Director Options. Subject to the other provisions
of this Section 11, options granted under Section 9 shall become exercisable as
to 100% of the Stock covered thereby on the first anniversary of the Grant date.
(c) Termination of Options. All options shall expire and terminate on such
date as the Board shall determine ("Option Termination Date"), which in no event
shall be later than ten (10) years from the date such option was granted. In the
case of an Incentive Option granted to a ten-percent stockholder, the option
shall not be exercisable after the expiration of five (5) years from the date
such option was granted. Upon termination of an option or portion thereof, the
Grantee shall have no further right to purchase Stock pursuant to such option.
(d) Termination of Employment or Service.
(i) Termination of Employment or Directorship. Upon the
termination of the employment or directorship of a Grantee with a Participating
Company for any reason other than for "cause" (pursuant to Section 14 below) or
by reason of death or Total Disability, all options that are not exercisable
shall terminate on the employment/directorship termination date. Options that
are exercisable on the employment/directorship termination date shall continue
to be exercisable for (A) six (6) months following the employment/directorship
termination date (in the case of Nonstatutory Options), (B) three (3) months
following the employment termination date (in the case of Incentive Options), or
(C) the Option Termination Date, whichever occurs first. A Grantee who is an
employee or director of a Participating Company shall be deemed to have incurred
a termination for purposes of this Section 11 (d)(i) if such Participating
Company ceases to be a Participating Company, unless such Grantee is an
employee, director, consultant or adviser of any other Participating Company.
(ii) Service Termination. In the case of an optionee who is
not an employee or director of any Participating Company, provisions relating to
the exercisability of options following termination of service shall be
specified in the award. If not so specified, all options held by such optionee
that are not then exercisable shall terminate upon termination of service for
any reason. Unless such termination was for "cause" (pursuant to Section 14
below), options that are exercisable on the date the optionee's service as a
consultant or adviser terminates shall continue to be exercisable for a period
of six (6) months following the service termination date (as defined in a
consulting or similar agreement or as determined by the Board) or the Option
Termination Date, whichever occurs first.
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<PAGE> 8
(e) Rights in the Event of Death. In the event that the employment and/or
directorship of an optionee with a Participating Company is terminated by reason
of death, all options that are not exercisable shall terminate on the date of
death. Options that were exercisable on the date prior to the optionee's death
may be exercised by the optionee's executor or administrator or by the person or
persons to whom the option is transferred by will or the applicable laws of
descent and distribution, at any time within the one-year period (or such longer
period as the Board may determine prior to the expiration of such one-year
period) beginning with the date of the optionee's death, but in no event beyond
the Option Termination Date.
(f) Rights in the Event of Total Disability. In the event that the
employment and/or directorship of an optionee with a Participating Company is
terminated by reason of Total Disability, all options that are not exercisable
shall terminate on the employment/directorship termination date. Options that
were exercisable on the employment/directorship termination date may be
exercised at any time within the one-year period (or such longer period as the
Board may determine prior to the expiration of such one-year period) beginning
with the commencement of the optionee's Total Disability (as determined by the
Board) but in no event beyond the Option Termination Date.
(g) Leave of Absence. An approved leave of absence shall not constitute a
termination of employment under the Plan. An approved leave of absence shall
mean an absence approved pursuant to the policy of a Participating Company for
military leave, sick leave, or other bona fide leave, not to exceed ninety (90)
days or, if longer, as long as the employee's right to re-employment is
guaranteed by contract, statute or the policy of a Participating Company.
Notwithstanding the foregoing, in no event shall an approved leave of absence
extend an option beyond the Option Termination Date.
12. EXERCISE OF OPTIONS; NON-TRANSFERABILITY
(a) Exercise of Options. Vested options may be exercised, in whole or in
part, by giving written notice of exercise to the Company, which notice shall
specify the number of shares of Stock to be purchased and shall be accompanied
by payment in full of the purchase price in accordance with Section 12(b) below
and the full amount of any federal and state withholding and other employment
taxes applicable to such person as a result of such exercise. No shares of Stock
shall be issued until full payment of the purchase price and applicable
withholding tax has been made. Until the issuance of stock certificates, no
right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to optioned shares notwithstanding the exercise of the
option.
(b) Payment. Full payment of the purchase price for the Stock as to which
an option is being exercised shall be made (i) in United States dollars in cash
or by check in a form satisfactory to the Company, (ii) at the Grantee's
election, and subject to discretion of the Board, through delivery of Shares
having a Fair Market Value on the day immediately preceding the day notice of
exercise is received by the Company equal to the cash exercise price of the
option, (iii)
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in accordance with a so-called cashless exercise plan established
with a securities brokerage firm, or (iv) by any combination of the permissible
forms of payment.
(c) Non-Transferability of Options. Except as the Board may otherwise
determine, no option may be transferred other than by will or by the laws of
descent and distribution, and during an optionee's lifetime an option may be
exercised only by the Grantee.
13. RESTRICTED STOCK
(a) Grant of Restricted Stock. The Board may from time to time grant
Restricted Stock to certain employees and directors of a Participating Company,
subject to such restrictions, conditions and other terms, if any, as the Board
may determine.
(b) Restrictions. At the time a Grant of Restricted Stock is made, the
Board may establish a period of time (the "Restricted Period") during which a
Grantee's right to all or a portion of such Restricted Stock shall vest over
time, subject to certain terms and conditions. Each Grant of Restricted Stock
may be subject to a different Restricted Period. The Board may, in its sole
discretion, at the time a Grant of Restricted Stock is made, prescribe
forfeiture or vesting conditions in addition to or other than the expiration of
the Restricted Period. The Board also may, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to
all or a portion of the Restricted Stock. Restricted Stock may not be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period or prior to the satisfaction of any other restrictions
prescribed by the Board with respect to such Restricted Stock.
(c) Restricted Stock Certificates. Orbital shall issue, in the name of
each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee. The Secretary of Orbital shall hold such certificates for the Grantee's
benefit until such time as the restrictions lapse or the Restricted Stock is
forfeited to Orbital.
(d) Rights of Holders of Restricted Stock. Unless the Board otherwise
provides in an Award Agreement, holders of Restricted Stock shall have the right
to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Board may provide that any dividends paid on
Restricted Stock must be reinvested in Stock, which may or may not be subject to
the same vesting conditions and restrictions applicable to such Restricted
Stock. All distributions, if any, received by a Grantee with respect to
Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
(e) Termination of Employment. Upon termination of the
employment/directorship of a Grantee with Orbital, other than by reason of death
or Total Disability, any Restricted Stock held by such Grantee that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Board, in its
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discretion, determines otherwise. Upon forfeiture of Restricted Stock, the
Grantee shall have no further rights with respect to such Grant, including but
not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock.
(f) Rights in the Event of Total Disability or Death. The rights of a
Grantee with respect to Restricted Stock in the event such Grantee terminates
employment/directorship with Orbital by reason of Total Disability or death
shall be determined by the Board at the time of Grant.
(g) Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of
Restricted Stock shall lapse, and, upon payment by the Grantee to Orbital, in
cash or by check, of the aggregate par value of the shares of Stock represented
by such Restricted Stock, a stock certificate for such shares shall be
delivered, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be.
14. FORFEITURE CONDITIONS.
The Board may provide in an Award Agreement for conditions of forfeiture
for "cause" of any Grantee's rights with respect to a Grant. "Cause" shall
include engaging in an activity that is detrimental to the Company including,
without limitation, criminal activity, failure to carry out the duties assigned
to the Grantee as a result of incompetence or willful neglect, conduct casting
such discredit on the Company as in the opinion of the Board justifies
termination or forfeiture of the Grant, or such other reasons, including the
existence of a conflict of interest, as the Board may determine. "Cause" is not
limited to events that have occurred prior to the Grantee's termination of
service, nor is it necessary that the Board's finding of "cause" occur prior to
such termination. If the Board determines, subsequent to a Grantee's termination
of service but prior to the exercise of any rights under a Grant, that either
prior or subsequent to the Grantee's termination the Grantee engaged in conduct
that would constitute "cause," then the rights with respect to a Grant shall be
forfeited.
15. COMPLIANCE WITH SECURITIES LAWS.
(a) The delivery of Stock upon the exercise of an option or lapse of a
Restricted Period shall be subject to compliance with (i) applicable federal and
state laws and regulations, (ii) all applicable listing requirements of any
national securities exchange or national market system on which the Stock is
then listed or quoted, and (iii) Company counsel's approval of all other legal
matters in connection with the issuance and delivery of such Stock. If the sale
of Stock has not been registered under the Securities Act of 1933, as amended,
the Company may require, as a condition to exercise of the option or receipt of
Restricted Stock, such representations or agreements as counsel for the Company
may consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
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(b) It is the intent of the Company that Grants pursuant to the Plan and
the exercise of options granted hereunder will qualify for the exemption
provided by Rule 16b-3 under the Exchange Act. To the extent that any provision
of the Plan or action by the Board does not comply with the requirements of Rule
16b-3 in respect of an employee or director subject to Section 16(b) of the
Exchange Act, it shall be deemed inoperative to the extent permitted by law and
deemed advisable by the Board, and shall not affect the validity of the Plan. In
the event that Rule 16b-3 is revised or replaced, the Board may exercise its
discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or take advantage of any features of the revised exemption or
its replacement.
16. MERGERS, etc.
(a) Effect on Options and Plan. Except as otherwise provided herein, all
options outstanding under the Plan shall accelerate and become immediately
exercisable for a period of fifteen days (or such longer or shorter period as
the Board may prescribe) immediately prior to the scheduled consummation of a
Terminating Transaction, which exercise shall be (i) conditioned upon the
consummation of the Terminating Transaction and (ii) effective only immediately
before the consummation of such Terminating Transaction. Upon consummation of
any such event, the Plan and all outstanding but unexercised options shall
terminate. Notwithstanding the foregoing, to the extent provision is made in
writing in connection with such Terminating Transaction, for the continuation of
the Plan and the assumption of options under the Plan theretofore granted, or
for the substitution for such options of new options covering the stock of a
successor company, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
then the Plan and options theretofore granted shall continue in the manner and
under the terms so provided, and the acceleration and termination provisions set
forth in the first two sentences of this Section 16(a) shall be of no effect.
The Company shall send written notice of a Terminating Transaction to all
individuals who hold options not later than the time at which the Company gives
notice thereof to its stockholders.
b. Effect on Restricted Stock. All outstanding shares of Restricted Stock
shall be deemed to have vested, and all restrictions and conditions applicable
to such shares of Restricted Stock shall be deemed to have lapsed immediately
prior to the occurrence of a Terminating Transaction.
17. TAXES
The Board shall make such provisions and take such steps as it deems
necessary or appropriate for the withholding of any federal, state, local and
other tax required by law to be withheld with respect to the grant or exercise
of options, or the vesting of or other lapse of restrictions applicable to
Restricted Stock, or with respect to the disposition of Stock acquired pursuant
to the Plan, including, but without limitation, the deduction of the amount of
any such
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withholding tax from any compensation or other amounts payable to a Grantee, or
requiring a Grantee (or the optionee's beneficiary or legal representative), as
a condition of a Grant or exercise of an option or receipt of Restricted Stock,
to pay to the appropriate Participating Company any amount required to be
withheld, or to execute such other documents as the Board deems necessary or
desirable in connection with the satisfaction of any applicable withholding
obligation.
18. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the making of any Grants shall confer
upon any Grantee any right to continue as an employee or director of, or
consultant or adviser to, any Participating Company or affect in any way the
right of any Participating Company to terminate them at any time. Except as
specifically provided by the Board in any particular case, the loss of existing
or potential profit in Grants under this Plan shall not constitute an element of
damages in the event of termination of the relationship of a Grantee even if the
termination is in violation of an obligation of the Company to the Grantee by
contract or otherwise.
19. AMENDMENT OR TERMINATION OF PLAN
(a) Neither adoption of the Plan nor the making of any Grants shall affect
the Company's right to make awards to any person that is not subject to the
Plan, to issue to such persons Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued.
(b) The Board may at any time discontinue granting awards under the Plan.
With the consent of the Grantee, the Board may at any time cancel an existing
Grant in whole or in part and make any other Grant for such number of shares as
the Board specifies. The Board may at any time, prospectively or retroactively,
amend the Plan or any outstanding Grant for the purpose of satisfying the
requirements of I.R.C. Section 422 or of any changes in applicable laws or
regulations or for any other purpose that may at the time be permitted by law,
or may at any time terminate the Plan as to further grants of awards, but no
such amendment shall materially adversely affect the rights of any Grantee
(without the Grantee's consent) under any outstanding Grant.
(c) In the Board's discretion, the Board may, with an optionee's consent,
substitute Nonstatutory Options for outstanding Incentive Options, and any such
substitution shall not constitute a new option grant for the purposes of the
Plan, and shall not require a revaluation of the option exercise price for the
substituted option. Any such substitution may be implemented by an amendment to
the applicable option agreement or in such other manner as the Board in its
discretion may determine.
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20. GENERAL PROVISIONS
(a) Titles and Headings. Titles and headings of sections of the Plan are
for convenience of reference only and shall not affect the construction of any
provision of the Plan.
(b) Governing Law. The Plan shall be governed by, interpreted under and
construed and enforced in accordance with the internal laws, and not the laws
pertaining to conflicts or choice of laws, of the State of Delaware, applicable
to agreements made and to be performed wholly within the State of Delaware.
(c) Severability. If any provision of the Plan or any Award Agreement
shall be determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
<PAGE> 1
EXHIBIT 11.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31, 1998
ASSUMING
BASIC DILUTION (2)
----- ------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING SHARES 32,819,641 32,819,641
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS N/A 1,330,710
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE NOTES (1) N/A 3,571,429
---------- -----------
SHARES USED IN COMPUTING
NET INCOME PER COMMON SHARE 32,819,641 37,721,780
========== ==========
NET INCOME $ 6,519,000 $ 6,519,000
ADJUSTMENTS ASSUMING DILUTION:
INTEREST EXPENSE ADJUSTMENT, NET OF TAXES N/A 850,116
----------- -----------
NET INCOME $ 6,519,000 $ 7,369,116
=========== ===========
NET INCOME PER COMMON SHARE $ 0.20 $ 0.20
=========== ===========
NOTES:
</TABLE>
(1)- On September 16, 1997, the company sold $100 million of 5% convertible
subordinated notes due October 2002. The notes are convertible at the
option of the holders into Orbital common stock at a conversion price
of $28.00 per share.
(2)- Subsidiary stock options that enable holders to obtain subsidiary's
common stock pursuant to effective stock option plans are included in
computing the subsidiary's earnings per share, to the extent dilutive.
Those earnings per share data are included in the Company's per share
computations based on the Company's holdings of the subsidiary's stock.
For the three months ended March 31, 1998, all such subsidiary stock
options were anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000820736
<NAME> ORBITAL SCIENCES CORP /DE/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,458
<SECURITIES> 2,998
<RECEIVABLES> 218,638
<ALLOWANCES> (8,577)
<INVENTORY> 47,082
<CURRENT-ASSETS> 299,415
<PP&E> 233,595
<DEPRECIATION> (92,937)
<TOTAL-ASSETS> 828,443
<CURRENT-LIABILITIES> 231,324
<BONDS> 223,998
0
0
<COMMON> 332
<OTHER-SE> 371,005
<TOTAL-LIABILITY-AND-EQUITY> 828,443
<SALES> 186,159
<TOTAL-REVENUES> 186,159
<CGS> 134,785
<TOTAL-COSTS> 134,785
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 945
<INCOME-PRETAX> 7,243
<INCOME-TAX> 724
<INCOME-CONTINUING> 6,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,519
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
