<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended
MARCH 31, 1998
ORBITAL SCIENCES CORPORATION
Commission file number 0-18287
DELAWARE 06-1209561
------------------------ ---------------------------
(State of Incorporation) (IRS Identification number)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 (703) 406-5000
- ---------------------------------------- ------------------
(Address of principal executive offices) (Telephone number)
The registrant has (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
As of April 30, 1998, 36,688,497 shares of the registrant's common stock were
outstanding.
<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
-----------
RESTATED
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 139,158 137,498
INVESTMENTS IN AND ADVANCES TO AFFILIATES, NET 181,258 159,230
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $21,938 and $19,794, respectively 180,412 181,955
DEFERRED INCOME TAXES AND OTHER ASSETS 27,457 28,511
--------- ---------
TOTAL ASSETS $ 827,700 $ 771,639
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term obligations $ 40,320 $ 29,317
Accounts payable 50,874 36,217
Accrued expenses 99,466 100,274
Deferred revenues 41,847 46,138
--------- ---------
TOTAL CURRENT LIABILITIES 232,507 211,946
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION 223,998 198,394
OTHER LIABILITIES 757 2,443
--------- ---------
TOTAL LIABILITIES 457,262 412,783
NON-CONTROLLING INTERESTS IN
NET ASSETS OF CONSOLIDATED SUBSIDIARIES 875 3,755
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01; 10,000,000 shares authorized:
Series A Special Voting Preferred Stock, one share authorized and outstanding -- --
Common Stock, par value $.01; 80,000,000 shares authorized,
33,332,436 and 32,481,719 shares outstanding, respectively
after deducting 20,877 shares held in treasury 332 325
Additional paid-in capital 335,790 326,187
Unrealized gains on short-term investments 136 272
Cumulative translation adjustments (4,700) (4,943)
Retained earnings 38,005 33,260
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 369,563 355,101
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 827,700 $ 771,639
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
RESTATED
----------------------------
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 8,565 7,012
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 27,484 19,878
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 1,960 741
------------ ------------
INCOME FROM OPERATIONS 13,365 6,047
NET INVESTMENT INCOME (EXPENSE) 260 260
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (10,677) (1,268)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 2,880 621
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,828 5,660
PROVISION FOR INCOME TAXES 1,083 566
------------ ------------
NET INCOME $ 4,745 $ 5,094
============ ============
NET INCOME PER COMMON SHARE $ 0.14 $ 0.16
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE 32,819,641 32,819,432
============ ============
NET INCOME PER COMMON SHARE, ASSUMING DILUTION $ 0.13 $ 0.16
SHARES USED IN COMPUTING NET INCOME
PER COMMON SHARE, ASSUMING DILUTION 37,721,780 32,819,432
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
March 31,
RESTATED
--------------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 4,745 $ 5,094
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 8,685 6,461
Equity in losses of affiliates 10,677 1,268
Non-controlling interests in losses of consolidated subsidiaries (2,880) (621)
Foreign currency translation adjustment 243 (184)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in current and other non-current assets (17,029) (6,050)
Increase (decrease) in current and other non-current liabilities 1,334 7,579
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,775 13,547
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,503) (4,733)
Purchases, sales and maturities of available-for-sale investment securities, net -- (4,215)
Investments in and advances to affiliates (26,584) (1,304)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (35,087) (10,252)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) 15,461 3,350
Principal payments on long-term obligations (6,318) (4,697)
Proceeds from issuance of long-term obligations 27,464 --
Net proceeds from issuances of common stock 9,610 442
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,217 (905)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,905 2,390
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,553 26,859
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,458 $ 29,249
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to instructions, rules and regulations prescribed by the Securities and Exchange
Commission (the "SEC"). Although the company believes that the disclosures
provided are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the footnotes
thereto included in the company's Annual Report on Form 10-K for the year ended
December 31, 1997. Operating results for the three-month period ended March 31,
1998 are not necessarily indicative of the results expected for the full year.
Orbital Sciences Corporation is hereafter referred to as "Orbital" or the
"company."
(1) RESTATEMENT
The accompanying condensed consolidated financial statements for the three
months ended March 31, 1998 have been restated. Based on accounting decisions
made in connection with the preparation of the company's consolidated year-end
financial statements, the company has restated the aforementioned financial
statements to consistently apply accounting policies to certain transactions
recorded in the three month period ended March 31, 1998, as summarized below.
The company recorded $1,500,000 of additional research and development expenses
related to certain product enhancements at its Magellan subsidiary in the
Satellite Access sector that had been previously capitalized (before
considering the associated minority interests of $510,000). The company
recorded $1,200,000 of additional general and administrative expenses in the
Space and Ground Infrastructure Systems sector (the "SGIS sector") for
estimated post-retirement health benefit obligations related to a plan acquired
in a prior business combination. In addition, the company reduced net interest
expense by approximately $800,000 in the SGIS sector to reflect the appropriate
amount of interest capitalized on certain assets in process. Lastly, the
company revised its tax provision to reflect the impact of these adjustments
and to reflect the company's revised estimate of its effective tax rate for the
year.
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<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
As Reported As Restated
----------- -----------
<S> <C> <C>
Retained Earnings $39,779,000 $38,005,000
Net Income $ 6,519,000 $ 4,745,000
Diluted Earnings Per Share $ 0.20 $ 0.13
</TABLE>
The restatement noted above is included in the accompanying condensed
consolidated financial statements.
(2) INVENTORIES
Inventories consist of components inventory, work-in-process inventory and
finished goods inventory and are generally stated at the lower of cost or net
realizable value on a first-in, first-out or specific identification basis.
Components and raw materials are purchased to support future production efforts.
Work-in-process inventory consists primarily of (i) costs incurred under
long-term fixed-price contracts accounted for using the percentage-of-completion
method of accounting applied on a units of delivery basis, and (ii) partially
assembled commercial products, and generally includes direct production costs
and certain allocated indirect costs (including an allocation of general and
administrative costs). Work-in-progress inventory has been reduced by
contractual progress payments received. Finished goods inventory consists of
fully assembled commercial products awaiting shipment.
(3) EARNINGS PER SHARE
Net income per common share is calculated using the weighted average number of
common shares outstanding during the periods. Net income per common share
assuming dilution is calculated using the weighted average number of common and
dilutive common equivalent shares outstanding during the periods, plus the
effects of an assumed conversion of the company's $100,000,000, 5%, convertible
notes due 2002, after giving effect to all net income adjustments that would
result from the assumed conversion.
(4) INCOME TAXES
The company has recorded its interim income tax provision based on estimates of
the company's effective tax rate expected to be applicable for the full fiscal
year. Estimated effective rates recorded during interim periods may be
periodically revised, if necessary, to reflect current estimates.
(5) RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 condensed consolidated
financial statements to conform to the 1998 condensed consolidated financial
statement presentation.
(6) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income."
Disclosure requirements with respect to comprehensive income are as follows (in
thousands):
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<TABLE>
<CAPTION>
MARCH 31,
1998 1997
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<S> <C> <C>
Comprehensive income:
Net income, as reported $ 4,745 $ 5,094
Unrealized losses on
short-term investments (136) (20)
Translation adjustments 243 (184)
------- -------
Total $ 4,852 $ 4,890
======= =======
Accumulated other comprehensive income:
Beginning of period $(4,671) $(3,667)
======= =======
End of period $(4,564) $(3,871)
======= =======
</TABLE>
(7) SUBSEQUENT EVENTS
Equity Offering: On April 20, 1998, the company sold 3,450,000 shares of its
common stock in a public offering at $45.81 per share, generating net proceeds
to the company of approximately $150,000,000 after deducting approximately
$8,000,000 of underwriters' discounts and other estimated offering expenses.
The following table sets forth the cash and cash equivalents and short-term
investments, total debt and total stockholders' equity of the company as of
March 31, 1998, as reported and as adjusted as if the net proceeds from the sale
of common stock were used to pay down existing borrowings under the company's
credit facility and line of credit and the remainder were invested in short-term
interest-bearing securities (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Cash and cash equivalents and
short-term investments $ 29,458 $ 90,208
======== ========
Total debt $264,318 $175,068
======== ========
Total stockholders' equity $369,563 $520,238
======== ========
</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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 1998 AND 1997
Certain statements included in this discussion relating to future revenues,
sales, expenses, growth rates, net income, new business, operational
performance, schedules, sources and uses of funds, and the performance of the
company's affiliates, Orbital Imaging Corporation ("ORBIMAGE") and ORBCOMM
Global L.P. ("ORBCOMM") are forward-looking statements that involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance, achievements or investments of the company to differ
materially from any future results, performance, achievements, or investments
expressed or implied by such forward-looking statements. Such factors include,
among others, general and economic business conditions, launch success, product
performance, risks associated with government contracts, the introduction of
products and services by competitors, risks associated with acquired businesses,
availability of required capital, market acceptance of new products and
technologies and other factors more fully described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Outlook: Issues
and Uncertainties" incorporated in the company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
The company's products and services are grouped into three business sectors:
Space and Ground Infrastructure Systems, Satellite Access Products and Satellite
Services. Space and Ground Infrastructure Systems include launch vehicles,
satellites, electronics and sensor systems, and satellite ground systems. The
company's Satellite Access Products sector consists of recreational,
professional and automotive satellite-based navigation products, satellite
communications products and transportation management systems. The company's
Satellite Services sector includes satellite-based, two-way mobile data
communications services and satellite-based imagery services, conducted through
the company's ORBCOMM and ORBIMAGE affiliates. The company does not control the
operational and financial affairs of ORBCOMM and ORBIMAGE and, consequently,
their financial results are not consolidated with the company's and are not
reported on herein.
RECENT DEVELOPMENTS. On April 21, 1998, ORBCOMM Corporation ("ORBCOMM Corp.")
announced that it has filed a registration statement with the Securities and
Exchange Commission for an initial public offering of $125,000,000 of its common
stock. ORBCOMM Corp. was organized for the sole purpose of investing in and
acting as a general partner of ORBCOMM. The registration statement has not yet
become effective.
On April 20, 1998, the company sold 3,450,000 shares of its common stock in a
public offering at $45.81 per share, generating net proceeds of approximately
$150,000,000 (see Liquidity and Capital Resources).
On May 4, 1998, the company signed a non-binding letter of intent with CCI
International N.V. ("CCI"). Under the terms of this preliminary agreement,
Orbital will receive a satellite construction and launch contract, valued at
approximately $450,000,000, and will provide up to
8
<PAGE> 9
$150,000,000 in equity capital and vendor financing to CCI, subject to
negotiation of definitive documentation. In addition, the company terminated
discussions regarding a satellite procurement agreement and a potential
investment in the Ellipso satellite network of Mobile Communications Holdings,
Inc.
REVENUES. Orbital's revenues for the three-month periods ended March 31, 1998
and 1997 were $186,159,000 and $122,112,000, respectively.
Space and Ground Infrastructure Systems. Revenues from the company's Space and
Ground Infrastructure Systems sector totaled $156,341,000 and $106,199,000 for
the three months ended March 31, 1998 and 1997, respectively.
Revenues from the company's launch vehicles increased to $46,040,000 in the
first quarter of 1998, from $29,894,000 in the first quarter of 1997. The
increase in revenues in 1998 as compared to a year ago is attributable to
increased revenues from the company's Pegasus and Taurus launch vehicle
programs, and from its suborbital launch vehicle programs. Additionally, the
company generated more revenues in the 1998 first quarter for contractual work
performed on the X-34 reusable launch vehicle.
For the three months ended March 31, 1998, satellite revenues increased to
$61,532,000 from $30,803,000 in the first quarter of 1997. The increase in
satellite sales is primarily due to additional revenues generated from new
satellite orders received in 1997. Revenues in 1998 also include approximately
$16,590,000 of sales generated by the satellite business acquired from CTA
INCORPORATED in August 1997.
Revenues from electronics and sensor systems of approximately $27,348,000 for
the three months ended March 31, 1998 were generally consistent with the
revenues of $28,066,000 in the comparable 1997 period.
Revenues from the company's ground systems products were $21,421,000 in the
first quarter of 1998 as compared to $17,436,000 in the comparable 1997 quarter.
The increase in revenues in 1998 is due to contractual work performed on 1997
new orders for new satellite ground systems and system upgrades.
Revenues for the three months ended March 31, 1998 include sales to ORBCOMM and
ORBIMAGE of $16,277,000 and $27,324,000, respectively, as compared to first
quarter 1997 sales to ORBCOMM of $11,500,000. Since the company consolidated
ORBIMAGE's results of operations through May 8, 1997, no revenue was recorded on
sales to ORBIMAGE during the first quarter of 1997.
Satellite Access Products. Revenues from sales of navigation, communications and
transportation management systems and products increased to $29,754,000 for the
1998 first quarter as compared to $15,646,000 for the comparable 1997 period.
The first quarter of 1998 includes approximately $11,000,000 of sales generated
by the company's industrial navigation operations that were acquired as a result
of the December 1997 merger of Ashtech Inc. with the company's subsidiary,
Magellan Corporation ("Magellan").
9
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GROSS PROFIT/COSTS OF GOODS SOLD. Costs of goods sold include the costs of
personnel, materials, subcontracts and overhead related to commercial products
and under the company's various development and production contracts. Gross
profit depends on a number of factors, including the company's mix of contract
types and costs incurred thereon in relation to estimated costs. The company's
gross profit for the first quarter of 1998 was $51,374,000 as compared to
$33,678,000 in the 1997 first quarter. Gross profit as a percentage of sales was
approximately 28% in both periods.
Space and Ground Infrastructure Systems. Gross profit from the company's Space
and Ground Infrastructure Systems totaled $42,840,000 (or 27.4% of revenues) and
$28,592,000 (or 26.9% of revenues) for the three months ended March 31, 1998 and
1997, respectively.
Gross profit margins from the company's launch vehicles were 26.7% for the first
quarter of 1998 as compared to 32% for the first quarter of 1997. The decrease
in launch vehicle gross margins in 1998 is primarily due to completing work on
certain less profitable launch vehicle contracts. Satellites contributed gross
margins of 27.7% during the first quarter of 1998 as compared to 23.0% during
the first quarter of 1997. The increase is due to work performed on more
profitable new contracts received in the second half of 1997. For the three
months ended March 31, 1998 and 1997, electronics and sensor systems had gross
margins of 27.9% and 25.6%, respectively. Gross margins for ground systems were
27.4% and 27.1% for each of the first quarters in 1998 and 1997.
Satellite Access Products. Gross margins for satellite access products were
34.0% for the first quarter of 1998 and 35.8% for the first quarter of 1997.
This decrease in gross margin percentage is due to lower unit sales prices for
satellite navigation recreational products in the 1998 period.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses represent
Orbital's self-funded product development activities, and exclude direct
customer-funded development. Research and development expenses during the
three-month periods ended March 31, 1998 and 1997 were $8,565,000 (or 4.6% of
revenues) and $7,012,000 (or 5.7% of revenues), respectively. Research and
development expenses in both quarters relate primarily to the development of new
or improved satellite navigation, communications and automotive products and new
satellite initiatives.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include the costs of marketing, advertising, promotional
and other selling expenses as well as the costs of the finance, administrative
and general management functions of the company. Selling, general and
administrative expenses for the first quarters of 1998 and 1997 were $27,484,000
(or 14.8% of revenues) and $19,878,000 (or 16.3% of revenues), respectively. The
decrease in selling, general and administrative expenses as a percentage of
revenues during 1998 as compared to 1997 was primarily attributable to
substantial revenue growth, particularly in launch vehicles and satellite
systems, with only a modest growth in selling, general and administrative
expenses.
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INTEREST INCOME AND INTEREST EXPENSE. Net interest income was $260,000 for each
of the three months ended March 31, 1998 and 1997. Interest income for the
periods reflects interest earnings on short-term investments. Interest expense
in 1998 is primarily for outstanding amounts on Orbital's convertible
subordinated notes, revolving credit facilities and on other secured and
unsecured debt. Interest expense has been reduced by capitalized interest of
$3,663,000 and $1,313,000 in 1998 and 1997, respectively.
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN
(EARNINGS) LOSSES OF CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of
affiliates net of non-controlling interests in (earnings) losses of consolidated
subsidiaries for the first quarters of 1998 and 1997 were ($7,797,000) and
($647,000), respectively. These amounts primarily represent (i) elimination of
proportionate profits or losses on sales of infrastructure products to ORBCOMM
and ORBIMAGE, (ii) the company's pro rata share of current period earnings and
losses of each of ORBCOMM, ORBCOMM International Partners, L.P. and ORBIMAGE and
(iii) non-controlling stockholders' pro rata share of ORBCOMM USA, L.P.'s and
Magellan's current period earnings and losses. The increase in losses during the
first quarter of 1998 is due to increased losses at ORBCOMM and the fact that
subsequent to May 8, 1997, the company used the equity method to account for its
investment in ORBIMAGE when it had previously consolidated ORBIMAGE's operations
during the first quarter of 1997.
PROVISION FOR INCOME TAXES. The company recorded an income tax provision of
$1,083,000 and $566,000 for the three month periods ended March 31, 1998 and
1997, respectively. The company records its interim income tax provisions based
on estimates of the company's effective tax rate expected to be applicable for
the full fiscal year. Estimated effective rates recorded during interim periods
may be periodically revised, if necessary, to reflect current estimates.
At December 31, 1997, Orbital had approximately $150,000,000 of U.S. Federal net
operating loss carryforwards and $3,000,000 of U.S. Federal research and
experimental tax credit carryforwards, which are available to reduce future
income tax obligations, subject to certain annual limitations and other
restrictions.
NET INCOME (LOSS). Space and Ground Infrastructure Systems provided net income
of approximately $15,184,000 for the three months ended March 31, 1998 as
compared to net income of $8,069,000 in the first quarter of 1997. The company's
satellite access products sector reported a net loss in the first quarter of
1998 of $1,766,000 as compared to net income of $718,000 in the 1997 first
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The company's growth has required substantial capital to fund expanding working
capital needs, investments in ORBCOMM and ORBIMAGE, certain business
acquisitions, new business initiatives, research and development and capital
expenditures. The company has funded these requirements to date, and expects to
fund its requirements in the future, through cash generated by operations,
working capital, loan facilities, asset-based financings, joint venture
arrangements and private and public equity and debt offerings. The company
expects to continue to pursue potential acquisitions and equity investments that
it believes would enhance its businesses and to
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fund such transactions through cash generated by operations, existing loan
facilities, the issuance of equity and/or debt securities and asset-based
financings.
On April 20, 1998, the company sold 3,450,000 shares of its common stock in a
public offering, generating net proceeds of approximately $150,000,000 (the
"Offering"). Orbital plans to use the net proceeds from this Offering
principally to support further business expansion in its Space and Ground
Infrastructure Systems sector as a result of higher than expected new orders in
1997 and 1998 for satellites and launch vehicles, including working capital and
capital expenditures for facilities and production test equipment. Additionally,
a portion of the net proceeds may be used for investments in new projects or
emerging space-related businesses (such as CCI), expanded research and
development for new products, or acquisitions of businesses and/or product lines
complementary to the company's existing businesses, and for other general
corporate purposes. Pending the foregoing uses and as discussed below, the
company paid down existing borrowings under its credit facility and line of
credit and invested the remainder in short-term interest-bearing securities.
Cash, cash equivalents and short-term investments were $32,456,000 at March 31,
1998, and the company had total debt obligations outstanding of approximately
$264,318,000. At March 31, 1998, the outstanding debt is comprised primarily of
the company's convertible subordinated notes, advances under the company's line
of credit facilities, secured and unsecured notes, and asset-based financings.
The company's primary revolving credit facility provides for total borrowings
from an international syndicate of six banks of up to $100,000,000.
Approximately $64,750,000 of borrowings were outstanding under the facility at
March 31, 1998 at a weighted average interest rate of approximately 7.25%.
Borrowings are secured by contract receivables, and the facility prohibits the
payment of cash dividends, contains certain covenants with respect to the
company's working capital, fixed charge ratio, leverage ratio and consolidated
net worth, and expires in August 2001. The company (or its subsidiaries) also
maintains two additional, smaller revolving credit facilities, under which
approximately $25,528,000 was outstanding at March 31, 1998 at a weighted
average interest rate of 6.28%. Additional borrowing capacity on the two
additional agreements is approximately $500,000 at March 31, 1998. The company
used approximately $94,250,000 of proceeds from the Offering to pay down
outstanding borrowings on these credit facilities.
The company's operations provided net cash of approximately $5,775,000 in the
first quarter of 1998. The company was committed to provide up to an additional
$15,000,000 in capital to ORBCOMM, of which $10,000,000 has been funded to date,
$7,500,000 during the three months ended March 31, 1998. The company has also
provided to ORBCOMM approximately $26,000,000 in vendor financing, $12,690,000
during the three months March 31, 1998 (one-half of which has been advanced to
Orbital by an affiliate of Teleglobe Inc.). The company anticipates that ORBCOMM
will require additional vendor financing during 1998, pending completion of
ORBCOMM Corp.'s initial public offering of its common stock. In addition, during
the first quarter of 1998, the company incurred $8,503,000 in capital
expenditures for various satellite, launch vehicle and other production,
manufacturing, test and office equipment.
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Orbital expects that its capital needs for the remainder of 1998 will in part be
provided by working capital, cash flows from operations, existing credit
facilities, customer financings and operating lease arrangements.
13
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY- HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - A complete listing of exhibits required is given in the Exhibit
Index that precedes the exhibits filed with this report.
(b) Reports on Form 8-K
(i) On February 26, 1998, the company filed a Current Report on Form 8-K,
dated February 5, 1998, disclosing the financial results of the company for
the fiscal year ending December 31, 1997.
(ii) On March 27, 1998, the company filed a Current Report on Form 8-K,
dated March 26, 1998, disclosing that it proposed to make a public offering
of shares of its common stock.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
DATED: February 19, 1999 By: /s/ David W. Thompson
------------------------------------------------
David W. Thompson, President
and Chief Executive Officer
DATED: February 19, 1999 By: /s/ Jeffrey V. Pirone
------------------------------------------------
Jeffrey V. Pirone, Executive Vice President
and Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.16 Orbital Sciences Corporation 1997 Stock Option and Incentive Plan, as amended (previously filed).
11 Statement re: Computation of Earnings Per Share (transmitted herewith).
27 Financial Data Schedule (such schedule is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed" as part of the Form 10-Q/A, or otherwise
subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted
herewith).
</TABLE>
16
<PAGE> 1
EXHIBIT 11.
STATEMENT re: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31, 1998
- --------------------------------------------------------------------------
RESTATED
RESTATED 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 $4,745,000 $ 4,745,000
ADJUSTMENTS ASSUMING DILUTION:
INTEREST EXPENSE ADJUSTMENT, NET OF TAXES N/A 169,000
---------- -----------
NET INCOME $4,745,000 $ 4,914,000
========== ===========
NET INCOME PER COMMON SHARE $ 0.14 $ 0.13
========== ===========
</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 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> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<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> 232,095
<DEPRECIATION> (92,937)
<TOTAL-ASSETS> 827,700
<CURRENT-LIABILITIES> 232,507
<BONDS> 233,998
0
0
<COMMON> 332
<OTHER-SE> 369,231
<TOTAL-LIABILITY-AND-EQUITY> 827,700
<SALES> 186,159
<TOTAL-REVENUES> 186,159
<CGS> 134,785
<TOTAL-COSTS> 134,785
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 169
<INCOME-PRETAX> 5,828
<INCOME-TAX> 1,083
<INCOME-CONTINUING> 4,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,745
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
