<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended
MARCH 31, 1995
ORBITAL SCIENCES CORPORATION
Commission file number 0-18287
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<CAPTION>
<S> <C>
DELAWARE 06-1209561
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(State of Incorporation) (IRS Identification number)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 (703) 406-5000
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(Address of principal executive offices) (Telephone number)
</TABLE>
The registrant has (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
As of May 3, 1995, 20,357,661 shares of the registrant's common stock were
outstanding.
<PAGE> 2
EXPLANATORY NOTE
Orbital Sciences Corporation ("Orbital") has determined to restate its
consolidated financial statements for the year ended December 31, 1995 and its
condensed consolidated quarterly financial statements for 1995. This amendment
includes in Item 1 such restated condensed consolidated financial statements and
related footnotes thereto for the three months ended March 31, 1995 and other
information relating to such restated condensed consolidated financial
statements. Item 2 includes Orbital's amended and restated discussion and
analysis of financial condition and results of operations.
Except for Items 1 and 2 and Exhibits 11 and 27, no other information included
in the original report on Form 10-Q is amended by this amendment. For current
information regarding risks, uncertainties and other factors that may affect
Orbital's future performance, please see "Outlook: Issues and Uncertainties"
included in Item 7 of Orbital's Annual Report on Form 10-K for the year ended
December 31, 1999.
<PAGE> 3
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
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<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------- -------------
(RESTATED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,371 $ 21,156
Short-term investments, at market 9,427 12,426
Receivables, net 100,394 94,236
Inventories, net 23,809 26,098
Deferred income taxes and other current assets 8,161 5,914
------------- -------------
TOTAL CURRENT ASSETS 146,162 159,830
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation
and amortization of $35,274 and $33,432, respectively 101,880 102,061
INVESTMENTS IN AFFILIATES 56,124 54,721
GOODWILL, less accumulated amortization of $10,646 and $10,042, respectively 68,244 68,878
DEFERRED INCOME TAXES AND OTHER ASSETS 16,981 17,238
------------- -------------
TOTAL ASSETS $ 389,391 $ 402,728
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term obligations $ 27,866 $ 28,160
Accounts payable 15,330 14,961
Accrued expenses 26,724 37,439
Payable to subcontractors 9,576 13,695
Deferred revenues 14,066 13,272
------------- -------------
TOTAL CURRENT LIABILITIES 93,562 107,527
LONG-TERM OBLIGATIONS, net of current portion 79,711 81,163
OTHER LIABILITIES 11,353 11,992
------------- -------------
TOTAL LIABILITIES 184,626 200,682
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01; 10,000,000 shares authorized,
No shares issued or outstanding -- --
Common stock, par value $.01, 40,000,000 shares authorized,
20,233,408 and 20,170,196 shares outstanding,
after deducting 15,735 shares held in treasury 203 202
Additional paid-in capital 201,862 201,328
Unrealized gains (losses) on short-term investments (400) (462)
Retained earnings 3,100 978
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 204,765 202,046
------------- -------------
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 389,391 $ 402,728
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
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<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------
1995 1994
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(RESTATED)
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REVENUES $ 68,569 $ 50,310
Costs of goods sold 49,656 36,029
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GROSS PROFIT 18,913 14,281
Research and development expenses 3,831 3,698
Selling, general and administrative expenses 11,268 7,257
Amortization of goodwill 661 423
------------- -------------
INCOME FROM OPERATIONS 3,153 2,903
Net investment income (expense) (614) 511
Equity in earnings (losses) of affiliates 426 (423)
------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,965 2,991
Provision for income taxes 2,626 816
------------- -------------
Income before cumulative effect of accounting change 339 2,175
Cumulative effect of accounting change, net of tax (2,377) --
------------- -------------
NET INCOME (LOSS) $ (2,038) $ 2,175
============= =============
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Income before cumulative effect of accounting change $ 0.02 $ 0.12
Cumulative effect of accounting change, net of tax (0.12) --
------------- -------------
$ (0.10) $ 0.12
============= =============
Shares used in computing net income (loss)
per common and common equivalent share 20,654,907 17,864,089
============= =============
NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION
Income (loss) before cumulative effect of accounting change $ 0.02 $ 0.08
Cumulative effect of accounting change, net of tax (0.12) --
------------- -------------
$ (0.10) $ 0.08
============= =============
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON SHARE, ASSUMING FULL DILUTION 20,654,907 22,017,976
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
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<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------
1995 1994
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(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (2,038) $ 2,175
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH USED IN OPERATING
ACTIVITIES:
Depreciation and amortization expenses 4,240 2,092
Equity in (earnings) losses of affiliates 426 423
Cumulative effect of accounting change, net of tax 2,377 --
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in contract receivables (6,158) (2,972)
(Increase) decrease in components inventory 2,289 (7)
(Increase) decrease in other current assets (632) (235)
(Increase) decrease in deposits and other assets (292) (9)
Increase (decrease) in payables and accrued expenses (14,465) (5,407)
Increase (decrease) in deferred revenue 378 (7,240)
Increase (decrease) in deferred income taxes and other noncurrent assets (639) (260)
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (14,514) (11,440)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,527) (2,986)
Proceeds from sales of fixed assets 125 --
Purchase of investment securities -- (3,356)
Sale of investment securities 3,061 --
Investments in affiliates (1,719) (602)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (1,060) (6,944)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) (901) (2,458)
Principal payments on long-term obligations (845) (315)
Net proceeds from issuances of common stock to employees 535 979
Adjustment to recast pooled companies' year end -- (1,138)
------------ -----------
NET CASH USED IN FINANCING ACTIVITIES (1,211) (2,932)
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (16,785) (21,316)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,156 49,458
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,371 $ 28,142
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to instructions, rules and regulations prescribed by the Securities and Exchange
Commission (the "Commission"). Although the Company believes that the
disclosures provided are adequate to make the information presented not
misleading, these unaudited interim condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and the footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994. Operating results for the three-month
periods ended March 31, 1995 and 1994 are not necessarily indicative of the
results expected for the full year.
Orbital Sciences Corporation is hereafter referred to as "Orbital" or the
"Company."
(1) RESTATEMENT
Management has determined to restate its previously issued consolidated
financial statements for 1995 with respect to its accounting treatment for
capitalized costs and certain other matters. For a full description of the
restatement matters, refer to Notes 1A and 16 to the Company's consolidated
financial statements included in the Company's 1995 Annual Report on Form 10-K/A
previously filed with the Commission.
The effect of the restatement matters on the Company's previously reported
revenues, gross profit, income (loss) from operations, net income (loss) and net
income (loss) per common and dilutive share for the periods is as follows (in
thousands, except per share data):
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QUARTER ENDED
MARCH 31, 1995
------------------
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RESTATED:
Revenues $ 68,569
Gross profit 18,913
Income from operations 3,153
Net income (loss) (2,038)
Net income (loss) per common
share (0.10)
Net income (loss) per dilutive
share (0.10)
</TABLE>
6
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<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, 1995
------------------
<S> <C>
AS PREVIOUSLY REPORTED:
Revenues $ 68,341
Gross profit 18,854
Income from operations 3,152
Net income (loss) (2,192)
Net income per common share (0.11)
Net income per dilutive share (0.11)
</TABLE>
(2) NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of" ("SFAS 121"), which (i) requires
that long-lived assets "to be held and used" be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, (ii) requires that long-lived assets "to be disposed of"
be reported at the lower of carrying amount or fair value less cost to sell, and
(iii) provides guidelines and procedures for measuring an impairment loss that
are significantly different from existing guidelines and procedures.
The Company adopted the provisions of SFAS 121 during the quarter ended March
31, 1995. As a result, as of January 1, 1995 Orbital recorded a cumulative
adjustment for a change in accounting principle of $2,377,000, net of tax
benefit of $1,783,000, related to the impairment in the carrying amount of
certain assets to be disposed of that supported its orbit transfer vehicle
product line. The effect of adopting SFAS 121 on income from continuing
operations for the quarter ended March 31, 1995 was not material.
(3) 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 inventory consists primarily of components and raw materials
purchased to support future production efforts. Work-in-process inventory
consists primarily of (i) costs incurred under U.S. Government fixed-price
contracts accounted for using the percentage of completion method of accounting
applied on a units of delivery basis and (ii) partially assembled commercial
products, and generally includes direct production costs and certain allocated
indirect costs (including an allocation of general and administrative costs).
Work in process inventory has been reduced by contractual progress payments
received. Finished goods inventory consists of fully assembled commercial
products awaiting shipment.
7
<PAGE> 8
(4) INVESTMENTS IN AFFILIATES
The Company's majority-owned subsidiary, Orbital Communications Corporation
("OCC"), and Teleglobe Mobile Partners, an affiliate of Teleglobe Inc., formed a
partnership, ORBCOMM Development Partners, L.P. ("ORBCOMM Development"), for the
two-phased design, development, construction, integration, test and operation of
a 26-satellite low-Earth orbit satellite communications system (the "ORBCOMM
System"). Pursuant to the terms of the partnership agreement, OCC and Teleglobe
Mobile Partners are each 50% general partners in ORBCOMM Development. Teleglobe
Mobile has an option to invest an additional $70,000,000 in the next phase of
the ORBCOMM System implementation.
Orbital and OCC are the primary suppliers of communications satellites, launch
vehicles, ground tracking systems, system software and integration services to
ORBCOMM Development, and successfully launched the first two ORBCOMM System
satellites in April 1995. Preliminary test results from the initial phases of
planned comprehensive on-orbit testing of the satellites indicate that the major
spacecraft support systems on both satellites, including electrical power,
flight computer, attitude control and thermal control, are operating as
expected. Several anomalies have been discovered on the spacecraft, including a
problem with the gateway communication subsystem that controls one satellite's
response to uplink commands, and a problem with the other satellite's subscriber
communications subsystem that is responsible for communications with subscriber
terminals. While no assurances can be given that the anomalies will be
successfully resolved, a comprehensive anomaly review and potential corrective
actions are currently being pursued.
Based on its current assessment of the overall business prospects of ORBCOMM
Development and the ORBCOMM System, the Company currently believes its
investment in ORBCOMM Development of approximately $56,000,000 is fully
recoverable. If, in the future, implementation of the ORBCOMM System is
significantly delayed, significantly restricted or abandoned, the Company may be
required to expense part or all of its investment.
(5) EQUITY IN EARNINGS (LOSSES) OF AFFILIATES
During the three months ended March 31, 1995 and for the years ended December
31, 1994 and 1993, Orbital recorded contract revenues on sales to ORBCOMM
Development of approximately $6,000,000, $30,000,000 and $38,000,000,
respectively, and eliminated as equity in earnings of affiliate 50% of its
profits on those sales. At March 31, 1995, Orbital had approximately $7,900,000
in unbilled receivables from ORBCOMM Development.
During the construction phase of the project and prior to the commencement of
planned operations, ORBCOMM Development is capitalizing substantially all
8
<PAGE> 9
construction-related costs and is expensing as incurred all selling, general and
administrative costs as period costs.
(6) 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.
(7) INCOME (LOSS) PER SHARE
Income (loss) per common and common equivalent share is calculated using the
weighted average number of common and common equivalent shares, to the extent
dilutive, outstanding during the periods.
Income (loss) per common share assuming full dilution is calculated using the
weighted average number of common and common equivalent shares outstanding
during the periods plus the effects of an assumed conversion of the Company's 6%
convertible subordinated debentures, after giving effect to all net income
adjustments that would result from the assumed conversion. Any reduction of less
than three percent in the aggregate has not been considered dilutive in the
calculation and presentation of income (loss) per common share assuming full
dilution.
(8) HERCULES INCORPORATED
In November 1988, Orbital and Hercules Incorporated ("Hercules") entered into a
joint venture agreement relating to the development and production of the
Pegasus space launch vehicle (the "Joint Venture Agreement"). In 1995, Alliant
Techsystems Inc. ("Alliant") acquired the assets of Hercules Aerospace Company
(a division of Hercules) and, in connection therewith, assumed the rights and
responsibilities of Hercules with respect to the Joint Venture Agreement.
Effective May 3, 1995, Orbital and Alliant replaced the Joint Venture Agreement
with a joint teaming agreement to provide for the continuation of joint
performance on the Pegasus and Taurus space launch vehicle programs (the "Joint
Teaming Agreement"). The Joint Teaming Agreement provides, among other things,
that Orbital will perform as the system prime contractor for all present and
future Pegasus and Taurus missions and Alliant will perform as a solid rocket
motor and payload fairing subcontractor to Orbital on the Pegasus program and as
a solid rocket motor subcontractor to Orbital on the Taurus program. As a
subcontractor, Alliant will receive firm-fixed prices for its subcontracts and
will no longer share in Pegasus contract profits and losses, but will share in
the costs and benefits associated with certain defined outstanding issues on
current Pegasus contracts. The Joint Teaming Agreement will continue through
December 31, 2005, unless terminated earlier by mutual agreement.
9
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Orbital and Alliant also have agreed to a final dismissal with prejudice of all
present and future claims and litigation related to the Joint Venture Agreement,
including (i) the January 1994 lawsuit filed by Hercules against Orbital
alleging breaches of certain representations and warranties by Orbital in the
1988 stock purchase agreement between Hercules and Orbital, and (ii) the July
1994 lawsuit filed by Hercules against Orbital alleging breach of fiduciary duty
and breach of contract in the determination of Orbital's recoverable costs
pursuant to the Joint Venture Agreement.
(9) RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 condensed consolidated
financial statements to conform to the 1995 condensed consolidated financial
statement presentation. The December 1994 acquisition of Magellan Corporation
was recorded using the pooling of interests method of accounting for business
combinations and, accordingly, Orbital's 1994 historical financial statements
have been restated to reflect this transaction.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1994
The ORBCOMM System. The Company's majority-owned subsidiary, Orbital
Communications Corporation ("OCC"), and Teleglobe Mobile Partners, an affiliate
of Teleglobe Inc., formed a partnership, ORBCOMM Development Partners, L.P.
("ORBCOMM Development"), for the two-phased design, development, construction,
integration, test and operation of a 26-satellite low-Earth orbit satellite
communications system (the "ORBCOMM System"). Pursuant to the terms of the
partnership agreement, OCC and Teleglobe Mobile Partners are each 50% general
partners in ORBCOMM Development. Teleglobe Mobile has an option to invest an
additional $70,000,000 in the next phase of the ORBCOMM System implementation.
Orbital and OCC are the primary suppliers of communications satellites, launch
vehicles, ground tracking systems, system software and integration services to
ORBCOMM Development, and successfully launched the first two ORBCOMM System
satellites in April 1995. Preliminary test results from the initial phases of
planned comprehensive on-orbit testing of the satellites indicate that the major
spacecraft support systems on both satellites, including electrical power,
flight computer, attitude control and thermal control, are operating as
expected. Several anomalies have been discovered on the spacecraft, including a
problem with the gateway communication subsystem that controls one satellite's
response to uplink commands, and a problem with the other satellite's subscriber
communications subsystem that is responsible for communications with subscriber
terminals. While no assurances can be given that the anomalies will be
successfully resolved, a comprehensive anomaly review and potential corrective
actions are currently being pursued.
Based on its current assessment of the overall business prospects of ORBCOMM
Development and the ORBCOMM System, the Company currently believes its
investment in ORBCOMM Development of approximately $56,000,000 is fully
recoverable. If, in the future, implementation of the ORBCOMM System is
significantly delayed, significantly restricted or abandoned, the Company may be
required to expense part or all of its investment.
Certain of the 1995 financial information has been restated. See note 1 to the
condensed consolidated financial statements.
Revenues. Orbital's revenues for the three-month periods ended March 31, 1995
and 1994 were $68,569,000 and $50,310,000, respectively. Revenues
11
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from the Company's space launch vehicle products decreased to $6,658,000 during
the 1995 three-month period from $15,610,000 during the comparable 1994 period,
although revenues increased from the fourth quarter of 1994 by over 40%. The
significant decrease is attributable primarily to the continuing effects of
production delays caused by the Company's failed first launch of its new Pegasus
XL launch vehicle in June 1994, which required additional research and
development efforts to prepare for the next launch. The Company completed the
research and development activities early in 1995. Sales of space launch
vehicles to ORBCOMM Development were $92,000 and $2,076,000 during the 1995 and
1994 three-month periods, respectively. The Company successfully launched its
Pegasus vehicle for ORBCOMM Development on April 3, 1995.
Revenues from suborbital launch vehicle products decreased to $5,720,000 in the
1995 three-month period as compared to $7,097,000 in the 1994 period, although
revenues were level with fourth quarter 1994 revenues of $5,284,000. Suborbital
revenues have decreased significantly during the past few years as U.S.
Government defense spending has been reduced.
In the three months ended March 31, 1995, spacecraft systems revenues increased
to $14,519,000 from $6,978,000 in the 1994 period, primarily as a result of
additional revenues generated from the Company's wholly-owned subsidiary
Fairchild Space and Defense Corporation ("Fairchild"), acquired in August 1994.
The 1995 and 1994 periods included $1,860,000 and $3,082,000, respectively, in
sales of MicroStar spacecraft to ORBCOMM Development. Revenues generated from
sales of space sensors and instruments of $3,485,000 during the 1995 quarter
were consistent with first quarter 1994 sales of $3,387,000.
Revenues from defense electronics and avionics products were approximately
$15,463,000 for the three-month period ended March 31, 1995 as compared to
$3,220,000 in the 1994 period. These products were acquired as part of the 1994
Fairchild acquisition and the September 1993 acquisition of the Applied Science
Operations of The Perkin-Elmer Corporation ("ASO").
Revenues from sales of navigation and positioning products increased to
$13,886,000 for the three months ended March 31, 1995 as compared to $8,922,000
for the 1994 period, primarily due to increased unit sales offset, in part, by
lower unit prices for GPS navigators. Satellite-based services revenues in the
first quarter of 1995 were approximately $4,126,000 as compared to $2,223,000 of
first quarter 1994 sales, reflecting revenues from sales of services to ORBCOMM
Development.
Revenues from the Company's newly-established Advanced Projects Group were
$3,792,000 during the first quarter of 1995 as a result of work performed on two
research and development projects for ARPA and NASA.
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Gross Profit. Gross profit depends on a number of factors, including the
Company's mix of contract types and costs incurred thereon in relation to
estimated costs. The Company's gross profit for the three-month periods ended
March 31, 1995 and 1994 were $18,913,000 and $14,281,000, respectively. Gross
profit margin as a percentage of sales for those periods was approximately 27.6%
and 28.4%, respectively. The decreased gross profit margin during 1995 was
primarily attributable to cost growth on the Pegasus program as a result of the
1994 Pegasus XL failure.
Research and Development Expenses. Research and development expenses represent
Orbital's self-funded product development activities, and exclude direct
customer-funded development. Research and development expenses during the
three-month periods ended March 31, 1995 and 1994 were $3,831,000 and
$3,698,000, respectively. Research and development expenses in the first quarter
of 1995 related primarily to the development of new or improved navigation
products, completion of development efforts on the Company's Pegasus program and
new spacecraft programs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include the costs of marketing, advertising, promotional
and other selling expenses as well as the costs of the finance, administrative
and general management functions of the Company. Selling, general and
administrative expenses for the three months ended March 31, 1995 and 1994 were
$11,268,000 (or 16.4% of revenues) and $7,257,000 (or 14.4% of revenues),
respectively. The increase in selling, general and administrative expenses
during the first quarter of 1995 was primarily attributable to expanded
marketing efforts related to the Company's ORBCOMM project and various remote
sensing systems, and to the Fairchild acquisition.
Interest Income and Interest Expense. Net interest expense was $614,000 for the
three months ended March 31, 1995 as compared to net interest income of $511,000
during the 1994 quarter. Interest income for the periods reflects interest
earnings on short-term investments. Interest expense is primarily for
outstanding amounts on Orbital's revolving credit facility, on the Company's
public debentures and, during the 1995 quarter, on acquisition debt incurred for
the Fairchild acquisition. Interest expense has been reduced by capitalized
interest of $1,343,000 and $1,287,000, respectively, for the 1995 and 1994
three-month periods.
Equity in Earnings (Losses) of Affiliates. Equity in earnings (losses) of
affiliates for the three-month periods ended March 31, 1995 and 1994 of $426,000
and ($423,000), respectively, represents elimination of 50% of the profits on
sales to ORBCOMM Development, as well as the Company's pro-rata share of ORBCOMM
Development's current period earnings and losses. During the construction phase
of the project and prior to the commencement of
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<PAGE> 14
planned operations, ORBCOMM Development is capitalizing substantially all
construction-related costs and is expensing as incurred all selling, general and
administrative costs as period costs.
Provision for Income Taxes. The Company recorded an income tax provision of
$2,626,000 and $816,000 during the three-month periods ended March 31, 1995 and
1994, 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's growth has required substantial capital to fund both an expanding
business base and significant research and development and capital investment
expenditures. Additionally, the Company has historically made strategic
acquisitions of businesses and routinely evaluates potential acquisition
candidates. The Company expects to continue to pursue potential acquisitions
that it believes would augment its marketing, technical, manufacturing or
financial capabilities. The Company has funded these requirements to date, and
expects to fund its requirements in the future, through cash generated by
operations, working capital loan facilities, asset-based financings, joint
venture arrangements, and private and public equity and debt offerings.
Orbital issued secured notes totaling approximately $24,200,000 to eight
financial institutions, to support its acquisition of Fairchild in 1994. The
notes have an average interest rate of approximately 8 3/4% and generally mature
on a monthly basis over a three- to five-year period.
Cash, cash equivalents and short-term investments were $13,798,000 at March 31,
1995, and the Company had short-term and long-term debt obligations outstanding
of approximately $107,577,000. The outstanding debt relates primarily to
advances under the Company's line of credit facility, secured notes issued in
connection with the Fairchild acquisition, fixed asset financings and the
Company's public debentures.
The Company's revolving credit facility provides for total borrowings from an
international syndicate of six banks of up to $65,000,000, subject to a defined
borrowing base comprised of certain contract receivables. Approximately
$21,600,000 of borrowings were outstanding under the facility at March 31, 1995,
against an available facility limit of approximately $23,800,000. The available
facility limits were approximately $33,900,000 at April 30, 1995. At March 31,
1995, the average interest rate under this facility was approximately 9%.
Borrowings are secured by contract receivables and certain other assets. The
facility restricts the payment of dividends and contains certain covenants
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<PAGE> 15
with respect to the Company's working capital, fixed charge ratio, leverage
ratio and tangible net worth, and expires in September 1997.
The Company's operations used net cash of approximately $14,514,000 in the three
months ended March 31, 1995. The Company also invested approximately $1,719,000
in its ORBCOMM project and $2,527,000 in capital expenditures related primarily
to spacecraft production and test equipment.
Orbital expects that its 1995 capital needs for its existing operations,
including its planned $10,000,000 investment in the ORBCOMM project, will in
part be provided by working capital, cash flows from operations, credit
facilities, asset-based financings, customer financings and operating lease
arrangements. Additionally, as part of a joint venture partially funded by NASA
and Rockwell International Corporation, Orbital has committed to invest at least
$50,000,000 in the development of a new reusable launch vehicle, which
investment will be required over the next four years, including approximately
$5,000,000 in 1995. Orbital believes that it will require equity and/or debt
financing in 1995 to fully fund its currently planned operations and capital
requirements, to meet its potential increased investment in the ORBCOMM System
and to meet its investment requirements for the new launch vehicle.
On May 3, 1995, the Company entered into a $12,500,000 90-day bridge loan with a
bank syndicate that includes certain of the existing lenders under its revolving
credit facility. Borrowings are secured by contract receivables, and have an
interest rate of the higher of prime or the Federal funds rate, plus 1%. The
Company is currently seeking the private placement of approximately $20,000,000
of unsecured debt, the proceeds of which will fund, among other things, the
repayment of existing borrowings under the bridge loan and revolving credit
facility.
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PART II
OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
Note 8 to the Company's Unaudited Condensed Consolidated
Financial Statements for the three months ended March 31,
1995, provided in Item 1 of Part I of this Form 10-Q/A,
regarding the settlement of all outstanding litigation
between the Company and Alliant Techsystems Inc., which
recently acquired Hercules Aerospace Company, a division
of Hercules Incorporated, is incorporated herein by
reference.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - A complete listing of exhibits required is
given in the Exhibit Index that precedes the exhibits
filed with this report.
(b) On January 11, 1995, the Company filed Amendment No.
2 on Form 8-K/A reporting the consummation of its
acquisition of Magellan Corporation. The Company
filed a report on Form 8-K on February 8, 1995 and on
March 15, 1995, in each case reporting events under
Item 5.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10Q/A to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
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DATED: June 28, 2000 By: /s/ Jeffrey V. Pirone
---------------------
Jeffrey V. Pirone, Executive Vice President
and Chief Financial Officer
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EXHIBIT INDEX
THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT.
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Exhibit No. Description
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10.1 Amendment No. 4 to System Design, Development and
Operations Agreement dated March 17, 1995 (previously filed).
11 Statement re: Computation of Earnings (Loss) 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).
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