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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to __________
Commission file number 0-18287
ORBITAL SCIENCES CORPORATION
21700 Atlantic Boulevard
Dulles, Virginia 20166
(703) 406-5000
(Address and telephone number
of principal executive offices)
Delaware 06-1209561
(State of incorporation) (I.R.S. Employer I.D. No.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 (listed on The Nasdaq National Market
System)
________________________
Indicate by check mark whether the registrant (1) has 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price on March 6, 1995 was approximately
$335,678,381.
As of March 6, 1995, 20,211,540 shares of the registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for fiscal year ended
December 31, 1994 (the "Annual Report") are incorporated by reference in
Parts I, II and IV of this Report. Portions of the registrant's definitive
Proxy Statement dated March 27, 1995 (the "Proxy Statement") are incorporated
by reference in Part III of this Report.
ORBITAL SCIENCES CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1994
PART I Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . .11
Item 4a. Executive Officers of the Registrant . . . . . . . . . . . . . . . .11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . .13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . .13
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . .13
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . .13
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . .13
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .13
Item 12. Security Ownership of Certain Beneficial Owners and Management . . .13
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . .14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . .14
ITEM 1. BUSINESS
Background and Recent Acquisitions
Orbital Sciences Corporation (together with its subsidiaries, "Orbital" or
the "Company") is a space technology company that designs, manufactures,
operates and markets a broad range of space products and services that are
grouped into three categories: Launch Systems, Space and Electronics Systems,
and Communications and Information Systems. Launch Systems include space and
suborbital launch vehicles and orbit transfer vehicles; Space and Electronics
Systems include satellites, spacecraft platforms, space sensors and instruments,
space payloads and experiments, as well as advanced avionics and data management
systems; and Communications and Information Systems include satellite-based two-
way mobile data communications systems, remote sensing systems and satellite-
based navigation products, along with satellite tracking systems and
environmental monitoring products.
Orbital was incorporated in Delaware in 1987 to consolidate the assets,
liabilities and operations of Space Systems Corporation (formerly named Orbital
Sciences Corporation) ("SSC") and Orbital Research Partners, L.P. (the
"Partnership") through an exchange offer to the Partnership and to the
stockholders of SSC (the "Consolidation"). As a result of the consummation of
the Consolidation in 1988, SSC became a wholly owned subsidiary of Orbital, and
Orbital acquired substantially all of the assets and liabilities of the
Partnership. The Company acquired Space Data Corporation ("Space Data") in
1988, thereby expanding its product lines and increasing its vertical
integration in production and testing. In late 1992, SSC and Space Data were
merged into Orbital, with the Company being the surviving corporation. In
September 1993, Orbital acquired all the assets of the Applied Science
Operation, a division of The Perkin-Elmer Corporation ("ASO"). This operation
designs, develops and produces satellite-borne scientific sensors for space and
terrestrial research and in situ atmospheric monitoring equipment for human
space flight programs.
In August 1994 and December 1994, Orbital acquired Fairchild Space and
Defense Corporation ("Fairchild") and Magellan Corporation ("Magellan"),
respectively. The Fairchild acquisition has enhanced Orbital's satellite system
and subsystem development and production capabilities and has expanded Orbital's
existing product lines by adding various sophisticated electronics products.
Magellan designs, manufactures and markets hand-held receivers for Global
Positioning System ("GPS") satellite-based navigation and positioning for
commercial and consumer markets.
Description of Orbital's Products and Services
The space products and services provided by the Company are grouped into
three categories: Launch Systems, Space and Electronics Systems, and
Communications and Information Systems. Orbital's business is not seasonal to
any significant extent.
Launch Systems
The Company's Launch Systems Group's products include space and suborbital
launch vehicles and orbit transfer vehicles.
Space Launch Vehicles. The Company has developed three space launch
vehicles: the Pegasus(TM) launch vehicle; the Pegasus XL(R) launch vehicle; and
the Taurus(R) launch vehicle. Orbital's Pegasus vehicle is launched from
beneath a modified large aircraft such as a Lockheed L-1011 to deploy 500- to
1,000-pound satellites into low-Earth orbit. The Pegasus vehicle has been
developed and is being produced and marketed pursuant to a joint venture
agreement with Hercules Incorporated ("Hercules"). Through December 1994, the
Company has conducted a total of seven Pegasus missions (including one Pegasus
XL), six of which were fully or partially successful. The modified Pegasus XL,
developed to deploy heavier satellites into orbit, had an unsuccessful first
flight in June 1994. The Company believes it has identified the cause of this
failure and has implemented what it currently believes to be the necessary
corrective actions. In 1992, Orbital entered into a ten-year lease for a
Lockheed L-1011 aircraft, which has been modified to enable it to launch both
the Pegasus and Pegasus XL vehicles. There is no assurance that, in the event
that the L-1011 were unavailable for any reason, another aircraft could be
obtained on a timely or cost-effective basis.
Customers for Pegasus launch vehicles include the National Aeronautics and
Space Administration ("NASA"), the U.S. Air Force, the Advanced Research
Projects Agency ("ARPA"), the Ballistic Missile Defense Organization ("BMDO"),
Spain's National Institute of Aerospace Technology and the Company's majority
owned subsidiary, Orbital Communications Corporation ("ORBCOMMsm"). Orbital
also anticipates Pegasus launches in connection with certain programs of the
Company's wholly owned subsidiary, Orbital Imaging Corporation ("ORBIMAGEsm").
The higher-capacity Taurus vehicle is a ground-launched derivative of the
Pegasus vehicle that can carry payloads weighing up to 3,000 pounds to low-Earth
orbit and payloads weighing up to 800 pounds to geosynchronous orbit. In March
1994, Orbital successfully launched the first Taurus vehicle, deploying two
satellites for ARPA.
The Company continues to explore new, longer-term research and development
opportunities for more affordable and flexible space launch vehicles. In March
1995, the Company and Rockwell International Corporation were selected by NASA
to develop, operate and market the X-34 small reusable launch system.
Suborbital Launch Vehicles. Suborbital launch vehicles place payloads
into a variety of high-altitude trajectories but, unlike space launch vehicles,
do not place payloads into orbits around the Earth. The Company's suborbital
launch products include suborbital vehicles and their principal subsystems,
payloads carried by such vehicles and related launch support installations and
systems used in their assembly and operation. The Company offers its customers
customized vehicle and payload design, manufacturing and integration, launch and
mission support and tracking and recovery services, as well as construction and
activation of launch pads and other infrastructure elements. Customers
typically use the Company's suborbital launch vehicles to launch scientific and
other payloads and for defense-related applications such as target and
interceptor experiments. Primary customers of the Company's suborbital launch
vehicles include the U.S. Army, the U.S. Navy and BMDO.
Orbital's primary programs in 1994 for suborbital launch vehicles and
related systems included the STORM contract pursuant to which Orbital provided
ballistic and maneuvering tactical target suborbital vehicles for use with the
Patriot and Extended Range Interceptor anti-missile defense systems for target
and interceptor experiments for the U.S. Army, the Navy LEAP contract with BMDO
and the High-Gear contract with the Massachusetts Institute of Technology -
Lincoln Laboratory pursuant to which Orbital provided suborbital vehicles that
serve as targets for U.S. Air Force testing of anti-missile defense systems.
Since January 1991, the Company has conducted a total of 37 launches of
suborbital vehicles, of which 33 have been fully or partially successful and
four have been failures.
Orbit Transfer Vehicles. Orbit transfer vehicles carry satellite payloads
from lower- to higher-energy orbits or to interplanetary trajectories. The
Company's Transfer Orbit Stage(TM) ("TOS(TM)") orbit transfer vehicle completed
successful missions in September 1992 (NASA's Mars Observer spacecraft) and
September 1993 (NASA's Advanced Communications Technology Satellite). While
Orbital currently has no bookings for TOS, the Company continues to explore
potential future missions for the vehicle.
Space and Electronics Systems
The Company's Space and Electronics Systems products enable Orbital to
provide its customers fully integrated, low-cost space networks and related
services. The Company's most significant Space and Electronics Systems products
are spacecraft systems and payloads, engineering services, defense avionics and
sensors.
The Company's Dulles, Virginia operations manage the design and production
of the Company's small satellite platforms such as PegaStar(TM), MicroStar(TM)
and PicoStar(TM). The PegaStar spacecraft platform is deployed by the Pegasus
or Taurus launch vehicle for use as a general purpose spacecraft, and is planned
to be used for certain of the Company's satellite-based remote sensing systems,
such as the SeaStar(TM) project. The PegaStar spacecraft platform was first
successfully used in August 1994 in the Company's launch on a Pegasus launch
vehicle of the U.S. Air Force's Advanced Photovoltaic and Electronics Experiment
satellite. Orbital's MicroStar spacecraft platform, which is placed into orbit
by the Pegasus launch vehicle, is designed for use in ORBCOMM's satellite-based
two-way data communications network (the "ORBCOMM System") and also for a
variety of small space science and remote sensing projects, including some of
those being pursued by ORBIMAGE. Customers for the Company's small spacecraft
and related ground station equipment include NASA, the U.S. Air Force, the
University Corporation for Atmosphere Research and ORBCOMM.
The Company's Germantown, Maryland operations (formerly Fairchild) have
enhanced Orbital's satellite system and subsystem development and production
capabilities and have expanded Orbital's existing product lines by adding
various sophisticated electronics products. The Company designs, produces and
tests small and medium class spacecraft for scientific, military and commercial
applications. In addition, Orbital designs and manufactures spacecraft command
and data handling, attitude control and structural subsystems for a variety of
government and commercial customers, and provides a broad range of spacecraft
design engineering services as well as specialized analytical engineering
services for NASA, the Department of Defense ("DoD"), the Department of Energy
and other customers.
The Company develops, manufactures and markets defense avionics, including
advanced electronics and data management systems for aircraft flight operations
and ground support. These systems collect, process and store mission-critical
data for, among other things, mission planning and flight operations, and manage
on-board equipment for strategic tactical military aircraft, helicopters,
satellites and surface vehicles. The primary customers for data management
systems are the U.S. Navy, the U.S. Air Force, and various DoD prime contractors
and foreign governments. The Company is the leading supplier of certain
avionics systems and products, including mission data loaders for the U.S. Navy,
and data transfer equipment and digital terrain systems for the U.S. Air Force.
In addition, as a result of the Fairchild acquisition, the Company now provides
stores management systems, including weapons arming and firing functions for use
on tactical aircraft and helicopters. The avionics systems and products are
deployed on a number of aircraft, including the F-14, F-15, F-16, F-22 and the
LAMPS Helicopter.
Orbital's Pomona, California operations include satellite-borne scientific
sensors and instruments, such as atmospheric ozone monitoring instruments and
environmental sensors. The Total Ozone Mapping Spectrometer ("TOMS") instrument
is being produced by the Company for launch on a Pegasus vehicle for NASA. TOMS
measures ozone concentrations around the world for the purpose of monitoring the
effect of man-made chemicals and atmospheric conditions on the ozone layer. In
addition, Orbital is currently developing and producing various in situ
monitoring products for space and defense applications. These products include
an atmospheric monitoring system for use on the Space Station called the
Atmospheric Composition Monitoring Assembly ("ACMA"). The ACMA, developed under
a contract with The Boeing Company, will measure various atmospheric gases in
the crew's living quarters on the Space Station for the purpose of ensuring a
healthy living environment for astronauts. The Company also produces the
Central Atmospheric Monitoring System for the U.S. Navy for use on submarines.
Communications and Information Systems
Orbital's Communications and Information Systems include products and
services provided by Orbital's Magellan, ORBCOMM and ORBIMAGE subsidiaries.
Magellan manufactures GPS-based navigation and positioning products for
commercial and consumer markets including marine and aviation applications,
outdoor recreational users such as hunters and hikers, professional users such
as geologists, geographers, surveyors, natural resource managers and contractors
and, to a lesser extent, the government. ORBCOMM and ORBIMAGE are developing
satellite-based services to address the expanding markets for global two-way
data communications and information derived from remote sensing of the
atmosphere, oceans and land surfaces. The Company believes that the ORBCOMM and
ORBIMAGE systems will require significant capital investments. Although the
Company believes the long-term profit potential of such service businesses
developed and supported by the Company's proprietary product technologies is
significant, there can be no assurance that the Company will be able to
successfully develop these businesses.
Satellite-Based Navigation and Positioning Products. The Company's
Magellan subsidiary designs, manufactures and markets hand-held GPS receivers
that provide users with precise positioning and navigation information. The
need for positioning and navigation information is central to a broad range of
personal and professional activities including marine navigation, outdoor
recreation (hiking and hunting), surveying and general aviation. Magellan
focuses its research, design and engineering activities on the development of
GPS receivers that are reliable, portable, easy to use and affordable, recently
targeting the growing recreational market. Magellan is also expected to be a
significant supplier of personal communicators for the ORBCOMM System and to be
involved in the continued development of satellite-based communications and
tracking technology for the ORBCOMM System.
In addition, Orbital's Germantown operations produce data management
systems that have been applied to the design, development and manufacture of
"intelligent transportation systems," primarily for metropolitan transit
operators, that provide GPS-based location of vehicles and allow for
communications and schedule management.
ORBCOMM System. The ORBCOMM System, which is being designed, developed,
constructed and launched in two phases, is designed to provide virtually
continuous mobile data communications coverage over much of the Earth's surface.
Under this design, subscribers will be able to use inexpensive, pocket-sized
personal communicators to send and receive short messages, emergency alerts and
other critical information, and to use the position-determining capability of
the communicators to obtain data concerning the location and condition of
automobiles, trucks, shipping vessels and other valuable assets. The Company
expects that the ability to send and receive other short messages and data
without the geographic limitations of existing data communications systems will
stimulate the growth of new markets for satellite-based data communications and
will be used to supplement terrestrial communications systems by providing
relatively low-cost coverage in areas outside the range of these systems.
The ORBCOMM System design consists of a constellation of small low-Earth
orbit satellites, a satellite control center operating and positioning the
satellites, network control centers controlling the flow of information through
the system, local ground stations sending and receiving signals between the
network control centers and nearby satellites, and the mobile communicators used
by subscribers to transmit and receive messages to and from nearby satellites.
In early 1993, the Company successfully launched two experimental satellite
payloads that obtained information concerning spectrum occupancy by existing
users in the frequency bands allocated to low-Earth orbit mobile satellite
systems. The satellite payloads also performed successfully in a variety of
other ORBCOMM System tests.
The Company expects that, using at least 26 satellites and appropriately
located gateway Earth stations, the ORBCOMM System will provide communications
availability generally exceeding 95% during each 24-hour period in the United
States and other temperate zones in the Northern and Southern hemispheres and
exceeding 75% of each 24-hour period in the equatorial region. Equatorial
region availability could be improved to generally exceed 90% with an additional
plane of eight satellites. Outages will be dispersed in brief intervals over the
24-hour period, thereby minimizing the effect of any unavailability of the
system. The ORBCOMM System will only be available in areas where appropriate
licenses have been obtained and generally only where there is a proximate
gateway Earth station.
Development and Financing. Effective June 30, 1993, ORBCOMM and Teleglobe
Mobile Partners ("Teleglobe Mobile"), an affiliate of Teleglobe Inc., created
a partnership, ORBCOMM Development Partners, L.P. ("ORBCOMM Development") for
the design, development, construction, testing and operation of the ORBCOMM
System, and created two marketing partnerships to market the ORBCOMM System in
the United States and internationally. ORBCOMM U.S. L.P. and ORBCOMM
International L.P. (together, the "Marketing Partnerships") each have the
exclusive right to market the ORBCOMM System in the United States and
internationally, respectively. Also effective June 30, 1993, Orbital entered
into the ORBCOMM System Design, Development and Operations Agreement (the
"System Agreement") with ORBCOMM Development pursuant to which ORBCOMM continues
to have responsibility for the overall design, development, integration and
testing of the ORBCOMM System. ORBCOMM has retained control over applicable
licenses issued by the Federal Communications Commission ("FCC"), consistent
with FCC regulations. The System Agreement provides that ORBCOMM will
subcontract with Orbital for construction and launch of the two satellites for
the ORBCOMM Phase 1 System and the 24 satellites for the ORBCOMM Phase 2 System,
and for construction of the satellite control center, the United States network
control center and the four United States gateway Earth stations. The System
Agreement also contains options for the construction and launch by the Company
of an additional eight satellites. Under the System Agreement, Orbital is
providing satellites and launch services and vehicles and the gateway Earth
stations on a fixed-price basis, and is providing the other products and
services on a cost reimbursable basis. Consistent with industry practice for
many launch contracts, the System Agreement contains certain performance
warranties with respect to the satellites and their launch.
Under ORBCOMM Development's partnership agreement, action by the
partnership generally requires the approval of general partners holding a
majority of the participating interests (i.e., interests participating in
profits and losses) held by the general partners. Each of ORBCOMM and Teleglobe
Mobile is a general partner of ORBCOMM Development and holds 50% of the
participating interests in ORBCOMM Development, with the result that the
approval of both the Company and Teleglobe Mobile is necessary for ORBCOMM
Development to act. The partnership agreements for the Marketing Partnerships
contain management provisions generally similar to those of ORBCOMM Development.
Currently, the Company holds 85% of the participating interests in each of the
Marketing Partnerships, and thus is generally able to control these
partnerships.
ORBCOMM Development intends to construct and implement the ORBCOMM System
in two phases: the ORBCOMM Phase 1 System, consisting of the satellite control
center, the United States network control center, four United States gateway
Earth stations and two MicroStar satellites; and the ORBCOMM Phase 2 System,
consisting of an additional 24 MicroStar satellites. ORBCOMM is licensed by the
FCC to launch an additional ten satellites. The decision as to when to deploy
additional satellites will depend upon market and financial factors. The
Company currently expects to complete the construction of the ground portion of
the ORBCOMM Phase 1 System and the construction and launch of the two ORBCOMM
Phase 1 System satellites in the first half of 1995. Subject to the technical
success of the ORBCOMM Phase 1 System and to the ability of ORBCOMM Development
to secure sufficient financing from, among other sources, the exercise of the
Phase 2 Option (as described below), the construction and launch of the 24
additional satellites comprising the ORBCOMM Phase 2 System is targeted to be
completed in late 1996 or early 1997.
Orbital estimates that implementation of the ORBCOMM Phase 1 System in the
United States will cost approximately $66 million, and that implementation in
the United States of the ORBCOMM Phase 2 System will cost approximately an
additional $104 million. Although construction of the ORBCOMM Phase 1 System
is almost completed, development and construction of the ORBCOMM Phase 2 System
is in an early stage and the actual cost of the system and the amount and
structure of anticipated investment in ORBCOMM Development may vary
significantly from current estimates. Teleglobe Mobile has invested $10 million
in ORBCOMM Development in exchange for a 50% participating interest. Orbital
has invested approximately $55 million in ORBCOMM Development, and has committed
to invest the balance of the funding necessary to implement the ORBCOMM Phase
1 System, in exchange for a 50% participating interest and a non-participating
interest in an amount equal to the excess of its investment over $10 million.
In addition, Orbital and Teleglobe Mobile hold 85% and 15% participating
interests, respectively, in each of the Marketing Partnerships.
Teleglobe Mobile has an option (the "Phase 2 Option") to increase its
aggregate investment in ORBCOMM Development to at least $80 million. The Phase
2 Option is exercisable from the launch of the first ORBCOMM satellite and until
the later of 90 days after such launch and initial satellite signal acquisition
or 30 days after completion of on-orbit satellite acceptance testing. If the
Phase 2 Option is exercised, the Company will be obligated to increase its
aggregate investment in ORBCOMM Development to at least $66 million. ORBCOMM
Development intends to seek additional equity contributions and/or bank or other
debt financing for up to $20 to $25 million. ORBCOMM Development has already
obtained asset-based financing of $5 million to fund a portion of its
development and startup costs for the ORBCOMM Phase 2 System. The Company has
guaranteed ORBCOMM Development's outstanding indebtedness, and may be required
to guarantee or provide credit support in connection with additional
indebtedness incurred by ORBCOMM Development. Assuming exercise of the Phase
2 Option, each of Teleglobe Mobile's and Orbital's non-participating interest
in ORBCOMM Development will be increased by the amount of such additional
contribution, and each will continue to hold a 50% participating interest in
ORBCOMM Development. The Company has been informed that Teleglobe Mobile has
obtained a $44 million commitment from Technologies Resources Industries Bhd.,
a Malaysian telecommunications company, to acquire up to 30% of Teleglobe
Mobile's interest in ORBCOMM Development, and that Teleglobe Mobile intends to
seek additional investors to participate in its investment in ORBCOMM
Development. In the event that Teleglobe Mobile does not exercise the Phase 2
Option, Orbital may solicit additional equity or debt investors for ORBCOMM
Development and, if any additional commitment is obtained, Orbital has the
option, under certain circumstances, to purchase, or cause ORBCOMM Development
to purchase, Teleglobe Mobile's interest in ORBCOMM Development and the
Marketing Partnerships. There can be no assurance such funding can be obtained
or, if such funding is available, it will be at acceptable rates. Upon
investment by Teleglobe Mobile in ORBCOMM Development for construction of the
ORBCOMM Phase 2 System, 98% of the participating interests in the Marketing
Partnerships will be transferred to ORBCOMM Development, with ORBCOMM and
Teleglobe Mobile each retaining a 2% participating interest in ORBCOMM U.S. and
ORBCOMM International, respectively.
In the event that Teleglobe Mobile does not exercise the Phase 2 Option or
ORBCOMM Development does not otherwise receive the necessary capital,
implementation and commercial development of the ORBCOMM System may be delayed,
significantly restricted or possibly abandoned, and the Company could be
required to expense part or all of its investment (approximately $55 million as
of December 31, 1994) in the ORBCOMM System. In addition, start-up of the
ORBCOMM System will produce significant ORBCOMM Development operating losses for
several years. Because Orbital has a 50% participating interest in ORBCOMM
Development, Orbital expects to recognize its pro rata share of ORBCOMM
Development profits and losses.
As of December 31, 1994, certain officers and employees of ORBCOMM and
Orbital held options to acquire 599,074 shares of ORBCOMM's common stock (or
approximately 13 percent of ORBCOMM's outstanding common stock) at option
exercise prices ranging from $1.50 to $14.00 per share. Commencing in September
1995, and annually thereafter, holders of ORBCOMM common stock acquired on
exercise of these options may, subject to certain conditions, require ORBCOMM
to purchase such ORBCOMM common stock at its then fair market value.
Regulatory Approvals. In October 1994, ORBCOMM became the first company
to be awarded full FCC authority to construct, launch and operate a low-Earth
orbit satellite-based messaging and data communications network in the United
States. This license, which provides that the ORBCOMM System must be
constructed within six years from the date the license was granted, extends for
a period of ten years from the date the first ORBCOMM System satellite is
operational. At the end of the seventh year of the ten-year term, a renewal
application must be filed with the FCC. As with any such license, the ORBCOMM
System license may be revoked and a license renewal application may be denied
for cause. In late 1994, two other applicants for FCC licenses similar to that
awarded to ORBCOMM petitioned the FCC to reconsider the grant of the license to
ORBCOMM. ORBCOMM has opposed the petition, which the Company and ORBCOMM
believe are without merit. In addition, for the ORBCOMM System to be operated
in other countries throughout the world, the Company or the foreign licensees
must obtain from the appropriate foreign regulatory bodies authority to do so.
The Company anticipates that the cost of these activities will be borne
primarily by foreign licensees. ORBCOMM International has entered into
preliminary agreements with 22 candidate licensees serving 69 countries to seek
such licenses and to initiate country-specific market development in such
countries. There can be no assurance that the Company or foreign licensees will
be granted all licenses or approvals necessary to operate the ORBCOMM System in
any other country.
ORBIMAGE Remote Sensing and Imaging Systems. The Company is currently
seeking to develop and market a broad range of information services to identify
and monitor global environmental changes and to collect and disseminate other
remote sensing information. Small Earth-viewing satellites and related sensors
and instruments to be placed in relatively low orbits are expected to offer
cost-efficient data collection, daily global coverage and high-resolution
imaging services.
In March 1991, Orbital entered into a contract with NASA to provide
worldwide, daily ocean imagery using Orbital's SeaStar environmental monitoring
satellite system, based on the PegaStar spacecraft. The Company plans to
develop, produce, launch and operate the SeaStar system to deliver high-quality
multi-spectral ocean imagery for up to five years, currently scheduled to
commence during 1995. In addition to providing unprocessed real-time ocean data
to NASA, the Company plans to use value-added resellers and other marketing
agents to sell the SeaStar data to other U.S. Government users and to potential
domestic and international customers such as commercial fishermen, oil and gas
companies, ocean transportation companies and oceanographers.
ORBIMAGE is developing and marketing other small satellite-based Earth
observation, remote sensing and environmental monitoring services using, among
other things, the Company's PegaStar and MicroStar spacecraft platforms, Pegasus
and Taurus launch vehicles, space sensors and instruments and other space
products. Services to be provided by ORBIMAGE could include high-resolution
optical imaging of land surfaces for geographic information services, mapping
and news-gathering, sensing of ocean and atmospheric conditions and measuring
of ozone and other gaseous concentrations in the atmosphere. The Company is
currently exploring potential strategic arrangements for the development of
several remote sensing businesses, with Orbital providing launch services,
spacecraft and other related products. There can be no assurance that the
Company will be able to conclude such strategic arrangements or develop
profitable commercial Earth observation, remote sensing or environmental
monitoring businesses.
Satellite Tracking Systems. Orbital's ground tracking systems, installed
at approximately 75 sites around the world, consist of meteorological and
satellite tracking and telemetry stations that are used to collect weather data
and to communicate with and control orbiting spacecraft. Orbital's current
customers for satellite tracking systems include Lockheed Martin Corporation
("Lockheed Martin"), as well as certain ORBCOMM and ORBIMAGE programs.
Financial information, including revenue and gross profit contributions,
concerning the Company's primary products and services is included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Company's Annual Report, and is incorporated herein
by reference.
Competition
Orbital believes that competition for sales of its products and services
is based on price, performance and other technical features, reliability,
scheduling and customization.
The primary competition to the Pegasus and Taurus vehicles is expected to
come from the smaller and larger classes, respectively, of LLV launch vehicles
currently being developed by Lockheed Martin. Direct competition to the Taurus
vehicle also comes from EER Systems' Conestoga launch vehicle. Potential
competition to the Pegasus may come from launch systems derived from surplus
ballistic missiles that could be made available by the U.S. Government and
various foreign governments including Russia. In August 1994, the President
signed the National Space Transportation Policy Presidential Decision Directive
pursuant to which agencies of the U.S. Government are authorized to use excess
ballistic missiles to launch payloads into orbit on a case-by-case basis. Such
use may only be permitted after the DoD has determined, among other things, that
such use would meet the agency's needs and would result in a cost savings to the
U.S. Government compared to a commercial launch service. Competition for Taurus
could also come from surplus Titan II launch vehicles, although Titan II
production has been discontinued and only a limited inventory remains. Indirect
competition to Pegasus and Taurus vehicles also exists in the form of secondary
or "piggyback" payload capacity on large boosters such as Ariane, Titan, Long
March and Proton launch vehicles. While secondary payloads offer a low-cost
method of launching satellites in some cases, the secondary status of the
payload often requires customers to accept less desirable orbits, "standby"
launch scheduling and potentially more complicated and costly payload
integration procedures. The Company's TOS vehicle primarily competes with The
Boeing Company's Inertial Upper Stage. In addition, foreign launch vehicles
such as Europe's Ariane IV may compete with TOS for certain satellite launches,
while certain satellites themselves have an integrated orbit transfer stage and
do not require a separate rocket such as the TOS vehicle.
Orbital's suborbital launch vehicles, spacecraft systems and payloads,
satellite-based services and space support products compete with products and
services produced or provided by numerous companies and government entities.
The Company's space instruments and airborne and ground-based electronics, data
management systems and defense-oriented avionics products face competition from
several established manufacturers.
The ORBCOMM System will face direct and indirect competition from numerous
existing and potential alternative communication products and services from
various large and small companies, ranging from one-way tower-based data and
messaging services to sophisticated two-way satellite-based data and voice
communications services. Depending on the requirement of the specific market,
the ORBCOMM System may both compete with and complement existing services such
as paging (offered by SkyTel, PageNet, MobileComm, Metrocall and others),
cellular data (offered by McCaw, Bell Atlantic, and others), specialized mobile
radio (such as that offered by Nextel) and private networks (including Ram and
Ardis). ORBIMAGE may face competition from private and U.S. government entities
that provide satellite-based and other land imaging, environmental monitoring
and atmospheric sensing products. Satellite-based navigation and positioning
products manufactured by the Company's recently acquired Magellan operations
face competition from other producers of GPS receivers. The Company believes
that Magellan's success will depend on its ability to continue to develop new
lower-cost and enhanced performance products and to enter into and develop new
markets for GPS receivers. The Company's space sensors and instruments face
competition from a number of companies and university research laboratories
capable of designing and producing space instruments.
Many of the Company's competitors are larger and have substantially
greater resources than the Company. Furthermore, the possibility exists that
other domestic or foreign companies or governments, some with greater experience
in the space industry and greater financial resources than Orbital, will seek to
produce products or services that compete with those of the Company, including
the Pegasus and Taurus launch vehicles, various suborbital launch vehicles, the
TOS orbit transfer vehicle, PegaStar, MicroStar and other satellite systems, GPS
receivers and ORBCOMM and other satellite services. Any such foreign competitor
could benefit from subsidies from, or other protective measures by, its home
country. In addition, in response to reductions in the U.S. defense budget,
Orbital may face competition from companies, such as missile manufacturers, that
could attempt to adapt existing or future products for non-defense, space and
suborbital launch applications.
Research and Development
The Company expects to continue to invest in product-related research and
development, to conceive and develop new products and services, to enhance
existing products and to seek customer and, where appropriate, strategic partner
investments in these products. Orbital's research and development expenses,
excluding direct customer-funded development, were approximately $14.4 million,
$14.9 million, and $10.6 million, respectively, for the fiscal years ended
December 31, 1994, 1993 and 1992. It is expected that the Company's research
and development expenses during 1995 will be primarily for new or modified
launch systems, spacecraft programs, including possible ORBIMAGE projects, and
satellite-based navigation and positioning products.
Patents and Trademarks
Orbital relies, in part, on patents, trade secrets and know-how to develop
and maintain its competitive position and technological advantage. The Company
holds U.S. and foreign patents relating to the Pegasus vehicle as well as for
other components and products produced by the Company. The Company also has
various pending patent applications relating to Pegasus and the ORBCOMM System.
Certain of the trademarks and service marks used in connection with the
Company's products and services have been registered with the U.S. Patent and
Trademark Office.
Components and Raw Materials
Orbital purchases a significant percentage of its product components,
including rocket propulsion motors and electronic equipment, from third parties.
From time to time, Orbital obtains parts and equipment from the U.S. Government
that are used in the production of the Company's products or in the provision
of the Company's services. Orbital to date has not experienced material
difficulty in obtaining such parts and equipment and believes that, if any
difficulty should arise, alternative sources of supply would be available.
However, increased costs could be incurred in securing alternative sources of
supply.
Orbital's Pegasus program Joint Venture Agreement with Hercules provides
that neither joint venturer will contract with other parties for the scope of
work to be performed by the other under the Pegasus Joint Venture Agreement
without the consent of the other party. From time to time, issues have arisen
between the Company and Hercules relating to the Joint Venture Agreement,
particularly with respect to the determination of each party's recoverable
recurring costs under the joint venture including the recoverability by the
Company of certain general and administrative expenses. See "Legal
Proceedings."
Government Contracts
During 1994, 1993 and 1992, approximately 60 percent, 70 percent and 80
percent, respectively, of the Company's total annual revenues were derived from
contracts with the U.S. Government and its agencies or from subcontracts with
the U.S. Government's prime contractors. Orbital's government contracts are
subject to regular audit and periodic reviews and may be modified, increased,
reduced or terminated in the event of changes in government requirements or
policies, Congressional appropriations and program progress and scheduling.
U.S. Government curtailment of expenditures for space research and development
and related products and services could have a material adverse effect on
Orbital's revenues and results from operations. Agencies within the U.S.
Government and commercial customers to which sales by the Company accounted for
ten percent or more of the Company's consolidated 1994 revenues were NASA, DoD
and ORBCOMM.
Orbital's major contracts with the U.S. Government fall into three
categories: firm fixed-price contracts, fixed-price incentive fee contracts and
cost-plus-fee contracts. Under firm fixed-price contracts, work performed and
products shipped are paid for at a fixed price without adjustment for actual
costs incurred in connection with the contract. Risk of loss due to increased
cost, therefore, is borne by the Company although some of this risk may be
passed on to subcontractors. Under fixed-price government contracts requiring
work with lead times in excess of six months prior to delivery, Orbital may
receive progress payments, generally in an amount equal to between 80 and
95 percent of monthly costs, or it may receive milestone payments upon the
occurrence of certain program achievements. Fixed-price incentive fee contracts
provide for sharing by the customer and the supplier of unexpected costs
incurred or savings realized within specified limits, and may provide for
adjustments in price depending on actual contract performance other than costs.
Costs in excess of the negotiated maximum (ceiling) price and the risk of loss
by reason of such excess costs are borne by the Company, although some of this
risk may be passed on to subcontractors. Under a cost-plus-fee contract,
Orbital recovers its actual allowable costs incurred and receives a fee
consisting of a base amount that is fixed at the inception of the contract
and/or an award amount that is based on the Government's subjective evaluation
of the contractor's performance in terms of the criteria stated in the contract.
All of Orbital's U.S. Government contracts and, in general, its
subcontracts with the U.S. Government's prime contractors provide that such
contracts may be terminated at will by the U.S. Government or the prime
contractor, respectively. Furthermore, any of these contracts may become
subject to a government-issued stop work order under which the Company is
required to suspend production. In the event of a termination at will, Orbital
is normally entitled to recognize the purchase price for delivered items,
reimbursement for allowable costs for work in process, and an allowance for
reasonable profit thereon or adjustment for loss if completion of performance
would have resulted in a loss. The Company has experienced several contract
suspensions and terminations in the past.
Backlog
The Company's backlog at December 31, 1994 and 1993 was approximately $335
million and $210 million, respectively. As of December 31, 1994, approximately
60 percent of the Company's backlog was with the U.S. Government and its
agencies or from subcontracts with the U.S. Government's prime contractors.
Backlog consists of aggregate contract values for firm product orders, excluding
the portion previously included in operating revenues on the basis of percentage
of completion accounting, and including government contracts awarded but not
signed and orders not yet funded in the amounts of approximately $171 million
and $108 million as of December 31, 1994 and 1993, respectively. Approximately
$143 million of backlog is currently scheduled to be performed beyond 1995.
Backlog excludes unexercised contract options having an aggregate potential
contract value at December 31, 1994 of approximately $828 million.
Environmental Regulation
The Company's operations are subject to a variety of Federal, state and
local environmental regulations, including laws regulating air and water quality
and hazardous materials and regulations implementing those laws. The Company
is one of several potentially responsible parties involved in a California
mandated clean-up of a manufacturing facility near Salinas, California. Through
December 31, 1994, Orbital and two other potentially responsible parties have
shared certain investigation and monitoring costs, resulting in total Company
expenditures after insurance recoveries of approximately $85,000. Based on the
cost allocations among responsible parties to date, the Company currently
believes that its share of total clean-up costs, which would be payable over a
number of years, should not exceed $600,000 before insurance recoveries.
Orbital believes that it will receive insurance reimbursement for a significant
portion of its clean-up costs. The Company does not believe that its total
exposure in this clean-up, or that other compliance by it with applicable
environmental regulations, will have a material adverse effect on its
operations.
Employees
As of December 31, 1994, Orbital had 1,845 full-time permanent employees.
ITEM 2. PROPERTIES
In 1993, Orbital entered into a 12-year lease agreement for approximately
100,000 square feet of office and engineering space in Dulles, Virginia, which
serves as its corporate headquarters. In 1994, the Company completed
construction of an approximately 30,000 square-foot satellite engineering and
manufacturing facility on land adjacent to the Dulles office facility. Orbital
also leases approximately 320,000 square feet of office, engineering and
manufacturing space in Germantown, Maryland; 305,000 square feet of office,
engineering and manufacturing space in Chandler, Arizona; approximately 135,000
square feet of office, engineering and manufacturing space in Pomona,
California; and approximately 40,000 square feet of office, engineering and
manufacturing space in San Dimas, California. The Company leases or owns other
small facilities or offices in Huntsville, Alabama; Edwards Air Force Base,
California; Vandenberg Air Force Base, California; and Greenbelt, Maryland.
Although completion of the Company's existing and pending contracts may in the
future require additional manufacturing capacity, Orbital believes that its
existing facilities are adequate for its near and medium-term requirements.
ITEM 3. LEGAL PROCEEDINGS
In 1993, Hercules commenced arbitration proceedings against the Company
relating to certain insurance proceeds obtained by the Company in connection
with the second Pegasus mission which occurred in 1991. In 1994, the
arbitration panel unanimously held in favor of the Company and denied all of
Hercules' claims. On January 3, 1994, Hercules filed a lawsuit against the
Company in Arizona Superior Court in Phoenix, Arizona. The action concerns
alleged breaches of certain representations and warranties in the 1988 stock
purchase agreement between Hercules and Orbital, pursuant to which Hercules
purchased 20 percent of Orbital's common stock. These shares were sold by
Hercules in June 1991. Hercules is seeking unspecified monetary damages in an
amount up to $15,000,000. On July 21, 1994, Hercules filed a lawsuit against
the Company in the Delaware Chancery Court for New Castle County. The action
concerns alleged breaches by the Company, in its joint venture with Hercules,
of certain fiduciary duties and certain terms of the joint venture agreement.
Hercules is seeking unspecified monetary damages, including up to $3,000,000 for
one count. In March 1995, this action was dismissed with prejudice and is now
subject to adjudication by an arbitration panel. Orbital believes that the
claims in both pending suits are without merit and will not have a material
adverse effect on the financial condition of the Company. Orbital is disputing
vigorously Hercules' claims. Although the Company believes that regardless of
the outcome, Hercules' claims do not affect its obligations under the Pegasus
joint venture agreement, the failure to resolve these claims could adversely
affect the joint venture and the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted to a vote of the Company's security holders
during the fourth quarter of 1994.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position of each of the
Executive Officers of Orbital as of March 1, 1995. All Executive Officers are
elected annually and serve at the discretion of the Board of Directors.
Name Age Position
David W. Thompson 40 Chairman of the Board, President and Chief
Executive Officer
Bruce W. Ferguson 40 Executive Vice President and General
Manager/Communications and Information Systems
Group
James R. Thompson 58 Executive Vice President and General Manager/
Launch Systems Group
Jack A. Frohbieter 59 Executive Vice President and General Manager/
Space and Electronics Systems Group
Alan L. Parker 55 Senior Vice President
John H. Mehoves 47 Senior Vice President
Albert F. Tillman 59 Senior Vice President
Donald W. Tutwiler 59 Senior Vice President
Antonio L. Elias 45 Senior Vice President
Carlton B. Crenshaw 49 Senior Vice President/Finance and Administration
and Treasurer
Leslie C. Seeman 42 Senior Vice President, General Counsel and
Secretary
David W. Thompson is a founder of Orbital and has been Chairman of the
Board, President and Chief Executive Officer of the Company since 1982.
Bruce W. Ferguson is a founder of Orbital and has been Executive Vice
President and General Manager/Communications and Information Systems Group since
October 1993 and a Director of the Company since 1982. Mr. Ferguson was
Executive Vice President and Chief Operating Officer of Orbital from 1989 to
October 1993 and Senior Vice President/Finance and Administration and General
Counsel of Orbital from 1985 to 1989.
James R. Thompson (who is not related to David W. Thompson) has been
Executive Vice President and General Manager/Launch Systems Group since October
1993 and a Director since January 1992. Mr. Thompson was Executive Vice
President and Chief Technical Officer of Orbital from 1991 to October 1993. He
was Deputy Administrator of NASA from 1989 to 1991. From 1986 until 1989, Mr.
Thompson was Director of the Marshall Space Flight Center. Mr. Thompson was
Deputy Director for Technical Operations at Princeton University's Plasma
Physics Laboratory from 1983 through 1986. Before that, he had a 20-year career
with NASA at the Marshall Space Flight Center.
Jack A. Frohbieter has been a Director of the Company since August 1994,
and Executive Vice President and General Manager/Space and Electronics Systems
since September 1994. From 1990 until August 1994, Mr. Frohbieter was
President and Chief Operating Officer of Fairchild. From 1988 to 1990, he was
Vice President and General Manager of General Electric Company's Government
Electronics Systems Division, and from 1966 to 1987, he held a variety of
positions at RCA's Astro Space Division, including Vice President and Division
Manager from 1986 to 1987.
Alan L. Parker has been Senior Vice President of the Company since October
1993 and President of ORBCOMM since 1990. From 1991 to October 1993, he served
as President/Satellite Services Division of the Company. From 1988 until 1990,
he was President of Business Development Resources, a management consulting
firm. From 1987 until 1988, he was Senior Vice President of Technology
Applications, Inc., a professional services company. From 1962 until 1986, he
held a variety of managerial positions with Ford Motor Company and Ford
Aerospace Corporation, including President of Ford Aerospace Satellite Services
Corporation from 1982 until 1986.
John H. Mehoves has been Senior Vice President since October 1993. From
1990 to October 1993, he was Executive Vice President/Space Systems Division of
Orbital, from 1987 to 1989, he was Vice President/Space Transportation and from
1985 to 1987, he was Vice President/Operations.
Albert F. Tillman has been Senior Vice President since October 1993. From
1988 to September 1993, he was a Vice President of The Perkin-Elmer Corporation
and General Manager of ASO, and from 1982 to 1988, he was a Group Director at
the Central Intelligence Agency.
Donald W. Tutwiler has been Senior Vice President since February 1994.
From 1991 to October 1993, he was Executive Vice President/Space Data Division
of Orbital. From 1963 to 1991, Mr. Tutwiler held a variety of positions at
McDonnell Douglas Astronautics Company, including the position of Director of
the Delta launch vehicle program for NASA, the Strategic Defense Initiative
Organization and commercial customers from 1984 until 1991.
Antonio L. Elias has been Senior Vice President since May 1993 and was
Senior Vice President/Space Systems Division from 1990 to April 1993. He was
Vice President/Engineering of Orbital from 1989 to 1990 and was Chief Engineer
from 1986 to 1989. From 1980 to 1986, Dr. Elias was an Assistant Professor of
Aeronautics and Astronautics at Massachusetts Institute of Technology.
Carlton B. Crenshaw has been Senior Vice President/Finance and
Administration and Treasurer of Orbital since January 1993. From 1989 to
January 1993, he was Vice President/Finance and Administration and Treasurer of
the Company. From 1985 to 1989, Mr. Crenshaw was Vice President/Finance and
Administration and Chief Financial Officer of Software AG Systems, Inc.
Leslie C. Seeman has been Senior Vice President of the Company since
October 1993 and General Counsel and Secretary of the Company since 1989. From
1989 to October 1993, she was Vice President of the Company, and from 1987 to
1989, Ms. Seeman was Assistant General Counsel of Orbital. From 1984 to 1987,
she was General Counsel of Source Telecomputing Corporation, a
telecommunications company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by this Item is included under the captions
"Market Information" and "Corporate Information - Dividends" of the Annual
Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included under the caption
"Selected Consolidated Financial Data" of the Annual Report and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Annual Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in pages 31 through 47
of the Annual Report and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item and not given in Item 4A, Executive
Officers of the Registrant, is included under the caption "Election of Directors
- -- Directors to be Elected at the 1995 Annual Meeting, -- Directors Whose Term
Expires in 1996, and -- Directors Whose Term Expires in 1997" and "Compliance
with Section 16(a) of the Exchange Act" of the Proxy Statement filed pursuant
to Regulation 14A on March 27, 1995 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included under the captions
"Election of Directors -- Summary Compensation Table," "Election of Directors -
- - Option Grants in Last Fiscal Year," "Election of Directors -- Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,"
"Election of Directors -- Indemnification Agreements," "Election of Directors -
- - Executive Employment Agreements" and "Election of Directors - Information
Concerning the Board and Its Committees" of the Proxy Statement filed pursuant
to Regulation 14A on March 27, 1995 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included under the caption
"Ownership of Common Stock" of the Proxy Statement filed pursuant to
Regulation 14A on March 27, 1995 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements. The following financial statements,
together with the report of KPMG Peat Marwick LLP, appearing in
the portions of the Annual Report, filed as Exhibit 13, are
incorporated herein by reference and filed as a part of this
report:
A. Independent Auditors' Report (Annual Report page 31)
B. Consolidated Statements of Earnings (Annual Report page 32)
C. Consolidated Balance Sheets (Annual Report page 33)
D. Consolidated Statements of Stockholders' Equity (Annual
Report page 34)
E. Consolidated Statements of Cash Flows (Annual Report
page 35)
F. Notes to Consolidated Financial Statements (Annual Report
pages 36 through 47)
2. Financial Statement Schedules. The following additional
financial data should be read in conjunction with the
Consolidated Financial Statements in the Annual Report.
Schedules other than those listed below have been omitted
because they are inapplicable or are not required.
Form 10-K Page
Independent Auditors' Report on
Consolidated Financial Statement Schedule 17
VIII Valuation and Qualifying Accounts 18
3. Exhibits. A complete listing of exhibits required is
given in the Exhibit Index that precedes the exhibits
filed with this report on page 19-22 hereof.
(b) Reports on Form 8-K
On August 26, 1994, the Company filed a report on Form 8-
K, reporting the acquisition of Fairchild on August 11,
1994. The following amendments on Form 8-K/A were filed
with respect to this report: Amendment No. 1 filed on
September 14, 1994; Amendment No. 2 filed on October 11,
1994; Amendment No. 3 filed on October 12, 1994;
Amendment No. 4 filed on November 29, 1994; and Amendment
No. 5 filed on December 9, 1994.
On November 29, 1994 the Company filed a report on Form
8-K, reporting the proposed acquisition of Magellan
Corporation. On January 11, 1995, the Company filed
Amendment No. 1 on Form 8-K/A to the Company's Report on
Form 8-K filed with the Commission on November 29, 1994
reporting consummation of the Magellan acquisition.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 1995 By /s/ David W. Thompson
David W. Thompson, Chairman of the
Board, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated. Each individual whose signature appears below hereby
authorizes each of David W. Thompson, Bruce W. Ferguson and Leslie
C. Seeman, and appoints each of them singly, his true and lawful
attorney, each with full power of substitution, to sign for him,
and in his name and in the capacity indicated below, the Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission, hereby ratifying and confirming
his signature as it may be signed by said attorneys, and each of
them, to said report and any and all amendments and supplements
thereto, and generally to do all such things in his name and on his
behalf in his capacity as director to enable Orbital Sciences
Corporation to comply with the provisions of the Securities Act of
1933, the Securities Exchange Act of 1934, and all requirements of
the Securities and Exchange Commission.
DATED: March 28, 1995
Signature: Title:
/s/ David W. Thompson
David W. Thompson Chairman of the Board, Principal Executive
Officer and Director
/s/ Carlton B. Crenshaw
Carlton B. Crenshaw Principal Financial Officer
/s/ Jeffrey V. Pirone
Jeffrey V. Pirone Controller and Principal Accounting
Officer
/s/ Fred C. Alcorn
Fred C. Alcorn Director
/s/ Kelly H. Burke
Kelly H. Burke Director
/s/ Bruce W. Ferguson
Bruce W. Ferguson Director
/s/ Daniel J. Fink
Daniel J. Fink Director
/s/ Lennard A. Fisk
Lennard A. Fisk Director
/s/ Jack A. Frohbieter
Jack A. Frohbieter Director
/s/ Jack L. Kerrebrock
Jack L. Kerrebrock Director
/s/ J. Paul Kinloch
J. Paul Kinloch Director
/s/ Douglas S. Luke
Douglas S. Luke Director
/s/ John L. McLucas
John L. McLucas Director
/s/ Harrison H. Schmitt
Harrison H. Schmitt Director
/s/ James R. Thompson
James R. Thompson Director
/s/ Scott L. Webster
Scott L. Webster Director
C:\LEGAL\SEC-FILE\10K.94
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Orbital Sciences Corporation
Under date of February 6, 1995, we reported on the consolidated
balance sheets of Orbital Sciences Corporation and subsidiaries
(the "Company") as of December 31, 1994 and 1993, and the related
statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1994,
as contained in the 1994 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the Company's annual report on Form
10-K for the year 1994. In connection with our audits of the
aforementioned consolidated financial statements, we also have
audited the related consolidated financial statement schedule as
listed in Item 14(a)2 in the Company's Form 10-K for the year 1994.
This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is
to express an opinion on the consolidated financial statement
schedule based on our audits.
In our opinion, based on our audits and the reports of other
auditors, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1995
ORBITAL SCIENCES CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)
Column A Column B Column C Column D Column E
Additions
__________________________________
Charged/credited
Balance at Charged to costs to Balance at
Description start of period and expenses other accounts Deductions end of period
Year ended December 31, 1992
Allowance for doubtful accounts $ 289 $ 150 - $ (47) $ 392
Allowance for obsolete inventory 1,034 39 - (175) 898
Deferred income tax valuation reserve - 588 - - 588
Year ended December 31, 1993
Allowance for doubtful accounts $ 392 $ 55 $ 15 - $ 462
Allowance for obsolete inventory 898 416 910 - 2,224
Deferred income tax valuation reserve 588 - - (303) 285
Year ended December 31, 1994
Allowance for doubtful accounts $ 462 $ 136 $ 80 - $ 678
Allowance for obsolete inventory 2,224 216 1,571 (111) 3,900
Allowance for unrecoverable investment - - 3,100 - 3,100
Deferred income tax valuation reserve 285 - 32,003 (168) 32,120
All historical balances have been restated to reflect the Company's acquisition of Magellan Corporation. The acquisition
was accounted for using the pooling of interests method of accounting.
Additions charged/credited to other accounts represent valuation and qualifying accounts recorded pursuant
to purchase business combinations as described in Note 4 to the consolidated financial statements incorporated
by reference elsewhere herein, and adjustments required to recast pooled company's year end as described in
Note to the consolidated financial statements incorporated by reference elsewhere herin.
Deduction of specific charge-offs previously reserved.
Deduction for re-valuation of allowance account.
EXHIBIT INDEX
The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement
or report, such statement or report is identified in parentheses. In
addition, the registrant has executed certain instruments reflecting long-term
debt, the total amount of which does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. In accordance with
section 4(iii) of Item 601 under Regulation S-K, the registrant agrees to
furnish to the Securities and Exchange Commission copies of each instrument
relating to such long-term debt not otherwise filed herewith or incorporated
herein by reference.
Exhibit
No. Description
2.1 Asset Acquisition Agreement dated as of September 16, 1993
between The Perkin-Elmer Corporation and the Company
(incorporated by reference to Exhibit 2 to the Company's
Report on Form 8-K, dated September 27, 1993).
2.2 Acquisition Agreement dated as of July 29, 1994 between
Matra Aerospace, Inc., and the Company (incorporated by
reference to Exhibit 2 to the Company's Report on Form 8-K,
dated August 11, 1994).
2.3 Agreement and Plan of Merger dated as of November 25, 1994
among the Company, Orbital Acquisition Corporation and
Magellan Corporation (incorporated by reference to Exhibit
2 to the Company's Report on Form 8-K, dated November 25,
1994).
3.1 Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File Number 33-33453) filed on
February 9, 1990 and effective on April 24, 1990).
3.2 By-Laws (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (File Number
33-33453) filed on February 9, 1990 and effective on
April 24, 1990).
4.1 Form of Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (File Number 33-33453) filed on
February 9, 1990 and effective on April 24, 1990).
4.2 Stock Purchase Agreement, dated November 9, 1988, by and
between the Company and Hercules Incorporated (incorporated
by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-1 (File Number 33-33453) filed on
February 9, 1990 and effective on April 24, 1990).
4.3 Indenture dated as of February 25, 1993 among the Company
and Security Trust Company, National Association, as
Trustee (incorporated by reference to Exhibit 4.4 to the
Company's Annual Report on Form 10-K, dated March 31,
1993).
4.4 Form of 6 3/4% Convertible Subordinated Debenture due 2003
(incorporated by reference to Exhibit 4.5 to the Company's
Annual Report on Form 10-K, dated March 31, 1993).
4.5 Registration Rights Agreement dated as of August 11, 1994
between Matra Aerospace, Inc. and the Company (incorporated
by reference to Exhibit 10.1 to the Company's Report on
Form 8-K, dated August 11, 1994).
4.6 Promissory Notes dated as of August 31, 1994 made by
Fairchild Space and Defense Corporation and Corporate
Guaranty dated August 31, 1994 made by the Company
(incorporated by reference to Exhibit 10.7 to the Company's
Report on Form 10-Q for the Quarter ended September 30,
1994, dated November 14, 1994).
10.2 Sale/Leaseback Agreement, dated September 29, 1989, by and
among Corporate Property Associates 8, L.P., Corporate
Property Associates 9, L.P. and Space Data Corporation
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (File Number 33-33453)
filed on February 9, 1990 and effective on April 24, 1990).
10.2.1 First Amendment to Sale/Leaseback Agreement, dated as of
December 27, 1990, by and among Corporate Property
Associates 8, L.P., Corporate Property Associates 9, L.P.
and Space Data Corporation (incorporated by reference to
Exhibit 10.2.1 to the Company's Annual Report on Form 10-K,
dated March 23, 1992).
10.3 Office Lease, dated July 17, 1992, between S.C. Realty,
Inc. and the Company (incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K, dated
March 31, 1993).
10.4 Lease Agreement dated as of August 11, 1994 between
Germantown Holding Corp. and Fairchild Space and Defense
Corporation (incorporated by reference to Exhibit 10.3 to
the Company's Report on Form 8-K, dated August 11, 1994).
10.5.1 Orbital Sciences Corporation 1990 Stock Option Plan
(incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 (File Number 33-47789)
dated May 11, 1992).**
10.5.2 Orbital Sciences Corporation 1990 Stock Option Plan for
Non-Employee Directors (incorporated by reference to
Exhibit 4.5 to the Company's Registration Statement on
Form S-8 (File Number 33-47789) dated May 11, 1992).**
10.5.3 Orbital Communications Corporation Restated 1992 Stock
Option Plan (transmitted herewith).**
10.6 Amended and Restated Credit Agreement dated as of September
27, 1994 among the Company, Orbital Imaging Corporation and
Fairchild Space and Defense Corporation, the Banks listed
therein, Morgan Guaranty Trust Company of New York, as
Administrative Agent and J.P. Morgan Delaware, as
Collateral Agent (the "Credit Agreement") (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form
10-Q for the Quarter ended September 30, 1994, dated
November 14, 1994).
10.6.1 Amendment No. 1 to the Credit Agreement dated October 26,
1994 among the Company, Orbital Imaging Corporation and
Fairchild Space and Defense Corporation, the Banks listed
therein, Morgan Guaranty Trust Company of New York, as
Administrative Agent, and J.P. Morgan Delaware, as
Collateral Agent (transmitted herewith).
10.6.2 Waiver No. 1 to the Credit Agreement dated December 19,
1994 among the Company, Orbital Imaging Corporation and
Fairchild Space and Defense Corporation, the Banks listed
therein, Morgan Guaranty Trust Company of New York, as
Administrative Agent, and J.P. Morgan Delaware, as
Collateral Agent (transmitted herewith).
10.7 Security Agreement dated as of June 30, 1992 among the
Company, J.P. Morgan Delaware, as Collateral Agent and
American Security Bank, N.A., as Audit Agent (incorporated
by Reference to Exhibit 10.6.1 to the Company's Report on
Form 10-Q for the Quarter Ended September 30, 1994, dated
November 14, 1994).
10.8 Master Security Agreement dated as of August 31, 1994
between Fairchild Space and Defense Corporation and General
Electric Capital Corporation (incorporated by reference to
Exhibit 10.7 to the Company's Report on Form 10-Q for the
Quarter ended September 30, 1994, dated November 14, 1994).
10.9 Participation Agreement dated August 20, 1992 by and
between ITT Commercial Finance Corp. and the Company, as
amended through August 26, 1992 (incorporated by reference
to Exhibit 10.14 to Amendment No. 2 to the Company's Report
on Form 10-Q for the Quarter Ended September 30, 1992,
dated January 27, 1993).
10.10 Form of Executive Employment Agreement entered into between
the Company and Executive Officers and certain other
Officers of the Company (incorporated by reference to
Exhibit 10.17 to the Company's Registration Statement on
Form S-1 (File Number 33-33453) filed on February 9, 1990
and effective on April 24, 1990).**
10.10.1 Employment Agreement between Jack A. Frohbieter and
Fairchild Space and Defense Corporation, dated August 26,
1992 (transmitted herewith).**
10.11 Form of Indemnification Agreement entered into between the
Company and Directors, Executive Officers and certain other
Officers of the Company (incorporated by reference to
Exhibit 10.18 to the Company's Registration Statement on
Form S-1 (File Number 33-33453) filed on February 9, 1990
and effective on April 24, 1990).**
10.11.1 Amendment dated October 22, 1992 to form of Indemnification
Agreement entered into between the Company and Directors,
Executive Officers and certain other Officers of the
Company (incorporated by reference to Exhibit 19 to the
Company's Report on Form 10-Q for the Quarter Ended
September 30, 1992, dated November 16, 1992).**
10.12 Joint Venture Agreement, dated November 9, 1988, by and
among the Company, Space Systems Corporation and Hercules
Incorporated (incorporated by reference to Exhibit 10.14 to
the Company's Registration Statement on Form S-1 (File
Number 33-33453) filed on February 9, 1990 and effective on
April 24, 1990).
10.13.1 Master Agreement dated as of June 30, 1993 among the
Company, Orbital Communications Corporation, Teleglobe Inc.
and Teleglobe Mobile Partners (the "Master Agreement")
(incorporated by reference to Exhibit 10.24.1 to the
Company's Report on Form 10-Q for the Quarter Ended June
30, 1993, dated August 13, 1993).+
10.13.1.1 Amendment No. 1 to Master Agreement dated as of April 1,
1994 (incorporated by reference to Exhibit 10.16.1.1 to the
Company's Report on Form 10-Q for the Quarter Ended June
30, 1994, dated August 15, 1994).+
10.13.1.2 Amendment No. 2 to Master Agreement dated as of October 1,
1994 (transmitted herewith).*
10.14 Agreement of Limited Partnership of ORBCOMM Development
Partners, L.P. dated as of June 30, 1993 between Orbital
Communications Corporation and Teleglobe Mobile Partners
(incorporated by reference to Exhibit 10.24.2 for the
Company's Report on Form 10-Q for the Quarter ended June
30, 1993, dated August 13, 1993).+
10.14.1 Amendment No.1 to Agreement of Limited Partnership of
ORBCOMM Development Partners, L.P. dated as of April 1,
1994 (incorporated by reference to Exhibit 10.16.2.1 to the
Company's Report on Form 10-Q for the Quarter Ended June
30, 1994, dated August 15, 1994).+
10.15 Agreement of Limited Partnership of ORBCOMM U.S. Partners,
L.P. dated as of June 30, 1993 between Orbital
Communications Corporation and Teleglobe Mobile Partners
(incorporated by reference to Exhibit 10.24.3 of the
Company's Report on Form 10-Q for the Quarter ended June
30, 1993, dated August 13, 1993).
10.16 Agreement of Limited Partnership of ORBCOMM International
Partners, L.P. dated as of June 30, 1993 between Orbital
Communications Corporation and Teleglobe Mobile Partners
(incorporated by reference to Exhibit 10.24.3 to the
Company's Report on Form 10-Q for the Quarter Ended June
30, 1993, dated August 13, 1993).
10.17 ORBCOMM System Construction Agreement dated as of June 30,
1993 between Orbital Communications Corporation and ORBCOMM
Development Partners, L.P (incorporated by reference to
Exhibit 10.24.5 to the Company's Report on Form 10-Q for
the Quarter Ended June 30, 1993, dated August 13, 1993).
10.18 ORBCOMM System Design, Development and Operations Agreement
dated as of June 30, 1993 between Orbital Communications
Corporation and ORBCOMM Development Partners, L.P. (the
"System Design, Development and Operations Agreement")
(incorporated by reference to Exhibit 10.24.6 to the
Company's Report on Form 10-Q for the Quarter Ended June
30, 1993, dated August 13, 1993).+
10.18.1 Amendments No. 1 and No. 2 to System Design, Development
and Operations Agreement dated March 1, 1994 (incorporated
by reference to Exhibit 10.16.6.1 to the Company's Report
on Form 10-Q for the Quarter Ended March 31, 1994, dated
May 12, 1994).+
10.18.2 Amendment No. 3 to System Design, Development and
Operations Agreement dated April 1, 1994 (incorporated by
reference to Exhibit 10.16.6.2 to the Company's Report on
Form 10-Q for the Quarter Ended June 30, 1994, dated August
15, 1994).+
10.19 System Charge and Marketing (U.S.) Agreement dated as of
June 30, 1993 between Orbital Communications Corporation
and ORBCOMM U.S. Partners, L.P. (incorporated by reference
to Exhibit 10.24.8 to the Company's Report on Form 10-Q for
the Quarter Ended June 30, 1993, dated August 13, 1993).
10.19.1 Amendment No. 1 to System Charge and Marketing (U.S.)
Agreement dated as of June 30, 1994 (transmitted herewith).
10.20 International System Charge and Marketing (Non-U.S.)
Agreement dated as of June 30, 1993 among ORBCOMM
Development Partners, L.P., Teleglobe Mobile Partners and
ORBCOMM International Partners, L.P (incorporated by
reference to Exhibit 10.24.8 to Company's Report on Form
10-Q for the Quarter Ended June 30, 1993, dated August 13,
1993).
10.20.1 Amendment No. 1 to International System Charge and
Marketing (Non-U.S.) Agreement dated as of June 30, 1993
among ORBCOMM Development Partners, L.P., Teleglobe Mobile
Partners and ORBCOMM International Partners, L.P dated as
of June 30, 1994 (transmitted herewith).
10.21 Proprietary Information and Non-Competition Agreement dated
as of June 30, 1993 among the Company, Orbital
Communications Corporation, Teleglobe Inc., Teleglobe
Mobile Partners, ORBCOMM Development Partners, L.P.,
ORBCOMM U.S. Partners, L.P. and ORBCOMM International
Partners, L.P (incorporated by reference to Exhibit 10.24.9
to the Company's Report on Form 10-Q for the Quarter Ended
June 30, 1993, dated August 13, 1993).
11 Statement re: Computation of Earnings Per Share
(transmitted herewith).
13 Portions of the 1994 Annual Report to Stockholders
(transmitted herewith).
21 Subsidiaries of the Company (transmitted herewith).
23 Consent of KPMG Peat Marwick LLP (transmitted herewith).
24 Power of Attorney (included on Signature Page).
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-K, or
otherwise subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934) (transmitted herewith).
______________________
* Confidential treatment requested pursuant to Rule 24b-2 of the Exchange
Act.
+ Confidential treatment previously granted by the Commission.
** Management Contract or Compensatory Plan or Arrangement.