Back to GetFilings.com
1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
/X/
For the fiscal year ended December 31, 1995
or
/ /
Transition report pursuant to Section 13 or 15(d) of the Securities for the
transition period from __ to __
Commission file number 0-18287
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD 06-1209561
DULLES, VIRGINIA 20166 (I.R.S. Employer I.D. No.)
(Address of principal executive offices)
(703) 406-5000
(Registrant's telephone number)
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 as reported on the Nasdaq Stock
Market on March 20, 1996 was approximately $350,131,005.
As of March 20, 1996, 25,935,630 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, 1995 (the "Annual Report") are incorporated by reference in
Parts I and II of this Report. Portions of the registrant's definitive Proxy
Statement dated March 25, 1996 (the "Proxy Statement") are incorporated by
reference in Part III of this Report.
2
ORBITAL SCIENCES CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1995
PART I PAGE
- ------ ----
ITEM 1 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 12
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . 12
PART II
- -------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY . . . . . . . . . . . 14
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF . . . . . . . . . . 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . 14
PART III
- --------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . 14
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 15
PART IV
- -------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii
3
ITEM 1. BUSINESS
BACKGROUND
Orbital Sciences Corporation (together with its subsidiaries,
"Orbital" or the "Company") is a space technology and satellite services
company that designs, manufactures, operates and markets a broad range of
space-related products and services. Orbital's products and services are
grouped into four categories: Launch Systems, Space and Electronics Systems,
Ground Systems and Software, and Communications and Information Services.
Launch Systems include space and suborbital launch vehicles, and orbit transfer
and other advanced vehicles; Space and Electronics Systems include satellites,
spacecraft platforms, space sensors and instruments, space payloads and
experiments, as well as advanced electronics and data management systems;
Ground Systems and Software products include commercial satellite remote
sensing ground station and related information processing software, automated
aeronautical information and air traffic management systems, defense system
software and network systems consulting services; and Communications and
Information Services include satellite-based two-way mobile data communications
systems and services, satellite-based navigation and communications products
and remote sensing services.
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 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 enhanced Orbital's
satellite system and subsystem development and production capabilities and
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, along with portable satellite
communications equipment. In November 1995, Orbital acquired MacDonald,
Dettwiler and Associates, Ltd. ("MDA"), a leading supplier of commercial space
remote sensing ground stations and related information processing software
headquartered in Vancouver, British Columbia. MDA complements Orbital's
satellite information collection businesses and has strengthened Orbital's
ability to offer a broader range of space-based information services.
DESCRIPTION OF ORBITAL'S PRODUCTS AND SERVICES
The space products and services provided by the Company are grouped
into four categories: Launch Systems, Space and Electronics Systems, Ground
Systems and Software, and Communications and Information Services. 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 and other advanced vehicles.
1
4
SPACE LAUNCH VEHICLES. The Company has developed three space launch
vehicles: the Pegasus(R) launch vehicle; the Pegasus XL(TM) launch vehicle;
and the Taurus(R) launch vehicle. Orbital's Pegasus and Pegasus XL vehicles
are launched from beneath a modified large aircraft such as the Company's
leased Lockheed L-1011 to deploy satellites weighing up to 1,000 pounds into
low-Earth orbit. Through December 1995, the Company had conducted a total of
seven standard Pegasus missions, all of which were fully or partially
successful. Whether a mission is fully or partially successful depends on the
particular mission requirements designated by the customer. Prior to its first
successful flight in March 1996, the modified Pegasus XL, developed to deploy
heavier satellites into orbit, had two unsuccessful flights, one occurring in
June 1994 and the other in June 1995. The first Pegasus XL failure was caused
by inaccurate aerodynamic modeling of the vehicle. The second Pegasus XL
failure resulted from human assembly error involving the improper installation
of a small component that prevented the Stage 1/Stage 2 interstage from
properly separating from Stage 2. Following a comprehensive review of design,
assembly, test and operations procedures, the Pegasus XL returned to flight on
March 8, 1996, successfully launching a satellite for the U.S. Air Force to its
targeted orbit.
Customers for Pegasus launch vehicles include the National
Aeronautics and Space Administration ("NASA"), the U.S. Air Force, the Defense
Advanced Research Projects Agency ("DARPA"), the Ballistic Missile Defense
Organization ("BMDO"), Spain's National Institute of Aerospace Technology, the
Company's affiliated partnership, ORBCOMM Global L.P. ("ORBCOMM Global") and
the Company's wholly owned subsidiary, Orbital Imaging Corporation
("ORBIMAGE").
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 DARPA. The Company received several new Taurus
orders in 1995, including a commercial launch for Ball Corporation ("Ball")
carrying a U.S. Navy satellite scheduled for late 1996, a launch for the U.S.
Air Force in 1997, and options for up to 11 Taurus missions pursuant to a
contract award under NASA's Med-Lite program. The Taurus mission for Ball is
also expected to launch two satellites for ORBCOMM Global as a secondary
payload.
During 1995, Orbital and Rockwell International Corporation
("Rockwell") teamed together to develop and construct the X-34 reusable launch
vehicle in a project to be jointly funded by Orbital, Rockwell and NASA. The
X-34 was intended as a next-generation space launch vehicle that would
significantly reduce the costs of placing a satellite in orbit. Following an
assessment that the design of the vehicle would not achieve the economic and
performance goals of the project, development efforts on the vehicle were
terminated in early 1996. Orbital continues to explore new, longer-term
research and development opportunities for more affordable and flexible space
launch vehicles.
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 orbit 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 1995 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 Theater High Altitude Area Defense Interceptor
anti-missile defense systems for target and interceptor experiments for the
U.S. Army, the Navy LEAP
2
5
contract with BMDO and the High-Gear contract with the Massachusetts Institute
of Technology - Lincoln Laboratory pursuant to which Orbital provided
suborbital vehicles to serve as targets for U.S. Air Force testing of
anti-missile defense systems. Orbital conducted ten suborbital launches in
1995, all of which were successful. Since January 1993, the Company has
conducted a total of 26 launches of suborbital vehicles, all of which were
successful.
SPACE AND ELECTRONICS SYSTEMS
The Company's Space and Electronics Systems Group's products enable
Orbital to provide its customers fully integrated, low-cost space systems,
networks and related services. The Company's most significant Space and
Electronics Systems products are satellite systems and payloads, space sensors
and instruments, defense electronics and sensors, and transit management
systems.
The Company designs and produces small and medium class satellites
for scientific, military and commercial applications. The Company's small
satellite platforms such as PegaStar(TM), MicroStar(TM) and PicoStar(TM) are
designed and produced to be launched by the Pegasus or Taurus launch vehicle.
The PegaStar spacecraft is a general purpose spacecraft that has successfully
performed one mission for the U.S. Air Force measuring space radiation and
carrying out related experiments. It will also be used for certain of the
Company's satellite-based remote sensing systems, such as the SeaStar(TM) ocean
and land surface environmental monitoring satellite system. Orbital's
MicroStar spacecraft platform, which is placed into orbit by the Pegasus launch
vehicle, is designed for use in ORBCOMM Global'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. In April 1995, the first three MicroStar spacecraft were
deployed, two for the ORBCOMM System, and the other for ORBIMAGE to monitor
lightning and severe weather patterns for NASA. Customers for the Company's
small spacecraft include NASA, the U.S. Air Force and ORBCOMM Global. In late
1995, DARPA selected the Company for a contract to develop a specialized
MicroStar communications satellite.
Orbital's medium class satellites, such as NASA's TOPEX/Poseidon,
NASA's Upper Atmosphere Research satellite, and the National Oceanic and
Atmospheric Administration's Landsat 4 and Landsat 5 have been in space for
several years, and are used to gather various scientific data, such as ocean
topography and Earth imaging information. In August 1995, Orbital was selected
to become the spacecraft supplier to Johns Hopkins University, which is leading
NASA's Far Ultraviolet Spectroscopy Explorer (FUSE) program to measure the
early universe's radiation. The FUSE spacecraft is presently scheduled for
launch in 1998.
In addition, Orbital designs and manufactures satellite 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 and engineering services as well as specialized analytical engineering
services for NASA, the Department of Defense ("DoD"), the Department of Energy
and other customers. Orbital provided engineering support and services for the
first repair mission for the orbiting Hubble Space Telescope, and will provide
similar services on a second repair mission currently scheduled for early 1997.
The Company also develops, manufactures and markets defense
electronics, including advanced avionics 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 and 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, the
3
6
Company 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-4, F-14,
F-16, F-18 and F-22 and the LAMPS Helicopter.
In addition, Orbital produces electronics and data management
systems that have been applied to the development and manufacture of
"intelligent transportation systems," primarily for metropolitan mass transit
operators, that provide GPS-based tracking of vehicles and allow for
communications and schedule management. Customers for Orbital's intelligent
transportation systems include several metropolitan mass transit operators,
such as the Chicago Transit Authority.
Orbital's Pomona, California operations produce satellite-borne
scientific sensors and instruments, such as atmospheric ozone monitoring
instruments and environmental sensors. For example, 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 environment for astronauts. The
Company also produces the Central Atmospheric Monitoring System for the U.S.
Navy for use on submarines.
GROUND SYSTEMS AND SOFTWARE
As a result of the Company's November 1995 acquisition of MDA,
Orbital's Ground Systems and Software Group is a leading supplier of commercial
satellite remote sensing ground stations and a provider of advanced
space-qualified software, air navigation systems, and network communications
training and consulting services. The Company's defense electronics systems
have also expanded to include software-intensive systems designed for naval
operations, artillery command and control, radar deception systems and
logistics support.
The Company develops, provides and upgrades commercial satellite
remote sensing ground stations and related information processing software. Of
the 27 major non-military satellite ground stations around the world, MDA has
built or been involved in the construction of 23 ground stations in 20
countries. These ground stations are designed to receive and process data from
the eight major civil and commercial Earth observation satellites currently in
operation. In 1995, the Company completed the ground station and mission
control and management systems for the Canadian Space Agency's RADARSAT-1
remote sensing satellite that was launched successfully in November 1995. MDA
also develops and markets software that generates and processes imagery and
mapping products from satellites and airborne sensors. Customers for the
Company's ground stations and Earth information systems include the European
and Canadian Space Agencies as well as Canadian and foreign government
customers.
The Company's aviation systems products include automated aeronautical
information and air traffic management systems. The Company has developed the
Pegasus-AIS(TM) (not related to the Pegasus launch vehicle), an off-the shelf,
automated aeronautical information management system that delivers weather and
route information directly to a pilot by computer. These systems are designed
to address a growing trend toward commercialization and automation of air
traffic control systems. Faster and less expensive to operate than traditional
manual systems, automated aeronautical information systems provide pilots and
other users with aeronautical and meteorological information on a timely basis.
Customers for the Company's aviation systems products include the military and
civil aviation authorities in various countries such as Australia, Belgium,
Canada, Norway and Switzerland.
4
7
The Ground Systems and Software Group also provides computer network
communications consulting, training and other services to network equipment
vendors and telecommunications carriers in Canada, the United States, Australia
and Asia.
COMMUNICATIONS AND INFORMATION SERVICES
Orbital's Communications and Information Services include products
and services provided by Magellan, the Company's majority owned subsidiary
Orbital Communications Corporation ("ORBCOMM"), and ORBIMAGE. Magellan
manufactures GPS satellite-based navigation and communications products for
commercial and consumer markets including commercial and recreational marine
and aviation markets, outdoor recreational users such as hunters and hikers,
and professional users such as geologists, geographers, surveyors, natural
resource managers and contractors. 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 ORBCOMM and ORBIMAGE systems will
require significant capital investments and market development. 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 COMMUNICATIONS PRODUCTS. The
Company's Magellan subsidiary designs, manufactures and markets hand-held GPS
navigators that provide users with precise positioning and location
information. The need for positioning and location information is central to a
broad range of personal and professional activities including marine
navigation, outdoor recreation (e.g., hiking and hunting), surveying and
general aviation. Magellan focuses its research, design and engineering
activities on the development of GPS navigators that are reliable, portable,
easy to use and highly affordable, targeting the growing recreational market.
During 1995, Magellan introduced the low-cost GPS 2000(TM) personal navigation
unit that is widely distributed in mass merchandising outlets and mail order
catalogs. Magellan has also started production of the microCOM-M(TM), a small,
lightweight and low-priced INMARSAT satellite telephone for worldwide voice,
fax and data communications. 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 that is compatible with the ORBCOMM System.
ORBCOMM COMMUNICATIONS SERVICES. The ORBCOMM System is designed to
provide virtually continuous mobile data communications coverage over much of
the Earth's surface. Under this system, subscribers are able to use
inexpensive communicators to send and receive short messages, high priority
alerts and other information, such as the location and condition of
automobiles, trucks, shipping vessels and other remote assets. The Company
expects that the ability to send and receive 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-based communications systems by providing
relatively low-cost coverage in areas outside the range of such tower-based
systems.
The global ORBCOMM System design consists of a constellation of
small low-Earth orbit satellites, a satellite control center operating and
positioning the satellites, the mobile communicators used by subscribers to
transmit and receive messages to and from the satellites, and the gateways that
transmit and control the flow of data and message communications and other
information for the system. A gateway generally will consist of gateway Earth
stations and a software-based gateway message switching system that processes
the message traffic and provides the interconnection to terrestrial networks.
The U.S. gateway, for example, includes four gateway Earth stations located in
New York, Washington, Arizona and Georgia with the message switching system
located at ORBCOMM Global's network operations center in
5
8
Dulles, Virginia. Gateways are planned to be owned and operated by ORBCOMM
Global licensees in strategic locations around the world.
In April 1995, the Company successfully launched the first two
satellites that will comprise the ORBCOMM System constellation. Certain
technical problems with both spacecraft resulted in a delay of several months
in the completion of on-orbit testing. The Company believes that it has
identified and implemented the appropriate corrective actions with respect to
these problems, and does not believe that they will impact continued
development of the ORBCOMM System. During 1995, in addition to the launch of
the first two satellites, the Company completed construction and testing of
various network management systems including the satellite control center and
the network operations center, and substantially completed the four United
States gateway Earth stations. Prototype communicators also transmitted
hundreds of thousands of messages. Following comprehensive testing of the
space and ground network during 1995, intermittent commercial service in the
United States commenced in February 1996. Several consumer electronics
manufacturers are developing communicators that monitor fixed assets and
hand-held communicators for personal use for shipment during 1996, and the
Company expects that the number of users of the ORBCOMM System will grow
significantly as subscriber unit production rates increase.
The two ORBCOMM System satellites currently in orbit and the U.S.
gateway provide communications availability in the United States approximately
10% of each 24-hour period, with maximum outages of approximately nine hours.
With the launch of additional satellites, such as the two scheduled to be
launched as a secondary payload on a Taurus mission scheduled for late 1996,
communications availability will also increase. The Company expects that, with
a planned constellation of at least 26 satellites and appropriately situated
gateways, the ORBCOMM System will provide communications availability generally
exceeding 95% of 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. Outside the United States, the ORBCOMM System will only be
available in countries and regions where appropriate licenses have been
obtained and where there is a gateway that can serve the applicable market.
DEVELOPMENT AND FINANCING. In 1993, ORBCOMM and Teleglobe Mobile
Partners ("Teleglobe Mobile"), an affiliate of Teleglobe Inc., formed a
partnership, ORBCOMM Global (formerly known as ORBCOMM Development Partners,
L.P.) for the two-phased design, development, construction, integration,
testing and operation of the ORBCOMM System. ORBCOMM and Teleglobe Mobile also
formed two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and
ORBCOMM International Partners, L.P. ("ORBCOMM International"), each with the
exclusive right to market the ORBCOMM System in the United States and
internationally, respectively. ORBCOMM has retained control over applicable
licenses issued by the Federal Communications Commission ("FCC"), consistent
with FCC regulations.
Also in 1993, Orbital entered into an agreement with ORBCOMM Global
whereby Orbital had responsibility for the overall design, construction and
integration for the first phase of the ORBCOMM project, which was completed
during 1995. In September 1995, Orbital and ORBCOMM Global executed the
ORBCOMM System Procurement Agreement (the "Procurement Agreement"), which
provides that Orbital will, among other things, construct and launch an
additional 26 satellites, and construct an additional eight satellites. Under
the Procurement Agreement, Orbital is providing satellites and launch services
on a fixed-price basis. Consistent with industry practice for many launch
contracts, the Procurement Agreement contains certain performance incentives
with respect to the satellites and their launch.
Under ORBCOMM Global'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). ORBCOMM and Teleglobe Mobile are each 50% general
partners in
6
9
ORBCOMM Global, with the result that ORBCOMM and Teleglobe Mobile share equal
responsibility for the operational and financial affairs of ORBCOMM Global and
the approval of both ORBCOMM and Teleglobe Mobile is necessary for ORBCOMM
Global to act. ORBCOMM holds indirectly a 51% participating interest in
ORBCOMM USA and Teleglobe Mobile holds indirectly a 51% participating interest
in ORBCOMM International, with the result that ORBCOMM acting alone can
generally control the operational and financial affairs of ORBCOMM USA, and
Teleglobe Mobile acting alone can generally control the operational and
financial affairs of ORBCOMM International.
In September 1995, Teleglobe Mobile exercised its option to
participate in the second phase of the ORBCOMM System and, accordingly, Orbital
and Teleglobe Mobile's total capital commitments to ORBCOMM Global are
approximately $75 million and $85 million, respectively, of which approximately
$62 million and $35 million, respectively, had been contributed through
December 31, 1995. Although construction of the first phase of the ORBCOMM
System is completed, development and construction of the second phase is in an
early stage, and the actual cost of the system and the amount and structure of
anticipated investment in ORBCOMM Global may vary significantly from current
estimates. Orbital expects that the total estimated required capital for the
ORBCOMM System will be approximately $225-$250 million. ORBCOMM Global intends
to seek additional equity contributions and/or bank or other debt financing to
fund the remaining requirements. ORBCOMM Global already obtained asset-based
financing of $5 million to fund a portion of its development costs for the
first phase of the ORBCOMM System. The Company has guaranteed ORBCOMM
Global's outstanding indebtedness, and may be required to guarantee or provide
credit support in connection with additional indebtedness incurred by ORBCOMM
Global.
In the event that ORBCOMM Global does not otherwise receive the
necessary capital, full development and implementation 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 in the ORBCOMM
System. In addition, start-up of the ORBCOMM System will produce significant
ORBCOMM Global operating losses for several years. Even if the ORBCOMM System
is fully constructed and operational, there can be no assurance that an
adequate market will develop for ORBCOMM System services, that ORBCOMM Global
will achieve profitable operations or that Orbital will recover any of its past
or anticipated investment in the ORBCOMM System. Because Orbital (through
ORBCOMM) has a 50% participating interest in ORBCOMM Global, Orbital expects to
recognize its pro rata share of ORBCOMM Global profits and losses.
As of March 1, 1996, certain officers and employees of ORBCOMM
Global and Orbital held options to acquire 555,100 shares of ORBCOMM's common
stock (or approximately 12 percent of ORBCOMM's outstanding common stock) at
option exercise prices ranging from $1.50 to $17.00 per share. On an annual
basis, 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. As of March 1, 1996, there were
52,286 shares of ORBCOMM common stock outstanding that were acquired in
connection with option exercises by current or former ORBCOMM and Orbital
employees.
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 was
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 October 1995, ORBCOMM requested a modification of its FCC
license with respect to ORBCOMM's channel plan for purposes of facilitating
frequency coordination of the ORBCOMM System with foreign governments. This
request has completed the public comment cycle and
7
10
ORBCOMM believes its request will be granted within the next several months.
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 a definitive license
agreement with ORBCOMM Canada Inc., which is expected to begin providing
ORBCOMM service in Canada in Spring 1996. ORBCOMM has signed preliminary
agreements with 19 candidate licensees serving 71 other countries to seek such
regulatory approvals and to initiate territory-specific market development in
such countries. There can be no assurance that ORBCOMM or its foreign
licensees will be granted all licenses or approvals necessary to operate the
ORBCOMM System in any other country.
ORBIMAGE REMOTE SENSING AND IMAGING SERVICES. The Company is
currently seeking to develop and market a broad range of information services
that involve identifying and monitoring global environmental changes and
weather patterns and collecting and disseminating digital land maps and other
remote sensing information. Small Earth-viewing satellites and related sensors
and instruments to be placed in relatively low orbits are planned to offer
cost-efficient data collection, daily global coverage and high-resolution
imaging services.
In April 1995, ORBIMAGE's first MicroStar satellite, MicroLab-1,
was successfully launched to monitor lightning and severe weather patterns for
NASA. In 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 and land surface imagery for up to five years.
The SeaStar launch has been delayed several years, primarily due to technical
challenges associated with the development of the spacecraft and launch delays
relating to the Pegasus XL failures in 1994 and 1995. The SeaStar satellite is
currently scheduled to be launched in late 1996 or early 1997. In addition to
providing unprocessed real-time ocean data to NASA, ORBIMAGE plans to market
the SeaStar data directly and through value-added resellers and other marketing
agents to other U.S. Government users and to potential domestic and
international customers such as commercial fishing fleets, oil and gas
companies, ocean transportation operators, oceanographers and agricultural
companies.
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, 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 development of the
high-resolution remote sensing business, with Orbital providing launch
services, spacecraft, ground stations and other related products. During 1995,
ORBIMAGE signed preliminary agreements with several potential imagery
distributors and initiated preliminary discussions with potential strategic
partners. 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.
* * * *
Financial information about the Company's products and services,
foreign and domestic operations and export sales is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Notes to the Company's Consolidated Financial Statements set forth in the
Company's Annual Report, and is incorporated herein by reference.
8
11
COMPETITION
Orbital believes that competition for sales of its products and
services is based on performance and other technical features, price,
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 LMLV
launch vehicles currently being developed by Lockheed Martin Corporation
("Lockheed Martin"). The LMLV had an unsuccessful first flight in August 1995.
Potential competition to the Pegasus may also come from launch systems derived
from surplus ballistic missiles that are primarily being made available by the
U.S. Government and Russia. The National Space Transportation Policy (the
"NSTP") authorizes U.S. Government agencies to use excess ballistic missiles to
launch payloads into orbit on a case-by-case basis. While Lockheed Martin
currently has a contract with the DoD to convert excess Minuteman missiles into
space launch vehicles, the NSTP established that 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 very limited inventory remains. In addition, in 1995
the Japanese space agency successfully launched a booster that directly
competes with Taurus in terms of launch capacity, but is more expensive than
the Taurus. Indirect competition to Pegasus and Taurus vehicles also exists in
the form of secondary or "piggyback" payload capacity on large boosters such as
the 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.
While several companies design and manufacture suborbital launch
vehicles, Orbital's primary competitor in this product line is Coleman Research
Corp. Satellite systems and payloads and space support products compete with
products and services produced or provided by numerous companies and government
entities, including TRW Inc. and CTA, Inc. The Company's space instruments and
airborne and ground-based electronics, data management systems,
defense-oriented avionics products and software systems, and aviation systems
face competition from several established manufacturers. 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. The Company's main competition in the area of ground stations
include Datron Systems Inc. and Hughes-STX Corp.
Magellan's marine and outdoor recreation GPS satellite-based
navigation products primarily face competition from Garmin International.
Magellan competes with a larger number of producers of GPS navigation and
communications products in its other markets. 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 navigators.
The ORBCOMM System will face competition from numerous existing and
potential alternative communications products and services provided by various
large and small companies, including sophisticated two-way satellite-based data
and voice communications services. For specific markets, the ORBCOMM System
may complement existing tower-based services such as one-way and two-way
paging, cellular data, specialized mobile radio and private networks. ORBIMAGE
may face competition from U.S. and foreign government and private entities that
provide or are seeking to provide satellite-based and other land imaging,
environmental monitoring and atmospheric sensing products.
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. Any such foreign competitor could benefit from subsidies from, or
other protective measures by, its home country.
9
12
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 $25.5 million, $17.3 million, and $19.7 million, respectively,
for the fiscal years ended December 31, 1995, 1994 and 1993. It is expected
that the Company's research and development expenses during 1996 will be
primarily for satellite programs, possible ORBIMAGE projects, new or modified
launch systems, and satellite-based navigation and communications 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 and U.S.
patents relating to the ORBCOMM System 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 along with other
products. 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 and the Canadian Intellectual Property Office.
COMPONENTS AND RAW MATERIALS
Orbital purchases a significant percentage of its product
components, including rocket propulsion motors, structural assemblies and
electronic equipment, from third parties. Orbital also occasionally obtains
from the U.S. Government parts and equipment that are used in the production of
the Company's products or in the provision of the Company's services. Orbital
has not experienced material difficulty in obtaining product components or
necessary parts and equipment and believes that alternative sources of supply
would be available, although increased costs could be incurred in securing
alternative sources of supply. The Company's ability to launch its Pegasus and
Pegasus XL vehicles depends on the availability of an aircraft with the
capability of carrying and launching such space launch vehicles. Orbital
entered into a 10-year lease in 1992 for a Lockheed L-1011 for the air-launch
of the Pegasus and Pegasus XL vehicles.
U.S. GOVERNMENT CONTRACTS
During 1995, 1994 and 1993, approximately 40 percent, 45 percent
and 45 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
1995 revenues were NASA, DoD and ORBCOMM Global.
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,
10
13
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, 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 Company 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, 1995 and 1994 was
approximately $530 million and $419 million, respectively. As of December 31,
1995, 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 $355 million and $171 million as of December 31, 1995 and 1994,
respectively. Approximately $303 million of backlog is currently scheduled to
be performed beyond 1996. Backlog excludes unexercised and undefinitized
contract options having an aggregate potential contract value at December 31,
1995 of approximately $910 million.
EMPLOYEES
As of December 31, 1995, Orbital had 2, 729 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. The Company owns 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 212,000 square feet of
office and engineering space in Richmond, British Columbia; approximately
135,000 square feet of office, engineering and manufacturing space in Pomona,
California; approximately 40,000 square feet of office, engineering and
manufacturing space in San Dimas, California. The Company leases or owns other
11
14
smaller facilities, offices or manufacturing space around the United States,
including Huntsville, Alabama; Edwards Air Force Base, California; Vandenberg
Air Force Base, California and Greenbelt, Maryland; in other locations in
Canada such as Ottawa, Ontario, as well as in England, Malaysia, Mexico and
Australia. 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
Not applicable.
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 1995.
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, 1996. All Executive
Officers are elected annually and serve at the discretion of the Board of
Directors.
Name Age Position
- ---- --- --------
David W. Thompson 41 Chairman of the Board, President and Chief Executive Officer
Bruce W. Ferguson 41 Executive Vice President and General Manager/Communications and Information Services Group
James R. Thompson 59 Executive Vice President and General Manager/Launch Systems Group
Jack A. Frohbieter 59 Executive Vice President and General Manager/Space and Electronics Systems Group
Daniel E. Friedmann 39 Executive Vice President and General Manager/Ground Systems and Software Group
Michael D. Griffin 46 Executive Vice President and General Manager/Advanced Systems Group
Carlton B. Crenshaw 50 Executive Vice President and Chief Financial Officer
Antonio L. Elias 46 Senior Vice President and Chief Technical Officer
John H. Mehoves 48 Senior Vice President/Corporate Strategy
Leslie C. Seeman 43 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 Services 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
12
15
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.
He 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 General
Manager from 1986 to 1987.
Daniel E. Friedmann has been Executive Vice President and General
Manager/Ground Systems and Software since January 1996. He continues to serve
as President and Chief Executive Officer of MDA, a position he has held since
March 1995. From 1992 to March 1995, he served as Executive Vice President and
Chief Operating Officer of MDA. Between 1979 and 1992, he held a variety of
positions at MDA, including serving as Vice President of various divisions.
Michael D. Griffin has been Executive Vice President/Advanced Systems
Group since January 1996. Dr. Griffin joined Orbital in August 1995 when he
was appointed Senior Vice President and Chief Technical Officer. From 1994 to
August 1995, he was Senior Vice President for Program Development at Space
Industries International. From September 1991 to January 1994 he served as
Chief Engineer of NASA and was Deputy Director for Technology at the Strategic
Defense Initiative Organization from 1989 to 1991.
Carlton B. Crenshaw has been Executive Vice President and Chief
Financial Officer since February 1996. He was Senior Vice President/Finance
and Administration from August 1995 to January 1996 and was Senior Vice
President/Finance and Administration and Treasurer of Orbital from January 1993
to August 1995. 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.
Antonio L. Elias has been Senior Vice President and Chief Technical
Officer since January 1996. From May 1993 through December 1995 he was Senior
Vice President for Advanced Projects 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.
John H. Mehoves has been Senior Vice President/Corporate Strategy
since January 1996. From October 1993 to December 1995, he was Senior Vice
President, 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.
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. Prior to that, she was an associate with the law
firm of Wilmer, Cutler & Pickering.
13
16
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 34 through
55 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 1996 Annual Meeting, --
Directors Whose Term Expires in 1997, and -- Directors Whose Term Expires in
1998" and "Compliance with Section 16(a) of the Exchange Act" of the Proxy
Statement filed pursuant to Regulation 14A on March 28, 1996 and is
incorporated herein by reference.
14
17
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 28, 1996 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 28, 1996 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 filed as a part of this
report:
A. Independent Auditors' Report (Annual Report
page 34)
B. Consolidated Statements of Operations (Annual
Report page 35)
C. Consolidated Balance Sheets (Annual Report page
36)
D. Consolidated Statements of Stockholders' Equity
(Annual Report page 37)
E. Consolidated Statements of Cash Flows (Annual
Report page 38)
F. Notes to Consolidated Financial Statements
(Annual Report pages 39 through 55)
2. FINANCIAL STATEMENT SCHEDULES. The following additional
financial data are transmitted with this report and
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.
15
18
Independent Auditors' Report on
Consolidated Financial Statement
Schedule
II Valuation and Qualifying Accounts
3. EXHIBITS. A complete listing of exhibits required is
given in the Exhibit Index that precedes the exhibits
filed with this report.
(b) Reports on Form 8-K
1. On November 2, 1995, the Company filed a Form 8-K reporting its
potential acquisition of MacDonald, Dettwiler and Associates, Ltd.
("MDA") pursuant to Item 5. The following financial statements were
filed as part of that report:
Consolidated Financial Statements of MDA, together with report
of the independent auditors, as of March 31, 1995, 1994 and
1993;
Unaudited Consolidated Financial Statements of MDA, as of June
30, 1995 and for the three-month periods ended June 30, 1995
and 1994;
Pro Forma Financial Information of Orbital Sciences
Corporation as of and for the six-month period ended June 30,
1995, and for the years ended December 31, 1994, 1993 and
1992.
2. On December 4, 1995, the Company filed a Form 8-K reporting the
consummation of its acquisition of MDA pursuant to Item 2.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
16
19
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, 1996 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.
DATED: March 28, 1996
Signature: Title:
/s/ David W. Thompson Chairman of the Board, Principal
-------------------------------------------------------- Executive Officer and Director
David W. Thompson
/s/ Carlton B. Crenshaw Principal Financial Officer
--------------------------------------------------------
Carlton B. Crenshaw
/s/ Jeffrey V. Pirone Controller and Principal Accounting
-------------------------------------------------------- Officer
Jeffrey V. Pirone
/s/ Fred C. Alcorn Director
--------------------------------------------------------
Fred C. Alcorn
/s/ Kelly H. Burke Director
--------------------------------------------------------
Kelly H. Burke
/s/ Bruce W. Ferguson Director
--------------------------------------------------------
Bruce W. Ferguson
/s/ Daniel J. Fink Director
--------------------------------------------------------
Daniel J. Fink
17
20
/s/ Lennard A. Fisk Director
--------------------------------------------------------
Lennard A. Fisk
/s/ Jack A. Frohbieter Director
--------------------------------------------------------
Jack A. Frohbieter
/s/ Jack L. Kerrebrock Director
--------------------------------------------------------
Jack L. Kerrebrock
/s/ J. Paul Kinloch Director
--------------------------------------------------------
J. Paul Kinloch
/s/ Douglas S. Luke Director
--------------------------------------------------------
Douglas S. Luke
/s/ John L. McLucas Director
--------------------------------------------------------
John L. McLucas
/s/ Harrison H. Schmitt Director
--------------------------------------------------------
Harrison H. Schmitt
/s/ James R. Thompson Director
--------------------------------------------------------
James R. Thompson
/s/ Scott L. Webster Director
--------------------------------------------------------
Scott L. Webster
18
21
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Orbital Sciences Corporation
Under date of February 5, 1996, we reported on the consolidated balance sheets
of Orbital Sciences Corporation and subsidiaries (the "Company") as of December
31, 1995 and 1994, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995, as contained in the 1995 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 1995. 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 1995.
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 5, 1996
19
22
ORBITAL SCIENCES CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------------
CHARGED/ BALANCE AT
BALANCE AT CHARGED TO COSTS CREDITED TO END OF
DESCRIPTION START OF PERIOD (1) AND EXPENSES OTHER ACCOUNTS (2) DEDUCTIONS (3) PERIOD
- ----------------------------------------- ----------------- --------------- ------------------ -------------- ------------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful accounts $ 475 $ 97 $ 15 - 587
Allowance for obsolete inventory 929 421 910 - 2,260
Deferred income tax valuation reserve 14,759 (4) - - (303) 14,456(4)
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $ 587 $ 149 $ 42 - 778
Allowance for obsolete inventory 2,260 216 1,571 (111) 3,936
Allowance for unrecoverable investments - - 3,100 - 3,100
Deferred income tax valuation reserve 14,456 - 32,003 (168) 46,291
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts $ 778 $ 189 $ - (194) 773
Allowance for obsolete inventory 3,936 580 - (738) 3,778
Allowance for unrecoverable investments 3,100 - - (2,000) 1,100
Deferred income tax valuation reserve 46,291 21,445 (2,695) - 65,041
(1) - All historical balances have been restated to reflect the Company's
acquisitions of Magellan Corporation and MacDonald, Dettwiler and
Associates, Ltd. The acquisitions were accounted for using the pooling of
interests method of accounting.
(2) - Amounts 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, adjustments required to recast
pooled company's year end as described in Note (4) to the consolidated
financial statements incorporated by reference elsewhere herein, and
certain reclassifications of deferred tax accounts.
(3) - Deduction for revaluation of allowance account.
(4) - The deferred income tax valuation reserve at December 31, 1993 and 1992
has been provided based on estimated deferred tax assets and liabilities
in a foreign taxing jurisdiction, converting to generally accepted
accounting principles as applied in the U.S. (SFAS 109), after recasting
pooled company's year end as described in Note (4) to the consolidated
financial statements incorporated by reference elsewhere herein.
Page 1
23
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
--- -----------
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 of Orbital Sciences Corporation, as amended on July 27, 1995 (incorporated by
reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, dated November 14, 1995).
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).
4.3 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).
9 Voting and Exchange Trust Agreement between the Company, MacDonald Dettwiler Holdings Inc. and
State Street Bank and Trust Company (transmitted herewith).
10.1 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).
10.1.1 Amendment No. 1 to the Credit Agreement, dated as of October 26, 1994 (incorporated by
reference to Exhibit 10.6.1 to the Company's Annual Report on Form 10-K, dated March 28, 1995).
10.1.2 Amendment No. 2 to the Credit Agreement, dated as of July 5, 1995 (incorporated by reference
to Exhibit 10.6.3 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995
filed on August 14, 1995).
10.1.3 Amendment No. 3 to the Credit Agreement, dated as of August 23, 1995 (incorporated by
reference to Exhibit 10.3 to the Company's Report on Form 10-Q for the quarter ended September
30, 1995, dated November 14, 1995).
10.1.4 Amendment No. 4 to the Credit Agreement, dated as of November 15, 1995 (transmitted herewith).
10.1.5 Waiver No. 1 to the Credit Agreement, dated as of December 19, 1994 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, dated March
21
24
28, 1995).
10.1.6 Waiver No. 2 to the Credit Agreement, dated as of February 29, 1996 (transmitted herewith).
10.2 Note Agreement, dated as of June 14, 1995 between the Corporation and The Northwestern Mutual
Life Insurance Company (the "NWML Note Agreement") (incorporated by reference to Exhibit 4.7.1
to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, dated August 14,
1995).
10.2.1 1st Amendment to the NWML Note Agreement ,dated as of June 30, 1995, between the Corporation
and The Northwestern Mutual Life Insurance Company (incorporated by reference to the Company's
Report on Form 10-Q for the quarter ended September 30, 1995, dated November 14, 1995).
10.2.2 Second Amendment to the NWML Note Agreement, dated as of March 15, 1996 (transmitted
herewith).
10.3 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).
10.4 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).
10.5 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).
10.6 Orbital Sciences Corporation 1990 Stock Option Plan, restated as of April 27, 1995
(incorporated by reference to Exhibit 10.5.1 to the Company's Report on Form 10-Q for the
quarter ended June 30, 1995, dated August 14, 1995).**
10.7 Orbital Sciences Corporation 1990 Stock Option Plan for Non-Employee Directors, restated as of
April 27, 1995 (incorporated by reference to Exhibit 10.5.2 to the Company's Report on Form
10-Q for the quarter ended June 30, 1995, dated August 14, 1995).**
10.8 Orbital Communications Corporation Restated 1992 Stock Option Plan, restated as of September
12, 1995 (transmitted herewith).**
10.9 Orbital Sciences Corporation 1995 Deferred Compensation Plan.** (transmitted herewith)
10.10 Fairchild Space and Defense Corporation Supplemental Executive Retirement Plan.** (transmitted
herewith)
10.11 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).**
10.11.1 Employment Agreement between Jack A. Frohbieter and Fairchild Space and Defense Corporation,
dated August 26, 1992 (incorporated by reference to Exhibit 10.10.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, filed March 28, 1995).**
10.12 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
22
25
the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9,
1990 and effective on April 24, 1990).**
10.12.1 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).**
10.13 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 19.14 to
Amendment No. 2 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1992,
dated January 27, 1993).
10.14 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).+
10.14.1 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).+
10.14.2 Amendment No. 2 to Master Agreement dated as of October 1, 1994 (incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994 dated March 28,
1995).+
10.14.3 Amendment No. 3 to Master Agreement dated as of September 12, 1995 (transmitted herewith).
10.15 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).+
10.15.1 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).+
10.16 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).
10.16.1 Amendment No. 1 to Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. dated as of
September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global Partners
(transmitted herewith).
10.17 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).
10.17.1 Amendment No.1 to Agreement of Limited Partnership of ORBCOMM International Partners, L.P.
dated as of September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global
Partners (transmitted herewith).
10.18 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
23
26
on Form 10-Q for the Quarter Ended June 30, 1993, dated August 13, 1993).
10.18.1 Amendment No.1 to Proprietary Information and Non-Competition Agreement dated as of September
12, 1995 among the Company, Orbital Communications Corporation, Teleglobe Inc., Teleglobe
Mobile Partners, ORBCOMM Global, L.P., ORBCOMM USA, L.P., and ORBCOMM International Partners,
L.P. (transmitted herewith).
10.19 Support Agreement between the Company and MacDonald, Dettwiler Holdings, Inc., dated November
17, 1995. (transmitted herewith)
11 Statement re: Computation of Earnings Per Share (transmitted herewith).
13 Portions of the 1995 Annual Report to Stockholders (transmitted herewith).
21 Subsidiaries of the Company (transmitted herewith).
23 Consent of KPMG Peat Marwick LLP (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-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.
24