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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X]
For the fiscal year ended December 31, 1996
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)
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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
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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 sales price as reported on the Nasdaq
Stock Market on March 19, 1997 was approximately $515,228,830.
As of March 12, 1997, 32,201,802 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, 1996 (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 24, 1997 (the "Proxy Statement") are incorporated by
reference in Part III of this Report.
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ORBITAL SCIENCES CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1996
PART I Page
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Item 1. Business 1
Item 2. Properties 11
Item 3. Legal Proceedings 11
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 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition 14
and Results of Operations
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 14
Item 12. Security Ownership of Certain Beneficial Owners and Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15
Pegasus(R) and Taurus(R) are registered trademarks and service marks, and
OrbView(R) is a registered trademark of Orbital Sciences Corporation;
Orbital(TM), MicroStar(TM) and PegaStar(TM) are trademarks of Orbital Sciences
Corporation; and Orbital(sm) and ORBIMAGE(sm) are service marks of Orbital
Sciences Corporation. ORBCOMM(sm) is a service mark of ORBCOMM Global, L.P.
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ITEM 1. BUSINESS
BACKGROUND
Orbital Sciences Corporation (together with its subsidiaries,
"Orbital" or the "Company") is a space and information systems company that
designs, manufactures, operates and markets a broad range of space-related
products and services. Orbital's products and services are grouped into three
business sectors: space and ground infrastructure systems, satellite access
products and satellite services. Space and ground infrastructure systems
include launch vehicles, satellites, electronics and sensors, and ground
systems and software. Satellite access products include low-cost, hand-held
satellite-based navigation and communications products. Satellite services
include satellite-based two-way mobile data communications and remote sensing
and Earth imaging services. Orbital operates major launch vehicle, satellite
and electronics engineering, manufacturing and test facilities in Dulles,
Virginia, Germantown, Maryland and Chandler, Arizona, a launch vehicle and
satellite integration and test facility at Vandenberg Air Force Base,
California, a space sensors and instruments facility in Pomona, California, a
ground systems and software facility in Vancouver, British Columbia, and
facilities for its navigation and communications products in San Dimas,
California and Mexicali, Mexico.
Orbital was incorporated in Delaware in 1987 to consolidate the
assets, liabilities and operations of Space Systems Corporation and Orbital
Research Partners, L.P. 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. This operation designs,
develops and produces satellite-borne scientific sensors for space and
terrestrial research, in situ atmospheric monitoring equipment for human space
flight programs and other sensors and instruments for commercial and military
applications. 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
satellite imaging ground stations and related information processing software
based in Vancouver, British Columbia.
In 1992, Orbital established a wholly owned subsidiary, Orbital
Imaging Corporation ("ORBIMAGE"), to develop and operate commercial Earth
imaging and remote sensing satellites and to market the information services
derived from such satellites.
In 1993, Orbital's majority owned subsidiary Orbital Communications
Corporation ("OCC") and Teleglobe Mobile Partners ("Teleglobe Mobile"), an
affiliate of Teleglobe Inc., formed ORBCOMM Global, L.P. ("ORBCOMM Global") to
develop, construct and operate a low-Earth orbit satellite-based two-way data
communications and messaging system (the "ORBCOMM System"). OCC 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.
DESCRIPTION OF ORBITAL'S PRODUCTS AND SERVICES
Orbital's products and services are grouped into three categories:
space and ground infrastructure systems, satellite access products and
satellite services. Orbital's overall business is not seasonal to any
significant extent.
SPACE AND GROUND INFRASTRUCTURE SYSTEMS
The Company's space and ground infrastructure systems include launch
vehicles, satellites, electronics and sensors, and ground systems and software.
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SPACE LAUNCH VEHICLES. The Company has developed and produces the
Pegasus and Taurus space launch vehicles. Orbital's Pegasus launch vehicle is
launched from beneath the Company's leased Lockheed L-1011 aircraft to deploy
satellites weighing up to 1,000 pounds into low-Earth orbit. Through December
1996, the Company had conducted a total of fourteen Pegasus missions, twelve 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. Orbital conducted five Pegasus missions in 1996. Following a
comprehensive review of design, assembly, test and operations procedures
triggered by two earlier unsuccessful flights, the Pegasus XL, an enhanced
version of the standard Pegasus launch vehicle, successfully launched a
satellite for the U.S. Air Force to its intended orbit in March 1996 and
performed two successful National Aeronautics and Space Administration ("NASA")
missions during the summer. A standard Pegasus also successfully launched a
U.S. Department of Defense ("DoD") satellite in May 1996. In a November 1996
launch for NASA, a Pegasus XL delivered two scientific satellites to their
designated orbits, but the satellites failed to separate from the launch
vehicle. The Pegasus separation system used on this launch has worked properly
on all previous launches on which it was deployed. The Company believes that
the problem was caused by a faulty electrical power system on the Pegasus that
failed to activate certain satellite separation mechanisms, and does not
anticipate significant further delays in its launch schedule to implement
necessary corrective actions.
The higher capacity Taurus launch 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 the Defense Advanced Research
Projects Agency ("DARPA").
U.S. and international government customers for Pegasus launch
vehicles include NASA, the U.S. Air Force, DARPA, the Ballistic Missile Defense
Organization ("BMDO"), and the national space agencies of Spain and Brazil.
Commercial customers include ORBCOMM Global and CTA, Incorporated ("CTA"). In
addition, ORBIMAGE plans to launch a remote imaging satellite on Pegasus.
Customers for Taurus launch vehicles include NASA, the U.S. Air Force, Ball
Corporation ("Ball"), ORBCOMM Global (as a secondary payload on the Ball
mission) and South Korea's space agency.
During 1996, NASA selected Orbital to design, construct, test and
operate the X-34 reusable launch demonstrator vehicle. The X-34 will test and
demonstrate advanced reusable launch system technologies and materials as part
of NASA's Reusable Launch Vehicle Program that is spearheading the development
of next-generation, lower cost 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 signature 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 1996 for suborbital launch vehicles and
related systems included the Theater Missile Defense Critical Measurement
Program pursuant to which Orbital provides ballistic and maneuvering tactical
target suborbital vehicles for use by the U.S. Army and U.S. Air Force in
developing and testing interceptor and sensor systems, and BMDO's Red Tigress
anti-missile defense research program. Orbital conducted two suborbital
launches in 1996, both of which were successful. From January 1993 through
March 1997, the Company has conducted a total of 34 launches of suborbital
vehicles with a 100% success rate.
SATELLITES. The Company designs and produces small and medium class
satellites for commercial, scientific and military applications. The Company's
small satellite platforms such as MicroStar and PegaStar are designed and
produced to be launched by the Pegasus or Taurus launch vehicle. The PegaStar
spacecraft is a general purpose
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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 ORBIMAGE satellite-based remote imaging programs, such as
the OrbView-2 ocean and land surface environmental monitoring satellite system
and the OrbView-3 high-resolution remote imagery system. Orbital's MicroStar
spacecraft platform, which is placed into orbit by the Pegasus launch vehicle,
is designed for use in the ORBCOMM System and also for a variety of small space
science and remote imaging projects. The first three MicroStar spacecraft were
deployed by Orbital in 1995, two for the ORBCOMM System and the other for
ORBIMAGE to monitor lightning and severe weather patterns, and continued to
perform throughout 1996. Customers for the Company's small spacecraft include
NASA, the U.S. Air Force, DARPA and ORBCOMM Global.
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 up
to 15 years, and are used to gather various scientific data, such as ocean
topography and atmospheric imaging information. Orbital also is the spacecraft
supplier to Johns Hopkins University, which is leading NASA's Far Ultraviolet
Spectroscopic Explorer (FUSE) program to measure the early universe's radiation.
Orbital also 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, DoD, the Department of Energy and other customers. For
example, Orbital provided engineering support products and services for both
the first and second repair missions for the orbiting Hubble Space Telescope.
ELECTRONICS AND SENSORS. Orbital develops, manufactures and markets
defense electronics, including advanced avionics and data management systems
for aircraft flight operations and ground support applications. 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 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 equipment for the U.S. Navy and data transfer equipment
and digital terrain systems for the U.S. Air Force. In addition, the 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 platforms, including the F-4, F-14,
F-16, F-18 and F-22 aircraft and the LAMPS helicopter.
In addition, Orbital produces electronics and data management systems
that have been applied to the development and installation of "intelligent
transportation systems," primarily, to date, for metropolitan mass transit
operators. These systems help manage public bus and light rail systems,
provide for voice and data communications and transmit precise GPS-based
location information in emergency situations. Customers for Orbital's
intelligent transportation systems include the metropolitan mass transit
authorities in Chicago and New York City.
Orbital also produces satellite-borne scientific sensors and
instruments, such as atmospheric ozone monitoring instruments and environmental
sensors. The Company's second and third Total Ozone Mapping Spectrometer
("TOMS") instruments were successfully launched in 1996, one 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. Orbital has also developed and produced an
atmospheric monitoring system for use on the Space Station called the
Atmospheric Composition Monitoring Assembly, which 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. In addition, Orbital
recently expanded its commercial base of sensors products to include the
manufacturing and marketing of sensors that analyze fuel properties in the
chemical, biotechnology, pharmaceutical and steel industries.
SATELLITE GROUND SYSTEMS. Orbital is a leading supplier of commercial
satellite remote imaging ground stations and a provider of advanced
space-qualified software and air navigation systems. The Company's ground
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systems have also expanded to include software-intensive systems designed for
naval operations, artillery command and control, radar deception and logistics
support.
The Company develops, provides and upgrades commercial satellite
remote imaging ground stations and related information-processing software. Of
the 27 major non-military satellite ground stations around the world, Orbital's
MDA subsidiary 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. 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
various commercial and government customers around the world.
The Company's aviation systems products include automated aeronautical
information and air traffic management systems. The Company has developed an
automated aeronautical information management system that delivers weather and
route information directly to a pilot by computer. This system is designed to
address a growing trend toward automation and commercial operation 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, Malaysia and Switzerland.
SATELLITE ACCESS PRODUCTS
The Company's Magellan subsidiary designs, manufactures and markets
hand-held GPS navigators that provide users with precise positioning and
location information and also develops and provides personal data and voice
communicators that operate in conjunction with satellite systems. Magellan
manufactures satellite-based navigation and communications products for
commercial and consumer markets including recreational marine and aviation
users, outdoor recreational users such as hunters and hikers and professional
users such as geologists, geographers, surveyors, natural resource managers and
construction contractors. 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. Recently, Magellan announced the introduction of a combined GPS
navigator and personal messaging communicator for the ORBCOMM System that
Magellan expects to be ready for shipment in 1997, and Magellan will continue
to develop new satellite-based communications and tracking technology that is
compatible with the ORBCOMM System and other satellite networks.
SATELLITE SERVICES
In the Company's satellite services sector, ORBCOMM Global and
ORBIMAGE are developing satellite-based services to address markets for global
two-way data communications and information derived from remote imaging of the
atmosphere, oceans and land surfaces.
ORBCOMM COMMUNICATIONS SERVICES. The ORBCOMM System is designed to
provide virtually continuous low-cost monitoring, tracking and messaging
communications coverage over most 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, industrial equipment, shipping vessels and
other remote assets. The Company expects that the ability to send and receive
data and messages without the geographic limitations of existing communications
systems will stimulate the growth of new markets for satellite-based
monitoring, tracking and messaging communications and will be used to
supplement terrestrial-based communications systems by providing relatively
low-cost geographic coverage in areas these systems are unable to reach.
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The global ORBCOMM System design consists of a constellation of small
low-Earth orbit satellites, a control center that monitors and manages the flow
of information throughout the System, the gateways that transmit and receive
signals and process data and other information and the communicators that are
used by subscribers to transmit and receive messages to and from the
satellites. The first two ORBCOMM Global satellites launched in April 1995 are
being used to provide initial services, primarily in monitoring and tracking
applications, following the commencement of commercial service in the United
States in February 1996. There are currently four operational U.S. "gateway"
Earth stations located in New York, Washington, Arizona and Georgia, while
gateways are also planned to be owned and operated by ORBCOMM Global licensees
in strategic locations around the world. During 1996, ORBCOMM Global reached
agreements with several manufacturers for the development and manufacture of
hand-held communicators and various types of industrial communicators that
monitor fixed assets. In March 1996, subscriber communicators became
commercially available from Panasonic, the first of ORBCOMM's manufacturers.
The ORBCOMM System will be operated throughout the world by ORBCOMM
Global licensees, who will be responsible for obtaining the applicable foreign
regulatory approvals and for constructing the ground network in their
designated territories. The ORBCOMM System is marketed in the United States
through ORBCOMM USA. ORBCOMM International has signed preliminary agreements
with seven candidate licensees serving 69 countries to seek such regulatory
approvals and to initiate territory-specific market development in such
countries. ORBCOMM International has definitive agreements with international
licensees who will provide regional services in Canada, Europe and portions of
East Asia, the Middle East and Africa.
The two ORBCOMM System satellites currently in orbit and the U.S.
gateways provide communications availability in the United States approximately
10% of each 24-hour period, with maximum outages of approximately nine hours.
This type of availability is particularly appropriate for ORBCOMM Global's
planned initial applications focusing on monitoring the status of remote assets
and tracking trucks and cargo, where several readings per day satisfy a
customer's requirements. With the launch of additional satellites,
communications availability will also increase. The Company expects that, with
a planned constellation of 28 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 group 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.
Under the ORBCOMM System Procurement Agreement between Orbital and
ORBCOMM Global (the "Procurement Agreement"), Orbital is constructing and will
launch 26 additional satellites, and will construct an additional eight
satellites, all on a fixed-price basis. Consistent with industry practice for
similar contracts, the Procurement Agreement contains certain performance
incentives with respect to the satellites and their launches.
The ORBCOMM Partnerships. 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). OCC and Teleglobe Mobile are each 50%
general partners in ORBCOMM Global, with the result that OCC and Teleglobe
Mobile share equal responsibility for the operational and financial affairs of
ORBCOMM Global, and the approval of both OCC and Teleglobe Mobile is necessary
for ORBCOMM Global to act on major matters. OCC indirectly holds a 51%
participating interest in ORBCOMM USA, and Teleglobe Mobile indirectly holds a
51% participating interest in ORBCOMM International, with the result that OCC
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.
Financing. Orbital and Teleglobe Mobile's total equity capital
contributions to ORBCOMM Global are approximately $75 million and $85 million,
respectively. In 1996, ORBCOMM Global and its wholly owned subsidiary, ORBCOMM
Global Capital Corporation, issued $170,000,000 of senior unsecured notes (the
"Notes") to institutional investors. The Notes are fully and unconditionally
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA
and ORBCOMM International. The guarantees and the Notes are non-recourse to
Orbital, bear interest at a fixed rate of 14% and provide for noteholder
participation in future ORBCOMM System
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revenues, payment of which may be deferred by ORBCOMM Global to the extent
certain fixed charge ratios are not met. Net proceeds from the sale of the
Notes (approximately $164,500,000) are being applied to (i) the design,
construction, launch, operation and marketing of the ORBCOMM System and related
development, operating and management expenses (including cost contingencies)
and (ii) the first two years of interest on the Notes.
Start-up of the ORBCOMM System will produce significant ORBCOMM Global
operating losses for several more years. Even if the ORBCOMM System is fully
constructed and operational, there can be no assurance that an adequate market
will develop for ORBCOMM 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 OCC) has a 50%
participating interest in ORBCOMM Global, Orbital expects to recognize its
proportionate share of ORBCOMM Global profits and losses.
As of March 14, 1997, certain officers and employees of ORBCOMM Global
and Orbital held options to acquire 611,680 shares of OCC's common stock (or
approximately 13 percent of OCC's outstanding common stock) at option exercise
prices ranging from $1.50 to $26.50 per share. On an annual basis, holders of
OCC common stock acquired on exercise of these options may, subject to certain
conditions, require OCC to purchase such OCC common stock at its then fair
market value, subject to limitations under the indenture for the senior note
financing. As of March 14, 1997, there were 48,020 shares of OCC common stock
outstanding that were acquired in connection with option exercises by current
or former OCC and Orbital employees.
Regulatory Approvals. OCC has retained control over the applicable
license issued by the Federal Communications Commission ("FCC"), consistent
with FCC regulations. 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 FCC license may be revoked and a license renewal
application may be denied for cause. In addition, there can be no assurance
that ORBCOMM Global or its international 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, through its ORBIMAGE subsidiary, 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 imaging information. Small
Earth-viewing satellites and related sensors and instruments placed in low
orbits are planned to offer cost-efficient image collection and processing,
together with daily global coverage and high-resolution imaging quality.
Since April 1995, ORBIMAGE's first satellite, OrbView-1, has been
monitoring lightning and severe weather patterns. Orbital has also entered
into a contract with NASA to provide worldwide, daily ocean imagery using
Orbital's OrbView-2 environmental monitoring satellite system. The Company
plans to develop, produce, launch and operate the OrbView-2 system to deliver
high-quality multi-spectral ocean imagery and land surface imagery for up to
five years. The OrbView-2 launch has been delayed several years, primarily due
to technical challenges associated with the development of the spacecraft. The
OrbView-2 satellite has completed final testing and is currently scheduled to
be launched in the first half of 1997. In addition to providing unprocessed
real-time ocean data to NASA, ORBIMAGE plans to market the OrbView-2 imagery
directly and indirectly 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 pursuing a one-meter high-resolution satellite imagery
business based on imagery to be provided by the OrbView-3 satellite currently
under development by the Company, with Orbital under contract to provide the
launch service, ground stations and other related products and services.
OrbView-3 would be the third in a fleet of three spacecraft, including
OrbView-1 and OrbView-2, that will constitute the foundation of ORBIMAGE's
commercial satellite remote imagery business. The Company is currently
pursuing a transaction that would involve a sale of ORBIMAGE equity securities
to one or more third parties in order to finance such venture including the
development and construction of the OrbView-3 satellite and ground system.
There can be no assurance that the
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Company will be able to conclude such financing arrangement or develop
profitable commercial Earth observation and other remote imaging businesses.
* * * *
Financial information about the Company's products and services,
domestic and foreign 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.
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.
While there is currently no direct domestic competition for the
Pegasus and Taurus launch vehicles, potential competition may come from launch
systems derived from the LMLV currently being developed by Lockheed Martin
Corporation ("Lockheed"). Pegasus may face competition from launch systems
derived from government surplus ballistic missiles. The Israeli Shavit vehicle
and other potential foreign launch vehicles could also pose competitive
challenges to Pegasus, although U.S. government policy currently prohibits the
launch of foreign vehicles from U.S. territory. Competition for Taurus could
come from surplus Titan II launch vehicles, although a very limited inventory
remains. Japan's space agency has a launcher that directly competes with
Taurus in terms of launch capacity, but is considerably more expensive than the
Taurus. Competition to Pegasus and Taurus vehicles also exists in the form of
partial or secondary ("piggyback") payload capacity on larger boosters such as
the Ariane, Titan, Delta, Long March and Proton launch vehicles. While several
companies design and manufacture suborbital launch vehicles, Orbital's primary
competitors in this product line are Coleman Research Corp. and Space Vector
Corporation.
The Company's satellite systems and subsystems products compete with
products and services produced or provided by government entities and numerous
companies, including TRW Inc., CTA, Ball and Spectrum Astro, Inc. The
Company's 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 competitors in the area of satellite ground
stations include Datron Systems Inc., Matra Marconi Space N.V. and Hughes-STX
Corp.
Magellan's marine, outdoor recreation and aviation GPS satellite-based
navigation products primarily face competition from Garmin International.
Magellan competes with a larger number of producers of satellite 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 to enter into and develop new
markets for GPS navigators and personal satellite communicators, and to develop
and strengthen sales and distribution channels for such products.
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 entities and private
entities, such as EarthWatch Incorporated and Space Imaging L.P., that provide
or are seeking to provide satellite-based and other land remote imaging,
environmental monitoring and atmospheric sensing products.
10
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.
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 services and to seek customer and, where appropriate,
strategic partner investments in these products and services. Orbital's
research and development expenses, excluding direct customer-funded
development, were approximately $22.2 million, $28.5 million and $17.3 million,
respectively, for the fiscal years ended December 31, 1996, 1995 and 1994.
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 systems 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, the Canadian Intellectual Property Office and certain
other foreign trademark authorities.
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 and possible delays could be incurred in
securing alternative sources of supply. The Company's ability to launch its
Pegasus vehicle 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 the modified Lockheed L-1011 used for the air-launch
of the Pegasus vehicle.
U.S. GOVERNMENT CONTRACTS
During 1996, 1995 and 1994, approximately 45 percent, 40 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 1996 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, work performed and
11
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, with final payments occurring at
project completion. 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 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 from time to time experiences
contract suspensions and terminations.
BACKLOG
Orbital's contract backlog is attributable to its space and ground
infrastructure systems business. The Company's firm backlog at December 31,
1996 and 1995 was approximately $710 million and $530 million, respectively.
As of December 31, 1996, 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 contract orders not yet funded in the amounts of approximately $265
million and $355 million as of December 31, 1996 and 1995, respectively.
Approximately $325 million of backlog is currently scheduled to be performed
beyond 1997. Backlog excludes unexercised and undefinitized contract options
having an aggregate potential contract value at December 31, 1996 of
approximately $1.4 billion.
EMPLOYEES
As of December 31, 1996, Orbital had approximately 3,000 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
approximate 30,000 square-foot satellite engineering and manufacturing facility
on land adjacent to the Dulles office facility and is constructing an addition
to such facility to provide additional office, engineering and manufacturing
space. 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 214,000 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; and approximately 75,000 square feet
of office, engineering and manufacturing space in San Dimas, California. The
Company leases or owns other 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; as well as in other locations in Canada
12
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
On November 12, 1996, BTG USA Inc. filed a lawsuit against Magellan in
the U.S. District Court for the Eastern District of Pennsylvania, alleging that
Magellan's GPS products infringe a United States patent and seeking an
unspecified amount of monetary damages. The patent at issue expired in
November 1996. The Company believes the complaint has no merit, and the
Company is vigorously defending the action.
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 1996.
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, 1997. All Executive Officers
are elected annually and serve at the discretion of the Board of Directors.
Name Age Position
- ---- --- --------
David W. Thompson 42 Chairman of the Board, President and Chief Executive Officer
Bruce W. Ferguson 42 Executive Vice President and General Manager/Communications
and Information Services Group
James R. Thompson 60 Executive Vice President and General Manager/Launch Systems Group
Michael D. Griffin 47 Executive Vice President and General Manager/Space Systems Group
Robert D. Strain 40 Executive Vice President and General Manager/Electronics and Sensor
Systems Group
Daniel E. Friedmann 40 Executive Vice President and General Manager/Systems Integration
and Software Group
Jeffrey V. Pirone 36 Senior Vice President and Chief Financial Officer
Antonio L. Elias 47 Senior Vice President and Chief Technical Officer
Leslie C. Seeman 44 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. From
1981 to 1982, Mr. Thompson was Special Assistant to the President at Hughes
Aircraft Company's Missile Systems Group. From 1977 to 1979, Mr. Thompson was
employed by NASA at the Marshall Space Flight Center as a project manager and
engineer. Prior to that, he worked on the Space Shuttle's autopilot design at
the Charles Stark Draper Laboratory.
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 October 1993. He
was Deputy Administrator of NASA from 1989 to 1991. From 1986 until 1989, Mr.
Thompson was Director of NASA's Marshall
13
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.
Michael D. Griffin has been Executive Vice President/Space 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, from 1989 to 1991, was Deputy Director for
Technology at the Strategic Defense Initiative Organization.
Robert D. Strain has been Executive Vice President and General
Manager/Electronics and Sensor Systems Group since October 1996. From 1994
until 1996, he was Vice President for Finance and Manufacturing at Orbital.
Prior to that he served in a variety of senior-level financial positions with
Fairchild, including Vice President of Finance, Treasurer and Controller.
Daniel E. Friedmann has been Executive Vice President and General
Manager/Systems Integration and Software Group since January 1996. He
continues to serve as President and Chief Executive Officer of Orbital's
subsidiary, 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.
Jeffrey V. Pirone has been Senior Vice President and Chief Financial
Officer since August 1996, and had served as acting Chief Financial Officer as
of April 1996. From 1993 until March 1996, Mr. Pirone served as Vice President
and Controller of Orbital. Mr. Pirone joined Orbital as Controller in 1991,
and prior to that was a Senior Manager at KPMG Peat Marwick LLP.
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.
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 attorney at the law firm
of Wilmer, Cutler and Pickering.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
On March 12, 1997, there were 1,549 Orbital stockholders of record.
Additional 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.
14
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 38 through
57 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 is included in Item 4A above and
under the caption "Election of Directors -- Directors to be Elected at the 1997
Annual Meeting, -- Directors Whose Terms Expire in 1998 and -- Directors Whose
Terms Expire in 1999" and "Section 16(a) Beneficial Ownership Reporting
Compliance" of the Proxy Statement filed pursuant to Regulation 14A on or about
March 26, 1997 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included under the captions
"Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,"
"Indemnification Agreements," " Executive Employment Agreements and Termination
of Employment Agreements" and "Information Concerning the Board and Its
Committees" of the Proxy Statement filed pursuant to Regulation 14A on or about
March 26, 1997 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 or about March 26, 1997 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included under the caption
"Related Transactions" of the Proxy Statement filed pursuant to Regulation 14A
on or about March 26, 1997 and is incorporated herein by reference.
15
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 37)
B. Consolidated Statements of Earnings (Annual Report
page 38)
C. Consolidated Balance Sheets (Annual Report page 39)
D. Consolidated Statements of Stockholders' Equity
(Annual Report page 40)
E. Consolidated Statements of Cash Flows (Annual
Report page 41)
F. Notes to Consolidated Financial Statements (Annual
Report pages 42 through 57)
2. FINANCIAL STATEMENTS OF 50 PERCENT OWNED SUBSIDIARY AND
FINANCIAL STATEMENT SCHEDULES. The financial statements
of ORBCOMM Global, L.P. will be filed by amendment
pursuant to Regulation S-X 3-09(b).
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.
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
On December 23, 1996, the Company filed a Current Report on Form 8-K
reporting, pursuant to Item 9, its sale of 1.2 million shares of
common stock on December 13, 1996, in a transaction exempt from
registration pursuant to Regulation S under the Securities Act.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
16
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 25, 1997 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 25, 1997
Signature: Title:
/s/ David W. Thompson Chairman of the Board, Principal Executive
- -------------------------------------------------------- Officer and Director
David W. Thompson
/s/ Jeffrey V. Pirone Senior Vice President, Finance and Chief
- -------------------------------------------------------- Financial Officer
Jeffrey V. Pirone
/s/ Michael P. Keegan Controller
- --------------------------------------------------------
Michael P. Keegan
/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
/s/ Lennard A. Fisk Director
- --------------------------------------------------------
Lennard A. Fisk
17
/s/ Jack L. Kerrebrock Director
- --------------------------------------------------------
Jack L. Kerrebrock
/s/ Douglas S. Luke Director
- --------------------------------------------------------
Douglas S. Luke
/s/ John L. McLucas Director
- --------------------------------------------------------
John L. McLucas
/s/ Janice I. Obuchowski Director
- --------------------------------------------------------
Janice I. Obuchowski
/s/ Frank L. Salizzoni Director
- --------------------------------------------------------
Frank L. Salizzoni
/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
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Orbital Sciences Corporation
Under date of February 5, 1997, we reported on the consolidated balance sheets
of Orbital Sciences Corporation and subsidiaries (the "Company") as of December
31, 1996 and 1995, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996, as contained in the 1996 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 1996. 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 1996.
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, 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, 1997
19
ORBITAL SCIENCES CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C
- -------------------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------------------
CHARGED/
BALANCE AT CHARGED TO COSTS CREDITED TO
DESCRIPTION START OF PERIOD AND EXPENSES OTHER ACCOUNTS (1)
- -------------------------------------------------- ------------------- ------------------ -----------------------
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $ 587 $ 149 $ 42
Allowance for obsolete inventory 2,260 216 1,571
Allowance for unrecoverable investments - - 3,100
Deferred income tax valuation reserve 14,456 - 32,003
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts $ 778 $ 189 $ -
Allowance for obsolete inventory 3,936 580 -
Allowance for unrecoverable investments 3,100 - -
Deferred income tax valuation reserve 46,291 21,445 (2,695)
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts $ 773 $ 603 $ -
Allowance for obsolete inventory 3,778 667 685
Allowance for unrecoverable investments 1,100 - -
Deferred income tax valuation reserve 65,041 - -
COLUMN A COLUMN D COLUMN E
- -------------------------------------------------------------------------------------
BALANCE AT
DESCRIPTION DEDUCTIONS (2) END OF PERIOD
- -------------------------------------------------- ---------------- ----------------
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $ - $ 778
Allowance for obsolete inventory (111) 3,936
Allowance for unrecoverable investments - 3,100
Deferred income tax valuation reserve (168) 46,291
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts $ (194) $ 773
Allowance for obsolete inventory (738) 3,778
Allowance for unrecoverable investments (2,000) 1,100
Deferred income tax valuation reserve - 65,041
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts $ (8) $ 1,368
Allowance for obsolete inventory (32) 5,098
Allowance for unrecoverable investments - 1,100
Deferred income tax valuation reserve (7,808) 57,233
(1) - 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.
(2) - Deduction for revaluation of allowance account.
20
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 it 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 4.1 to the
Company's Registration Statement on Form S-3 (File Number 333-08769) filed and effective on
July 25, 1996.
3.1.1 Certificate of Designation for the Company's Series A Special Preferred Voting Stock
(incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3
(File Number 333-08769) filed and effective on July 25, 1996).
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).
4 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).
9 Voting and Exchange Trust Agreement between the Company, MacDonald Dettwiler Holdings Inc. and
State Street Bank and Trust Company (incorporated by reference to Exhibit 9 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
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).
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, for the fiscal year
dated December 31, 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).
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).
10.1.4 Amendment No. 4 to the Credit Agreement, dated as of November 15, 1995 (incorporated by
reference to Exhibit 10.1.3 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.1.5 Amendment No. 5 to the Credit Agreement , dated as of July 19, 1996 (incorporated by reference
to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ended June 30, 1996).
10.1.6 Amendment No. 6 to the Credit Agreement (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).
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).
21
10.2.2 Second Amendment to the NWML Note Agreement, dated as of March 15, 1996 (incorporated by
reference to Exhibit 10.2.2 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.2.3 Third Amendment to NWML Note Agreement, dated as of July 13, 1996 (incorporated by reference to
Exhibit 10.2 to the Company's Report on Form 10-Q for the quarter ended June 30, 1996).
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).
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).
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).
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).*
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).*
10.8 Orbital Communications Corporation Restated 1992 Stock Option Plan, restated as of September
12, 1995 (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
10.8.1 Amendment to Orbital Communications Corporation Restated 1992 Stock Option Plan, dated February
5, 1997 (transmitted herewith).*
10.9 Orbital Sciences Corporation 1995 Deferred Compensation Plan (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995).*
10.10 Magellan Corporation 1996 Stock Option Plan (incorporated by reference to Exhibit 10.3 to the
Company's Report on Form 10-Q for the quarter ended June 30, 1996).*
10.11 Orbital Imaging Corporation 1996 Stock Option Plan (transmitted herewith).*
10.12 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).*
10.12.1 Performance Share Agreement dated October 23, 1996 between the Company and Mr. D. W. Thompson
(transmitted herewith).*
10.13 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).*
10.13.1 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).*
22
10.14 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).
10.15 Master Agreement, restated as of September 12, 1995, by and among the Company, OCC, Teleglobe
Inc. and Teleglobe Mobile Partners (incorporated by reference to Exhibit 10. to ORBCOMM Global
L.P.'s Registration Statement on Form S-4 (File Number 333-11149) filed on August 30, 1996.
10.16 Restated Agreement of Limited Partnership of ORBCOMM Global, L.P., dated as of September 12,
1995, between OCC and Teleglobe Mobile Partners (incorporated by reference to Exhibit 3.2 to
ORBCOMM Global L.P.'s Registration Statement on Form S-4 (File Number 333-11149) filed on
August 30, 1996.
10.16.1 Amendment No. 1 to Restated Agreement of Limited Partnership of ORBCOMM Global, L.P., dated
December 2, 1996 (transmitted herewith).
10.17 Restated Agreement of Limited Partnership of ORBCOMM USA, L.P., dated as of September 12, 1995
between Orbital Communications Corporation and ORBCOMM Global (incorporated by reference to
Exhibit 3.4. to ORBCOMM Global L.P.'s Registration Statement on Form S-4 (File Number
333-11149) filed on August 30, 1996.
10.18 Support Agreement between the Company and MacDonald, Dettwiler Holdings, Inc., dated November
17, 1995 (incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995)
11 Statement re: Computation of Earnings Per Share (transmitted herewith).
13 Portions of the 1996 Annual Report to Stockholders (transmitted herewith).
21 Subsidiaries of the Company (transmitted herewith).
23.1 Consent of KPMG Peat Marwick LLP (transmitted herewith).
23.2 Consent of KPMG Peat Marwick LLP with respect to financial statements of ORBCOMM Global, L.P.
(to be filed by amendment).
27 Financial Data Schedule for year ended December 31, 1996 (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).
99 Important Factors Regarding Forward-Looking Statements (transmitted herewith).
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* Management Contract or Compensatory Plan or Arrangement.