Revenue, Earnings and Cash Flow Increase Compared to Year-Earlier Results – Company Provides Preliminary Financial Guidance for 2003
Orbital Sciences
Corporation today announced financial results for the third
quarter of 2002 and the first nine months of the year, reporting significant
improvements in revenue, operating income, earnings from continuing operations
and cash flow relative to the same periods in 2001.
The company reported revenue of $134.8 million in the third quarter of
2002, up $43.8 million or 48% over the comparable period in 2001. Orbital’s
third quarter 2002 operating income was $5.8 million as compared to an
operating loss of $16.9 million in the third quarter of 2001, a $22.7 million
quarter-over-quarter improvement. Orbital’s income from continuing operations
in the third quarter of 2002 was $0.8 million, or $0.02 per diluted share, as
compared to a loss of $16.3 million, or $0.42 per diluted share, in the third
quarter of 2001. The company’s net income in the third quarter of 2002 was
$1.6 million, or $0.04 earnings per diluted share, which included a gain of
$0.9 million, or $0.02 per diluted share, in connection with the favorable
adjustment of liabilities related to previously discontinued operations. Net
income in the third quarter of 2001 was $5.6 million, or $0.15 per diluted
share, and included a $21.9 million gain related to discontinued operations.
“In the third quarter, Orbital clearly demonstrated the strength of our
two core business areas, satellites and launch vehicles,” said Mr. David W.
Thompson, Orbital’s Chairman and Chief Executive Officer. “In our satellite
and related space systems segment, we continued to see operating margins
improve, both on a third quarter and sequential quarter comparison. We also
produced strong top-line revenue growth and a double-digit operating margin in
the launch vehicle segment, with our missile defense business continuing to be
the primary driver of the company’s revenue increases.”
Mr. Thompson added, “These outstanding results in our core business areas
were offset by disappointing results in our electronic systems segment.
Looking ahead to the fourth quarter, we expect electronic systems to return to
the normal levels of revenue and profitability that the business generated in
the first and second quarters of this year.”
For the first nine months of 2002, the company reported revenue of $391.0
million, an increase of 33% over the same period in 2001. Orbital generated
nine-month operating income of $18.3 million and net income from continuing
operations of $8.5 million, or $0.19 income per diluted share. These results
compare to $294.4 million in revenue, an operating loss of $29.9 million and a
net loss from continuing operations of $64.1 million, or $1.68 loss per
diluted share, in the first nine months of 2001. Orbital reported a net loss
of $4.4 million, or $0.10 per diluted share for the nine-month period in 2002.
The net loss includes a $13.8 million goodwill impairment charge related to
the electronic systems segment recorded as a cumulative effect of a change in
accounting. The company announced in the second quarter that it would be
recording an impairment charge prior to the end of 2002 in accordance with the
adoption of a new accounting standard, SFAS No. 142. The 2002 results also
include $0.9 million in net favorable adjustments related to previously
discontinued operations.
Financial Highlights
Summary financial results are as follows ($ in millions, except for per
share data):
Quarter Ended
September 30,
2002 2001
Revenue $134.8 $91.0
Gross Profit 21.1 12.2
Operating Income (Loss) 5.8 (16.9)
Income (Loss), Continuing Operations 0.8 (16.3)
Net Income 1.6 5.6
Income (Loss) Per Diluted Share,
Continuing Operations 0.02 (0.42)
Net Income Per Diluted Share $0.04 $0.15
Nine Months Ended
September 30,
2002 2001
Revenue $391.0 $294.4
Gross Profit 61.8 29.4
Operating Income (Loss) 18.3 (29.9)
Income (Loss), Continuing Operations 8.5 (64.1)
Net Income (Loss) (4.4) 50.6
Income (Loss) Per Diluted Share,
Continuing Operations 0.19 (1.68)
Net Income (Loss) Per Diluted Share $(0.10) $1.33
Revenue
Orbital’s third quarter and nine-month revenue of $134.8 million and
$391.0 million, respectively, increased 48% and 33% over the same periods in
2001, driven by strong growth in the company’s two core product segments,
launch vehicles and satellites.
The significant increase in launch vehicle revenue in 2002 is largely due
to Orbital’s work on the missile defense booster vehicle program under a
multi-year contract from The Boeing Company. The increase in the company’s
satellite manufacturing revenue is primarily attributable to its work on
geosynchronous (GEO) communications satellites. These revenue increases were
partly offset by a revenue decrease in the company’s only remaining non-core
business unit, its electronics systems division, which supplies vehicle
management systems for local and regional public transit and highway
maintenance agencies.
Revenue by business segment is as follows ($ in millions):
Quarter Ended
September 30,
2002 2001
Launch Vehicles and Advanced Programs $69.7 $26.5
Satellites and Related Space Systems 53.2 48.2
Electronic Systems 12.8 17.2
Eliminations and Other (0.9) (0.9)
Total Revenues $134.8 $91.0
Nine Months Ended
September 30,
2002 2001
Launch Vehicles and Advanced Programs $178.2 $92.7
Satellites and Related Space Systems 170.6 157.6
Electronic Systems 44.8 47.2
Eliminations and Other (2.6) (3.1)
Total Revenues $391.0 $294.4
Operating Income
Orbital generated operating income in the third quarter of 2002 of $5.8
million, a $22.7 million improvement over the same quarter last year. The
company’s launch vehicle and satellite manufacturing segments posted
significant improvements in operating income, partially offset by losses in
its electronic systems business. Operating income derived from the launch
vehicle segment increased primarily as a result of the strong growth in the
company’s missile defense-related business. In the company’s satellite
manufacturing unit, the improved operating results were mainly attributable to
better performance in its science and technology satellite product line.
Losses in the company’s electronic systems segment were related to a charge
for inventory obsolescence and adjustments for cost growth on certain
contracts. Corporate and other operating results in the third quarter of 2001
included non-recurring charges related to unoccupied office space and the
ORBIMAGE satellite construction program.
Orbital reported $18.3 million of operating income in the first nine
months of 2002, or a $48.2 million improvement over the same period in 2001.
The increased operating results were driven by improvements in the company’s
launch vehicle and satellite manufacturing segments, partially offset by lower
results from the electronic systems segment. For the first nine months of
2002, Orbital’s launch vehicle and satellite manufacturing segments together
produced $19.0 million in operating income.
Operating income (loss) by segment is as follows ($ in millions):
Quarter Ended
September 30,
2002 2001
Launch Vehicles and Advanced Programs $7.4 $0.6
Satellites and Related Space Systems 1.3 (3.7)
Electronic Systems (2.9) 0.7
Corporate and Other 0 (14.5)
Total Operating Income (Loss) $5.8 $(16.9)
Nine Months Ended
September 30,
2002 2001
Launch Vehicles and Advanced Programs $17.3 $7.6
Satellites and Related Space Systems 1.7 (18.6)
Electronic Systems (0.1) 1.3
Corporate and Other (0.6) (20.2)
Total Operating Income (Loss) $18.3 $(29.9)
Income from Continuing Operations
Orbital’s income from continuing operations for the third quarter of 2002
was $0.8 million, a $17.0 million improvement relative to the third quarter of
2001. This growth was due to significantly improved operating results, offset
partially by higher interest expense and a reduction in other non-operating
income.
For the first nine months of 2002, income from continuing operations
increased to $8.5 million compared to a $64.1 million loss in the comparable
2001 period. This increase was primarily due to improved operating results
and lower interest expense in 2002 in addition to the absence of allocated
share of losses of an affiliate, which totaled $20.0 million in 2001.
Cash Flow and Liquidity Status
The following table provides summary information on the company’s cash
flow and debt position for the third quarter and first nine months of 2002 ($
in millions):
Quarter Nine Months
Ended Ended
Sept. 30, Sept. 30,
2002 2002
Cash Used in Operating Activities $(2.8) $(25.4)
Capital Expenditures (3.1) (11.8)
Free Cash Flow (5.9) (37.2)
Net Proceeds from Issuance of
Long-Term Debt and Warrants 123.4 145.8
Repayment of Debt (125.4) (128.3)
Net Proceeds from Issuance of
Common Stock and Other 1.1 7.0
Net Decrease in Cash $(6.8) $(12.7)
Beginning Cash Balance $57.3 $ 63.2
Ending Cash Balance $50.5 $ 50.5
Beginning Total Debt $130.6 $108.4
Ending Total Debt $116.1 $116.1
In August 2002, Orbital closed a private sale of $135.0 million 12%
second-priority secured notes due in 2006 and 135,000 warrants to purchase
16.5 million shares of common stock. The company used the net proceeds to
retire its $100 million convertible bonds that were due on October 1, as well
as to repay a $25 million term loan. The warrants were recorded in the
balance sheet based on their initial fair value of $24 million as an increase
to equity and a discount to the notes, resulting in a net debt balance of $111
million. This discount will be amortized as non-cash interest expense over
the four-year term of the notes.
As of September 30, 2002, Orbital’s available cash balance was $50.5
million. The company had negative free cash flow (defined as cash flow from
operations less capital expenditures) of $5.9 million and $37.2 million in the
third quarter and first nine months of 2002, respectively. In the first half
of 2002, Orbital repaid a $50.0 million vendor financing agreement that was
outstanding as of the end of 2001.
Summary Balance Sheet for September 30, 2002
($ in millions)
Assets Liabilities and Equity
Cash and Equivalents $50.5 Short-Term Debt $1.7
Receivables (Net) 132.9 Other Current Liabilities 133.6
Other Current Assets 35.3 Long-Term Debt 114.4
Property & Equipment (Net) 89.5 Other Non-Current Liabilities 44.8
Goodwill 95.3
Other Assets 18.0 Stockholders' Equity 127.0
Total Assets $421.5 Total Liabilities & Equity $421.5
New Business Highlights
During the third quarter, Orbital received approximately $165 million in
new contract awards, including $50 million in firm contracts and $115 million
in options, bringing 2002 year-to-date new firm and option orders to over $1.3
billion. At the end of the third quarter of 2002, the company’s firm backlog
was approximately $715 million and its total backlog, which includes firm
contracts as well as options, indefinite-quantity contracts and undefinitized
orders, was approximately $2.6 billion.
Operational Highlights and Outlook
Over the past several months, Orbital successfully carried out two space
missions. The N-STAR c GEO satellite was launched in July and was activated
and delivered to NTT DoCoMo in August. In mid-October, Orbital successfully
launched a target vehicle for a test of the Ground-based Midcourse Defense
System conducted by the U.S. Missile Defense Agency. Since the beginning of
the year, the company’s operational record totals ten successful space
missions, consisting of eight rocket launches and two satellite and other
space systems deployments. For the remainder of 2002, Orbital is currently
scheduled to conduct another four launch vehicle and satellite missions,
bringing the yearly total to 14 space missions.
Financial Outlook Update
Looking ahead to the fourth quarter, Orbital updated its previous
financial guidance for 2002, increasing its targeted revenue to the $535 to
$545 million range for this year. The company reaffirmed its earlier targets
for operating income margin to be in the 5% to 6% range. Orbital also
improved its estimate free cash flow for the year, now expected to be in the
range of negative $45 to $50 million. The company’s earlier estimate was for
negative free cash flow in the range of $60 to $65 million for the year.
For 2003, Orbital is currently targeting top-line revenues of
approximately $560 to $580 million. The company is aiming to achieve EBITDA
(earnings before interest, taxes, depreciation and amortization) margins of
between 9% and 10% and operating margins of between 6% and 7% next year. The
company also stated that it expects to generate positive free cash flow in
2003 in the range of $15 to $20 million.
Mr. Garrett E. Pierce, Orbital’s Vice Chairman and Chief Financial
Officer, said, “Our primary focus in 2003 will be on generating significant
free cash flow and building on the positive earnings momentum that we
established this year, through a rigorous combination of program execution,
cost controls and working capital management.”
About Orbital
Orbital is one of the world’s leading developers and manufacturers of
affordable space systems for commercial, civil government and military
customers. The company’s primary products include low-orbit, geosynchronous
and planetary spacecraft for communications, scientific and remote sensing
missions; ground- and air-launched rockets that deliver satellites into orbit;
and missile defense boosters that are used as target and interceptor vehicles.
Orbital also offers space-related technical services to government agencies
and develops and builds satellite-based transportation management systems for
public transit and public works agencies, as well as private vehicle fleet
operators.
More information about Orbital can be found at http://www.orbital.com
Note: “Safe Harbor” Statement Under the Private Securities Litigation
Reform Act of 1995.
Some of the statements in this release constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than those of historical facts included herein,
including those related to the company’s financial outlook, goals, business
strategy, projected plans and objectives of management for future operations,
new order trends and liquidity are forward-looking statements. Such “forward-
looking statements” involve unknown risks and uncertainties that may cause the
actual results, performance or achievements of the company to be materially
different from any future results, performance or achievements, expressed or
implied by such forward-looking statements. Factors such as general economic
and business conditions, availability of required capital for Orbital,
continued government support and funding for key space and defense programs,
the financial condition of major customers, product performance, market
acceptance of products, services and technologies, consumer demand, and
dependence upon long-term contracts and licensing agreements with commercial
and government customers may impact the company’s revenues, expenses and
profit from period to period. These factors and others related to the
company’s business are described in further detail in the company’s SEC
filings, including its Form 10-K. Orbital assumes no obligation to update any
such forward-looking information.
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share data)
Quarter Ended
September 30,
2002 2001
Revenue $134,833 $91,008
Cost of goods sold 113,777 78,816
Gross profit 21,056 12,192
Research and development expenses 1,365 2,060
Selling, general and administrative expenses 13,855 25,549
Amortization of goodwill - 1,503
Income (loss) from operations 5,836 (16,920)
Other income, net 574 3,683
Interest expense (5,650) (3,041)
Income (loss) before provision for income taxes 760 (16,278)
Provision for income taxes - -
Income (loss) from continuing operations 760 (16,278)
Income from discontinued operations 875 21,895
Net income $ 1,635 $ 5,617
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.02 $ (0.42)
Income from discontinued operations 0.02 0.57
Net income $ 0.04 $ 0.15
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share data)
Nine Months Ended
September 30,
2002 2001
Revenue $390,980 $294,386
Cost of goods sold 329,219 264,949
Gross profit 61,761 29,437
Research and development expenses 3,021 6,281
Selling, general and administrative expenses 40,461 48,561
Amortization of goodwill - 4,519
Income (loss) from operations 18,279 (29,924)
Other income, net 1,664 4,663
Interest expense (11,430) (18,851)
Allocated share of losses of affiliate - (19,995)
Income (loss) before provision for income taxes 8,513 (64,107)
Provision for income taxes - -
Income (loss) from continuing operations
before cumulative effect of change in accounting 8,513 (64,107)
Income from discontinued operations 875 114,729
Cumulative effect of change in accounting (13,795) -
Net income (loss) $ (4,407) $ 50,622
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.19 $ (1.68)
Income from discontinued operations 0.02 3.01
Cumulative effect of change in accounting (0.31) -
Net income (loss) $ (0.10) $ 1.33
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2002 (Unaudited) 2001
ASSETS
Cash $ 50,530 $ 63,215
Receivables, net 132,865 125,538
Inventory and other current assets 35,327 35,845
Total current assets 218,722 224,598
Property, plant and equipment, net 89,462 88,795
Goodwill 95,293 109,088
Other non-current assets 17,978 10,253
Total Assets $421,455 $432,734
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 1,722 $103,710
Accounts payable and accrued expenses 97,677 160,386
Deferred revenues 35,880 23,886
Total current liabilities 135,279 287,982
Long-term debt 114,409 4,665
Other non-current liabilities 4,200 5,216
Allocated losses of affiliate 40,586 40,586
Total stockholders' equity 126,981 94,285
Total Liabilities and Stockholders' Equity $421,455 $432,734
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Quarter Nine Months
Ended Ended
September 30, September 30,
2002 2002
Net income $ 760 $ 8,513
Depreciation and amortization 3,661 11,146
Prepaid financing fees and debt
discount amortization 2,037 2,752
Stock-based compensation expense 348 348
Change in assets and liabilities and other (9,609) (48,127)
Net cash used in operating activities (2,803) (25,368)
Capital expenditures (3,078) (11,810)
Net proceeds from issuance of
long-term debt 123,433 145,797
Repayment of debt and other (125,439) (128,261)
Net proceeds from issuance of common stock 1,137 6,957
Net cash provided by financing activities (869) 24,493
Net decrease in cash (6,750) (12,685)
Cash, beginning of period 57,280 63,215
Cash, end of period $50,530 $50,530
CONTACT: Barron Beneski of Orbital Sciences Corporation, +1-703-406-5528,
or Beneski.barron@orbital.com
