GeoEye Launches Satellite; Restates 3 Years of Earnings

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  Space News Business

GeoEye Launches Satellite; Restates 3 Years of Earnings

By BECKY IANNOTTA
Space News Staff Writer
posted: 16 September 2008
08:39 am ET






WASHINGTON
GeoEye Inc. expects by late October or early November to begin receiving the first images from its GeoEye-1 satellite, which after several delays was launched successfully Sept. 6 from Vandenberg Air Force Base,
Calif.
, aboard a Boeing Delta 2 rocket.

Meanwhile, the Dulles, Va.-based company also plans to have cleared from its books $29.5 million in tax-related interest and penalties that resulted from a restatement of its earnings for the past three years.

Company officials have set their sights on GeoEye-1 to invigorate lagging imagery sales that account for a $16.5 million drop in revenue for the first half of 2008, compared to the first half of 2007.

GeoEye-1 will collect black-and-white-imagery with 0.41-meter resolution and color imagery with 1.65-meter resolution. The satellite is undergoing a calibration and checkout phase before imagery becomes available 45 to 60 days after launch.

The primary customer for GeoEye-1 images is the U.S. National Geospatial-Intelligence Agency (NGA), which agreed as part of its NextView program to pay $237 million toward building the satellite. The agency similarly subsidized a satellite for GeoEye competitor DigitalGlobe of Longmont, Colo.

GeoEye-1 cost $502 million to build, launch and insure, according to a Sept. 8 GeoEye filing with the U.S. Securities and Exchange Commission (SEC). GeoEye-1 is insured for up to $320 million, the filing said.

GeoEye
reviewed its finances during the summer and determined payments by the NGA that went toward construction of the satellite should have been calculated as income in previous years. That determination prompted GeoEye to restate its financial earnings for 2005, 2006, 2007 and the first quarter of 2008. That restatement led to tax interest and penalties totaling $29.5 million.

GeoEye
, however, is seeking approval from the U.S. Internal Revenue Service (IRS) for an accounting change that would reverse those penalties by the time the company reports its earnings for the months of July, August and September. The IRS could waive those penalties because the restatements were triggered by a company review and not an IRS audit, said Henry Dubois, GeoEye’s chief financial officer.

GeoEye-1 originally was scheduled for an April 2008 launch. The launch was postponed to late summer because of what GeoEye officials said was a request from the U.S. Department of Defense for the April launch slot.

Company officials say the delay hurt their NGA sales. Although GeoEye operates the Ikonos satellite, company officials say the NGA is more interested in the more-detailed data from GeoEye-1 and from DigitalGlobe’s WorldView-1 satellite, which was launched in September 2007. NGA orders for the first half of 2008 were down $20.6 million, GeoEye said in the SEC filing.

The NGA is looking forward to using GeoEye-1’s images, U.S. Navy Vice Adm. Robert B. Murrett, the agency’s director, said in a Sept. 8 statement. “We are excited about and eagerly await delivery of the first new imagery,” Murrett said. “With the improved resolution, agility and capacity of the GeoEye-1 satellite, we anticipate increasing the use of commercial imagery to satisfy our geospatial production requirements.”

Matthew O’Connell, chief executive of GeoEye, said GeoEye-1 and Ikonos will work in tandem to meet customer demands.

“This launch, and our important relationship with the National Geospatial-Intelligence Agency, shows how public-private partnerships can be successful for the collection of broad areas of the Earth,” he said in Sept. 6 written statement.

GeoEye-1 was built by General Dynamics Advanced Information Systems of Gilbert,
Ariz.
, and the sensor was built by ITT Corp.’s Space Systems Division of Rochester, N.Y.

GeoEye
has contracted with ITT to provide the instrument for the more-capable GeoEye-2 satellite that will launch no sooner than 2011, according to the SEC filing. GeoEye had spent $15.7 million on GeoEye-2 as of June 30, and expects to sign a contract with a satellite builder at the end of 2008, the filing said.