ORBIMAGE Inc.,
the satellite imaging company based in Dulles, VA, today
announced its financial results for the third quarter of 2004 and for the
first nine months ending September 30, 2004. ORBIMAGE also announced that its
investor conference call to discuss its third quarter financial and
operational results will be held on Wednesday, November 17, 2004 at 2:00 PM.
The Company will provide information for that call by press release and by
posting on its website.
Total revenues for the third quarter of 2004 were $8.9 million versus
third quarter 2003 revenues of $1.1 million. Net loss for the third quarter
of 2004 was $6.1 million versus a loss of $4.6 million in the same period a
year ago. Total revenues for the nine months ended September 30, 2004 were
$20.7 million versus $4.1 million in the same 2003 period. Net loss for the
first nine months of 2004 was $19.0 million versus a loss of $10.4 million in
the same period a year ago. Total revenues in the 2004 periods reflect the
commencement of OrbView-3 operations, while net loss in the 2004 periods
reflects an increase in operating costs (including depreciation) resulting
from the OrbView-3 satellite and from interest expense on our Senior Notes and
Senior Subordinated Notes issued on December 31, 2003.
“We made a conscious decision to sacrifice some short-term operating
growth in order to focus our efforts to win the National Geospatial-
Intelligence Agency’s (NGA) NextView Second Vendor Program satellite
procurement,” said ORBIMAGE’s President and Chief Executive Officer Matthew
O’Connell. “NGA’s announcement of our winning bid on September 30 obviously
justifies this decision. The NextView award is the latest example of the
progress we have made this year in establishing ourselves as an industry
leader providing imagery products and services in the U.S. and abroad.
Although a protest of our award has been filed with the Government
Accountability Office, we have been directed by NGA to continue work during
the protest proceeding, and we remain confident that we will prevail in
retaining the contract award.”
On December 31, 2003 (the “Effective Date”), Orbital Imaging Corporation
(the “Predecessor Company”) emerged from reorganization proceedings under
Chapter 11 of the Federal bankruptcy laws pursuant to the terms of the Plan of
Reorganization. Upon reorganization, the Orbital Imaging Corporation changed
its name to ORBIMAGE Inc. As a result of applying Fresh-Start accounting, the
reported historical financial statements of the Predecessor Company for
periods ended prior to December 31, 2003 generally are not comparable to those
of ORBIMAGE Inc. Therefore, comparisons of earnings per share data are not
included herein. As referenced within this news release, results of
operations for the quarter and nine months ended September 30, 2003 refer to
the Predecessor Company.
Operating Results
The following table presents ORBIMAGE’s summary reported results
(unaudited) for the third quarter and year-to-date periods (in thousands,
except share and per share data):
Successor Predecessor Successor Predecessor
Company Company Company Company
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenues $8,891 $1,134 $20,650 $4,125
Loss from operations (3,564) (2,116) (11,474) (4,615)
Net loss (6,140) (4,640) (18,957) (10,380)
Loss per common share -
basic and diluted $(0.95) $(0.18) $(2.97) $(0.41)
Weighted average shares
outstanding - basic and
diluted 6,497,292 25,214,000 6,388,335 25,214,000
Revenues for the three months ended September 30, 2004 were approximately
$8.9 million, a significant increase compared to $1.1 million in the same
period in 2003. Revenues for the nine months ended September 30, 2004 were
approximately $20.7 million compared to $4.1 million in the same period in
2003. The increase in 2004 revenues was primarily due to the commencement of
OrbView-3 operations for the U.S. Government and our major international
customers. Revenues generated from OrbView-3 products and services were
approximately $14.5 million in 2004.
Loss from operations was $3.6 million for the third quarter of 2004 versus
$2.1 million for the third quarter of 2003. In 2004, ORBIMAGE commenced
recording depreciation expense on the OrbView-3 satellite and related ground
station assets. Loss from operations includes depreciation expense of $5.9
million and $0.8 million for the third quarter of 2004 and 2003, respectively.
Additionally, loss from operations in the third quarter of 2004 includes $1.5
million of amortization of deferred compensation associated with stock awards
granted to employees. Loss from operations was $11.5 million for the first
nine months of 2004 and $4.6 million for 2003. Loss from operations includes
depreciation expense of $16.1 million and $2.5 million in 2004 and 2003,
respectively. Loss from operations in 2004 also includes $2.0 million of
amortization of deferred compensation associated with stock awards granted to
employees. The remaining favorable variance for both 2004 periods compared to
2003 results principally from the commencement of OrbView-3 revenue activities.
Net loss for the third quarter of 2004 was $6.1 million versus a loss of
$4.6 million in the same period a year ago. Net loss for the first nine
months of 2004 was $19.0 million versus a loss of $10.4 million in the same
period a year ago. ORBIMAGE recorded net interest expense of approximately
$2.6 million during the three months ended September 30, 2004 and $7.5 million
for the nine months ended September 30, 2004 on long-term debt incurred as
part of the Chapter 11 restructuring. Net loss for both 2003 periods includes
net interest expense on debt incurred to purchase insurance coverage for the
combined risk of launch, satellite checkout and on-orbit satellite operations
with respect to OrbView-3. This debt was converted to New Senior Notes on the
effective date of the emergence from Chapter 11. The Predecessor Company
previously had recognized no interest expense in 2003 because it was operating
under bankruptcy protection.
Cash Flow and Leverage
As of September 30, 2004, ORBIMAGE had approximately $12.8 million of cash,
cash equivalents and available-for-sale securities.
Net cash provided by operating activities for the quarter ended September
30, 2004 was $6.2 million. Net cash used for operating activities was $0.6
million for the nine months ended September 30, 2004. Capital expenditures
for the quarter and nine months ended September 30, 2004 were $0.6 million and
$1.1 million. Much of the 2004 expenditures represent internal salary and
related costs as well as external costs associated with the in-orbit checkout
of OrbView-3 and related systems. ORBIMAGE neither received nor used cash for
financing activities during the nine months ended September 30, 2004.
ORBIMAGE will be required to make significant capital expenditures to
develop, manufacture and launch the OrbView-5 satellite (assuming, as we do,
the GAO rejects the protest filed by the competing bidder). The Company
estimates that its total project cost (including financing and launch
insurance costs) to bring the OrbView-5 satellite into service in the second
quarter of 2007 will be approximately $502 million. In order to perform its
obligations under the NextView contract, ORBIMAGE will fund its cost
contribution for the project through a combination of an equity offering of
$65 million as described below, an issuance of $155 million of senior
subordinated indebtedness, and $45 million in cash flow from existing
operations. NGA’s contract will also provide revenue commitments to commence
following OrbView-5’s in-service date.
ORBIMAGE has received commitments from investors (the “Backstop Investors”)
to purchase 6.5 million units at $10 per unit. Each unit consists of one share
of common stock and one warrant with an exercise price of $10 per share and a
5-year maturity. The Company intends to call $32.5 million of this commitment
during the fourth quarter 2004 by privately issuing to these investors 3.25
million units on November 16, 2004, together with 1.0 million warrants on the
same terms. To raise the remaining $32.5 million of the equity portion of
financing to cover its cost share of the NextView project, the Company is
currently planning to conduct a rights offering to its shareholders that would
commence in late 2004 or early 2005 permitting its shareholders to purchase an
additional 3.25 million units on the same terms. Any rights offering by the
Company would be conducted only pursuant to an offering registered under the
Securities Act of 1933. The Company has not yet set a record date for the
rights offering and will not announce such record date prior to its occurrence,
but the Company expects that such record date will be set no earlier than late
November 2004. The Company intends to seek approval from its shareholders for
an increase in its authorized shares in order to conduct the offering. If the
rights offering is undersubscribed by shareholders, the Backstop Investors
have agreed to backstop the offering pursuant to their aforementioned
commitment.
ORBIMAGE has received commitments from investors to fund the $155 million
in aggregate principal amount of additional senior subordinated indebtedness.
The additional senior subordinated indebtedness will rank pari passu with the
Company’s existing Senior Subordinated Notes due 2008 (the “Senior Sub Notes”)
and will not have any scheduled amortization or a maturity date prior to the
scheduled maturity of the Senior Sub Notes. The parties who committed to the
additional senior subordinated indebtedness will receive a commitment fee
equal to 100 basis points in cash for the total aggregate principal to which
their commitments relate plus a pro rata share of 155,000 shares. Additionally,
if the commitments have not been refinanced by three months and six months
from contract execution, the Company will pay such parties additional
commitment fees in cash, equal to 50 basis points and 100 basis points,
respectively.
At September 30, 2004 the Company had received consents from the holders
of its Senior Sub Notes and the holders of its Senior Notes due 2008 that
permit the Company to use up to $45 million of its cash flow from existing
operations toward project costs for the OrbView-5 Satellite. The consenting
holders who held notes on the record date of July 29, 2004 received a consent
fee in additional notes equal to 200 basis points on the principal amount of
the notes to which the holders’ consents relate. Pursuant to the consents
received from the noteholders, the Senior Sub Notes and the Senior Notes will
not be callable by the Company until January 1, 2007.
The Company will be required to make an offer to repurchase Senior Notes
using all cash on hand (after cash required for operations, capital
expenditures, including permitted NextView expenditures, and required debt
service) in excess of $45 million at each June 30 and December 31, beginning
June 30, 2005. Once all Senior Notes are retired, all cash on hand in excess
of $45 million commencing at the end of the first quarter after such time as
none of the Senior Notes remain outstanding and semiannually thereafter (after
cash required for operations, capital expenditures and required debt service)
will be required to be used in offers by the Company to repurchase the Senior
Subordinated Notes until 50 percent or more of the Senior Subordinated Notes
(including all in kind interest accrued on such notes as of the date of their
redemption) have been redeemed.
ORBIMAGE Inc.
STATEMENTS OF OPERATIONS
(Unaudited; In thousands, except share data)
Successor Predecessor Successor Predecessor
Company Company Company Company
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenues $8,891 $1,134 $20,650 $4,125
Direct expenses 9,162 2,065 24,997 5,416
Gross loss (271) (931) (4,347) (1,291)
Selling, general and
administrative expenses 3,293 1,185 7,127 3,324
Loss from operations (3,564) (2,116) (11,474) (4,615)
Interest expense, net 2,576 646 7,484 648
Loss before reorganization
items and benefit for
income taxes (6,140) (2,764) (18,957) (5,263)
Reorganization items:
Professional fees - 1,878 - 5,132
Interest earned on
accumulated cash and
cash equivalents
during Chapter 11
proceedings - 2 - 15
Loss before benefit for
income taxes (6,140) (4,640) (18,957) (10,380)
Benefit for income taxes - - - -
Net loss $(6,140) $(4,640) $(18,957) $(10,380)
Loss per common share -
basic and diluted $(0.95) $(0.18) $(2.97) $(0.41)
Weighted average shares
outstanding - basic and
diluted 6,497,292 25,214,000 6,388,335 25,214,000
ORBIMAGE Inc.
BALANCE SHEETS
(Unaudited; In thousands, except share data)
Successor
ASSETS Company
September 30, December 31,
2004 2003
Current assets:
Cash and cash equivalents $12,751 $14,405
Receivables net of allowances of $157 and $0,
respectively 6,894 756
Other current assets 2,727 1,143
Total current assets 22,372 16,304
Property, plant and equipment, at cost, less
accumulated depreciation of $743 and $0,
respectively 15,428 17,714
Satellites and related rights, at cost, less
accumulated depreciation and amortization
of $3,451 and $0, respectively 76,240 89,370
Goodwill 28,490 28,490
Other assets 2,942 1,441
Total assets $145,472 $153,319
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $3,412 $4,743
Deferred revenue 1,945 651
Total current liabilities 5,357 5,394
Long-term debt 82,235 73,115
Total liabilities 87,592 78,509
Stockholders' equity:
Common stock 65 63
Additional paid-in-capital 79,822 78,149
Unearned compensation (3,050) (3,402)
Accumulated deficit (18,957) -
Total stockholders' equity 57,880 74,810
Total liabilities and stockholders' equity $145,472 $153,319
ORBIMAGE Inc.
STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)
Successor Predecessor
Company Company
Nine Months Ended September 30,
2004 2003
Cash flows from operating activities:
Net loss $(18,957) $(10,380)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 16,090 2,488
Interest paid in kind 7,559 769
Stock compensation 2,027 -
Changes in assets and liabilities:
(Increase) decrease in receivables (6,139) 380
(Increase) decrease in other
current assets (1,138) 114
(Decrease) increase in accounts
payable and accrued expenses (1,331) 3,193
Increase (decrease) in deferred
revenue 1,295 (270)
Net cash used in operating activities (594) (3,706)
Cash flows from investing activities:
Capital expenditures (1,060) (19,951)
Proceeds from launch delay penalties - 1,955
Net cash used in investing activities (1,060) (17,996)
Cash flows from financing activities:
Proceeds from insurance loan - 17,717
Proceeds from Orbital Sciences note - 2,500
Net cash provided in financing activities - 20,217
Net decrease in cash and cash equivalents (1,654) (1,485)
Cash and cash equivalents, beginning of period 14,405 6,293
Cash and cash equivalents, end of period $12,751 $4,808
Supplemental cash flow information:
Professional fees paid during
reorganization period $- $2,469
About ORBIMAGE:
ORBIMAGE is a leading global provider of Earth imagery products and
services, with a constellation of digital remote sensing satellites and a
worldwide integrated image receiving, processing and distribution network. The
company currently operates the new OrbView-3 high-resolution satellite
launched on June 26, 2003 which offers one-meter panchromatic (black and white)
and four-meter multispectral (color) digital imagery on a global basis and the
OrbView-2 ocean and land multispectral imaging satellite that was launched in
1997.
For more information about ORBIMAGE, please visit our web site at
http://www.orbimage.com.
This release contains forward-looking statements within the meaning of
section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements involve known and
unknown risks and uncertainties. ORBIMAGE’s actual financial results could
differ materially from those anticipated due to the company’s dependence on
conditions in the remote sensing industry, the level of new commercial imagery
orders, production rates for advanced image processing, the level of defense
spending, competitive pricing pressures, start-up costs and possible overruns
on new contracts, and technology and product development risks and
uncertainties.
