PARIS — Satellite and launch-vehicle manufacturer Orbital Sciences Corp. on Oct. 21 reported double-digit increases in revenue, operating income and net profit but said its 2011 financial performance could drop by 6 percent to 8 percent from expected levels if the U.S. government does not conclude a final 2011 budget before spring.
The Dulles, Va.-based company said its biggest ongoing investment — development of the Taurus 2 medium-lift rocket and the Cygnus cargo vehicle it will launch to the international space station — has encountered more delays. Its inaugural launch from Wallops Island, Va., is now set for between July and September.
Whether that flight serves only to demonstrate Taurus 2’s abilities or also carries the Cygnus freighter will depend on whether the U.S. Congress appropriates the money for a rocket-only flight when it enacts NASA’s budget for 2011. If that money, which would come out of the additional $300 million NASA has requested for its Commercial Orbital Transportation Services program, is forthcoming, a successful Taurus 2-only demonstration could be followed, about three months later, with a Taurus 2 Cygnus launch to the space station.
In a conference call with investors, Orbital Chief Executive David W. Thompson said it is the U.S. Defense Department’s budget uncertainties, and not NASA’s, that will have the most impact on Orbital’s 2011 financial outlook.
If the temporary budget authority under which the U.S. government has been operating since Oct. 1 is replaced by January or February with a firm budget, the consequences will be minimal, Thompson said. But if the budget debate drags on into the spring or longer, “that would be a different story. It certainly wouldn’t be good,” Thompson said. “As to the specific impact, I don’t have a number. It’s not 10 percent or 15 percent, but we could take a 5, 6 or 8 percent hit” to the company’s forecasted revenue for 2011.
As expected, Orbital said it spent $1 million in the three months ending Sept. 30 to retrofit satellites in construction so that they do not experience the same loss of control that occurred in April to the Orbital-built Intelsat Galaxy 15 satellite. That follows $2.5 million spent earlier in the year on the problem and up to $1 million more to be spent by the end of the year.
Orbital Chief Operating Officer J.R. Thompson said the company has “completed and implemented corrective actions on all spacecraft in production, and in orbit, to prevent any recurrence of a Galaxy 15-like anomaly.”
David Thompson said ground testing by Orbital since the failure suggests that Galaxy 15, which has remained in switched-on position since it stopped responding to commands, could be returned to normal service once its control system gives out and the satellite’s power runs down in November or December. At that point, a power-reset command will be sent and Galaxy 15 could be returned to full operational status. “However, I can’t say that is a certainty,” David Thompson said.
Orbital has $7 million in satellite performance incentive payments at stake if Galaxy 15 is declared a definitive loss, but it has taken out insurance against the loss of these payments.
David Thompson said the small-satellite manufacturing unit that Orbital purchased from General Dynamics early this year for $55 million in cash looks set to generate $100 million in revenue in 2011, with an operating margin of 9 percent. The division, based in Gilbert, Ariz., is bidding on three large projects — one for NASA, one for a U.S. national security customer, and one commercial bid — that in total could generate up to $500 million in revenue over three or four years.
Thompson did not mention it specifically, but Orbital is bidding against Ball Aerospace & Technologies Corp. of Boulder, Colo., for a contract to assemble, integrate and test 81 Iridium mobile communications satellites being designed and manufactured by Thales Alenia Space of France and Italy. A contract decision is expected before the end of the year.
Thompson said Orbital, which has won one commercial telecommunications satellite order this year — for the government of Azerbaijan — expects to book two more orders by the end of the year. In one of the bids now being competed, Orbital is proposing its higher-power satellite design, a product line the company has said it would develop only once it received an order.
For the three months ending Sept. 30, Orbital reported $314.5 million in revenue, up 13 percent over the same period a year ago. Operating income was up 43 percent, to $19.4 million or 6.2 percent of revenue. Net profit was $10.6 million, up 12.8 percent from a year earlier.
Orbital is forecasting 2011 revenue to be between $1.3 billion and $1.35 billion, with an operating margin of between 6 percent and 6.5 percent, assuming the U.S. government budget uncertainties are resolved early in 2011.
