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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT AMENDMENT NO. 1 PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED
JUNE 30, 1998
ORBITAL IMAGING CORPORATION
(COMMISSION FILE NO. 333-49583)
DELAWARE 54-1660268
(State of Incorporation) (IRS Identification number)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 (703) 406-5000
(Address of principal executive offices) (Telephone number)
Indicate by check mark whether the registrant has (1) 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, and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
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EXPLANATORY NOTE
In consultation with its new independent auditors retained in July 1999,
Orbital Imaging Corporation ("ORBIMAGE") determined that it would restate its
condensed financial statements for the quarter ended June 30, 1998, the quarter
ended September 30, 1998, and its financial statements for the year ended
December 31, 1998, and its condensed consolidated financial statements for the
quarter ended March 31, 1999, the quarter ended June 30, 1999 and the quarter
ended September 30, 1999. This amendment includes in Item 1 such restated
condensed financial statements for the three and six months ended June 30,
1998, and other information relating to such restated condensed financial
statements, including Management's Discussion and Analysis of Financial
Condition and Results of Operations (Item 2). Information regarding the effect
of the restatement on ORBIMAGE's results of operations for the three and six
months ended June 30, 1998 is included in Item 2 of this amendment and in the
Notes to Condensed Financial Statements included in Item 1 of this amendment.
Except for Items 1, 2 and 6, no other information included in the original
report on Form 10-Q is amended by this amendment. For current information
regarding risks, uncertainties and other factors that may affect ORBIMAGE's
future performance, please see the "Risk Factors" included in Item 7 of
ORBIMAGE's Annual Report on Form 10-K for the year ended December 31, 1999.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL IMAGING CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
DECEMBER 31, JUNE 30,
1997 1998
---- ----
Current assets: (RESTATED)
Cash and cash equivalents....................................... $ 10,883 $ 55,557
Short-term investments, at market, which approximates cost...... 11,337 83,570
Receivables and other current assets............................ 134 2,004
-------- --------
Total current assets....................................... 22,354 141,131
Long-term investments, at amortized cost.............................. - 16,637
Property, plant and equipment, at cost, less accumulated
depreciation of $5,144 and $6,305, respectively................. 11,054 12,566
Satellites and related rights, at cost, less accumulated
depreciation and amortization of $12,947 and
$18,064, respectively........................................... 104,226 138,910
Excess of purchase price over net assets acquired, less accumulated
amortization of $34 in 1998..................................... - 1,981
Deferred financing fees and other assets.............................. 115 5,304
-------- --------
Total assets.................................................... $137,749 $316,529
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................... $ 4,335 $ 17,224
Current portion of deferred revenue............................. 7,725 8,476
Deferred tax liabilities, net .................................. 468 580
-------- --------
Total current liabilities.................................. 12,528 26,280
Senior notes.......................................................... - 142,678
Deferred revenue, net of current portion.............................. 29,667 27,880
Deferred tax liabilities, net......................................... 10,194 6,920
-------- --------
Total liabilities............................................... 52,389 203,758
Preferred stock subject to repurchase, par value $0.01; 10,000,000
shares authorized; Series A 12% cumulative convertible,
2,000,000 shares authorized, 392,887 and 648,653 shares
issued and outstanding, respectively (liquidation value
of $40,074 and $70,133, respectively)........................... 36,355 72,777
Stockholders' equity:
Common stock, par value $0.01; 75,000,000 shares authorized;
25,214,000 shares issued and outstanding................... 252 252
Additional paid-in-capital...................................... 75,285 83,005
Accumulated deficit............................................. (26,532) (43,263)
-------- --------
Total stockholders' equity...................................... 49,005 39,994
-------- --------
Total........................................................... $137,749 $316,529
======== ========
See accompanying notes to condensed financial statements.
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ORBITAL IMAGING CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1998 1997 1998
---- ---- ---- ----
(RESTATED) (RESTATED)
Revenues..................................... $ 196 $ 2,922 $ 304 $ 5,338
Direct expenses.............................. 1,093 3,904 2,230 8,093
------- -------- -------- --------
Gross profit (loss).......................... (897) (982) (1,926) (2,755)
Selling, general and administrative
expenses................................... 162 2,289 776 3,313
------- -------- -------- --------
Income (loss) from operations................ (1,059) (3,271) (2,702) (6,068)
Net interest income, net of interest
expense of $0, $1,979 (restated), $0
and $1,979 (restated), respectively........ 367 278 367 1,322
------- -------- -------- --------
Income (loss) before benefit for income
taxes...................................... (692) (2,993) (2,335) (4,746)
Provision (benefit) for income taxes......... (438) (1,446) (438) (3,162)
-------- -------- -------- --------
Net income (loss)............................ $ (254) $ (1,547) $ (1,897) $ (1,584)
======== ======== ========= ========
See accompanying notes to condensed financial statements.
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ORBITAL IMAGING CORPORATION
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL
------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
BALANCE AS OF DECEMBER 31, 1996..... - $ - $45,921 $(19,642) $26,279
Issuance of common stock to
Orbital..................... 25,200,000 252 31,066 - 31,318
Preferred stock dividends...... - - - (600) (600)
Net loss....................... - - - (1,897) (1,897)
--------- ----- ------- -------- -------
BALANCE AS OF JUNE 30, 1997......... 25,200,000 $ 252 $76,987 $(22,139) $55,100
========== ===== ======= ======== =======
BALANCE AS OF DECEMBER 31, 1997..... 25,214,000 $ 252 $75,285 $(26,532) $49,005
Issuance of common stock
warrants.................... - - 7,594 - 7,594
Deemed dividend on issuance
of preferred stock subject to
repurchase.................. - - - (9,975) (9,975)
Issuance of compensatory
stock options............... - - 126 - 126
Preferred stock dividends...... - - - (5,172) (5,172)
Net loss....................... - - - (1,584) (1,584)
--------- ----- ------- -------- -------
BALANCE AS OF JUNE 30, 1998
(RESTATED)..................... 25,214,000 $ 252 $83,005 $(43,263) $39,994
========== ===== ======= ======== =======
See accompanying notes to condensed financial statements.
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ORBITAL IMAGING CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
---- ----
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................... $ (1,897) $ (1,584)
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation and amortization .................. 2,009 6,928
Deferred tax benefit............................ (438) (3,162)
Changes in assets and liabilities:
Increase in receivables and other current assets (76) (1,366)
(Increase) decrease in other assets............. 128 (393)
Increase in accounts payable and accrued
expenses...................................... 4,801 12,608
Decrease in deferred revenue.................... (246) (1,036)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 4,281 11,995
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... (29,997) (41,794)
Purchases of held-to-maturity investment securities........ - (32,896)
Purchases of available-for-sale investment securities...... (1,943) (71,165)
Maturities of available-for-sale investment securities..... - 15,400
Sales of available-for-sale investment securities.......... - 999
Payment for business acquisition - (4,000)
--------- ----------
NET CASH USED IN INVESTING ACTIVITIES...................... (31,940) (133,456)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of senior notes................. - 137,266
Net proceeds from issuance of common stock warrants........ - 7,594
Net proceeds from issuance of preferred stock subject to
repurchase.............................................. 27,056 21,275
Net proceeds from issuance of common stock................. 31,318 -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.................. 58,374 166,135
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................... 30,715 44,674
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................. - 10,883
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................ $ 30,715 $ 55,557
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
NON-CASH ITEMS:
Deemed dividend on issuance of preferred stock subject to
repurchase.............................................. - $ 9,975
Preferred stock dividends.................................. - 5,172
Capitalized compensatory stock options..................... - 41
See accompanying notes to condensed financial statements.
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ORBITAL IMAGING CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1998
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of such information.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to instructions, rules and regulations
prescribed by the Securities and Exchange Commission ("SEC"). Although
management believes that the disclosures provided are adequate to make the
information presented not misleading, these unaudited interim condensed
financial statements should be read in conjunction with the audited financial
statements and footnotes thereto for the year ended December 31, 1997, which
are included in Orbital Imaging Corporation's Registration Statement on Form
S-4, as amended, filed with the SEC (File No. 333-49583). Operating results for
the three-month and six-month periods ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the full year.
Orbital Imaging Corporation is hereafter referred to as "ORBIMAGE" or the
"Company."
On February 25, 1998, ORBIMAGE issued $150 million of units (the "1998
Offering"), each unit consisted of $1,000 principal amount of 11 5/8% senior
notes due 2005 and one warrant to purchase 8.75164 shares of ORBIMAGE common
stock. In consultation with its new independent auditors retained in July 1999,
the valuation of the warrants issued in connection with the 1998 Offering was
restated from $9.0 million to $7.9 million based on an independent third party
valuation, which resulted in reducing the debt discount and additional paid in
capital. The Series A Preferred Stock sold on February 25, 1998 was deemed to
have a beneficial conversion feature totaling $10.0 million as a result of the
difference between the common stock fair value based on an independent third
party valuation and the conversion price of the preferred stock. This difference
is a deemed dividend to the holders of the preferred stock. The preferred stock
dividends paid in shares during 1998 were also deemed to have a beneficial
conversion feature as a result of the difference between the conversion price of
the preferred stock and the underlying value of the common stock. Additionally,
the stock options issued to employees during 1998 were deemed to be compensatory
based on the difference between the exercise price and the common stock fair
value based on an independent third party valuation. As a result of these
changes, ORBIMAGE's loss before income taxes, benefit for income taxes, net loss
and preferred stock dividends were restated as follows for the three and six
months ended June 30, 1998 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, 1998 JUNE 30, 1998
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ORIGINALLY REPORTED:
Loss before income taxes...................... $ (2,967) $ (4,683)
Benefit for income taxes...................... (1,454) (3,170)
---------- ----------
Net loss....................................... $ (1,513) $ (1,513)
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Preferred stock dividends...................... $ (1,916) $ (3,354)
========== ==========
RESTATED:
Loss before income taxes...................... $ (2,993) $ (4,746)
Benefit for income taxes...................... (1,446) (3,162)
---------- ----------
Net loss....................................... $ (1,547) $ (1,584)
========== ==========
Preferred stock dividends...................... $ (2,759) $ (15,147)
========== ==========
(1) INCOME TAXES
The Company has recorded its interim income tax provision (benefit) based
on estimates of the Company's effective tax rate expected to be applicable for
the full fiscal year. Estimated effective rates recorded during interim periods
may be periodically revised, if necessary, to reflect current estimates.
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(2) RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements
to conform to the 1998 financial statement presentation. Amounts originally
reported as preferred stock and additional paid-in capital as of December 31,
1997 and June 30, 1998 were reclassified from stockholders' equity to preferred
stock subject to repurchase.
(3) RELATED PARTY TRANSACTIONS
Pursuant to a procurement contract under which ORBIMAGE is purchasing from
Orbital Sciences Corporation ("Orbital"), the Company's majority shareholder,
various satellites, rights, and ground systems, the company incurred costs of
approximately $22.4 million and $21.4 million for the three months ended June
30, 1997 and 1998, respectively, and approximately $26.7 million and $36.9
million for the six months ended June 30. ORBIMAGE incurred costs of
approximately $1.4 million and $0.7 million for the three months ended June 30,
1997 and 1998, respectively, and approximately $2.1 million and $1.2 million
for the six months ended June 30, 1997 and 1998, respectively, under an
administrative services agreement with Orbital.
(4) FINANCING ACTIVITIES
On February 25, 1998, ORBIMAGE raised gross proceeds of $150.0 million by
issuing units ("Units") consisting of (i) $150.0 million of 11-5/8% Senior
Notes (the "Notes") due 2005, valued at $142.1 million (restated), and (ii)
warrants (the "Warrants"), valued at $7.9 million (restated), to purchase
1,312,746 shares of ORBIMAGE's common stock. Interest on the Notes is payable
semi-annually beginning September 1, 1998. An amount equal to two years'
interest payable on the Notes (approximately $33.0 million) was placed in a
restricted account and invested in U.S. Treasury securities. These investments
have maturities ranging from six months to two years (and have been
appropriately reflected as short-term or long-term investments in the
accompanying Condensed Balance Sheets) and are pledged as security for
repayment of interest on the Notes. The Notes will rank pari passu in right of
payment with all existing and future senior indebtedness of the Company and
will rank senior in right of payment to any future subordinated indebtedness of
the Company. The Warrants are exercisable on February 25, 1999 (or earlier in
the event of a "change of control") and expire on March 1, 2005.
Concurrent with the issuance of the Units, ORBIMAGE completed a private
placement of 227,295 shares of 12% Series A Cumulative Convertible Preferred
Stock, raising gross proceeds of approximately $23.0 million.
(5) INTEREST CAPITALIZATION
The Company capitalizes interest costs in connection with the construction
of satellites and related ground segments and systems. Approximately $2.5
million and $4.2 million has been capitalized during the three- and six-month
periods ended June 30, 1998. The capitalized interest is recorded as part of
the historical cost of the asset to which it relates and will be amortized over
the asset's useful life when placed in service.
(6) COMPREHENSIVE INCOME
In 1998, the company adopted the provisions of Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income."
During the three- and six-month periods ended June 30, 1997 and 1998, there
were no differences between net income, as reported, and comprehensive income.
(7) BUSINESS ACQUISITION
On April 30, 1998, ORBIMAGE acquired substantially all the assets of
TRIFID Corporation ("TRIFID") for approximately $4.0 million. Under the terms
of the acquisition agreement, an additional $1.0 million in purchase price is
payable by ORBIMAGE to TRIFID if certain future revenue targets are achieved.
The acquisition was accounted for using the purchase method of accounting and
resulted in excess of purchase price over net assets acquired of approximately
$2.0 million, which amount will be amortized on a straight-line basis over 10
years.
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The following supplemental financial information presents the Company's
results of operations, on a pro forma basis, as though the TRIFID acquisition
were consummated on January 1, 1997 (in thousands):
THREE MONTHS ENDED JUNE 30,
1997 1998
----------------------------------------------------
(RESTATED)
Revenues $1,401 $3,332
Net loss (127) (1,178)
SIX MONTHS ENDED JUNE 30,
1997 1998
----------------------------------------------------
(RESTATED)
Revenues $1,953 $6,162
Net loss (2,383) (1,555)
The allocation of purchase price to net assets acquired may be adjusted if
additional information becomes known about certain business assumptions used to
estimate the fair value of such net assets.
(8) PREFERRED STOCK SUBJECT TO REPURCHASE
The activity in the preferred stock subject to repurchase was as follows
for the six months ended June 30, 1997 and 1998 (dollars in thousands):
SHARES AMOUNT
------ ------
BALANCE AS OF DECEMBER 31, 1996................ - $ -
Shares issued in private offering, net...... 392,887 33,490
Accrual of preferred stock dividends........ - 600
---------- ----------
BALANCE AS OF JUNE 30, 1997.................... 392,887 $ 34,090
========== ==========
BALANCE AS OF DECEMBER 31, 1997................ 392,887 $ 36,355
Shares issued in private offering, net...... 227,295 21,275
Deemed dividend on issuance of preferred
stock subject to repurchase............... - 9,975
Preferred stock dividends paid in shares.... 28,471 3,306
Accrual of preferred stock dividends........ - 1,866
---------- ----------
BALANCE AS OF JUNE 30, 1998 (RESTATED)......... 648,653 $ 72,777
========== ==========
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 1997
AND 1998
Certain statements included in this discussion relating to funding
requirements, capital expenditures, sources and uses of funds, operating
results and "Year 2000" issues are forward-looking statements that involve
known and unknown risks, uncertainties, and other factors that may cause the
actual results, performance or achievements of the Company to differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors may include, but are not limited
to, general and economic business conditions, launch success, satellite
performance, availability of required capital, market acceptance of new
products and technologies, the ability of customers and suppliers to assess
timely and accurately "Year 2000" issues, and U.S. government policies,
priorities and funding of programs. The actual results that ORBIMAGE achieves
may differ materially from any forward-looking statements due to such risks and
uncertainties.
The Company has made a preliminary assessment of potential "Year 2000"
issues with respect to various financial and operational computer-related
systems. The Company has developed an initial corrective action plan that
includes (i) reprogramming affected software when appropriate and feasible,
(ii) obtaining vendor-provided software upgrades when available, and (iii)
completely replacing affected systems when necessary. The Company currently
expects that identified "Year 2000" affected systems will be corrected by the
end of 1998, although there can be no assurance that the Company has identified
all "Year 2000" affected systems or that its corrective action plan will be
timely and successful. While the Company has not determined to date that "Year
2000" issues will materially impact its customers or suppliers, it continues to
assess risks associated with such third parties and will develop corrective
plans accordingly as more information becomes available.
BUSINESS ACQUISITION. On April 30, 1998, ORBIMAGE acquired substantially
all the assets of TRIFID Corporation ("TRIFID") for approximately $4.0 million.
Under the terms of the acquisition agreement, an additional $1.0 million of
purchase price is payable by ORBIMAGE to TRIFID if certain revenue targets are
achieved. TRIFID is a leading image processing and product generation company,
providing sophisticated image processing software, geographic information
database and production systems, imaging sensor design and related engineering
services to both governmental and commercial customers. The acquisition
provides ORBIMAGE with the technical personnel and production capability
required to generate high-resolution imagery and derived products. The
acquisition resulted in excess of purchase price over net assets acquired of
approximately $2.0 million, which amount will be amortized over 10 years.
REVENUES. Revenues for the three-month periods ended June 30, 1997 and
1998 were approximately $0.2 million and $2.9 million, respectively. Revenues
for the six-month periods ended June 30, 1997 and 1998 were approximately $0.3
million and $5.3 million, respectively. The increase in 1998 revenues is
primarily due to the commencement of the OrbView-2 satellite's commercial
operations in November 1997. Revenues during the second quarter of 1998 also
included $0.4 million in sales generated from the image processing business
acquired from TRIFID in April 1998. Revenues for the comparable 1997 periods
were attributable solely to the sale of OrbView-1 imagery products to NASA.
DIRECT EXPENSES. Direct expenses include costs of operating and
depreciating the OrbView-1 satellite, the license pursuant to which ORBIMAGE
has exclusive worldwide distribution rights for OrbView-2 satellite imagery
(the "OrbView-2 License"), and the related ground assets. Direct expenses for
the three-month periods ended June 30, 1997 and 1998 were approximately $1.1
million and $3.9 million, respectively. Direct expenses for the six-month
periods ended June 30, 1997 and 1998 were approximately $2.2 million and $8.1
million, respectively. Direct expenses increased from the 1997 periods to the
comparable 1998 periods as a result of the OrbView-2 License amortization,
additional ground station depreciation and increased operating expenses
primarily related to OrbView-2. The Company completed depreciating the
OrbView-1 satellite in the second quarter of 1998.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses include the costs of marketing, advertising,
promotion and other selling expenses, as well as the costs of the finance,
administrative and general management functions of the company. SG&A expenses
were approximately $0.2 million and $2.3 million (restated) for the three-month
periods ended June 30, 1997 and 1998, respectively. SG&A expenses were
approximately $0.8 million and $3.3 million (restated) for the six-month
periods ended June 30, 1997 and 1998, respectively. The increase in SG&A
expenses in 1998 was primarily attributable to the increase in salaries and
related benefits as the Company expanded its operations and workforce.
INTEREST INCOME AND INTEREST EXPENSE. Interest income reflects interest
earnings on investments made primarily with proceeds from the Company's
financing activities. Interest expense reflects interest incurred on the
Company's 11-5/8% Senior Notes due 2005 (the "Notes"), net of applicable
capitalized interest. Net interest income for the three-month periods ended
June 30, 1997 and 1998 was approximately $0.4 million and $0.3 million,
respectively. Net interest income was approximately $0.4 million and $1.3
million for the six-month periods ended June 30, 1997 and 1998, respectively.
Interest expense was approximately $2.0 million for the three- and six-month
periods ended June 30, 1998; ORBIMAGE had no interest expense in the comparable
1997 periods. Approximately $4.2 million of interest expense has been
capitalized in 1998 in connection with the construction of the OrbView-3 and
OrbView-4 satellites and related ground segments. The capitalized interest is
recorded as part of the historical cost of the asset to which it relates and
will be amortized over the asset's useful life when placed in service.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company recorded an income tax
provision (benefit) of approximately ($0.4 million) and ($1.4 million)
(restated) for the three-month periods ended June 30, 1997 and 1998,
respectively. The Company recorded an income tax provision (benefit) of
approximately ($0.4 million) and ($3.2 million) for the six-month periods ended
June 30, 1997 and 1998, respectively. The tax benefits result from a reduction
in net deferred tax liabilities based on an increase in deferred tax assets
primarily related to net operating losses generated during the period offset by
decreases in deferred tax liabilities for depreciation of satellite assets
which were previously deducted for tax purposes. The Company records its
interim income tax benefit or provision based on estimates of the Company's
effective tax rate expected to be applicable for the full fiscal year.
Estimated effective rates recorded during interim periods may be periodically
revised, if necessary, to reflect current estimates.
Restatement. In consultation with its new independent auditors retained in
July 1999, ORBIMAGE determined that it would restate its condensed financial
statements for the quarter ended June 30, 1998, the quarter ended September 30,
1998, and its financial statements for the year ended December 31, 1998, and its
condensed consolidated financial statements for the quarter ended March 31,
1999, the quarter ended June 30, 1999 and the quarter ended September 30, 1999.
See Note (1) of the Notes to Condensed Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had approximately $155.8 million of cash and
cash equivalents, and short- and long-term investments (including approximately
$32.9 million of securities pledged as security for repayment of interest on
the Notes) and had total debt outstanding of approximately $142.7 million
(restated) (principal amount $150.0 million). The Company's current ratio was
approximately 5.4 at June 30, 1998.
On February 25, 1998, ORBIMAGE issued units consisting of the Notes and
Common Stock warrants raising gross proceeds of $150.0 million (the "Units
Offering"). Interest on the Notes is payable semi-annually beginning on
September 1, 1998. Out of net proceeds of approximately $144.9 million
(restated), ORBIMAGE purchased approximately $32.9 million of U.S. Treasury
securities in an amount sufficient to pay the interest on the Notes for the
first four interest payment dates. These securities have maturities ranging
from six months to two years and were placed in a restricted account and
pledged as security for repayment of interest on the Notes. The Notes will rank
pari passu in right of payment with all existing and future senior indebtedness
of the Company, and will rank senior in right of payment to any future
subordinated indebtedness of the Company. Concurrent with the Units Offering,
ORBIMAGE completed a private placement of 227,295 shares of Series A Preferred
Stock, generating approximately $22.7 million of gross proceeds.
Operating activities provided net cash of approximately $12.0 million
during the first half of 1998. Investing activities used cash of approximately
$133.5 million for the six-month period ended June 30, 1998, primarily for the
net purchases (net of sales and maturities) of short- and long-term investments
and capital expenditures for the OrbView-3 and OrbView-4 satellites and the
related U.S. ground system.
Capital expenditures for the six months ended June 30, 1998 were
approximately $37.6 million (excluding capitalized interest) and consisted
primarily of costs relating to the acquisition of the OrbView-3 and OrbView-4
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satellites and the related U.S. ground system. The total cost of the OrbView-1
satellite, the OrbView-3 and OrbView-4 satellites, the OrbView-2 License and
the related U.S. ground system is estimated to be approximately $297.0 million,
which amount includes all satellite design, construction and launch costs, but
excludes insurance costs. Of this amount, ORBIMAGE has spent approximately
$167.0 million through June 30, 1998 and expects to spend approximately $55.0
million through the remainder of 1998, which amount will be funded by the
Company's cash, cash equivalents, short-term investments and net cash generated
from operations.
The Company expects to fund its future capital expenditures and negative
cash flows from operating activities using cash and cash equivalents and
short-term investments together with advance payments from customers.
ORBIMAGE's ability to generate positive cash flow is dependent on the continued
expansion of commercial services, adequate customer acceptance of ORBIMAGE's
services and numerous other factors. While the Company believes it has
sufficient resources to fund the Company's operations through its positive free
cash flow (expected to occur by the end of 1999, when OrbView-3 is expected to
be operational), additional funding may be necessary in the event of an
OrbView-3 or OrbView-4 launch delay, cost increases or any shortfall in
projected levels of estimated cash flow, or unanticipated expenses. There can
be no assurance that additional capital will be available on favorable terms or
on a timely basis, if at all. ORBIMAGE has incurred losses since its inception
and ORBIMAGE believes that it will continue to do so for the foreseeable
future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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 - Not applicable.
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14
SIGNATURES
Pursuant to the requirements 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 IMAGING CORPORATION
DATED: March 30, 2000 By: /s/ Gilbert D. Rye
------------------------------
Gilbert D. Rye, President
and Chief Executive Officer
DATED: March 30, 2000 By: /s/ Armand D. Mancini
------------------------------
Armand D. Mancini, Vice President
and Chief Financial Officer
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15
EXHIBIT INDEX
The following exhibits are filed as part of this report.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule