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AS FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-59402
Prospectus
4,631,121 Shares
[ORBITAL LOGO]
ORBITAL SCIENCES CORPORATION
COMMON STOCK
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This prospectus relates to up to 4,631,121 shares of our common stock that
will be issued by us from time to time in connection with the exercise of
warrants. We will issue the warrants upon the effectiveness of the registration
statement of which this prospectus is a part. The warrants will be issued in
settlement of a class action lawsuit filed by some of our shareholders. The
terms of the warrants are set forth in a Warrant Agreement dated January 16,
2001.
The warrants will be exercisable for shares of our common stock, at an
exercise price of $4.82 per share, for a period of three years from the date of
their issuance. The warrants provide for appropriate anti-dilutive adjustments
in the exercise price and in the number of shares of common stock issuable upon
exercise. Any additional shares of common stock issued pursuant to such
adjustments will also be covered by this prospectus.
Our common stock is listed on the New York Stock Exchange under the symbol
"ORB." On August 31, 2001, the last reported sale price of our common stock was
$3.83.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST 31, 2001.
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
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Special Note Regarding Forward-Looking Statements........... 1
Where You Can Find More Information......................... 1
Incorporation of Certain Documents by Reference............. 1
Prospectus Summary.......................................... 3
Company Overview............................................ 4
Risk Factors................................................ 6
Use of Proceeds............................................. 10
Plan of Distribution........................................ 10
Interests of Named Experts and Counsel...................... 10
Legal Matters............................................... 11
Experts..................................................... 11
</Table>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS PROSPECTUS IS ONLY ACCURATE AS OF THE DATE OF THIS
PROSPECTUS.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor, in certain circumstances, for certain "forward-looking statements" made
by or on behalf of us. All statements other than those of historical facts
included in this prospectus, including those related to our financial outlook,
liquidity, goals, business strategy, projected plans and objectives of
management for future operating results, are forward-looking statements. Such
forward-looking statements involve unknown risks and uncertainties that may
cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. The forward-looking statements are and will be
based on management's then-current views and assumptions regarding future events
and operating performance. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
events or results. In evaluating forward-looking statements, you should consider
specifically various factors, including the risks set forth below under the
heading "Risk Factors" and elsewhere in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at Seven World Trade Center, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials may be obtained from the
Commission at prescribed rates through its Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding Orbital; the address of such site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been previously filed by us (File No.
1-14279) with the Commission pursuant to the Exchange Act are incorporated by
reference in this prospectus and shall be deemed to be a part hereof:
(1) our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, as amended;
(2) our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2001;
(3) our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2001;
(4) our Current Report on Forms 8-K filed on June 12, 2001, as amended on
Forms 8-K/A filed on June 14, 2001 and July 5, 2001;
(5) our Definitive Proxy Statement on Schedule 14A;
(6) the description of our common stock contained in our Registration
Statement on Form 8-A, filed under Section 12 of the Exchange Act, and
all amendments or reports filed for the purpose of updating such
description; and
(7) the description of our stock purchase rights contained in our
Registration Statement on Form 8-A, filed under Section 12 of the
Exchange Act, and all amendments or reports filed for the purpose of
updating such description.
All documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering of the common stock to which this prospectus
relates, shall be deemed to be incorporated by reference in this prospectus and
to be a part hereof from the date of filing of such documents (such documents,
and the documents enumerated above,
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being hereinafter referred to as the "Incorporated Documents"). Any statement
contained in an Incorporated Document shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any subsequently filed Incorporated Document modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
WE WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH DOCUMENTS). SUCH REQUESTS SHOULD BE DIRECTED TO ORBITAL SCIENCES
CORPORATION, 21700 ATLANTIC BOULEVARD, DULLES, VIRGINIA 20166, TELEPHONE NUMBER:
(703) 406-5000, ATTENTION: GENERAL COUNSEL.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before investing in our common stock. You should read this entire
prospectus carefully.
In this prospectus:
- "Orbital," "we," "us" and "our" refer to Orbital Sciences Corporation and
our consolidated subsidiaries.
- "Warrants" refer to the warrants to be issued to certain shareholders in
connection with the settlement of a class action lawsuit. The Warrants
will be issued upon the effectiveness of the registration statement of
which this prospectus is a part.
Our principal executive offices are located at 21700 Atlantic Boulevard,
Dulles, Virginia 20166, and our telephone number is (703) 406-5000. Our Web site
can be found at www.orbital.com. Information contained on our Web site is not
intended to be a prospectus and is not incorporated into this prospectus.
RISK FACTORS
An investment in our securities involves a high degree of risk. Prospective
investors should carefully review the section entitled "Risk Factors" beginning
on page 6, as well as other information provided in this prospectus.
THE OFFERING
<Table>
Shares of common stock offered hereby........ Up to 4,631,121 shares of our common stock
which are issuable upon exercise of the
Warrants
Shares of common stock outstanding prior to
this offering.............................. 38,559,902 shares of common stock
Trading symbol for our common stock.......... Our common stock is traded on the New York
Stock Exchange ("NYSE") under the trading
symbol ORB.
</Table>
The above information is based on shares of our common stock outstanding as
of August 10, 2001.
In 1998, we adopted a stockholder rights plan, or "poison pill," in order
to discourage from being made any attempts to acquire us other than on terms
approved by our board of directors. Under the terms of the rights plan, a stock
purchase right is attached to each of our outstanding shares of common stock,
including the offered shares, and each share of common stock we issue in the
future will also be issued with a stock purchase right attached. The stock
purchase rights will only become exercisable in the event another person
attempts to acquire control of Orbital. No event has occurred to date to make
the stock purchase rights exercisable.
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COMPANY OVERVIEW
Orbital Sciences Corporation, together with its subsidiaries, is a space
technology systems company that designs, manufactures, operates and markets a
broad range of affordable space systems, including launch vehicles, satellites
and related space systems and sensors and electronics systems.
Orbital was incorporated in Delaware in 1987 to consolidate the assets,
liabilities and operations of Space Systems Corporation and Orbital Research
Partners, L.P. Since our inception, it has been our strategy to develop and grow
a core integrated business of space systems technologies and products, starting
with the design and manufacturing of lightweight rockets, small satellites and
other inexpensive space systems intended to capitalize on the commercial
development of space. A major part of this strategy has centered on market-
expanding innovations that we have pioneered, including the world's first
privately-developed space launch vehicle, the first commercial orbit transfer
vehicle and the first operational low-Earth orbit commercial communications
network.
During 2000, as a result of our liquidity needs and our goal to more
efficiently conduct our operations, we adopted a strategy intended to focus on
our core space technology businesses, primarily involving our satellites, launch
vehicles and related space systems. Part of this strategy involves the sale of
certain non-core assets, which we have pursued aggressively in 2000 and 2001. In
October 2000, we sold our Fairchild Defense electronics business unit for
approximately $100,000,000. In July 2000, our Canadian subsidiary, MacDonald,
Dettwiler and Associates Ltd. ("MDA"), completed an initial public offering on
the Toronto Stock Exchange, raising gross proceeds for itself of approximately
$37,500,000 and $18,800,000 for Orbital. On May 30, 2001, our wholly owned
subsidiary, MDA Holdings Corporation ("MDA Holdings"), sold 12,350,000 MDA
shares at approximately $9.00 per share to a group of Canadian institutional and
private equity investors and granted certain of the purchasers an option to
purchase its remaining 5,650,000 shares in MDA. The option has been exercised in
full and we have received approximately $169,000,000 in proceeds from the sales
of the MDA shares in 2001. We applied approximately $112,000,000 of the amount
we received to reduce our outstanding debt obligations and will use the
remainder for working capital and general corporate purposes.
On July 13, 2001, subsidiaries of Thales, S.A. acquired by merger our
majority-owned subsidiary, Magellan Corporation ("Magellan"), which designs,
produces, distributes, sells and licenses Global Positioning System-based
satellite access products, and purchased our 60% ownership interest in
Navigation Solutions LLC ("NavSol"), a joint venture engaged in satellite-aided
automotive guidance and related value-added information services for
$70,000,000. At closing, after allocation to Magellan's minority stockholders of
$4,500,000 of the proceeds, we received gross proceeds before transaction fees
and expenses of $65,500,000, of which approximately $39,000,000 was applied to
reduce our outstanding debt obligations.
On August 2, 2001, we entered into a definitive agreement to sell our
Pomona, California-based sensor systems division, which designs, manufactures
and supports sophisticated sensors and analytical instruments for defense, space
and industrial applications, to the Hamilton Sundstrand unit of United
Technologies Corporation. At closing, anticipated in September 2001, we expect
to receive gross proceeds before transaction fees and expenses of approximately
$20,000,000. We are continuing to explore the disposition of other non-core
assets.
We also have developed and funded several space-based services businesses,
primarily through the following entities:
- Orbital Imaging Corporation ("ORBIMAGE"), which develops and operates
commercial remote imaging satellites, and
- ORBCOMM Global L.P. ("ORBCOMM"), which has operated a low-Earth orbit
satellite communications system designed to serve the global market for
two-way data communications.
ORBCOMM and ORBIMAGE have both recently experienced serious financial
difficulties. In March 2001, ORBIMAGE defaulted on the interest payment
obligations under its $225,000,000 11 5/8% Senior Notes due 2005. This debt is
non-recourse to us. ORBIMAGE management does not believe that ORBIMAGE has
sufficient resources to meet its capital and operating requirements through the
third quarter of 2001.
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ORBIMAGE is seeking to restructure the Senior Notes and to obtain additional
capital from third parties as well as its existing shareholders, including
Orbital. There can be no assurance that such capital will be available on a
timely basis or at all. If ORBIMAGE does not succeed in raising additional
capital, our ORBIMAGE-related receivables and inventory could become impaired,
and we could be subject to litigation by ORBIMAGE and/or its creditors.
ORBCOMM filed for protection under Chapter 11 of the U.S. Bankruptcy Code
in September 2000 and, in April 2001, ORBCOMM sold a majority of its assets to a
third party in which we presently have no ownership interest. In conjunction
with ORBCOMM's asset sale, we entered into an agreement with ORBCOMM and the
other parties to the ORBCOMM bankruptcy proceeding, including the ORBCOMM
creditors committee, providing for a consensual liquidating plan of
reorganization for ORBCOMM. If the liquidating plan is consummated, we will
receive an approximately 40% equity interest in ORBCOMM's successor; however,
there can be no assurance that the liquidating plan will be consummated. If it
is not consummated, we expect that ORBCOMM's reorganization proceeding would be
converted to a Chapter 7 liquidation proceeding.
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RISK FACTORS
An investment in our common stock involves a significant degree of risk. In
determining whether to make an investment in our common stock, potential
investors should consider carefully all the information set forth in this
prospectus and, in particular, the risk factors described below. This prospectus
contains certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth below and elsewhere in this prospectus. See "Special Note
Regarding Forward-Looking Information."
RISKS FACTORS RELATED TO OUR BUSINESS AND OUR INDUSTRY
WE HAVE EXPERIENCED SIGNIFICANT OPERATING LOSSES AND HAVE AN ACCUMULATED
DEFICIT, AND WE MAY NOT HAVE THE ABILITY TO SATISFY OUR FUTURE CAPITAL AND
OPERATING REQUIREMENTS. OUR AUDITORS HAVE ISSUED THEIR REPORT ON OUR
CONSOLIDATED FINANCIAL STATEMENTS WHICH DISCUSSED SUBSTANTIAL DOUBT WITH RESPECT
TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
We incurred a net loss of $278,190,000 for the year ended December 31, 2000
and a loss from continuing operations of $24,178,000 for the six months ended
June 30, 2001. These losses as a percentage of revenues were 38% for the year
ended December 31, 2000 and 20% for the six months ended June 30, 2001. Our
accumulated deficit was $464,536,000 as of December 31, 2000 and $419,530,000 as
of June 30, 2001. Our cash flow from operations in 2001 is expected to be
insufficient to cover our capital and operating requirements, and we expect to
incur a net loss in 2001 before considering gains or losses from any asset
sales. To meet our capital and operating requirements, in 2001 we sold certain
non-core assets, including our interests in MDA, Magellan and NavSol, and in
August 2001 entered into a definitive agreement to sell our sensor systems
division. We are required to pay down our primary credit facility with a portion
of the proceeds we receive from any asset sales. Our plans include restructuring
business operations by consolidating operations and related systems and, if
appropriate, by reducing our workforce and otherwise lowering expenses. We also
intend to raise additional debt and/or equity capital and refinance existing
debt obligations, and have commenced initial efforts to replace our primary
credit facility. We are continuing to explore sales of additional non-core
assets. We believe that the foregoing actions should facilitate our ability to
satisfy our obligations; however, given these uncertainties, and in view of our
failure to close the sales of the MDA shares and the dispositions of our
interests in Magellan and NavSol by mid-April 2001, our independent auditors
concluded there exists substantial doubt as to our ability to continue as a
going concern and, accordingly, included a "going concern" uncertainty paragraph
in their report on our December 31, 2000 consolidated financial statements.
WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM GOVERNMENT CONTRACTS,
WHICH ARE SUBJECT TO TERMINATION BY THE GOVERNMENT AT ANY TIME FOR ANY REASON.
IN ADDITION, PAYMENTS UNDER U.S. GOVERNMENT CONTRACTS ARE SUBJECT TO POTENTIAL
ADJUSTMENT UPON AUDIT.
During 2000, 1999 and 1998 approximately 41%, 39% and 46%, respectively, of
our total annual revenues, and at December 31, 2000, 36% of our firm contract
backlog, were derived from contracts with the United States ("U.S.") government
and its agencies or were derived from subcontracts with the U.S. government's
prime contractors. Most of our U.S. government contracts are funded
incrementally on a year-to-year basis. Changes in government policies,
priorities or funding levels through agency or program budget reductions by the
U.S. Congress or executive agencies or the imposition of budgetary constraints
could materially adversely affect our financial condition or results of
operations. Furthermore, contracts with the U.S. government may be terminated or
suspended by the U.S. government at any time, with or without cause. For
example, in March 2001, the National Aeronautics and Space Administration
("NASA") terminated for convenience our X-34 research and development contract.
As a result, in the fourth quarter of 2000 we recorded an asset impairment
charge of approximately $15,911,000 and recorded a $3,400,000 provision for
potentially uncollectible accounts. In the second quarter of 2001, we submitted
an interim settlement proposal seeking recovery from NASA of our uncompensated
costs associated with the X-34 contract, including costs associated with
modifications we made to our L-1011 aircraft to accommodate the X-34, as well as
other termination and settlement costs. Although in August 2001 we received a
$10,000,000 provisional payment
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from NASA, we cannot be assured that we will recover all or most of our costs
under this settlement proposal. There can be no assurance that other government
contracts will not be terminated or suspended in the future, or that contract
suspensions or terminations will not result in unreimbursable expenses or
charges or other adverse effects on our financial condition.
The accuracy and appropriateness of our direct and indirect costs and
expenses under our contracts with the U.S. government are subject to extensive
regulation and audit by the Defense Contract Audit Agency or by other
appropriate agencies of the U.S. government. These agencies have the right to
challenge our cost estimates or allocations with respect to any such contract. A
substantial portion of payments to us under U.S. government contracts are
provisional payments that are subject to potential adjustment upon audit by such
agencies.
OUR LIQUIDITY CONSTRAINTS AND FINANCIAL CONDITION MAY IMPAIR OUR ABILITY TO
COMPLY WITH EXISTING CONTRACTS OR TO WIN NEW CONTRACTS.
Our liquidity constraints and financial condition may adversely affect our
ability to bid for and win new U.S. government contracts and may impact a
customer's determination to exercise options under existing contracts.
Government contracting rules typically require a contracting officer to make a
determination of financial responsibility prior to awarding a new contract. The
U.S. government may also seek assurances that a contractor's financial condition
will not impair its continued performance under contracts. While we have a
similar requirement in one of our major commercial contracts, we do not believe
that the contract is at risk because of this requirement. In addition, we have
been awarded satellite and launch vehicle contracts with a non-government
customer which are contingent on our ability to post letters of credit
supporting our performance and refund obligations under the contracts. In 2001,
these letter of credit requirements are anticipated to be in the range of
approximately 5 to 15% of total contract value of approximately $93 million and
will increase over the next two years to up to approximately 75 to 85% of
contract value. Due to our liquidity constraints, we may not be able to comply
with these requirements in a timely manner, which could delay our ability to
begin work under these contracts or could result in the loss of these awards.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PENETRATE AND RETAIN MARKETS FOR OUR
EXISTING PRODUCTS AND TO CONTINUE TO CONCEIVE, DESIGN, MANUFACTURE AND MARKET
NEW PRODUCTS AND SERVICES ON A COST-EFFECTIVE AND TIMELY BASIS. THERE CAN BE NO
ASSURANCE THAT OUR PRODUCTS WILL BE SUCCESSFULLY LAUNCHED OR OPERATED OR THAT
THEY WILL BE DEVELOPED OR WILL PERFORM AS INTENDED.
Most of the products we develop and manufacture are technologically
advanced and sometimes include novel systems that must function under demanding
operating conditions and are subject to significant technological change and
innovation. We have experienced product failures or other operational problems,
and we will likely experience some product and service failures, schedule delays
and other problems in connection with our launch vehicles, satellites and other
products in the future. In addition to any costs resulting from product
warranties or required remedial action, product failures may result in increased
costs or loss of revenues due to postponement or cancellation of subsequently
scheduled operations or product deliveries.
We anticipate that we will continue to incur expenses to design and develop
new products and services. There can be no assurance that we will be able to
achieve the technological advances necessary to remain competitive and
profitable, that new products and services will be developed and manufactured on
schedule or on a cost-effective basis or that our existing products and services
will not become technologically obsolete.
WE OPERATE IN A REGULATED INDUSTRY, AND OUR INABILITY TO SECURE OR MAINTAIN
THE LICENSES OR APPROVALS NECESSARY TO OPERATE OUR BUSINESS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
Our ability to pursue our business activities is regulated by various
agencies and departments of the U.S. government and, in certain circumstances,
the governments of other countries. Commercial space launches require licenses
from the U.S. Department of Transportation ("DoT") and operation of our L-1011
aircraft requires licenses from certain agencies of the DoT, including the
Federal Aviation Administration. There can be no assurance that we will be
successful in our efforts to obtain necessary licenses or regulatory approvals.
Exports of our products, services and technical information frequently require
licenses from the U.S.
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Department of State. Our inability to secure or maintain any necessary licenses
or approvals or significant delays in obtaining such licenses or approvals could
have a material adverse effect on our financial condition or results of
operations.
THE MAJORITY OF OUR CONTRACTS ARE LONG-TERM CONTRACTS, AND OUR REVENUE
RECOGNITION AND PROFITABILITY UNDER SUCH CONTRACTS MAY BE ADVERSELY AFFECTED TO
THE EXTENT THAT ACTUAL COSTS EXCEED ESTIMATES OR THAT THERE ARE DELAYS IN
COMPLETING SUCH CONTRACTS.
The majority of our contracts are long-term contracts. We recognize
revenues on long-term contracts using the percentage of completion method of
accounting, whereby revenue, and therefore profit, is recognized based on actual
costs incurred in relation to total estimated costs to complete the contract or
based on specific delivery terms and conditions. Revenue recognition and our
profitability, if any, from a particular contract may be adversely affected to
the extent that original cost estimates, estimated costs to complete or
incentive or award fee estimates are revised, delivery schedules are delayed, or
progress under a contract is otherwise impeded.
WE FACE SIGNIFICANT COMPETITION IN EACH OF OUR LINES OF BUSINESS, AND OUR
COMPETITORS MAY POSSESS SIGNIFICANTLY MORE RESOURCES THAN WE DO.
Many of our competitors are larger and have substantially greater resources
than we do. Furthermore, it is possible that other domestic or foreign companies
or governments, some with greater experience in the space industry and greater
financial resources than Orbital, will seek to produce products or services that
compete with our products or services. Any such foreign competitor could benefit
from subsidies from or other protective measures by its home country.
WE HAVE WRITTEN OFF SOME OF OUR INVESTMENTS IN SATELLITE SERVICES
BUSINESSES. THE FINANCIAL PERFORMANCE OF THESE BUSINESSES HAVE HAD AND MAY
CONTINUE TO HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
We have developed and funded several space-based satellite services
businesses, primarily through equity investments in Orbital Imaging Corporation
("ORBIMAGE"), which develops and operates commercial remote imaging satellites,
and ORBCOMM Global L.P. ("ORBCOMM"), which operates a low-Earth orbit satellite
communications system designed to serve the global market for two-way data
communications. ORBCOMM and ORBIMAGE have both recently experienced serious
financial difficulties.
In September 2000, ORBCOMM and its subsidiaries commenced a reorganization
proceeding under Chapter 11 of the U.S. Federal Bankruptcy Code and in April
2001, a majority of ORBCOMM's assets were sold to a third party in which we
presently have no ownership interest. We recorded non-cash charges totaling
$113,123,000 in 2000 to fully write off our investment in ORBCOMM and to write
down ORBCOMM-related receivables and inventory to their estimated realizable
values of $196,000 and $12,854,000, respectively, as of December 31, 2000. This
inventory is comprised primarily of rocket motors and related hardware that are
not unique to the ORBCOMM contracts and, accordingly, this inventory may be
utilized on contracts with other customers. Although we believe at this time
that these write-offs are sufficient to cover our current exposure, such
reserves do not include any additional charges that may result should any
disputes, litigation or unforeseen contingencies related to ORBCOMM arise.
In March 2001, ORBIMAGE defaulted on its interest payment obligations under
its outstanding public debt. The debt is non-recourse to Orbital. ORBIMAGE
management does not believe that ORBIMAGE has sufficient resources to meet its
capital and operating requirements through the third quarter of 2001. ORBIMAGE
is seeking to restructure its outstanding debt and to obtain additional capital
from third parties as well as its existing shareholders, including Orbital.
There can be no assurance that such capital will be available on a timely basis
or at all. If ORBIMAGE does not succeed in raising additional capital, our
ORBIMAGE-related receivables and inventory could become impaired, and we could
be subject to litigation by ORBIMAGE and/or its creditors.
We own approximately 99.9% of ORBIMAGE's outstanding common stock. Although
during the second quarter of 2000, our share of ORBIMAGE's losses exceeded our
investment balance and our investment
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balance was reduced to zero, we continue to recognize 100% of ORBIMAGE's losses.
As of June 30, 2001, we had recorded $35,129,000 of losses on our consolidated
financial statements after our investment balance was reduced to zero.
We generally recognize the revenues earned and costs incurred on sales of
products and services to ORBCOMM and ORBIMAGE. However, as a result of the
weakened financial condition of ORBCOMM and ORBIMAGE, we ceased recognizing
revenues on sales to ORBCOMM and ORBIMAGE effective June and July 2000,
respectively.
We sublease approximately 125,000 square feet to ORBCOMM, and we have an
agreement with ORBIMAGE pursuant to which ORBIMAGE is required to reimburse us
for use of our facilities. ORBIMAGE is in default on its rent payments with
approximately $728,000 due Orbital as of June 30, 2001, and there can be no
assurance that ORBCOMM and ORBIMAGE will be able to pay us their rent on a
timely basis, or at all.
THE COSTS AND OTHER EFFECTS OF PENDING OR POSSIBLE LITIGATION COULD HAVE AN
ADVERSE EFFECT ON OUR BUSINESS AND COULD DIVERT THE ATTENTION OF MANAGEMENT FROM
ONGOING BUSINESS MATTERS.
We are involved in litigation as disclosed in our Form 10-K/A for the year
ended December 31, 2000. The eventual outcome of these legal matters is
uncertain and, if resolved unfavorably to us, could result in a material adverse
effect on our results of operations and financial condition.
The creditors committee of ORBCOMM has notified us that they believe
ORBCOMM's bankruptcy estate is entitled to recover approximately $57,000,000 in
allegedly preferential payments that we received in connection with the sale of
satellites and launch services to ORBCOMM during the one-year period preceding
ORBCOMM's bankruptcy filing. The creditors committee has agreed to release the
foregoing claims against Orbital upon consummation of the proposed ORBCOMM plan
of reorganization; however, there can be no assurance that the plan of
reorganization will be consummated.
RISKS FACTORS RELATED TO OUR COMMON STOCK
OUR RESTATED CERTIFICATE OF INCORPORATION, OUR BYLAWS, OUR STOCKHOLDER
RIGHTS PLAN AND DELAWARE LAW CONTAIN ANTI-TAKEOVER PROVISIONS THAT MAY ADVERSELY
AFFECT THE RIGHTS OF OUR SHAREHOLDERS.
Our board of directors has the authority to issue up to 10,000,000 shares
of our preferred stock, $0.01 par value per share, and to determine the price,
rights, preferences, and privileges of those shares without any further vote or
action by the stockholders. The rights of the holders of our common stock will
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock. We have no present plans to issue shares of preferred stock.
In addition to our ability to issue preferred stock without stockholder
approval, our charter documents contain other provisions which could have an
anti-takeover effect, including:
- our charter provides for a staggered board of directors as a result of
which only one of the three classes of directors is elected each year;
- any merger, acquisition or other business combination that is not
approved by our board of directors must be approved by 66 2/3% of voting
stockholders;
- stockholders cannot act by written consent;
- stockholders holding less than 10% of our outstanding voting stock cannot
call a special meeting of stockholders; and
- stockholders must give advance notice to nominate directors or submit
proposals for consideration at stockholder meetings.
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In 1998, we adopted a stockholder rights plan which provides, among other
things, that when specified events occur, our stockholders will be entitled to
purchase from us a number of shares of common stock equal in value to two times
the purchase price, initially equal to $210.00 per share, subject to adjustment
upon the occurrence of specified events. Therefore, for example, if our shares
of common stock had a current market value of $5.00 and the purchase price was
$210.00, a stockholder would be entitled to purchase 84 shares of common stock
for $210.00. The stock purchase rights are triggered by the earlier to occur of
(1) ten days following the date of a public announcement that a person or group
acting in concert has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of our outstanding shares of common stock without the
prior consent of our board of directors or (2) ten business days after the
commencement of or announcement of an intention to make a tender offer or
exchange offer, the consummation of which would result in the acquiring person
becoming the beneficial owner of 15% or more of our outstanding shares of common
stock. The stock purchase rights would cause substantial dilution to a person or
group that attempts to acquire us on terms not approved by our board of
directors.
In addition, we are subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which restricts the ability of current
stockholders holding more than 15% of our voting shares to acquire us without
the approval of 66 2/3% of the other stockholders. These provisions could
discourage potential acquisition proposals and could delay or prevent a change
in control transaction. They could also have the effect of discouraging others
from making tender offers for our common stock. As a result, these provisions
may prevent our stock price from increasing substantially in response to actual
or rumored takeover attempts. These provisions may also prevent changes in our
management.
WE ARE UNABLE TO AND HAVE NO CURRENT INTENTION TO PAY DIVIDENDS.
We presently do not pay dividends on our common stock and do not plan to
pay dividends for the foreseeable future. In addition, we are prohibited from
paying cash dividends under our primary credit facility.
USE OF PROCEEDS
We will receive proceeds from the exercise of the Warrants to purchase the
shares of our common stock covered by this prospectus. The holders of the
Warrants are not obligated to exercise their Warrants. If the Warrants are
exercised in full by payment of the initial stated exercise price of $4.82 per
share, then we will receive gross proceeds of approximately $22,322,003. Under
the terms of our primary credit facility, which expires July 1, 2002, we are
required to apply 55% of the net cash proceeds to us from the issuance of shares
of common stock upon exercise of the warrants to pay down outstanding debt on
the credit facility. We will use the remaining amounts for working capital and
general corporate purposes.
PLAN OF DISTRIBUTION
We are registering shares of common stock underlying the Warrants. We will
distribute such shares if and when the holders of the Warrants exercise their
respective Warrants. The Warrants will be exercisable for a period of three
years from and after the date they are issued at an exercise price of $4.82 per
share. All costs, expenses and fees in connection with the registration of the
shares underlying the Warrants will be borne by us.
This offering will terminate on the earlier of (a) the date on which all of
the shares covered by this prospectus have been sold in connection with the
exercise of all of the Warrants in full or (b) the third anniversary of the date
the Warrants are issued, which is expected to occur concurrently with the
effectiveness of the registration statement of which this prospectus is a part.
INTERESTS OF NAMED EXPERTS AND COUNSEL
We have agreed to indemnify and hold KPMG LLP ("KPMG") harmless against and
from any and all legal costs and expenses incurred by KPMG in successful defense
of any legal action or proceeding that arises as a result of KPMG's consent to
the incorporation by reference of its audit reports on our, ORBIMAGE's
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and ORBCOMM's past consolidated financial statements incorporated by reference
into this registration statement. This means that, if KPMG is required to defend
any action or proceeding relating to its consent, Orbital will be required to
reimburse KPMG for its costs unless KPMG is determined in such proceeding to
have been liable for professional malpractice in its audits of such past
financial statements or KPMG settles the action or proceeding.
LEGAL MATTERS
Hogan & Hartson L.L.P., Washington, D.C., will pass upon the validity of
the issuance of the shares of common stock being offered hereby.
EXPERTS
The consolidated financial statements and schedules of Orbital as of
December 31, 2000 and 1999 incorporated in this prospectus by reference to the
Annual Report on Form 10-K for each of the two years in the two-year period
ended December 31, 2000 have been so incorporated in reliance on the report
(which contains an explanatory paragraph relating to the Orbital's ability to
continue as a going concern as described in Note 1 to the consolidated financial
statements) and the financial statements of Orbital Imaging Corporation as of
December 31, 2000 and 1999 have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of ORBCOMM Global, L.P. as of
December 31, 2000 and 1999 and for the years then ended and the financial
statements of Orbital Communications Corporation as of December 31, 1999 and for
the year then ended incorporated by reference in this prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
said reports, which include explanatory paragraphs with respect to the
uncertainty regarding the ability of both companies to continue as going
concerns as discussed in the notes to the financial statements.
The consolidated financial statements and schedule of Orbital for the year
ended December 31, 1998, before the reclassification to reflect Magellan
Corporation as a discontinued operation as described in Note 2 to the
consolidated financial statements, and the consolidated financial statements of
ORBCOMM and ORBIMAGE for the year ended December 31, 1998, have been
incorporated by reference herein and in the registration statement in reliance
upon reports of KPMG LLP, independent certified public accountants, incorporated
by reference herein, upon the authority of said firm as experts in accounting
and auditing.
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