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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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ANNUAL REPORT ON
FORM 11-K
For the fiscal year ended December 31, 2001
Commission file number 0-18287
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ORBITAL SCIENCES CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 06-1209561
(State of Incorporation of Registrant) (I.R.S. Employer I.D. No.)
21839 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
(Address of principal executive offices)
(703) 406-5000
(Registrant's telephone number)
DEFERRED SALARY AND PROFIT SHARING PLAN FOR EMPLOYEES OF
ORBITAL SCIENCES CORPORATION
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(Full Title of the Plans)
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
Deferred Salary and Profit Sharing Plan for
Employees of Orbital Sciences Corporation
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Deferred Salary and Profit Sharing Plan for Employees of Orbital Sciences
Corporation (the "Plan") at December 31, 2001 and 2000, and the changes in net
assets available for benefits for the year ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
PricewaterhouseCoopers LLP
McLean, Virginia
June 25, 2002
DEFERRED SALARY AND PROFIT SHARING PLAN
FOR EMPLOYEES OF
ORBITAL SCIENCES CORPORATION
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
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2001 2000
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Investments $152,360,121 $209,694,280
Contributions receivable:
Participant 343,561 484,573
Company 2,587,963 153,242
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Net assets available for benefits $155,291,645 $210,332,095
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See accompanying notes to financial statements.
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DEFERRED SALARY AND PROFIT SHARING PLAN
FOR EMPLOYEES OF
ORBITAL SCIENCES CORPORATION
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2001
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Investment income (loss):
Net depreciation in fair value of investments $(14,972,171)
Interest on investment contracts 2,932,428
Interest on participant loans 366,773
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Net investment loss (11,672,970)
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Contributions:
Participant 11,518,881
Company 6,639,549
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Total contributions 18,158,430
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Net additions 6,485,460
Deductions from net assets attributable to:
Benefits paid to participants 61,480,327
Administrative expenses 45,583
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Total deductions 61,525,910
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Net decrease (55,040,450)
Net assets available for benefits, beginning of year 210,332,095
------------
Net assets available for benefits, end of year $155,291,645
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See accompanying notes to financial statements.
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DEFERRED SALARY AND PROFIT SHARING PLAN
FOR EMPLOYEES OF
ORBITAL SCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the Deferred Salary and Profit Sharing Plan for
Employees of Orbital Sciences Corporation (the "Plan") provides only general
information. Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
General
The Plan is a voluntary defined contribution plan that is intended to constitute
a tax-qualified profit sharing plan under Section 401(a) of the Internal Revenue
Code (the "Code"). All U.S domestic employees of Orbital Sciences Corporation
(the "company") who are scheduled to work 1,000 hours during a 12-consecutive
month period, or are not so scheduled but in fact complete a year of service for
participation ("Plan Year"), and have attained the age of 21, are eligible to
participate in the Plan. The Plan is subject to the provisions of the Employment
Retirement Income Security Act of 1974 ("ERISA"). The Plan is administered by
the company.
Contributions
Participants may contribute up to 15% of their total eligible compensation on a
pre-tax basis, subject to certain annual limitations under the Plan and the
Code. Participants are also permitted to make employee contributions to the Plan
on an after-tax basis up to 19%, including pre-tax contributions, of total
eligible compensation.
The Plan provides for company matching and profit-sharing contributions. Both of
these contributions are at the company's discretion. The company's matching
contribution is based on the amount and rate of salary-deferral contributions.
In 2001, the company matched 100% of each dollar of participant contributions up
to 4% of the participant compensation. Beginning January 1, 2001, the company's
matching contribution has been in the form of company common stock. Company
contributions are made quarterly. The number of shares of common stock
contributed to each employee's account is equal to the dollar amount of the
company's matching contribution divided by the fair market value of the
company's common stock on the last business day of each quarter.
Each year the company decides the amount, if any, of its profit-sharing
contribution. The company profit-sharing contribution is calculated as a
percentage of gross pay. A profit-sharing contribution of approximately
$1,301,000 was made by the company for 2001 in the form of company common stock.
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Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers 11 pooled
separate accounts, an investment contract with guaranteed rate of return and
company stock.
The Plan also allows participants to make rollover contributions from other tax
qualified plans. Rollover contributions are included in the accompanying
financial statements as a component of employee contributions.
Participants' Accounts
A separate account is maintained for each investment option of a participant by
type of contribution. Each participant's account is credited with the
participant's contributions, transfers, rollovers, company contributions and
Plan earnings, and is charged with an allocation of administrative expenses.
Allocations of administrative expenses are based on participants' contributions,
earnings or account balances, as applicable as defined in the Plan document.
Participants are entitled to a benefit equal to the vested portion of their
participant account.
Vesting
Participants are immediately vested in their voluntary contributions and
rollovers plus actual earnings thereon. For participants who separated from
service prior to January 1, 2000, the company's matching and discretionary
contributions, plus earnings thereon, vested equally over a period of five years
of employment, as defined. For participants actively employed or hired on or
after January 1, 2000, the company's matching and discretionary contributions,
plus earnings thereon, vest equally over a period of three years. Participants
vest immediately upon death or long-term disability.
Forfeitures
Forfeitures by terminated employees of nonvested employer contributions are held
in a separate account and are used to offset either future employer
contributions or administrative expenses of the Plan. In 2001, company
contributions were reduced by $17,757 from forfeited nonvested accounts.
Payment of Benefits
Upon termination of service, death, long-term disability, attainment of age 59
1/2 or qualified financial hardship, a participant may elect to receive either a
lump-sum amount equal to the vested value of the participant's account or
installments over a determined period, as defined in the Plan document.
Participants may also withdraw their vested account balances while still in
service of the company, as defined in the Plan document.
Termination of Plan
Although it has not expressed any intent to do so, the company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
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Participant Loans
Participants may borrow from their respective participant accounts up to the
lesser of 50% of their vested balance or $50,000 reduced by their highest
outstanding loan balance in the past 12 months. Loan terms generally may not
exceed five years. Loans for the purchase of a primary residence may not exceed
ten years. The loans accrue interest at a rate commensurate with prevailing
rates as determined by the Plan.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting.
Investments
The Plan's investments are stated at fair value, except for the CIGNA Fixed
Income Fund investment contract, which is valued at contract value. Quoted
market prices as of December 31, 2001 and 2000, respectively, are used to value
pooled separate accounts. The company stock fund is valued at its year-end
closing market price. Participant loans receivable are carried at cost, which
approximates fair market value. Purchases and sales of securities are recorded
on a trade-date basis.
Contributions Receivable
Contributions receivable are recorded at net realizable value. This takes into
consideration any increase or decrease in the company's stock price from the
date of calculation to the date deposited.
Benefit Payments
Benefits are recorded when paid.
Administrative Expenses
The Plan document provides that administrative expenses may be paid by either
the Plan or the company. For the year ended December 31, 2001, certain
administrative services, such as legal fees and Plan management costs, were
provided by the company at no cost to the Plan. Direct transaction expenses are
paid by the Plan and are either netted against investment income or recorded as
a deduction from net assets.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent
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assets and liabilities at the date of the financial statements and the reported
amounts of additions to and deductions from net assets available for benefits
during the reporting period. Such estimates include those regarding fair value.
Actual results may differ from those estimates.
NOTE 3 - FEDERAL INCOME TAXES
The Internal Revenue Service has determined and informed the company by letter
dated August 23, 2001 that the Plan and its underlying trust qualify under the
applicable provisions of the Code and therefore are exempt from Federal income
tax. The company believes that the Plan design and operations are in compliance
with the applicable requirements of the Code and, therefore, believes that the
Plan remains qualified and the related trust remains tax-exempt. Therefore, no
provision for income taxes has been included in the Plan's financial statements.
NOTE 4 - INVESTMENTS
The following investments represent 5% or more of the Plan's total net assets
available for benefits as of December 31:
2001 2000
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Investments at fair value:
Fidelity Equity - Income II Fund Account $13,571,980 $21,090,621
Vanguard Growth and Income Fund Account 23,393,399 35,202,618
Fidelity Advisor Growth Opportunities Fund Account 17,439,511 30,029,946
Janus Worldwide Fund Account 12,701,377 21,198,519
Orbital Sciences Corporation Common Stock 7,765,115 * 2,965,426
Investments at contract value:
CIGNA Fixed Income Fund Account $46,993,730 $60,094,611
* Nonparticipant-directed
During 2001, the Plan's investments at fair value (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
Pooled separate accounts $(16,478,701)
Orbital Sciences Corporation
common stock 1,506,530
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Net depreciation $(14,972,171)
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Nonparticipant-Directed Investment:
The Plan's assets held in Orbital Sciences Corporation common stock are
classified as nonparticipant-directed because they include company-directed
contributions. Prior to January 1, 2001, company matching and discretionary
contributions were made in cash to participant-directed investments. Beginning
January 1, 2001, company contributions have been made in
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Orbital Sciences Corporation common stock. Participants are able to make
transfers from Orbital Sciences Corporation common stock to other Plan
investments at any time.
Information about the significant components of the changes in the Orbital
Sciences Corporation common stock investments for the year ended December 31,
2001 is as follows:
Contributions $ 4,702,379
Net appreciation 1,506,530
Benefits paid to participants (1,236,431)
Transfers to participant-directed investments, net (139,081)
Administrative expenses (33,708)
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$ 4,799,689
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NOTE 5 - DEPOSIT WITH INSURANCE COMPANY
The Plan participates in a contract via an investment in the CIGNA Fixed Income
Account, which is valued at contract value. The Plan's investment in the CIGNA
Fixed Income Account is credited with interest at the rate specified in the
contract. The effective yield for the six-month periods ended June 30, 2001 and
December 31, 2001 was 6.15% and 5.85%, respectively. The guaranteed rate of
return is stated semi-annually and is guaranteed against change for a six-month
period.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Plan's investments are held by CIGNA in an investment contract, pooled
separate accounts which invest in various mutual funds, and in Orbital Sciences
Corporation common stock. CIGNA is the trustee and the company is the Plan
Sponsor as defined by the Plan. Thus, these transactions qualify as
party-in-interest transactions which are exempt from the prohibited transaction
rules. Purchases of $5,754,300 (including $4,702,379 in contributions) and sales
of $2,461,141 of Orbital Sciences Corporation common stock were made during
2001. The market value of Orbital Sciences Corporation common stock at December
31, 2001 and 2000 was $7,765,115 and $2,965,426, respectively.
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NOTE 7 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements at December 31, 2001 and 2000 to the Form 5500:
2001 2000
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Net assets available for benefits per the
financial statements $155,291,645 $210,332,095
Less amounts allocated to withdrawing
participants (110,344) (6,415)
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Net assets available for benefits per the
Form 5500 $155,181,301 $210,325,680
============ ============
The following is a reconciliation of benefits paid to participants per the
financial statements for the year ended December 31, 2001 to the Form 5500:
Benefits paid to participants per the financial statements $61,480,327
Add: Amounts allocated to withdrawing participants at
December 31, 2001 110,344
Less: Amounts allocated to withdrawing participants at
December 31, 2000 (6,415)
Other (2,806)
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Benefits paid to participants per the Form 5500 $61,581,450
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Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not paid as of that date.
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ADDITIONAL INFORMATION
SCHEDULE I
DEFERRED SALARY AND PROFIT SHARING PLAN
FOR EMPLOYEES OF
ORBITAL SCIENCES CORPORATION
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
CURRENT
IDENTITY OF ISSUE ASSET DESCRIPTION COST VALUE
----------------- ----------------- ----------- ------------
Connecticut General Life Insurance Company Investment Contract, 5.85%
Retirement & Investment Services stated interest rate $46,993,730 $ 46,993,730
(CIGNA) Fixed Income Fund Account *
Vanguard Wellington Fund Account Pooled Separate Contract 6,399,926 7,392,079
Fidelity Equity - Income II Fund Account Pooled Separate Contract 11,305,580 13,571,980
Vanguard Growth and Income Fund Account Pooled Separate Contract 22,414,973 23,393,399
Fidelity Advisor Growth Opportunities Fund Pooled Separate Contract 18,663,848 17,439,511
Account
PBHG Growth Fund Account Pooled Separate Contract 8,930,568 5,024,551
Janus Worldwide Fund Account Pooled Separate Contract 15,339,773 12,701,377
Berger Small Value Fund Account Pooled Separate Contract 5,645,082 6,713,723
PIMCO Total Return Fund Account Pooled Separate Contract 1,007,031 1,009,833
Dresdner Large Growth Fund Account Pooled Separate Contract 229,256 230,858
American Century International Growth Fund Pooled Separate Contract 2,201,462 2,279,723
Account
Vanguard Explorer Fund Account Pooled Separate Contract 3,237,680 3,846,367
Orbital Sciences Corporation * Common Stock 11,687,591 7,765,115
Participant Loans * Participant Loans, interest
rates ranging from 5.00% to
16.01% and maturity dates
ranging from January 2002 to
January 2011 -- 3,997,875
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$152,360,121
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* Denotes a party-in-interest
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, Orbital
Sciences Corporation, the administrator of the employee benefit plan covered by
this Report on Form 11-K, has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
ORBITAL SCIENCES CORPORATION, Plan
Administrator for the Deferred Salary and
Profit Sharing Plan for Employees of
Orbital Sciences Corporation
Dated: July 1, 2002 By: /s/ Hollis M. Thompson
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Hollis M. Thompson
Vice President and Corporate Controller
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EXHIBIT INDEX
Exhibit 23 Consent of PricewaterhouseCoopers LLP (transmitted herewith)
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