Research and Development

9 Months Ended

Sep. 30, 2012

Research and Development [Abstract]

Research and Development

(11)  Research and Development

In 2008, the company entered into an agreement with NASA to design, build and demonstrate a new space transportation system under a program called Commercial Orbital Transportation Services (“COTS”), for delivering cargo and supplies to the International Space Station.  Under the agreement, as amended, NASA has agreed to pay the company $288 million in cash milestone payments, partially funding Orbital’s project costs which are currently estimated to be approximately $495 million.  The company expects to substantially complete this project in early 2013.

The COTS agreement is being accounted for as a best-efforts research and development cost-sharing arrangement.  As such, the amounts funded by NASA are recognized proportionally as an offset to the company’s COTS project research and development expenses, including associated general and administrative expenses.  As of September 30, 2012 and December 31, 2011, deferred revenue and customer advances on the accompanying balance sheet included $0 and $6.2 million, respectively, of cash received from NASA that had not yet been recorded as an offset to research and development expenses.  The following table summarizes the COTS project research and development expenses incurred and amounts funded by NASA (in millions):

	Third Quarter						First Nine Months						Inception
	2012			2011			2012			2011			To Date
Research and development costs incurred (1)	$	21.2		$	36.8		$	53.5		$	115.1		$	471.4
Less  amounts funded by NASA		(6.0	)		(23.0	)		(21.5	)		(82.3	)		(281.8	)
Net research and development expenses	$	15.2		$	13.8		$	32.0		$	32.8		$	189.6

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(1) Includes associated general and administrative expenses.

The company is engaged in a major product development program of a medium-capacity rocket named Antares.  Approximately $9.9 million and $9.0 million of the company’s research and development expenses in the third quarter of 2012 and 2011, respectively, and $29.6 million and $24.2 million in the first nine months of 2012 and 2011, respectively, were attributable to the Antares program.  Since the inception of the Antares program through September 30, 2012, the company has incurred $221.9 million of such costs.