-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EBxj0STGwyGmxTSFUmzqK6387CtgXZHalqCE95s57VWrYqubdHlT3MVDRL/3pAv2 ePUHMIDY7pzHXDDVIBwmVg== 0000820736-95-000018.txt : 19951119 0000820736-95-000018.hdr.sgml : 19951119 ACCESSION NUMBER: 0000820736-95-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBITAL SCIENCES CORP /DE/ CENTRAL INDEX KEY: 0000820736 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 061209561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18287 FILM NUMBER: 95592471 BUSINESS ADDRESS: STREET 1: 21700 ATLANTIC BOULEVARD CITY: DULLES STATE: VA ZIP: 20166 BUSINESS PHONE: 7034065000 MAIL ADDRESS: STREET 2: 21700 ATLANTIC BLVD CITY: DULLES STATE: VA ZIP: 20166 FORMER COMPANY: FORMER CONFORMED NAME: ORBITAL SCIENCES CORP II DATE OF NAME CHANGE: 19900212 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended September 30, 1995 ORBITAL SCIENCES CORPORATION Commission file number 0-18287 Delaware 06-1209561 (State of Incorporation) (IRS Identification number) 21700 Atlantic Boulevard Dulles, Virginia 20166 (703) 406-5000 (Address of principal (Telephone number) executive offices) 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. As of November 9, 1995, 22,693,669 shares of the registrant's common stock were outstanding. PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except share data) A S S E T S September 30, December 31, 1995 1994 CURRENT ASSETS: Cash and cash equivalents $11,200 $21,156 Short-term investments, at market 32,697 12,426 Receivables, net 89,710 94,236 Inventories, net 25,980 26,098 Deferred income taxes and other assets 12,218 5,914 Total current assets 171,805 159,830 PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $32,932 and $33,432, respectively 95,267 102,061 INVESTMENTS IN AFFILIATES, net 67,045 54,721 EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, less accumulated amortization of $12,177 and $10,042, respectively 70,517 68,878 DEFERRED INCOME TAXES AND OTHER ASSETS 19,313 17,238 TOTAL ASSETS $423,947 $402,728 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings and current portion of long-term obligations $5,924 $28,160 Accounts payable 19,132 14,961 Accrued expenses 26,824 37,439 Payable to subcontractors 2,071 13,695 Deferred revenue 20,730 13,272 Total current liabilities 74,681 107,527 LONG-TERM OBLIGATIONS, net of current portion 93,833 81,163 DEFERRED INCOME TAXES AND OTHER LIABILITIES 16,630 11,992 TOTAL LIABILITIES 185,144 200,682 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $.01; 10,000,000 shares authorized, no shares issued or outstanding - - Common stock, par value $.01; 40,000,000 shares authorized, 22,679,643 and 20,170,196 shares outstanding, after deducting 15,735 shares held in treasury 227 202 Additional paid-in capital 238,395 201,328 Unrealized gains (losses) on short-term investments (80) (462) Retained earnings 261 978 Total stockholders' equity 238,803 202,046 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $423,947 $402,728 See accompanying notes to condensed consolidated financial statements.
ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited; in thousands, except share data) Three Months Ended September 30, 1995 1994 REVENUES $79,172 $58,205 COSTS OF GOODS SOLD 57,851 40,891 GROSS PROFIT 21,321 17,314 RESEARCH AND DEVELOPMENT EXPENSES 3,512 3,159 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 12,356 10,184 AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED 791 567 INCOME FROM OPERATIONS 4,662 3,404 NET INTEREST INCOME (EXPENSE) (920) (238) EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (596) (995) INCOME BEFORE PROVISION FOR INCOME TAXES 3,146 2,171 PROVISION FOR INCOME TAXES 944 658 NET INCOME $2,202 $1,513 NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $0.10 $0.08 SHARES USED IN COMPUTING NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE 22,986,160 19,213,903 NET INCOME PER COMMON SHARE, ASSUMING FULL DILUTION $0.10 $0.08 SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE, ASSUMING FULL DILUTION 26,881,696 23,318,078 See accompanying notes to condensed consolidated financial statements.
ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, in thousands, except share data) Nine Months Ended September 30, 1995 1994 REVENUES $212,102 $156,880 COSTS OF GOODS SOLD 155,145 114,514 GROSS PROFIT 56,957 42,366 RESEARCH AND DEVELOPMENT EXPENSES 12,276 9,665 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 35,063 24,656 AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED 2,191 1,375 INCOME FROM OPERATIONS 7,427 6,670 NET INTEREST INCOME (EXPENSE) (2,806) 693 EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (234) (1,539) INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,387 5,824 PROVISION FOR INCOME TAXES 944 1,575 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,443 4,249 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (4,160) -- NET INCOME (LOSS) ($717) $4,249 NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Income Before Cumulative Effect of Accounting Change $0.16 $0.23 Cumulative Effect of Accounting Change (0.19) -- ($0.03) $0.23 SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE 21,640,635 18,346,929 NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION Income Before Cumulative Effect of Accounting Change $0.16 $0.21 Cumulative Effect of Accounting Change (0.19) -- ($0.03) $0.21 SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION 25,536,405 22,452,493 See accompanying notes to condensed consolidated financial statements.
ORBITAL SCIENCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in thousands) Nine Months Ended September 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ($717) $4,249 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization expense 13,186 8,455 Equity in (earnings) losses of affiliates 234 1,538 Cumulative effect of accounting change 4,160 -- Changes in assets and liabilities: (Increase) decrease in contract receivables 13,852 7,221 (Increase) decrease in components inventory 118 (970) (Increase) decrease in other current assets (4,957) (1,381) (Increase) decrease in deposits and other assets (5,701) 3,621 Increase (decrease) in payables and accrued expenses (21,725) (8,671) Increase (decrease) in deferred revenue 7,667 (18,777) Increase (decrease) in deferred income taxes and other 4,638 604 Net cash provided by (used in) operating activities 10,756 (4,111) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (16,620) (18,262) Proceeds from sales of fixed assets 125 -- Purchase of investment securities (24,199) (8,916) Sale of investment securities 4,310 14,210 Investments in affiliates (11,853) (10,539) Payment for business acquisition -- (40,718) Net cash used in investing activities (48,237) (64,225) CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowings (22,649) 13,546 Principal payments on long-term obligations (3,917) (896) Proceeds from issuance of long-term obligations 20,000 24,200 Net proceeds from issuances of common stock 34,092 1,276 Adjustment to recast pooled company's year end -- (1,138) Net cash provided by (used in) financing activities 27,526 36,988 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,956) (31,348) CASH AND CASH EQUIVALENTS, beginning of period 21,156 49,458 CASH AND CASH EQUIVALENTS, end of period $11,200 $18,110 See accompanying notes to condensed consolidated financial statements.
ORBITAL SCIENCES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 AND 1994 (Unaudited) BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation thereof. 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. Although the Company believes that the disclosures provided are adequate to make the information presented not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Operating results for the three- and nine-month periods ended September 30, 1995 and 1994 are not necessarily indicative of the results expected for the full year. Orbital Sciences Corporation is hereafter referred to as "Orbital" or the "Company." (1) The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS 121"), which (i) requires that long-lived assets "to be held and used" be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, (ii) requires that long-lived assets "to be disposed of" be reported at the lower of carrying amount or fair value less cost to sell, and (iii) provides guidelines and procedures for measuring an impairment loss that are significantly different from existing guidelines and procedures. The Company adopted the provisions of SFAS 121 during the quarter ended June 30, 1995. As a result, as of January 1, 1995 Orbital recorded a cumulative adjustment for a change in accounting principle of approximately $4.2 million related to the impairment in the carrying amount of certain assets to be disposed of that supported its orbit transfer vehicle product line. (2) Inventories Inventories consist of components inventory, work-in- process inventory and finished goods inventory and are generally stated at the lower of cost or net realizable value on a first-in, first-out or specific identification basis. Components inventory consists primarily of components and raw materials purchased to support future production efforts. Work-in-process inventory consists primarily of (i) costs incurred under U.S. Government fixed-price contracts accounted for using the percentage of completion method of accounting applied on a units of delivery basis and (ii) partially assembled commercial products, and generally includes direct production costs and certain allocated indirect costs (including an allocation of general and administrative costs). Work in process inventory has been reduced by contractual progress payments received. Finished goods inventory consists of fully assembled commercial products awaiting shipment. (3) Excess of Purchase Price Over Net Assets Acquired During the quarter ended September 30, 1995, as a result of obtaining additional information subsequent to the acquisition of Fairchild Space and Defense Corporation ("Fairchild") on August 11, 1994, the Fairchild purchase price was reallocated to reflect a more accurate valuation of assets and liabilities acquired. As a result of the reallocation, the value of net liabilities acquired increased by approximately $3,800,000 with a resulting increase in the excess of purchase price over net assets acquired. (4) Investments in Affiliates The Company's majority-owned subsidiary, Orbital Communications Corporation ("OCC"), and Teleglobe Mobile Partners, an affiliate of Teleglobe Inc., formed a partnership, ORBCOMM Global, L.P. ("ORBCOMM Global"), formerly known as ORBCOMM Development Partners, L.P., for the two-phased design, development, construction, integration, test and operation of a low-Earth orbit satellite communications system (the "ORBCOMM System"). Pursuant to the terms of the amended partnership agreement, OCC and Teleglobe Mobile Partners are each 50% general partners in ORBCOMM Global. Additionally, OCC owns 51% and 49%, respectively, in ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM International") (ORBCOMM Global, ORBCOMM USA and ORBCOMM International are, collectively, the "ORBCOMM Partnerships"), two partnerships formed to market the ORBCOMM System. Teleglobe Mobile Partners owns 49% and 51%, respectively, in the two marketing partnerships. During the quarter ended September 30, 1995, Teleglobe Mobile increased its capital commitments to ORBCOMM Global to $85 million, of which $30 million has been contributed to date. OCC also increased its total capital commitments to $75 million, of which approximately $59 million has been contributed to date. Orbital is the primary supplier of the communications satellites, launch vehicles, and the U.S. ground tracking systems to ORBCOMM Global, and successfully launched the first two ORBCOMM System satellites in April 1995. Several anomalies initially observed on the spacecraft have been resolved and, in July 1995, Orbital successfully completed on-orbit functional testing of the satellites. With the testing complete, ORBCOMM Global can begin conducting communications testing with customers in actual operating conditions. Based on its current assessment of the overall business prospects of the ORBCOMM Partnerships and the ORBCOMM System, the Company currently believes its investment of approximately $67 million in ORBCOMM Global is fully recoverable. If, in the future, implementation of the ORBCOMM System is significantly delayed, significantly restricted or abandoned, the Company may be required to expense part or all of its investment. (5) Debt In June 1995, the Company entered into a $20 million fixed-rate unsecured debt financing arrangement with a private insurance company. The debt has a six-year term and bears interest at 10 1/2% per annum. In September 1995, Orbital entered into a $7 million unsecured line of credit with an international bank. The line is repayable upon demand and bears interest at LIBOR plus 80 basis points, which was approximately 6% at September 30, 1995. No amounts were outstanding on the line at September 30, 1995. (6) Common Stock and Income Per Share In June 1995, the Company completed a private placement of two million shares of its Common Stock, receiving net proceeds of approximately $32 million. The Company's shares were placed with various international institutional investors and the private placement was exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended. Income per common and common equivalent share is calculated using the weighted average number of common and common equivalent shares, to the extent dilutive, outstanding during the periods. Income per common share assuming full dilution is calculated using the weighted average number of common and common equivalent shares outstanding during the periods plus the effects of an assumed conversion of the Company's 6 3/4% convertible subordinated debentures, after giving effect to all net income adjustments that would result from the assumed conversion. Any reduction of less than three percent in the aggregate has not been considered dilutive in the calculation and presentation of income per common share assuming full dilution. (7) Income Taxes The Company has recorded its interim income tax 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. (8) Hercules Incorporated In November 1988, Orbital and Hercules Incorporated ("Hercules") entered into an joint venture agreement relating to the development and production of the Pegasus space launch vehicle (the "Joint Venture Agreement"). In 1994, Alliant Techsystems, Inc. ("Alliant") acquired the assets of Hercules Aerospace Company (a wholly owned subsidiary of Hercules) and, in connection therewith, assumed the rights and responsibilities of Hercules with respect to the Joint Venture Agreement. During the second quarter of 1995, Orbital and Alliant replaced the Joint Venture Agreement with a joint teaming agreement to provide for the continuation of joint performance on the Pegasus and Taurus space launch vehicle programs (the "Joint Teaming Agreement"). The Joint Teaming Agreement provides, among other things, that Orbital will perform as the system prime contractor for all present and future Pegasus and Taurus missions and Alliant will perform as a solid rocket motor and payload fairing subcontractor to Orbital on the Pegasus program and as a solid rocket motor subcontractor to Orbital on the Taurus program. As a subcontractor, Alliant will receive firm-fixed prices for its subcontracts and will no longer share in contract profits and losses, but will share in the costs and benefits associated with certain defined outstanding issues on current contracts. The Joint Teaming Agreement will continue through December 31, 2005, unless terminated earlier by mutual agreement. Orbital and Alliant have also agreed to a final dismissal with prejudice of all present and future claims and litigation related to the Joint Venture Agreement, including (i) the January 1994 lawsuit filed by Hercules against Orbital alleging breaches of certain representations and warranties by Orbital in the 1988 stock purchase agreement between Hercules and Orbital, and (ii) the July 1994 lawsuit filed by Hercules against Orbital alleging breach of fiduciary duty and breach of contract in the determination of Orbital's recoverable costs pursuant to the Joint Venture Agreement. (9) Reclassifications Certain reclassifications have been made to the 1994 condensed consolidated financial statements to conform to the 1995 condensed consolidated financial statement presentation. The December 1994 acquisition of Magellan Corporation was recorded using the pooling of interests method of accounting for business combinations and, accordingly, Orbital's 1994 historical financial statements have been restated to reflect this transaction. (10) Business Combination On August 31, 1995, Orbital signed an agreement (the "Combination Agreement") to acquire MacDonald, Dettwiler and Associates Ltd. ("MDA"), a leading supplier of commercial remote sensing ground stations, headquartered in Vancouver, British Columbia. During its recently completed fiscal year ended March 31, 1995, MDA reported pre-tax income of approximately US$5,500,000 on sales of approximately US$80,000,000. The transaction will be structured as a tax-free merger and accounted for as a pooling of interests. Pursuant to the terms of the Combination Agreement, a newly formed Canadian subsidiary of Orbital will issue exchangeable preferred shares (the "Exchangeable Shares") for all of MDA's outstanding common stock based on an exchange ratio to be determined according to the average closing price of Orbital's stock in the month prior to closing. The Exchangeable Shares will be exchangeable on a one-for-one basis for Orbital common stock. The transaction is expected to close by the end of November. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 Revenues. Orbital's revenues for the three-month periods ended September 30, 1995 and 1994 were $79,172,000 and $58,205,000, respectively. The Company's revenues for the nine-month periods ended September 30, 1995 and 1994 were $212,102,000 and $156,880,000, respectively. Revenues from the Company's space launch vehicle products decreased to $7,521,000 during the 1995 three-month period from $17,838,000 during the comparable 1994 period. Space launch vehicle revenues were $19,486,000 and $47,599,000 for the nine- month periods ended September 30, 1995 and 1994, respectively. The significant decrease in revenues during the periods is attributable primarily to the continuing effects of production delays caused by the Company's two failed launches of its new Pegasus XL launch vehicle in June 1994 and in June 1995. Orbital expects total 1995 space launch vehicle revenues to be less than 1994 as a result of the ongoing failure review and return to flight process, although fourth quarter sales are expected to be higher than third quarter sales due to work performed on newly awarded contracts and option exercises for Taurus launches. Sales of space launch vehicles to ORBCOMM Global were $4,463,000 and $3,629,000 for the three-month periods ended September 30, 1995 and 1994, respectively. Revenues from suborbital launch vehicle products increased to $5,400,000 in the 1995 three-month period as compared to $4,699,000 in the 1994 period. Suborbital revenues were $16,891,000 and $16,325,000 for the nine-month periods ended September 30, 1995 and 1994, respectively. While suborbital revenues have decreased significantly during the past few years as U.S. Government defense spending has been reduced, the Company expects 1995 revenues to remain approximately consistent with, or to slightly increase from, revenue levels achieved in 1994. The increase in 1995 third quarter sales as compared to 1994's third quarter sales was the first such increase since 1992. For the three months ended September 30, 1995, spacecraft systems revenues increased to $32,337,000 from $11,043,000 in the 1994 period, and revenues for the nine-month period ended September 30, 1995 were $61,238,000 as compared to $26,775,000 in the same period in 1994. The increase in spacecraft system sales is primarily due to additional revenues generated from the Company's Germantown operations, acquired in August 1994 (the "Germantown Acquisition") and to sales to ORBCOMM Global. The 1995 and 1994 three-month periods included $19,198,000 and $3,685,000, respectively, in sales of MicroStar spacecraft to ORBCOMM Global. Revenues generated from sales of space sensors and instruments of $2,028,000 during the 1995 quarter decreased from the comparable 1994 quarter sales of $4,591,000. Space sensors and instruments sales were $8,575,000 and $13,363,000 for the 1995 and 1994 nine- month periods, respectively, and are expected to remain lower than 1994 levels throughout 1995. Revenues from defense electronics and avionics products were approximately $12,676,000 for the three-month period ended September 30, 1995 as compared to $2,651,000 in the 1994 period. Defense electronics and avionics products sales were $42,466,000 and $8,511,000 in the 1995 and 1994 nine-month periods, respectively. These products were acquired as part of the Germantown Acquisition and the September 1993 acquisition of the Applied Science Operation of The Perkin-Elmer Corporation. Revenues from sales of navigation and positioning products increased to $14,564,000 for the three months ended September 30, 1995 as compared to $8,185,000 for the 1994 period, and to $41,023,000 for the nine months ended September 30, 1995 as compared to $26,738,000 for the 1994 period, primarily due to a substantial increase in unit sales offset, in part, by lower unit prices for GPS navigators. The Company expects navigation and positioning products sales to continue to increase in the fourth quarter of 1995. Revenues from the Company's newly established Advanced Projects Group were $2,261,000 during the third quarter of 1995 and $11,665,000 for the first nine months of 1995 as a result of work performed under a cooperative agreement with NASA awarded earlier in 1995 for the development of a new small reusable launch vehicle and under contract to the U.S. Government's Advanced Research Projects Agency for the preliminary design of a new advanced unmanned, long-duration, high-flying aircraft. Gross Profit. Gross profit depends on a number of factors, including the Company's mix of contract types and costs incurred thereon in relation to estimated costs. The Company's gross profit for the three-month periods ended September 30, 1995 and 1994 was $21,321,000 and $17,314,000, respectively. Gross margin for the nine-month periods ended September 30, 1995 and 1994 was $56,957,000 and $42,366,000, respectively. Gross profit margin as a percentage of sales for those periods was approximately 26.9% and 29.7%, respectively, and 26.9% and 27.0%, respectively. The decreasing gross profit margin as a percentage of sales during 1995 is primarily attributable to cost increases on the Pegasus program as a result of the Pegasus XL failures in June of 1994 and 1995. The Company believes that its gross profit margin for the remainder of 1995 will increase slightly as compared to 1994 and the first nine months of 1995. Research and Development Expenses. Research and development expenses represent Orbital's self-funded product development activities, and exclude direct customer-funded development. Research and development expenses during the three-month periods ended September 30, 1995 and 1994 were $3,512,000 and $3,159,000, respectively. Research and development expenses for the 1995 and 1994 nine-month periods were $12,276,000 and $9,665,000, respectively. Research and development expenses in 1995 relate primarily to the development of new or improved navigation products and development efforts on the Company's Pegasus program, and include estimated expenses related to the 1995 Pegasus XL failure. The Company expects its research and development expenditures for the rest of 1995 to be consistent with 1994 expenditures. Selling, General and Administrative Expenses. Selling, general and administrative expenses include the costs of marketing, advertising, promotional and other selling expenses as well as the costs of the finance, administrative and general management functions of the Company. Selling, general and administrative expenses for the three months ended September 30, 1995 and 1994 were $12,356,000 (or 15.6% of revenues) and $10,184,000 (or 17.5% of revenues), respectively. Selling, general and administrative expenses for the nine months ended September 30, 1995 and 1994 were $35,063,000 (or 16.5% of revenues) and $24,656,000 (or 15.7% of revenues), respectively. The increase in selling, general and administrative expenses during 1995 as compared to 1994 was primarily attributable to substantially expanded marketing efforts related to the Company's ORBCOMM project, various remote sensing systems, and to the Germantown Acquisition. The Company expects selling, general and administrative expenses as a percentage of revenues during the remainder of 1995 to be in line with the percentage attained during third quarter of 1995. Interest Income and Interest Expense. Net interest expense was $920,000 for the three months ended September 30, 1995 as compared to net interest expense of $238,000 during the 1994 quarter. Net interest expense for the 1995 nine-month period was $2,806,000 as compared to $693,000 of net interest income for the 1994 nine-month period. Interest income for the periods reflects interest earnings on short-term investments. Interest expense is primarily for outstanding amounts on Orbital's revolving credit facility, on the Company's public debentures, on acquisition debt incurred for the Germantown Acquisition and, in 1995, on private debt issued in June 1995. Interest expense has been reduced by capitalized interest of $3,769,000 and $3,900,000 for the 1995 and 1994 nine-month periods, respectively. Equity in Earnings (Losses) of Affiliates. Equity in earnings (losses) of affiliates for the three-month periods ended September 30, 1995 and 1994 of ($596,000) and ($995,000), respectively, and for the nine-month periods ended September 30, 1995 of ($234,000) and ($1,539,000), respectively, represents elimination of 50% of the profits on sales to ORBCOMM Global, as well as the Company's pro rata share of ORBCOMM Global's current period earnings and losses. During the construction phase of the ORBCOMM project and prior to the commencement of planned operations, ORBCOMM Global is capitalizing substantially all construction-related costs and is expensing as incurred all selling, general and administrative costs as period costs. Provision for Income Taxes. The Company recorded an income tax provision of $944,000 and $658,000 for the three-month periods ended September 30, 1995 and 1994, respectively, and provisions of $944,000 and $1,575,000, respectively, for the nine-month periods then ended. The Company records its interim income tax provisions 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. At December 31, 1994, Orbital had approximately $50,000,000 and $900,000 of net operating loss and tax credit carryforwards, respectively, which are available to reduce future income tax obligations, subject to certain annual limitations and other restrictions. LIQUIDITY AND CAPITAL RESOURCES The Company's growth has required substantial capital to fund both an expanding business base and significant research and development and capital investment expenditures. Additionally, the Company has historically made strategic acquisitions of businesses and routinely evaluates potential acquisition candidates. The Company expects to continue to pursue potential acquisitions that it believes would augment its marketing, technical, manufacturing or financial capabilities. The Company has funded these requirements to date, and expects to fund its requirements in the future, through cash generated by operations, working capital loan facilities, asset-based financings, joint venture arrangements, and private and public equity and debt offerings. During the quarter ended June 30, 1995, Orbital entered into a $20 million fixed-rate unsecured debt financing arrangement with a private insurance company. The debt has a six-year term and bears interest at 10 1/2% per annum. The debt arrangement restricts the payment of dividends and contains certain covenants with respect to the Company's working capital, fixed charge ratio, leverage ratio and tangible net worth. Additionally, in June 1995, the Company completed a private placement of two million shares of its Common Stock, receiving net proceeds of approximately $32 million. The Company's shares were placed with various offshore institutional investors and the private placement was exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended. In August 1994, Orbital issued secured notes totaling approximately $24,200,000 to eight financial institutions, to support the Germantown Acquisition. The notes have an average interest rate of approximately 8 3/4% and generally mature on a monthly basis over a three- to five-year period. Cash, cash equivalents and short-term investments were $43,117,000 at September 30, 1995, and the Company had short-term and long-term debt obligations outstanding of approximately $99,757,000. The outstanding debt relates primarily to secured notes issued in connection with the Germantown Acquisition, unsecured notes issued in 1995, fixed asset financings and the Company's public debentures. During the quarter ended June 30, 1995, Orbital converted approximately $3,000,000 of its convertible debentures at the request of certain debenture holders, issuing approximately 209,000 shares of Common Stock. The Company's primary revolving credit facility provides for total borrowings from an international syndicate of six banks of up to $65,000,000, subject to a defined borrowing base comprised of certain contract receivables. No borrowings were outstanding under the facility at September 30, 1995, and the available facility limit was approximately $25,000,000. At September 30, 1995, the average interest rate on outstanding borrowings under this facility was approximately 8%. Borrowings are secured by contract receivables and certain other assets. The facility restricts the payment of dividends and contains certain covenants with respect to the Company's working capital, fixed charge ratio, leverage ratio and tangible net worth, and expires in September 1997. The Company (or its subsidiaries) also maintains two additional, smaller revolving credit facilities, under which no amounts were outstanding at September 30, 1995. The Company's operations provided net cash of approximately $10,756,000 in the nine months ended September 30, 1995. The Company also invested approximately $11,853,000 in its ORBCOMM project and $16,620,000 in capital expenditures related primarily to spacecraft production and test equipment and various remote sensing and Earth observation satellite systems. Orbital's capital expenditures for 1995 are expected to approximate 1994 and 1993 levels, including continued investments in space launch vehicle and spacecraft production, test, and airborne and ground support equipment. Orbital expects to invest up to $15,000,000 in various ORBIMAGE remote sensing projects. Orbital also intends to invest an additional $5,000,000 in the ORBCOMM System. Orbital expects that its 1995 capital needs for its existing operations, including its planned $5,000,000 additional investment in the ORBCOMM project, will in part be provided by working capital, cash flows from operations, credit facilities, asset-based financings, customer financings and operating lease arrangements. Additionally, as part of a joint venture to be partially funded by NASA and Rockwell International Corporation, Orbital intends to invest at least $73,000,000 in the development of a new small reusable launch vehicle, which investment will be required over the next four years, including approximately $5,000,000 in 1995. Orbital believes that it may require additional equity and/or debt financing to fully fund its currently planned operations and capital requirements, to meet its potential increased investment in the ORBCOMM System and to meet its investment requirements for the new launch vehicle and other potential projects. On August 31, 1995, Orbital signed an agreement (the "Combination Agreement") to acquire MacDonald, Dettwiler and Associates Ltd. ("MDA"), a leading supplier of commercial remote sensing ground stations, headquartered in Vancouver, British Columbia. During its recently completed fiscal year ended March 31, 1995, MDA reported pre-tax income of approximately US$5,500,000 on sales of approximately US$80,000,000. Pursuant to the terms of the Combination Agreement, a newly formed Canadian subsidiary of Orbital will issue exchangeable preferred shares (the "Exchangeable Shares") for all of MDA's outstanding common stock based on an exchange ratio to be determined according to the average closing price of Orbital's stock in the month prior to closing. The Exchangeable Shares will be exchangeable on a one- for-one basis for Orbital common stock. The transaction is expected to close by the end of November. 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 SECURITIES 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) On November 2, 1995, the Company filed a report on Form 8-K reporting the proposed acquisition of MacDonald, Dettwiler and Associates Ltd. On November 6, 1995 the Company filed Amendment No. 1 on Form 8-K/A. 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 SCIENCES CORPORATION DATED: November 14, 1995 By: /s/ David W. Thompson David W. Thompson, President and Chief Executive Officer DATED: November 14, 1995 By: /s/ Carlton B. Crenshaw Carlton B. Crenshaw, Senior Vice President and Principal Financial Officer EXHIBIT INDEX The following exhibits are filed as part of this report. Exhibit Description No. 2 Combination Agreement dated as of August 31, 1995 among Orbital Sciences Corporation, 3173623 Canada Inc. and MacDonald, Dettwiler and Associates Ltd. (Incorporated by reference to Exhibit 2 filed with the Company's Report on Form 8-K filed with the Commission on November 2, 1995). 3 By-laws of Orbital Sciences Corporation, as amended on July 27, 1995 (transmitted herewith). 10.1 First Amendment, dated as of June 30, 1995, to Note Agreement between the Company and The Northwestern Mutual Life Insurance Company dated as of June 1, 1995 (transmitted herewith). 10.2 Amendment No. 2 to the Credit Agreement dated as of July 5, 1995 among the Company, Orbital Imaging Corporation and Fairchild Space and Defense Corporation, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Administrative Agent, and J.P. Morgan Delaware, as Collateral Agent (transmitted herewith). 10.3 Amendment No. 3 to the Credit Agreement dated as of August 23, 1995 among the Company, Orbital Imaging Corporation and Fairchild Space and Defense Corporation, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Administrative Agent, and J.P. Morgan Delaware, as Collateral Agent (transmitted herewith). 11 Statement re: Computation of Earnings Per Share (transmitted herewith). 27 Financial Data Schedule (such schedule is furnished for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Form 10-Q, or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted herewith). EX-3 2 BY-LAWS OF ORBITAL SCIENCES CORPORATION ARTICLE I LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS Section 1.1 These by-laws are subject to the certificate of incorporation of the corporation. In these by-laws, references to law, the certificate of incorporation and by-laws mean the law, the provisions of the certificate of incorporation and the by-laws as from time to time are in effect. ARTICLE II STOCKHOLDERS Section 2.1 Annual Meeting. The annual meeting of stockholders shall be held on such date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which meeting the stockholders shall elect a board of directors and transact such other business as may be required by law or these by-laws or as may properly come before the meeting. Section 2.2 Special Meeting. A special meeting of the stockholders may be called at any time by the chairman, if any, or the president. A special meeting of the stockholders shall be called by the secretary, or in the case of the death, absence, incapacity or refusal of the secretary, by an assistant secretary or some other officer, upon application of a majority of the directors, which application shall state the purpose or purposes of the meeting. Any call for a meeting shall state the place, date, hour, and purposes of the meeting. Section 2.3 Place of Meeting. A meeting of the stock holders for the election of directors or for any other purpose shall be held at such place within or without the State of Delaware as may be determined from time to time by the chairman, if any, the president or the board of directors. Any adjourned session of any meeting of the stockholders shall be held at the place of the adjourned session or at such other place as may be designated in the vote of adjournment. Section 2.4 Notice of Meetings. Except as otherwise provided by law, a written notice of each meeting of stockholders stating the place, day and hour thereof and, in the case of a special meeting, the purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the meeting, to each stockholder entitled to vote thereat, by leaving such notice with him or at his residence or usual place of business, or by depositing it in the United States mail, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. Such notice shall be given by the secretary or by a person designated by the board of directors, or in the case of a special meeting by the officer calling the meeting. Notice of an adjourned meeting of stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment was taken, except that if the adjournment is for more than thirty days or if after the adjournment a new record date is set for the adjourned meeting, notice of any such adjourned meeting shall be given in the manner heretofore described. No notice of any meeting of stockholders or any adjourned session thereof need be given to a stockholder if a written waiver of notice, executed before or after the meeting or such adjourned session by such stockholder, is filed with the records of the meeting or if the stockholder attends such meeting without objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stock holders or any adjourned session thereof need be specified in any written waiver of notice. Section 2.5 Quorum of Stockholders. At any meeting of the stockholders a quorum as to any matter shall consist of a majority of the votes entitled to be cast on the matter, except where a larger quorum is required by law, by the certificate of incorporation or by these by-laws. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question whether or not a quorum is present. If a quorum is present at an original meeting, a quorum need not be present at an adjourned session of that meeting. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 2.6 Action by Vote. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide the question, except when a larger vote is required by law, by the certificate of incorporation or by these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. Section 2.7 Pre-Meeting Notification. A stockholder may propose to discuss business, or to introduce a resolution for vote, at a meeting of stockholders, provided that the nature of any such business, and the wording of any such resolution, is delivered in writing to the secretary at least thirty days prior to the date of such meeting. In the event such business or resolution concerns the nomination for election as a director of a person not nominated by the corporation, the information so delivered to the secretary shall include the name, age, address, employment history for the past ten years, and stock ownership in the corporation of such person, together with any other information that may be required by law. Section 2.8 Proxy Representation. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting of the stockholders, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. The authorization of a proxy may but need not be limited to specified action; provided, however, that if a proxy limits its authorization to a meeting or meetings of stockholders, unless otherwise specifically provided such proxy shall entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof. Section 2.9 Inspectors. The board of directors or the person presiding at a meeting of the stockholders may, but need not, appoint one or more inspectors of election and any substitute inspectors to act at the meeting or any adjourned session thereof. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. At the request of the person presiding at the meeting, the inspectors shall make a report in writing on any challenge, question or matter determined by them and execute a certificate of any fact found by them. Section 2.10 List of Stockholders. The secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. The stock ledger shall be the only evidence as to who are stockholders entitled to examine such list or to vote in person or by proxy at such meeting. ARTICLE III BOARD OF DIRECTORS Section 3.1 Number. The number of directors constituting the whole board shall not be less than one nor more than fifteen. Within the foregoing limits, the stockholders at the annual meeting shall determine the number of directors and shall elect the number of directors as determined. Within the foregoing limits, the number of directors may be increased or decreased at any time or from time to time by the stockholders or by the directors by vote of a majority of the directors then in office, provided that the number may be so decreased only to eliminate vacancies existing by reason of the death, resignation or removal of one or more directors. Section 3.2 Tenure. Except as otherwise provided by law, the certificate of incorporation or these by-laws, each director shall hold office until the next annual meeting and until his successor is elected and qualified, or until he earlier dies, resigns, is removed or becomes disqualified. Section 3.3 Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors which shall have and may exercise all the powers of the corporation and do all such lawful acts and things as are not by law, the certificate of incorporation or these by-laws directed or required to be exercised or done by the stockholders. Section 3.4 Vacancies. Vacancies and any newly created directorships resulting from any increase in the number of directors may be filled by vote of the stockholders at a meeting called for that purpose, or by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so tendered their resignations, shall have power to fill such vacancy or vacancies, the vote or action thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies, subject to any requirements of law, the certificate of incorporation or these by-laws as to the number of directors required for a quorum or for any vote or other action. Section 3.5 Committees. The board of directors may, by vote of a majority of the whole board, (a) designate, change the membership of or terminate the existence of any committee or committees, each committee to consist of one or more of the directors; (b) designate one or more directors as alternate members of any such committee who may replace any absent or disqualified member at any meeting of the committee; and (c) determine the extent to which each such committee shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, including the power to authorize the seal of the corporation to be affixed to all papers which require it and the power and authority to declare dividends or to authorize the issuance of stock; excepting, however, such powers which by law, the certificate of incorporation or these by-laws it is prohibited from so delegating. In the absence or disqualification of any member of such committee and his alternate, if any, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Except as the board of directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the board or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these by-laws for the conduct of business by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors upon request. Section 3.6 Regular Meetings. Regular meetings of the board of directors may be held without call or notice at such places within or without the State of Delaware and at such times as the board may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent directors. A regular meeting of the directors may be held without call or notice immediately after and at the same place as the annual meeting of stockholders. Section 3.7 Special Meetings. Special meetings of the board of directors may be held at any time and at any place within or without the State of Delaware designated in the notice of the meeting, when called by the chairman of the board, if any, the president, or by one-third or more in number of the directors, reasonable notice thereof being given to each director by the secretary or by the chairman of the board, if any, the president or any one of the directors calling the meeting. Section 3.8 Notice. It shall be reasonable and sufficient notice to a director to send notice by mail at least forty-eight hours or by telegram at least twenty-four hours before the meeting addressed to him at his usual or last known business or residence address or to give notice to him in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. Section 3.9 Quorum. Except as may be otherwise provided by law, the certificate of incorporation or these by-laws, at any meeting of the directors a majority of the directors then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of the total number of directors constituting the whole board. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. Section 3.10 Action by Vote. Except as may be otherwise provided by law, the certificate of incorporation or these by laws, when a quorum is present at any meeting the vote of a majority of the directors present shall be the act of the board of directors. Section 3.11 Action Without a Meeting. Any action required or permitted to be taken at any meeting of the board of directors or a committee thereof may be taken without a meeting if all the members of the board or of such committee consent thereto in writing, and such writing or writings are filed with the records of the meetings of the board or of such committee. Such consent shall be treated for all purposes as the act of the board or of such committee. Section 3.12 Participation in Meetings by Conference Telephone. Members of the board of directors, or any committee designated by the board, may participate in a meeting of the board or such committee by means of conference telephone or similar communications equipment whereby all persons partici pating in the meeting can hear each other, or by any other means permitted by law. Such participation shall constitute presence in person at such meeting. Section 3.13 Compensation. In the discretion of the board of directors, each director may be paid such fees for his services as director and be reimbursed for his reasonable expenses incurred in the performance of his duties as director as the board of directors from time to time may determine. Nothing contained in this section shall be construed to preclude any director from serving the corporation in any other capacity and receiving reasonable compensation therefor. Section 3.14 Interested Directors and Officers. (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the corporation's directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely of this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes such a contract or transaction. ARTICLE IV OFFICERS AND AGENTS Section 4.1 Enumeration; Qualification. The officers of the corporation shall be a president, a treasurer, a secretary and such other officers, if any, as the board of directors from time to time may in its discretion elect or appoint, including without limitation a chairman of the board, one or more vice presidents and a controller. The corporation may also have such agents, if any, as the board of directors from time to time may in its discretion choose. Any officer may be but none need be a director or stockholder. Any two or more offices may be held by the same person. Any officer may be required by the board of directors to secure the faithful performance of his duties to the corporation by giving bond in such amount and with sureties or otherwise as the board of directors may determine. Section 4.2 Powers. Subject to law, the certificate of incorporation and the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. Section 4.3 Election. The officers may be elected by the board of directors at their first meeting following the annual meeting of the stockholders or at any other time. At any time or from time to time the directors may delegate to any officer their power to elect or appoint any other officer or any agents. Section 4.4 Tenure. Each officer shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until his respective successor is chosen and qualified unless a shorter period shall have been specified by the terms of his election or appointment, or in each case until he earlier dies, resigns, is removed or becomes disqualified. Each agent shall retain his authority at the pleasure of the directors, or the officer by whom he was appointed or by the officer who then holds agent appointive power. Section 4.5 Chairman of the Board of Directors, President and Vice Presidents. The chairman of the board, if any, shall have such duties and powers as shall be designated from time to time by the board of directors. Unless the board of directors otherwise specifies, the chairman of the board, or if there is none the chief executive officer, shall preside, or designate the person who shall preside, at all meetings of the stockholders and of the board of directors. Unless the board of directors otherwise specifies, the president shall be the chief executive officer and shall have direct charge of all business operations of the corporation and, subject to the control of the directors, shall have general charge and supervision of the business of the corporation. Any vice presidents shall have such duties and powers as shall be set forth in these by-laws or as shall be designated from time to time by the board of directors or by the president. Section 4.6 Treasurer and Assistant Treasurers. The treasurer shall be in charge of the corporation's funds and valuable papers, and shall have such other duties and powers as may be designated from time to time by the board of directors or by the president. If no controller is elected, the treasurer shall also have the duties and powers of the controller. [Amended July 27, 1995.] Any assistant treasurer shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the treasurer. Section 4.7 Controller and Assistant Controllers. If a controller is elected, the controller shall be the chief accounting officer of the corporation and shall be in charge of its books of account and accounting records, and of its accounting procedures. The controller shall have such other duties and powers as may be designated from time to time by the board of directors, the president or the treasurer. Any assistant controllers shall have such duties and powers as shall be designated from time to time by the board of directors, the president, the treasurer or the controller. Section 4.8 Secretary and Assistant Secretaries. The secretary shall record all proceedings of the stockholders, of the board of directors and of committees of the board of directors in a book or series of books to be kept therefor and shall file therein all actions by written consent of stockholders or directors. In the absence of the secretary from any meeting, an assistant secretary, or if there be none or he is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed the secretary shall keep or cause to be kept the stock and transfer records of the corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. The secretary shall have such other duties and powers as may from time to time be designated by the board of directors or the president. Any assistant secretaries shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the secretary. ARTICLE V RESIGNATIONS AND REMOVALS Section 5.1 Any director or officer may resign at any time by delivering his resignation in writing to the chairman of the board, if any, the president, or the secretary or to a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time, and without in either case the necessity of its being accepted unless the resignation shall so state. A director (including a person elected by directors to fill a vacancy on the board) may be removed from office with or without cause by the vote of the holders of a majority of the shares issued and outstanding and entitled to vote in the election of directors. The board of directors may at any time remove any officer either with or without cause, and may at any time terminate or modify the authority of any agent. No director or officer resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the corporation) no director or officer removed shall have any right to any compensation as such director or officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise; unless, in the case of a resignation, the directors, or, in the case of removal, the body acting on the removal, shall in their or its discretion provide for compensation. ARTICLE VI VACANCIES Section 6.1 If the office of the president or the treasurer or the secretary becomes vacant, the directors may elect a successor by vote of a majority of the directors then in office. If the office of any other officer becomes vacant, any person or body empowered to elect or appoint that officer may choose a successor. Each such successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the secretary until his successor is chosen and qualified or in each case until he earlier dies, resigns, is removed or becomes disqualified. Any vacancy of a directorship shall be filled as specified in Section 3.4 of these by-laws. ARTICLE VII CAPITAL STOCK Section 7.1 Stock Certificates. Each stockholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by him, in such form as shall, in conformity to law, the certificate of incorporation and the by-laws, be prescribed from time to time by the board of directors. Such certificate shall be signed by the chairman of the board, if any, or the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary. Any or all of the signatures on the certificate may be a facsimile. In case an officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the time of its issue. Section 7.2 Loss of Certificates. In case of the alleged theft, loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms, including receipt of a bond sufficient to indemnify the corporation against any claim on account thereof, as the board of directors may prescribe. ARTICLE VIII TRANSFER OF SHARES OF STOCK Section 8.1 Transfer on Books. Subject to the restrictions, if any, stated or noted on the stock certificate, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the board of directors or the transfer agent of the corporation may reasonably require. Except as may be otherwise required by law, the certificate of incorporation or these by-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote or to give any consent with respect thereto and to be held liable for such calls and assessments, if any, as may lawfully be made thereon, regardless of any transfer, pledge or other disposition of such stock until the shares have been properly transferred on the books of the corporation. It shall be the duty of each stockholder to notify the corporation of his post office address. Section 8.2 Record Date and Closing Transfer Books. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days (or such longer period as may be required by law) before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed. (c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. ARTICLE XI CORPORATE SEAL Section 9.1 Subject to alteration by the directors, the seal of the corporation shall consist of a flat-faced circular die with the word "Delaware" and the name of the corporation cut or engraved thereon, together with such other words, dates or images as may be approved from time to time by the directors. ARTICLE X EXECUTION OF PAPERS Section 10.1 Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made, accepted or endorsed by the corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. ARTICLE XI FISCAL YEAR Section 11.1 The fiscal year of the corporation shall end on the 31st day of December of each year. ARTICLE XII AMENDMENTS Section 12.1 These by-laws may be adopted, amended or repealed by vote of a majority of the directors then in office or by vote of a majority of the stock then outstanding and entitled to vote. Any by-law, whether adopted, amended or repealed by the stockholders or directors, may be amended or reinstated by the stockholders or directors. EX-10 3 EXHIBIT 10.1 1ST AMENDMENT Dated as of June 30, 1995 TO NOTE AGREEMENT Dated as of June 1, 1995 THIS AMENDMENT, dated as of June 30, 1995 is entered into between Orbital Sciences Corporation, a Delaware corporation (the "Company") and The Northwestern Mutual Life Insurance Company (the "Purchaser"). RECITALS The Company and the Purchaser are parties to a Note Agreement dated as of June 1, 1995 (the "Note Agreement"). The parties now desire to amend the Note Agreement in certain respects so as to adjust certain financial tests. In addition, the Company is in default with respect to one covenant under the Note Agreement and has requested that the Purchaser grant a waiver with respect to such default; NOW, THEREFORE, in consideration of the premises and the mutual agreements of the parties herein contained, the parties agree as follows: ARTICLE I - AMENDMENTS 1.1 Section 5.8. Section 5.8 of the Note Agreement is amended to read in its entirety as follows: Section 5.8 Fixed Charges Coverage Ratio. The Company will at all times keep and maintain the Fixed Charges Coverage Ratio at not less than: DURING THE PERIOD MINIMUM RATIO LEVEL Closing Date through 1.25 to 1.00 March 31, 1996 April 1, 1996 and 1.50 to 1.00; thereafter provided, however that (i) at all times on and before December 31, 1995, the Fixed Charges Coverage Ratio shall be calculated to take into effect the FAS Adjustment and (ii) at all times on and before March 31, 1996, the Fixed Charge Coverage Test shall be calculated to take into effect the Pegasus Adjustment. 1.2. Definitions. The following two new definitions shall be inserted into Section 8. Interpretation of Agreement: Definitions in their appropriate alphabetical order. "FAS Adjustment" shall mean an amount equal to the amount set forth in the financial statements of the Company as at March 31, 1995 (as restated) to reflect charges resulting from the Company's revaluation of assets relating to its Transport Orbit Stage a/k/a Orbit Transfer Stage line of business in connection with the Company's adoption of Financial Accounting Standard 121, but in no event shall such amount exceed $4,200,000. The FAS Adjustment shall be excluded from the calculatlon of Adjusted Consolidated Operating Earnings for the period set forth in Section 5.8. "Pegasus Adjustment" shall mean an amount equal to the amount recorded in the Company's financial statements as at June 30, 1995 to reflect additional costs associated with and reserves taken in connection with the failed launch of the Pegasus XL Space Launch Vehicle on June 21, 1995, but in no event shall such amount exceed $4,500,000. The Pegasus Adjustment shall be excluded from the calculation of Adjusted Consolidated Operating Earnings for the period set forth in Section 5.8. ARTICLE ll - WAIVER Purchaser hereby waives through June 30, 1995 (but not after such date) any noncompliance by the Company with the provisions of Section 5.8 of the Note Agreement. ARTICLE lll - WARRANTIES To induce the Purchaser to enter into this Amendment, the Company (i) warrants to the Purchaser that no Default or Event of Default exists which will not be cured by this Amendment becoming effective and (ii) restates and reaffirms all of the representations and warranties set forth in Exhibit B to the Note Agreement. ARTICLE IV - GENERAL 4.1 Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Purchaser of a counterpart of this Amendment executed by both parties. 4.2 Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. 4.3 Reaffirmation. As herein amended, the Note Agreement shall remain in full force and effect and is hereby ratified, approved and confirmed in all respects. 4.4 Definitions and References. Terms used but not otherwise defined herein are used herein as defined in the Note Agreement. 4.5 References. On and after the effective date hereof, each reference to the Note Agreement therein and in any and all agreements, instruments, or other documents executed pursuant to or in connection with the Note Agreement shall be deemed to mean the Note Agreement as amended hereby. 4.6 Successors and Assigns. This Amendment shall be binding upon the Company and the Purchaser and their respective successors and assigns, and shall inure to the benefit of the Company and the Purchaser and the respective successors and assigns of the Purchaser. 4.7 Sole Holder. Purchaser is the sole Holder of the Notes and has the power and authority to execute this Amendment pursuant to Section 7 of the Note Agreement. Executed by and between the parties as of the date set forth above. ORBITAL SCIENCES CORPORATION /s/ Kenneth H. Sunshine By: Kenneth H. Sunshine Its: Treasurer THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY /s/ A. Kipp Koester By: A. Kipp Koester Its: Vice President EX-10 4 EXHIBIT 10.2 AMENDMENT NO. 2 TO CREDIT AGREEMENT AMENDMENT No. 2 dated as of July 5, 1995 among ORBITAL SCIENCES CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE AND DEFENSE CORPORATION, the BANKS listed on the signature pages hereof, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"), and J.P. MORGAN DELAWARE, as Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Amended and Restated Credit and Reimbursement Agreement dated as of September 27, 1994 (as amended from time to time, the "Agreement"); and WHEREAS, the parties hereto desire to amend the Agreement as set forth below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended hereby. SECTION 2. Additional Permitted Investment. Section 5.07 of the Agreement is amended by: (i) deleting the preposition "and" at the end of clause (d) thereof; (ii) renumbering clause (e) thereof as clause (f); and (iii) inserting a new clause (e) immediately following clause (d) thereof, to read in its entirety as follows: "(e) Investments made by the Company or any of its Wholly-Owned Subsidiaries, substantially on the terms described by the Company to the Banks in the "Project Summary-American Space Lines" dated June, 1995, copies of which have been delivered to each of the Banks, in an aggregate principal amount not exceeding $68,000,000, in any entity or entities through which the Company or any of its Wholly-Owned Subsidiaries will participate in the development, construction, operation and/or marketing of the X-34 small reusable launch vehicles; and" SECTION 3. Waiver Under Company Security Agreement. The Banks waive (i) compliance by the Company with the terms of Section 4(H) of the Company Security Agreement solely to the extent necessary to permit the Company to novate the Cooperative Agreement effective March 30, 1995 between the Company and the National Aeronautics and Space Administration and (ii) any Default arising under the Credit Agreement by reason of noncompliance by the Company with such Section solely as a result of such novation. Other than as specifically provided herein, this Section shall not operate as a waiver of any right, remedy, power or privilege of the Banks under any Financing Document or of any other term or condition of any Financing Document. SECTION 4. New York Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5. Counterparts; Effectiveness. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective upon receipt by the Administrative Agent of duly executed counterparts hereof signed by the Borrowers and the Required Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION By /s/ Carlton B. Crenshaw Title: Sr. Vice President\ Finance & Administration and Treasurer ORBITAL IMAGING CORPORATION By /s/ Carlton B. Crenshaw Title: Chief Financial Officer and Treasurer FAIRCHILD SPACE AND DEFENSE CORPORATION By /s/ Carlton B. Crenshaw Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Kevin J. O'Brien Title: Vice President THE BANK OF NOVA SCOTIA By /s/ J.R. Trimble Title: Senior Relationship Manager SIGNET BANK/VIRGINIA By /s/ Ronald K. Hobson Title: Vice President NATIONSBANK, N.A. By /s/ James W. Gaittens Title: Vice President THE BANK OF TOKYO TRUST COMPANY By Title: THE DAIWA BANK, LIMITED By /s/ Keith Rauschenberg Title: Vice President By /s/ Louanne Baily Title: Vice President and Manager EX-10 5 EXHIBIT 10.3 AMENDMENT NO. 3 TO CREDIT AGREEMENT AMENDMENT No. 3 dated as of August 23, 1995 among ORBITAL SCIENCES CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE AND DEFENSE CORPORATION, the BANKS listed on the signature pages hereof, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"), and J.P. MORGAN DELAWARE, as Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Amended and Restated Credit and Reimbursement Agreement dated as of September 27, 1994 (as amended from time to time, the "Agreement"); and WHEREAS, the parties hereto desire to amend the Agreement as set forth below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein that is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended hereby. SECTION 2. Decrease in the Minimum Consolidated Fixed Charges Ratio. Section 5.10 of the Agreement is amended to read in its entirety as follows: SECTION 5.10. Consolidated Fixed Charge Ratio. At the last day of any fiscal quarter, the ratio of Earnings Available for Fixed Charges to Consolidated Fixed Charges for the four consecutive fiscal quarters then ended will not be less than 1.10 to 1. For purposes of this Section 5.10, the fiscal quarters of the Company ended June 30, 1994 and June 30, 1995, respectively, shall be excluded from any determination of any period of four consecutive fiscal quarters (e.g. the fiscal quarters ended March 31, 1994, September 30, 1994, December 31, 1994 and March 31, 1995) shall constitute four consecutive fiscal quarters for purposes of this Section 5.10). SECTION 3. Additional Permitted Investment. Section 5.07 of the Agreement is amended by: (i) deleting the preposition "and" at the end of clause (e) thereof; (ii) renumbering clause (f) thereof as clause (g); and (iii) inserting a new clause (f) immediately following clause (e) thereof, to read in its entirety as follows: "(f) Investments made by the Company to acquire Macdonald, Dettwiler and Associates Ltd. ("MDA"), substantially on the terms described by the Company to the Banks in the draft of the Combination Agreement with respect to such acquisition, a copy of which has been delivered to each of the Banks, up to an amount not in excess of the value of 4,800,000 shares of common stock of the Company; and" SECTION 4. New York Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5. Counterparts; Effectiveness. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective on the date on which the Administrative Agent shall have received (i) duly executed counterparts hereof signed by the Borrowers and the Required Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party) and (ii) for the account of each Bank, an amendment fee equal to 1/8 of 1% of such Bank's Commitment as in effect on such date. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION By /s/ Carlton S. Crenshaw Title: Sr. Vice President/Finance Administrator and Treasurer ORBITAL IMAGING CORPORATION By /s/ Carlton B. Crenshaw Title: Chief Financial Officer and Treasurer FAIRCHILD SPACE AND DEFENSE CORPORATION By /s/ Carlton B. Crenshaw Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Kevin J. O'Brien Title: Vice President THE BANK OF NOVA SCOTIA By /s/ J. Alan Edwards Title: Authorized Signatory SIGNET BANK/VIRGINIA By /s/ Ronald K. Hobson Title: Vice President NATIONSBANK, N.A. By /s/ James W. Gaitten Title: Vice President THE BANK OF TOKYO TRUST COMPANY By /s/ J. Andrew Don Title: Vice President THE DAIWA BANK, LIMITED By /s/ Louanne Baily Title: Vice President and Manager By /s/ R.M. Shehorn Title: SVP & RM MIDWEST EX-11 6
Exhibit 11. Statement re: Computation of Earnings Per Share Three Month Period Ended 1995 Nine Month Period Ended 1995 September 30, September 30, Assuming Assuming Primary Full Dilution Primary Full Dilution Weighted average of 22,667,006 22,667,006 Weighted average of 21,242,456 21,242,456 outstanding shares outstanding shares Common equivalent shares: Common equivalent shares: Outstanding stock options 319,154 319,038 Outstanding stock options 398,179 398,297 Other potentially dilutive Other potentially dilutive securities: securities: Convertible debentures N/A 3,895,652 Convertible debentures N/A 3,895,652 Shares used in computing Shares used in computing net income per share 22,986,160 26,881,696 net income per share 21,640,635 25,536,405 Net income $2,202,289 $2,202,289 Net income ($716,793) ($716,793) Adjustments assuming Adjustments assuming full full dilution: dilution: interest expense, net of N/A 661,500 interest expense, net of N/A 1,984,500 taxes taxes Net income, assuming full $2,202,289 $2,863,789 Net income, assuming full ($716,793) $1,267,707 dilution dilution Net income per share $0.10 $0.11 Net income per share ($0.03) $0.05 Dilution percentage N/A -11.2% Dilution percentage N/A -249.9% assuming full assuming full dilution (1) dilution (1) Net income per share used $0.10 $0.10 Net income per share used ($0.03) ($0.03) Notes: (1) - Provided that dilution is greater than 3%, the convertible debentures are considered dilutive in the calculation and presentation of per share data.
EX-27 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000820736 ORBITAL SCIENCES CORP /DE/ 1,000 3-MOS DEC-31-1994 JUL-1-1995 SEP-30-1995 11,200 32,697 90,277 (567) 25,980 171,805 128,199 (32,932) 423,947 74,681 93,833 227 0 0 238,576 423,947 79,172 79,172 57,851 57,851 0 80 1,247 3,146 944 2,202 0 0 0 2,202 .10 .10
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