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Total revenues for the second quarter of 2005 and 2004 were $8.5 million and $9.7 million, respectively. Total revenues for the six months ended June 30, 2005 and 2004 were $17.2 million and $11.8 million, respectively. Net loss for the second quarter of 2005 was $5.4 million, or $0.32 per share, compared to $4.4 million, or $0.70 per share, for the second quarter of 2004. Net loss for the six months ended June 30, 2005 was $11.0 million, or $0.73 per share, compared to $12.8 million, or $2.02 per share, for the six months ended June 30, 2004.
"Unfortunately our revenues have developed more slowly than we anticipated largely as a result of international customers delaying their purchasing decisions pending the outcome of the consolidation currently underway in our industry," said ORBIMAGE's President and Chief Executive Officer Matthew O'Connell. "We will continue our efforts to manage costs in the mean time. On the positive side, the construction of our OrbView-5 satellite for the National Geospatial-Intelligence Agency's NextView program is progressing on schedule and within budget. We met our debt commitment for NextView in the second quarter by raising $250 million of additional long-term debt to fund the next phase of the program and refinance the debt we incurred when we reorganized at the end of 2003 on more favorable terms."
Operating Results
The following table presents ORBIMAGE's summary reported results (unaudited) for the second quarter and year-to-date periods (in thousands, except share and per share data):
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Revenues $ 8,501 $ 9,749 $ 17,160 $ 11,759
Loss from operations (3,855) (1,970) (6,644) (7,910)
Net loss (5,447) (4,428) (10,968) (12,817)
Loss per common share -
basic and diluted (0.32) (0.70) (0.73) (2.02)
Weighted average shares
outstanding - basic
and diluted 17,272,528 6,335,243 15,116,985 6,334,118
Revenues for the second quarter of 2005 were $8.5 million as compared to $9.7 million in the same period in 2004. Revenues for the six months ended June 30, 2005 were approximately $17.2 million, compared to $11.8 million for the same period in 2004. The decrease in revenue for the quarter resulted principally from a reduction in contract revenues on an international imagery contract renewed in 2005 at a lower amount and from a surge in production activities that took place during the second quarter of 2004 to compensate for first quarter 2004 delays in receiving source materials from our customers. The increase in 2005 year-to-date revenues as compared to 2004 was primarily due to commencement of OrbView-3 operations for the U.S. Government effective in March 2004 under the NGA ClearView program for imagery and infrastructure enhancements and in June 2004 for production services, and the commencement of OrbView-3 operations for international customers in the second quarter of 2004. Revenues generated from OrbView-3 products and services were $6.9 million and $7.2 million for the second quarter of 2005 and 2004, respectively, and $14.4 million and $7.8 million for the six months ended June 30, 2005 and 2004, respectively.
Loss from operations for the second quarter of 2005 was $3.9 million as compared to $2.0 million in the same period in 2004, which is attributable to increased sales and marketing expenditures to pursue business opportunities, increased staffing of sales and administrative functions and increased expenses associated with regulatory compliance. Loss from operations for the six months ended June 30, 2005 was $6.6 million as compared to $7.9 million in 2004. The decrease in this loss from the prior year is principally attributable to depreciation expense on the OrbView-3 satellite and related ground station assets which commenced in February 2004. Total depreciation expense recorded for these assets was $10.5 million in 2005 and $8.6 million in 2004. This increase is offset by the increased selling, general and administrative expenses in 2005 versus 2004 described above.
Net loss for the second quarter of 2005 was $5.5 million versus a net loss of $4.4 million in the same 2004 period. Net loss for the first six months of 2005 was $11.0 million versus a net loss of $12.8 million a year ago. ORBIMAGE recorded net interest expense of $1.6 million and $2.5 million during the three months ended June 30, 2005 and 2004, respectively, and $3.7 million and $4.9 million during the six months ended June 30, 2005 and 2004, respectively. On March 31, 2005, ORBIMAGE repaid its then outstanding Senior Notes due 2008 out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. This payment included an amount representing interest expense that would have been payable through June 30, 2005, the date of the initial interest payment. ORBIMAGE recorded a loss of $0.6 million associated with the early extinguishment of the Senior Notes in the first quarter of 2005.
Cash Flow and Leverage
As of June 30, 2005, ORBIMAGE had $185.4 million of cash and cash equivalents and $126.8 million of restricted cash resulting from the issuance of long-term debt as discussed below.
Net cash provided by operating activities for the six months ended June 30, 2005 was $54.9 million. During 2005, ORBIMAGE received approximately $45.3 million of milestone payments from the National Geospatial-Intelligence Agency ("NGA") related to the construction of the OrbView-5 satellite. Capital expenditures for the first six months of 2005 were $88.4 million, much of which represents expenditures associated with the OrbView-5 satellite and related systems. Net cash provided by financing activities were $158.3 million for the first six months of 2005. During the first quarter ORBIMAGE received approximately $74.0 million of proceeds from the exercise of warrants by certain of its investors and from the issuance of shares in conjunction with a subscription rights offering which concluded in March 2005. Approximately $22.2 million of the warrant proceeds were used to redeem the Senior Notes on March 31, 2005 as discussed above.
On June 29, 2005, ORBIMAGE Holdings Inc. issued $250 million aggregate principal amount of Senior Secured Floating Rate Notes due 2012 (the "Notes"). The Notes were offered in a private placement to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The purpose of the offering was to contribute the proceeds to the capital of its wholly-owned subsidiary, ORBIMAGE Inc., to be used for construction costs for the OrbView-5 satellite, to mandatorily redeem all of the outstanding Senior Subordinated Notes of ORBIMAGE Inc. that were to mature in 2008 and for general working capital purposes. In connection with this issuance, on June 29, 2005, ORBIMAGE Holdings entered into a Security Agreement with The Bank of New York ("BONY"), as Collateral Agent, pursuant to which ORBIMAGE Holdings granted a first priority lien on and security interest in substantially all of the assets of ORBIMAGE Holdings. ORBIMAGE Inc. was prohibited from issuing a guarantee of the Notes at the date of issuance due to restrictions in the indenture governing its Senior Subordinated Notes.
The Notes were issued at a discount of two percent of total principal; consequently, ORBIMAGE Holdings received $245 million of cash proceeds at closing. Concurrently with the closing of the offering, ORBIMAGE Holdings entered into an escrow agreement with BONY as Trustee and Escrow Agent whereby ORBIMAGE Holdings deposited $126.8 million into an escrow account, to remain until such time as ORBIMAGE Inc. could issue a guarantee of the Notes. This amount was classified as restricted cash in the Company's balance sheet as of June 30, 2005. Approximately $8.7 million was used to pay certain transaction-related expenses. The remaining $109.5 million was contributed by ORBIMAGE Holdings to the capital of ORBIMAGE Inc. As a result of this capital contribution, on June 30, 2005, ORBIMAGE Inc. had "Unrestricted Cash" as defined in the indenture governing its existing Senior Subordinated Notes in an amount sufficient to require ORBIMAGE Inc. to redeem the Senior Subordinated Notes pursuant to the mandatory redemption provisions of that indenture. ORBIMAGE Inc. redeemed the Senior Subordinated Notes on July 6, 2005. Upon redemption of the Senior Subordinated Notes, ORBIMAGE Inc. provided its guarantee of the Notes, and the escrow was released to ORBIMAGE Holdings on July 11, 2005. The Notes will bear interest at a rate per annum, reset semi-annually, equal to the greater of six-month LIBOR or three percent, plus a margin of 9.5 percent. ORBIMAGE Holdings has entered into an interest rate swap arrangement pursuant to which it has fixed its effective interest rate under the Notes at 13.75 percent through July 1, 2008.
ORBIMAGE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues $ 8,501 $ 9,749 $ 17,160 $ 11,759
Direct expenses 9,258 9,528 18,158 15,835
Gross profit (loss) (757) 221 (998) (4,076)
Selling, general and
administrative expenses 3,098 2,191 5,646 3,834
Loss from operations (3,855) (1,970) (6,644) (7,910)
Interest expense, net 1,591 2,458 3,685 4,907
Loss from early
extinguishment of debt - - 639 -
Loss before benefit for
income taxes (5,446) (4,428) (10,968) (12,817)
Benefit for income taxes - - - -
Net loss $(5,446) $(4,428) $(10,968) $(12,817)
Loss per common share -
basic and diluted $ (0.32) $ (0.70) $ (0.73) $ (2.02)
Weighted average shares
outstanding - basic and
diluted 17,272,528 6,335,243 15,116,985 6,334,118
ORBIMAGE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share data)
ASSETS
Pro Forma June 30, December
June 30, 2005 31,
2005 (a) 2004
Current assets:
Cash and cash equivalents $248,572 $185,380 $60,565
Restricted cash - 126,836 -
Receivables net of allowances of
$131 and $126, respectively 5,603 5,603 12,148
Other current assets 4,549 4,549 2,612
Total current assets 258,724 322,368 75,325
Property, plant and equipment, at cost,
less accumulated depreciation of $5,714
and $3,751, respectively 22,721 22,721 18,263
Satellites and related rights, at cost,
less accumulated depreciation and
amortization of $27,859 and $18,142,
respectively 176,846 176,846 116,640
Goodwill 28,490 28,490 28,490
Other assets 19,849 21,098 10,428
Total assets $506,630 $571,523 $249,146
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 5,536 $ 5,536 $ 3,970
Amounts payable to subcontractors 32,119 32,119 47,545
Deferred revenue 2,102 2,102 2,234
Other current liabilities 1,102 1,102 -
Total current liabilities 40,859 40,859 53,749
Long-term debt 245,002 307,776 85,018
Deferred revenue, net of current portion 69,911 69,911 24,491
Other noncurrent liabilities 6,910 6,910 -
Total liabilities 362,682 425,456 163,258
Stockholders' equity:
Common stock, par value $0.01;
25,000,000 shares authorized;
17,432,033 shares and 9,917,078
shares issued and outstanding
as of June 30, 2005 and
December 31, 2004, respectively 174 174 99
Additional paid-in-capital 186,050 186,050 112,373
Unearned compensation (1,109) (1,109) (1,845)
Accumulated deficit (37,826) (35,707) (24,739)
Accumulated other comprehensive
loss (3,341) (3,341) -
Total stockholders' equity 143,948 146,067 85,888
Total liabilities and stockholders'
equity $506,630 $571,523 $249,146
(a) ORBIMAGE Inc., a wholly owned subsidiary of ORBIMAGE Holdings Inc.,
redeemed its Senior Subordinated Notes on July 6, 2005 with proceeds
obtained through the issuance of $250 million of Senior Secured
Floating Rate Notes on June 29, 2005. Upon redemption of the Senior
Subordinated Notes and the issuance by ORBIMAGE Inc. of a guarantee of
the Notes, $126.8 million of escrow proceeds were released to ORBIMAGE
Holdings on July 11, 2005. The unaudited condensed pro forma balance
sheet is intended to illustrate the effect of the repayment of the
Senior Subordinated Notes and the release of restricted cash from
escrow as if these transactions had occurred on June 30, 2005.
ORBIMAGE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months Ended June 30,
2005 2004
Cash flows from operating activities:
Net loss $(10,968) $(12,817)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 11,951 10,189
Interest paid in kind - 4,954
Stock compensation 736 567
Loss on early extinguishment of
debt 639 -
Changes in assets and liabilities:
Decrease (increase) in
receivables and other current
assets 5,918 (8,707)
Increase in other assets (211) -
Increase (decrease) in accounts
payable and accrued expenses 1,562 (1,597)
Increase in deferred revenue 45,289 659
Net cash provided by (used in) operating
activities 54,916 (6,752)
Cash flows from investing activities:
Capital expenditures (88,408) (495)
Net cash used in investing activities (88,408) (495)
Cash flows from financing activities:
Issuance of long-term debt 245,000 -
Restricted cash held in escrow (126,836) -
Extinguishment of long-term debt (22,244) -
Long-term debt repayment and issuance costs (11,365) -
Issuance of common stock 73,752 -
Net cash provided by financing activities 158,307 -
Net increase (decrease) in cash and cash
equivalents 124,815 (7,247)
Cash and cash equivalents, beginning of period 60,565 14,405
Cash and cash equivalents, end of period $185,380 $ 7,158
Supplemental cash flow information:
Interest paid
$ 4,295 $ -
Non-cash items:
Capital expenditures $(32,119) $ -
Amounts payable to subcontractors 32,119 -
About ORBIMAGE:
ORBIMAGE is a leading global provider of earth imagery products and services, with digital remote sensing satellites and an integrated worldwide image receiving, processing and distribution network. In addition to the high- resolution OrbView-3 satellite, which is capable of measuring, mapping and monitoring objects smaller than automobiles and spectrally differentiating thousands of land use/land cover types, ORBIMAGE also operates the OrbView-2 ocean and land multispectral imaging satellite and the SeaStar Fisheries Information Service, which provides maps derived from essential oceanographic information to aid in commercial fishing. ORBIMAGE also produces value-added imagery products and provides advanced photogrammetric engineering services at its St. Louis, MO facility. The company distributes its products directly to the U.S. government for national security and related mapping applications. Commercial sales are primarily handled through a worldwide network of value- added resellers, regional distributors, sales agents, and select strategic partners. Over 10 million square kilometers of imagery has been collected since the launch of OrbView-3 in June 2003, which includes imagery of most of the world's capital cities, airports, and other areas of interest. The company is currently building a next-generation satellite, OrbView-5, to support the National Geospatial-Intelligence Agency's NextView image acquisition program. When OrbView-5 is launched in 2007, this next-generation commercial imaging satellite will acquire up to 700,000 square kilometers of imagery each day at the unprecedented resolution of 0.41-meters.
For more information about ORBIMAGE, please see our web site at http://www.orbimage.com
This release contains forward-looking statements within the meaning of section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks and uncertainties. ORBIMAGE's actual financial results could differ materially from those anticipated due to the company's dependence on conditions in the remote sensing industry, the level of new commercial imagery orders, production rates for advanced image processing, the level of defense spending, competitive pricing pressures, start-up costs and possible overruns on new contracts, and technology and product development risks and uncertainties.
CONTACT: William Warren of ORBIMAGE Holdings Inc., +1-703-480-5672, or
Email Contact
Web site: http://www.orbimage.com//