Orbital Sciences Corporation (ticker: ORB, exchange: New York Stock Exchange (.N))
News Release -
21-Feb-2007
Orbital Reports Fourth Quarter and Full Year 2006 Financial Results
Fourth Quarter and Full Year Results Reflect Substantial Increases
in Revenues, Operating Income, Free Cash Flow and Contract Backlog
Debt Refinancing Completed, Interest Expense Significantly Reduced
2007 Financial Guidance Increased
DULLES, Va.--(BUSINESS WIRE)--Feb. 21, 2007--Orbital Sciences
Corporation (NYSE: ORB) today announced financial results for the
fourth quarter and full year 2006. Orbital reported fourth quarter
2006 revenues of $215.8 million, an 8% increase compared to revenues
of $199.6 million in the fourth quarter of 2005. The company's fourth
quarter 2006 operating income rose 50% to $20.4 million as compared to
$13.6 million of operating income in the comparable quarter in 2005.
Fourth quarter adjusted net income* was $12.5 million in 2006,
compared to net income of $7.5 million in 2005, and adjusted diluted
earnings per share* (EPS) was $0.20, compared to diluted EPS of $0.12
in the fourth quarter of 2005. Orbital reported fourth quarter 2006
free cash flow* of $2.9 million compared to free cash flow of $26.5
million a year ago.
For the full year, Orbital reported revenues of $802.8 million in
2006, up 14% as compared to $703.5 million in 2005. Operating income
was $67.9 million in 2006, up 29% as compared to $52.5 million in
2005. Adjusted net income was $39.6 million in 2006, or $0.63 adjusted
diluted EPS, compared to net income of $27.8 million, or $0.45 diluted
EPS, in 2005. Orbital reported $78.5 million of free cash flow for the
full year of 2006, compared to $59.1 million in 2005.
Commenting on Orbital's financial results, Mr. David W. Thompson,
Chairman and Chief Executive Officer, said, "With exceptionally strong
fourth quarter results, Orbital completed an outstanding year in 2006.
The company's commercial satellite business generated strong revenue
growth and significantly higher operating profit margins as compared
to last year. Our missile defense programs also continued to post
solid results, as did the other products in our launch vehicles
segment. In addition, we completed a long-term debt refinancing late
in 2006, enhancing our capital structure and significantly reducing
future interest costs. We also expect these positive operational and
financial trends to continue in 2007, as we add human space
exploration projects as a new contributor to revenue growth and
profitability for the company."
Financial Highlights
Fourth quarter financial results were as follows (in millions,
except per share data):
Fourth Quarter
2006 2005
----------------------------------------------------------------------
Revenues $215.8 $199.6
Operating Income 20.4 13.6
Net Income 7.8 7.5
Adjusted Net Income 12.5 (1) 7.5
Diluted Net Income Per Share 0.12 0.12
Adjusted Diluted Earnings Per Share $ 0.20 (1) $ 0.12
----------------------------------------------------------------------
(1) Adjusted in 2006 to exclude debt extinguishment expense and a
gain from the liquidation of an investment, net of tax.
Full year financial results were as follows (in millions, except
per share data):
Full Year
2006 2005
----------------------------------------------------------------------
Revenues $802.8 $703.5
Operating Income 67.9 52.5
Net Income 34.9 27.8
Adjusted Net Income 39.6 (1) 27.8
Diluted Net Income Per Share 0.56 0.45
Adjusted Diluted Earnings Per Share $ 0.63 (1) $ 0.45
----------------------------------------------------------------------
(1) Adjusted in 2006 to exclude debt extinguishment expense and a
gain from the liquidation of an investment, net of tax.
Revenues
Revenues by segment for the fourth quarter were as follows (in
millions):
Fourth Quarter
2006 2005
----------------------------------------------------------------------
Launch Vehicles $ 80.2 $ 87.7
Satellites and Space Systems 125.4 106.5
Transportation Management Systems 11.0 6.8
Eliminations (0.8) (1.4)
------- -------
Total Revenues $215.8 $199.6
----------------------------------------------------------------------
Orbital's fourth quarter 2006 revenues were $215.8 million, up 8%
over fourth quarter 2005 revenues of $199.6 million. The fourth
quarter increase was primarily due to an 18% increase in satellites
and space systems segment revenues, driven by increased program
activity on certain science and technology satellites and a contract
awarded in the third quarter of 2006 to build and test a new Launch
Abort System for NASA's Orion Crew Exploration Vehicle. Launch
vehicles segment revenues decreased 8% primarily due to lower revenues
from the target launch vehicle product line. Transportation management
systems segment revenues increased 61% in the quarter, largely driven
by work on several new contracts started in late 2005 and early 2006.
Revenues by segment for the full year were as follows (in
millions):
Full Year
2006 2005
----------------------------------------------------------------------
Launch Vehicles $310.5 $335.3
Satellites and Space Systems 458.9 348.6
Transportation Management Systems 37.7 26.5
Eliminations (4.3) (6.9)
------- -------
Total Revenues $802.8 $703.5
----------------------------------------------------------------------
Orbital's full year revenues were $802.8 million, up 14% over 2005
revenues, primarily due to a 32% increase in satellites and space
systems segment revenues that was driven by growth in the
communications satellites product line. Launch vehicles segment
revenues decreased 7% primarily due to lower revenues from the
interceptor and target vehicle product lines due to lower levels of
program activity in 2006, partially offset by higher revenues from the
space launch vehicle product line. Transportation management systems
segment revenues increased 43% largely driven by work on several new
contracts started in late 2005 and early 2006.
Operating Income
Operating income by segment for the fourth quarter was as follows
(in millions):
Fourth Quarter
2006 2005
----------------------------------------------------------------------
Launch Vehicles $ 8.5 $ 9.1
Satellites and Space Systems 10.9 4.6
Transportation Management Systems 1.0 0.1
Corporate and Other - (0.2)
------- ------
Total Operating Income $20.4 $13.6
----------------------------------------------------------------------
Orbital reported operating income of $20.4 million in the fourth
quarter of 2006, up 50% over the fourth quarter of 2005. This increase
was due to substantially higher operating income in the satellites and
space systems segment driven by net cost reductions and favorable
contract adjustments in the communications satellites product line as
well as operating income growth from science and technology satellites
and the Launch Abort System contract. Launch vehicles segment income
decreased primarily due to lower target vehicle operating income
consistent with the revenue reduction in this product line. Operating
income in the transportation management systems segment increased
largely due to an increased level of contract activity in 2006 on
several new contracts.
Operating income by segment for the full year was as follows (in
millions):
Full Year
2006 2005
----------------------------------------------------------------------
Launch Vehicles $33.7 $35.4
Satellites and Space Systems 31.9 16.0
Transportation Management Systems 2.5 1.5
Corporate and Other (0.2) (0.4)
------ ------
Total Operating Income $67.9 $52.5
----------------------------------------------------------------------
Orbital reported operating income of $67.9 million for the full
year 2006, up 29% over 2005. This increase was due to significantly
higher operating income in the satellites and space systems segment,
primarily attributable to higher operating results in the
communications satellites product line, driven by substantial growth
in contract activity as well as cost reductions and profit margin
improvements on certain contracts. Operating income in the launch
vehicles segment declined slightly, while transportation management
systems segment operating income increased due to an increased level
of contract activity in 2006.
Net Income
In December 2006 the company recorded a $10.4 million pretax debt
extinguishment charge ($6.3 million after tax) related to the
repurchase of notes payable in connection with the financing
transaction described below. In addition, the company recorded a $1.6
million gain (pretax and after tax) in the fourth quarter of 2006 in
connection with the liquidation of an investment that had been fully
written off several years ago. Net income for the fourth quarter of
2006 including these transactions, was $7.8 million, or $0.12 diluted
EPS, and net income for full year 2006 was $34.9 million, or $0.56
diluted EPS.
Adjusted net income for the fourth quarter of 2006, which excludes
the debt extinguishment charge and the investment gain, was $12.5
million, or $0.20 adjusted diluted EPS, compared to net income of $7.5
million, or $0.12 diluted EPS, in the fourth quarter of 2005. Adjusted
net income for full year 2006 was $39.6 million, or $0.63 adjusted
diluted EPS, compared to net income of $27.8 million, or $0.45 diluted
EPS, in 2005.
Cash Flow and Balance Sheet
The company reported free cash flow of $2.9 million for the fourth
quarter of 2006 and $78.5 million for full year 2006.
In December 2006 the company issued $143.8 million of 2.4375%
convertible senior subordinated notes due in 2027. The proceeds from
the sale of the notes, together with cash on hand, were used to
repurchase $125.9 million (or 99.59%) of the previously outstanding
principal amount of its 9% senior notes due in 2011 and to repurchase
2.7 million shares of the company's common stock at a price of $18.83
per share, for a total of $50.0 million. As a result of this
refinancing transaction, the company will significantly reduce
interest expense in future periods.
Throughout 2006, Orbital repurchased an additional 1.1 million
shares of its common stock for $16.2 million as part of a securities
repurchase program.
The company's cash flow was as follows (in millions):
2006
Fourth Quarter Full Year
----------------------------------------------------------------------
Net Cash Provided by Operating Activities $ 10.4 $ 100.5
Capital Expenditures (7.5) (22.0)
-------------- ---------
Free Cash Flow 2.9 78.5
Issuance of Debt 140.4 140.4
Repayment of Debt (133.8) (133.8)
Repurchase of Common Stock (50.0) (66.2)
Proceeds from Issuance of Common Stock 5.3 16.4
Other 2.0 5.7
-------------- ---------
Net Increase (Decrease) in Cash (33.2) 41.0
Beginning Cash Balance 233.0 158.8
-------------- ---------
Ending Cash Balance $ 199.8 $ 199.8
----------------------------------------------------------------------
Summary balance sheet data as of December 31, 2006 was as follows
(in millions):
Assets Liabilities and Equity
----------------------------------------------------------------------
Cash $ 199.8 Short-Term Debt $ 0.6
Other Current Assets 250.5 Other Current Liabilities 205.8
Property and Equipment 92.9 Long-Term Debt 143.8
Goodwill 55.5 Other Non-Current Liabilities -
Other Assets 145.8 Stockholders' Equity 394.3
-------- -------
Total Assets $ 744.5 Total Liabilities and Equity $744.5
----------------------------------------------------------------------
New Business Highlights
During the fourth quarter of 2006, Orbital received approximately
$120 million in new firm contract bookings and $40 million in new
option contract bookings. In addition, the company received
approximately $60 million of option exercises under existing
contracts. For the full year, Orbital received approximately $1.05
billion in new firm contract bookings, $430 million in new option
contract bookings and $310 million of option exercises under existing
contracts. As of December 31, 2006, the company's firm contract
backlog was approximately $1.79 billion, an increase of 42% compared
to its year-end 2005 level. Total backlog (including options,
indefinite-quantity contracts and undefinitized orders) was
approximately $3.43 billion, up 18% over a year ago.
Operational Highlights
In the fourth quarter of 2006, Orbital completed three major space
missions. In October, the Optus D-1 commercial communications
satellite was successfully launched and deployed for Optus Networks of
Australia. Orbital also carried out two successful rocket launches,
both in December, including a Minotaur 1 vehicle for the U.S. Air
Force carrying the TacSat-2 spacecraft and a suborbital target vehicle
in support of a Missile Defense Agency mission.
"For the year as a whole, Orbital carried out 16 major launch
vehicle and space system missions and 18 smaller sounding rocket and
missile target launches. The company also delivered 13 additional
rockets, satellites and other space systems for future deployments,"
said Mr. Thompson. "These highly successful operations increased our
record to 63 consecutive successful major space missions since 2002
and boosted our record to 149 successes out of 151 major space
missions during the past ten years," Mr. Thompson added.
Orbital's 2007 operational schedule is expected to be one of the
busiest in the company's 25-year history. The company plans to carry
out approximately 25 major launch vehicle and spacecraft missions and
to complete and deliver an additional 15 or more launch vehicles and
satellites for future missions. Included in the operational totals are
between 18 and 20 interceptor, space launch and target vehicle
missions and the deployment of up to six spacecraft for commercial
satellite operators and U.S. government customers.
2007 Financial Guidance
The company has revised its preliminary financial guidance for
2007, with increases in revenues, operating margin, EPS and free cash
flow as summarized in the table below:
Full Year 2007 Current Previous
----------------------------------------------------------------------
Revenues (in millions) $880 - $900 $870 - $890
Operating Income Margin 8.25% - 8.75% 8.0% - 8.5%
Diluted Earnings Per Share $0.75 - $0.80 $0.72 - $0.77
Free Cash Flow (in millions) $55 - $60 $50 - $55
----------------------------------------------------------------------
Disclosure of Non-GAAP Financial Measures
Free cash flow is defined as GAAP (Generally Accepted Accounting
Principles) net cash provided by operating activities (the most
directly comparable GAAP financial measure) less capital expenditures
for property, plant and equipment. A quantitative reconciliation of
free cash flow to net cash provided by operating activities is
included above in the section entitled "Cash Flow and Balance Sheet."
Management believes that the company's presentation of free cash flow
is useful because it provides investors with an important perspective
on the company's liquidity, financial flexibility and ability to fund
operations and service debt. Orbital does not intend for this non-GAAP
financial measure to be considered in isolation or as a substitute for
the related GAAP measure. Other companies may define this measure
differently.
Adjusted net income is defined as 2006 GAAP net income (the most
directly comparable GAAP financial measure) adjusted to exclude debt
extinguishment expense and the gain from the dissolution of an
investment. Adjusted diluted earnings per share is equal to adjusted
net income divided by diluted shares. These measures are provided so
investors can more easily compare 2006 results to 2005 results. The
reconciliation of the reported net income to adjusted net income is as
follows (in millions, except per share data):
Quarter Ended Full Year Ended
December 31, 2006 December 31, 2006
----------------------------------------------------------------------
Reported Net Income $ 7.8 $ 34.9
Adjustments
Debt Extinguishment Expense, net
of tax 6.3 6.3
Investment Liquidation Gain (1) (1.6) (1.6)
----------------- ------------------
Adjusted Net Income $ 12.5 $ 39.6
================= ==================
Adjusted Diluted Earnings Per
Share $ 0.20 $ 0.63
----------------------------------------------------------------------
(1) This gain is reported as a return of investment for tax
purposes; accordingly, no tax provision was recorded related to the
gain.
* "Adjusted net income," "adjusted diluted earnings per share" and
"free cash flow" are non-GAAP financial measures discussed in this
release. For additional details, please refer to the sections of this
news release entitled "Cash Flow and Balance Sheet" and "Disclosure of
Non-GAAP Financial Measures."
About Orbital
Orbital develops and manufactures small rockets and space systems
for commercial, military and civil government customers. The company's
primary products are satellites and launch vehicles, including
low-orbit, geosynchronous-orbit and planetary spacecraft for
communications, remote sensing, scientific and defense missions;
ground- and air-launched rockets that deliver satellites into orbit;
and missile defense systems that are used as interceptor and target
vehicles. Orbital also offers space-related technical services to
government agencies and develops and builds satellite-based
transportation management systems for public transit agencies and
private vehicle fleet operators.
"Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995
Certain statements in this press release may be forward-looking in
nature or "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to risks, trends and uncertainties that could
cause the actual results or performance of the company to be
materially different from the forward-looking statement. Uncertainty
surrounding factors such as continued government support and funding
for key space and defense programs, product performance and market
acceptance of products and technologies, the outcome of the government
investigation, as well as other risk factors and business
considerations described in the company's SEC filings, including its
annual report on Form 10-K/A, could impact Orbital's actual financial
and operational results. Orbital assumes no obligation for updating
the information contained in this press release.
A transcript of the earnings teleconference call will be available
on Orbital's website at http://www.orbital.com/Investor.
ORBITAL SCIENCES CORPORATION
Condensed Consolidated Income Statements
(in thousands, except per share data)
Quarter Ended December 31,
2006 2005
----------------------------------------------------------------------
Revenues $ 215,837 $ 199,574
Costs of goods sold 171,259 165,297
------------- ------------
Gross profit 44,578 34,277
Research and development expenses 2,371 2,951
Selling, general and administrative expenses 21,805 17,689
------------- ------------
Income from operations 20,402 13,637
Interest expense (2,985) (3,158)
Interest income and other 5,445 1,658
Debt extinguishment expense (10,388) -
------------- ------------
Income before income taxes 12,474 12,137
Income taxes (4,693) (4,620)
------------- ------------
Net income $ 7,781 $ 7,517
============= ============
Basic net income per share $ 0.13 $ 0.14
============= ============
Diluted net income per share $ 0.12 $ 0.12
============= ============
Shares used in computing basic net income
per share 60,629 55,169
Shares used in computing diluted net income
per share 62,686 61,981
----------------------------------------------------------------------
ORBITAL SCIENCES CORPORATION
Condensed Consolidated Income Statements
(in thousands, except per share data)
Year Ended December 31,
2006 2005
----------------------------------------------------------------------
Revenues $ 802,761 $ 703,450
Costs of goods sold 644,370 578,764
----------- -----------
Gross profit 158,391 124,686
Research and development expenses 9,633 6,294
Selling, general and administrative expenses 80,838 65,935
----------- -----------
Income from operations 67,920 52,457
Interest expense (12,272) (11,746)
Interest income and other 13,773 4,576
Debt extinguishment expense (10,388) -
----------- -----------
Income before income taxes 59,033 45,287
Income taxes (24,149) (17,438)
----------- -----------
Net income $ 34,884 $ 27,849
=========== ===========
Basic net income per share $ 0.60 $ 0.51
=========== ===========
Diluted net income per share $ 0.56 $ 0.45
=========== ===========
Shares used in computing basic net income per
share 58,118 54,804
Shares used in computing diluted net income per
share 62,627 62,386
----------------------------------------------------------------------
ORBITAL SCIENCES CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
December 31,
2006 2005
----------------------------------------------------------------------
Assets
Cash $199,751 $158,849
Receivables, net 165,755 131,251
Inventory 30,053 19,006
Deferred income taxes, net 42,880 30,614
Other current assets 11,794 12,767
--------- ---------
Total current assets 450,233 352,487
Property, plant and equipment, net 92,878 85,640
Goodwill 55,551 55,551
Deferred income taxes, net 136,484 167,835
Other non-current assets 9,348 8,864
--------- ---------
Total Assets $744,494 $670,377
========= =========
Liabilities and Stockholders' Equity
Short-term debt $ 551 $ 76
Accounts payable and accrued expenses 124,170 116,153
Deferred revenues 81,704 30,281
--------- ---------
Total current liabilities 206,425 146,510
Long-term debt 143,750 126,459
Other non-current liabilities - 87
Total stockholders' equity 394,319 397,321
--------- ---------
Total Liabilities and Stockholders' Equity $744,494 $670,377
========= =========
----------------------------------------------------------------------
ORBITAL SCIENCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
Quarter Ended Full Year Ended
December 31, 2006 December 31, 2006
----------------------------------------------------------------------
Net income $ 7,781 $ 34,884
Depreciation and amortization 3,971 14,837
Deferred taxes 4,345 19,085
Amortization of debt costs 157 616
Debt extinguishment expense 10,388 10,388
Changes in assets and liabilities (15,358) 15,389
Stock-based compensation and other (847) 5,295
----------------- -----------------
Net cash provided by operating
activities 10,437 100,494
----------------- -----------------
Capital expenditures (7,522) (22,035)
Proceeds from liquidation of
investment 1,648 1,648
Change in cash restricted for
letters of credit, net (3) 310
----------------- -----------------
Net cash used in investing
activities (5,877) (20,077)
----------------- -----------------
Repayment of long-term notes
payable (133,830) (133,830)
Net proceeds from issuance of debt 140,371 140,371
Repurchase of common stock (50,004) (66,212)
Net proceeds from issuance of
common stock 5,276 16,390
Tax benefit of stock-based
compensation and other 349 3,766
----------------- -----------------
Net cash used in financing
activities (37,838) (39,515)
----------------- -----------------
Net increase (decrease) in cash (33,278) 40,902
Cash, beginning of period 233,029 158,849
----------------- -----------------
Cash, end of period $ 199,751 $ 199,751
================= =================
----------------------------------------------------------------------
CONTACT: Orbital Sciences Corporation
Public and Investor Relations:
Barron Beneski, 703-406-5528
beneski.barron@orbital.com
SOURCE: Orbital Sciences Corporation
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Orbital Sciences Corporation
