ORBIMAGE will be required to make significant capital expenditures to develop, manufacture and launch the OrbView-5 satellite. The Company estimates that its total project cost (including financing and launch insurance costs) to bring the OrbView-5 satellite into service in the second quarter of 2007 will be approximately $502 million. In order to perform its obligations under the NextView contract, ORBIMAGE will fund its cost contribution for the project through a combination of an equity offering of $65 million as described below, an issuance of $155 million of senior subordinated indebtedness, and $45 million in cash flow from existing operations. NGA's contract will also provide revenue commitments to commence following OrbView-5's in-service date.
ORBIMAGE has received commitments from investors (the "Backstop Investors") to purchase 6.5 million units at $10 per unit. Each unit consists of one share of common stock and one warrant with an exercise price of $10 per share and a 5-year maturity. The Company called $32.5 million of this commitment during the fourth quarter 2004 by privately issuing to these investors 3.25 million units on November 16, 2004, together with 1.0 million warrants on the same terms. To raise the remaining $32.5 million of the equity portion of financing to cover its cost share of the NextView project, the Company conducted a rights offering in March 2005 permitting its shareholders to purchase an additional 3.25 million units on the same terms. The rights offering closed on March 14, 2005 and was oversubscribed. On March 26, the Company received $32.6 million in gross proceeds.
ORBIMAGE has received commitments from investors to fund the $155 million in aggregate principal amount of additional senior subordinated indebtedness. The additional senior subordinated indebtedness would rank pari passu with the Company's existing Senior Subordinated Notes due 2008 (the "Senior Sub Notes") and would not have any scheduled amortization or a maturity date prior to the scheduled maturity of the Senior Sub Notes. The parties who committed to the additional senior subordinated indebtedness received a commitment fee equal to $1.6 million in cash for the total aggregate principal to which their commitments relate plus a pro rata share of 155,000 shares. The parties also received an additional $0.8 million in cash in January 2005 since the commitments were not refinanced by three months from contract execution.
At September 30, 2004 the Company had received consents from the holders of its Senior Sub Notes and the holders of its Senior Notes due 2008 that permit the Company to use up to $45 million of its cash flow from existing operations toward project costs for the OrbView-5 Satellite. The consenting holders who held notes on the record date of July 29, 2004 received a consent fee in additional notes equal to 200 basis points on the principal amount of the notes to which the holders' consents relate.
On March 31, 2005, we repaid our Senior Notes due 2008 out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. In the second quarter of 2005, we intend to undertake a holding company reorganization, which will result in a holding company being created that will hold all of the capital stock of the Company, and will itself be held by the shareholders of the Company immediately prior to consummation of the reorganization. We plan for the new holding company to raise approximately $240 million through an offering of new senior notes of the holding company in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, and we have engaged a placement agent to assist us in the placement of these notes. The new senior notes would not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. We expect that the holding company would contribute the proceeds of this offering to the Company as a capital contribution, which would constitute "unrestricted cash," a portion of which we would be obligated to use to repay our Senior Subordinated Notes due 2008 together with interest thereon to June 30, 2005, under the mandatory redemption provisions of the Senior Subordinated Notes. Upon repayment of our Senior Subordinated Notes, we would provide a guarantee of the new senior notes issued by the new holding company. We expect to use the remainder of the cash that is contributed by the new holding company to replace the $155 million of debt commitments that were previously released, with the remaining proceeds to be used for general working capital purposes.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
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.
ORBIMAGE Inc.
STATEMENTS OF OPERATIONS
(In thousands, except share data)
Successor Company Predecessor Company
Quarter Ended December 31, Year Ended December 31,
2004 2003 2004 2003
Revenues $10,370 $5,093 $31,020 $9,219
Direct expenses 8,757 5,280 33,754 10,697
Gross (loss) profit 1,613 (187) (2,734) (1,478)
Selling, general and
administrative expenses 4,619 1,420 11,746 4,744
Asset losses and impairment
charges - 18,205 - 18,205
Loss from operations (3,006) (19,812) (14,480) (24,427)
Interest expense, net 2,776 655 10,259 1,303
Loss before reorganization
items and provision
(benefit) for income
taxes (5,782) (20,467) (24,739) (25,730)
Reorganization items:
Gain on debt discharge - (116,056) - (116,056)
Professional fees - 935 - 6,067
Interest earned on
accumulated cash and
cash equivalents
during Chapter 11
proceedings - (15) - (30)
Earnings (loss) before
provision (benefit) for
income taxes (5,782) 94,669 (24,739) 84,289
Provision (benefit) for
income taxes - - - -
Net earnings (loss) $(5,782) $94,669 $(24,739) $84,289
Earnings (loss) per common
share - basic $(0.74) $3.85 $(3.80) $3.34
Earnings (loss) per common
share - diluted $(0.74) $1.95 $(3.80) $1.73
ORBIMAGE Inc.
BALANCE SHEETS
(In thousands, except share data)
December 31, December 31,
ASSETS 2004 2003
Current assets:
Cash and cash equivalents $60,565 $14,405
Receivables net of allowances of $126 and
$0, respectively 12,148 756
Other current assets 2,612 1,143
Total current assets 75,325 16,304
Property, plant and equipment, less accumulated
depreciation of $3,751 and $0, respectively 18,263 17,714
Satellites and related rights, less accumulated
depreciation and amortization of $18,142 and
$0, respectively 116,640 89,370
Goodwill 28,490 28,490
Other assets 10,428 1,441
Total assets $249,146 $153,319
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $3,970 $4,743
Amounts payable to subcontractors 47,545 -
Deferred revenue 2,234 651
Total current liabilities 53,749 5,394
Long-term debt 85,018 73,115
Deferred revenue, net of current portion 24,491 -
Total liabilities 163,258 78,509
Stockholders' equity:
Common stock, par value $0.01;
25,000,000 shares authorized,
9,917,078 shares issued and
outstanding and 6,332,993 shares
issued and outstanding at December
31, 2004 and 2003, respectively 99 63
Additional paid-in-capital 112,373 78,149
Unearned compensation (1,845) (3,402)
Accumulated deficit (24,739) -
Total stockholders' equity 85,888 74,810
Total liabilities and stockholders' equity $249,146 $153,319
ORBIMAGE Inc.
STATEMENTS OF CASH FLOWS
(In thousands)
Successor Predecessor
Company Company
Year Ended Year Ended
December 31, December 31,
2004 2003
Cash flows from operating activities:
Net earnings (loss) $(24,739) $84,289
Adjustments to reconcile net earnings
(loss) to net cash provided by
(used) in operating activities:
Depreciation, amortization and
other 22,575 3,356
Interest expense paid in kind 11,903 1,403
Stock compensation 3,452 -
Gain on debt extinguishment - (116,056)
Asset losses and impairment
charges - 18,205
Changes in assets and liabilities:
(Increase) decrease in
receivables and other current
assets (11,993) 5,416
Decrease in other assets 1,000 -
Decrease in accounts payable
and accrued expenses (773) (181)
Increase (decrease) in
deferred revenue 26,075 581
Net cash provided by (used) in operating
activities 27,500 (2,987)
Cash flows from investing activities:
Capital expenditures (3,530) (21,402)
Proceeds from sale of satellite license - 10,000
Proceeds from launch delay penalties - 2,284
Net cash used in investing activities (3,530) (9,118)
Cash flows from financing activities:
Prepaid financing costs (10,174) -
Issuance of common stock 32,364 -
Proceeds from insurance loan - 17,717
Proceeds from Orbital Sciences note - 2,500
Net cash provided by financing activities 22,190 20,217
Net increase (decrease) in cash and cash
equivalents 46,160 8,112
Cash and cash equivalents, beginning of year 14,405 6,293
Cash and cash equivalents, end of year $60,565 $14,405
Supplemental cash flow information:
Interest paid $ - $ -
Non-cash items:
Capital expenditures $(47,545) $ -
Amounts payable to subcontractors 47,545 -
About ORBIMAGE:
