Cash Flow and Leverage
As of September 30, 2005, ORBIMAGE had $253.3 million of cash and cash equivalents. Net cash provided by operating activities for the nine months ended September 30, 2005 was $92.1 million. During 2005, ORBIMAGE received approximately $75.6 million of milestone payments from the National Geospatial-Intelligence Agency ("NGA") related to the construction of the OrbView-5 satellite. Net cash used for investing activities were $119.4 million for the first nine months of 2005. Capital expenditures for the first nine months of 2005 were $112.7 million, much of which represents expenditures associated with the OrbView-5 satellite and related systems. ORBIMAGE also used approximately $6.7 million for the initial payment and other acquisition- related costs associated with the purchase of Space Imaging.
Net cash provided by financing activities were $220.0 million for the first nine 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. The Notes bear interest at a rate per annum, reset semi-annually, equal to the greater of nine-month LIBOR or three percent, plus a margin of 9.5 percent. ORBIMAGE Holdings 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 Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Revenues $ 11,197 $ 8,891 $ 28,357 $ 20,650 Direct expenses 9,685 9,162 27,843 24,997 Gross profit (loss) 1,512 (271) 514 (4,347) Selling, general and administrative expenses 3,146 3,293 8,792 7,127 Loss from operations (1,634) (3,564) (8,278) (11,474) Interest expense, net 5,795 2,576 9,480 7,483 Loss from early extinguishment of debt 2,119 - 2,758 - Loss before benefit for income taxes (9,548) (6,140) (20,516) (18,957) Benefit for income taxes - - - - Net loss $ (9,548) $ (6,140) $ (20,516) $ (18,957) Loss per common share -- basic and diluted $ (0.55) $ (0.95) $ (1.29) $ (2.97) Weighted average shares outstanding -- basic and diluted 17,291,587 6,497,292 15,849,818 6,388,335 ORBIMAGE HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except share data) ASSETS September 30, December 31, 2005 2004 Current assets: Cash and cash equivalents $ 253,318 $ 60,565 Receivables net of allowances of $127 and $126, respectively 8,444 12,148 Other current assets 3,634 2,612 Total current assets 265,396 75,325 Property, plant and equipment, at cost, less accumulated depreciation of $6,635 and $3,751, respectively 27,455 18,263 Satellites and related rights, at cost, less accumulated depreciation and amortization of $32,687 and $18,142, respectively 221,483 116,640 Goodwill 28,490 28,490 Other assets 26,092 10,428 Total assets $ 568,916 $ 249,146 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 13,484 $ 3,970 Amounts payable to subcontractors 62,984 47,545 Deferred revenue 1,113 2,234 Other current liabilities 1,561 - Total current liabilities 79,142 53,749 Long-term debt 245,182 85,018 Deferred revenue, net of current portion 100,791 24,491 Other noncurrent liabilities 3,811 - Total liabilities 428,926 163,258 Stockholders' equity: Common stock, par value $0.01; 25,000,000 shares authorized; 17,434,889 shares and 9,917,078 shares issued and outstanding as of September 30, 2005 and December 31, 2004, respectively 174 99 Additional paid-in-capital 186,043 112,373 Unearned compensation (765) (1,845) Accumulated deficit (45,255) (24,739) Accumulated other comprehensive loss (207) - Total stockholders' equity 139,990 85,888 Total liabilities and stockholders' equity $ 568,916 $ 249,146 ORBIMAGE HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in thousands) Nine Months Ended September 30, 2005 2004 Cash flows from operating activities: Net loss $ (20,516) $ (18,957) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 18,665 16,090 Interest paid in kind - 7,559 Stock compensation 1,080 2,027 Loss on early extinguishment of debt 2,758 - Changes in assets and liabilities: Decrease (increase) in receivables and other current assets 3,992 (7,277) Decrease in other assets 992 - Increase (decrease) in accounts payable and accrued expenses 9,512 (1,331) Increase in deferred revenue 75,627 1,295 Net cash provided by (used in) operating activities 92,110 (594) Cash flows from investing activities: Capital expenditures (112,693) (1,060) Acquisition of Space Imaging (6,688) - Net cash used in investing activities (119,381) (1,060) Cash flows from financing activities: Issuance of long-term debt 245,000 - Extinguishment of long-term debt (85,016) - Long-term debt repayment and issuance costs (13,706) - Issuance of common stock 73,746 - Net cash provided by financing activities 220,024 - Net increase (decrease) in cash and 192,753 (1,654) cash equivalents Cash and cash equivalents, beginning of period 60,565 14,405 Cash and cash equivalents, end of period $ 253,318 $ 12,751 Supplemental cash flow information: Interest paid $ 4,295 $ - Payments made in conjunction with Chapter 11 reorganization $ - $ 1,040 Non-cash items: Capital expenditures $ (67,625) $ - Amounts payable to subcontractors 62,984 - About ORBIMAGE: