- The Washington Times - Wednesday, April 18, 2001

Orbital Sciences Corp., a Sterling, Va., manufacturer of satellites and other space equipment, yesterday announced losses of $278.2 million ($2.35 a diluted share) in 2000, compared with a loss of $105.1 million (81 cents) in 1999.
The announcement follows an outside audit report by PricewaterhouseCoopers that raised doubts about the company's future.
The company has been plagued with losses in the past two years, as it has been unable to gain market share against larger companies like Lockheed Martin and Boeing. Now, it's in the process of selling off parts of its operations to offset losses. Its stock, meanwhile, hit a 3 and 1/2-month low yesterday.
The PricewaterhouseCoopers report, based on an analysis of Orbital's consolidated financial statements, said: "The company has suffered recurring losses from operations and has a net working-capital deficit that raise[s] substantial doubt about its ability to continue as a going concern."
But a company spokesman said yesterday that the PricewaterhouseCoopers opinion was made before Monday's sale of its subsidiary MacDonald, Dettwiler and Associates Ltd. (MDA), a Canadian information systems company. Orbital executives said that move will help the company in its quest to divest "non-core" operations.
"It's really a timing issue," said Orbital spokesman Barron Beneski. At least one analyst agreed.
"If the MDA sale had come a few days earlier, the auditor reports would have been much different," said Paul Nisbet, an analyst with JSA Research Inc. in Rhode Island.
By June, Orbital is expected to have divested four of its businesses, including MDA, and its Fairchild Defense division. Orbital also plans to sell its Magellan Corp. business unit and its interest in Navigation Solutions LLC.
Company executives said that $163 million, or 70.1 percent of the loss for 2000 stemmed from non-cash or non-recurring charges, including a class-action lawsuit stemming from its restatement of financial results in 1999 and the termination of a contract with NASA. Orbital executives said the four divestitures will bring in $350 million, and that they had a total contract backlog of more than $5 billion.
Without those charges, the annual loss would have been $228.2 million.
The company posted a loss of $88.2 million in the fourth quarter, compared with a loss of $30.1 million a year earlier. Sales fell 22.6 percent to $169.8 million.
In a conference call yesterday, executives said they were optimistic that the company's focus on "core operations" after the divestitures would improve its financial situation.
"The Magellan transaction will provide us with even more of a liquidity position by the end of the year," Orbital President and CEO David Thompson said.
Analysts who cover the company were more cautious.
"Investors shouldn't feel warm and fuzzy," said Robert Friedman, an analyst with Standard & Poor's. Mr. Friedman has rated Orbital as a "sell" for much of the year, and said many things are working against the company. He said stiff competition from Lockheed Martin and Boeing could essentially exclude Orbital from certain sectors of the space manufacturing industry.
"They're operating in a poor business and their management has not done a good job," Mr. Friedman said. "They have a long history of financial restatements and delays."
Since its financial restatement in 1999, Orbital has hired Garrett Pierce as its new chief financial officer. Analysts said it will take time to determine whether he can help improve Orbital's financial situation.
"He certainly has a good reputation, but it's been too rough a period since he came on to see what impact he's having," Mr. Nisbet said. "The management hasn't performed very well in the past."
Company spokesmen were somewhat evasive when asked about possible employee layoffs as a result of the divestitures and reorganizations. Management would be "streamlined," they said, while about 100 jobs would be cut from the company's satellite-manufacturing division. Employees lost to general attrition would likely not be replaced, Mr. Beneski said.
Orbital dropped 16 cents on the New York Stock Exchange yesterday to close at $4.65, its lowest price since Jan. 2.
Diluted shares reflect reflect options, warrants and other securities convertible into common stock.


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