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: