ORBIMAGE Announces Results For First Six Months Of 2005
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ORBIMAGE Announces Results For First Six Months Of 2005

DULLES, Va., Aug. 15 /PRNewswire-FirstCall/ -- ORBIMAGE Holdings Inc. (OTC Bulletin Board: ORBM) today announced its financial results for the second quarter of 2005 and for the six months ended June 30, 2005.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040930/DCTH068LOGO-a )

Total revenues for the second quarter of 2005 and 2004 were $8.5 million and $9.7 million, respectively. Total revenues for the six months ended June 30, 2005 and 2004 were $17.2 million and $11.8 million, respectively. Net loss for the second quarter of 2005 was $5.4 million, or $0.32 per share, compared to $4.4 million, or $0.70 per share, for the second quarter of 2004. Net loss for the six months ended June 30, 2005 was $11.0 million, or $0.73 per share, compared to $12.8 million, or $2.02 per share, for the six months ended June 30, 2004.

"Unfortunately our revenues have developed more slowly than we anticipated largely as a result of international customers delaying their purchasing decisions pending the outcome of the consolidation currently underway in our industry," said ORBIMAGE's President and Chief Executive Officer Matthew O'Connell. "We will continue our efforts to manage costs in the mean time. On the positive side, the construction of our OrbView-5 satellite for the National Geospatial-Intelligence Agency's NextView program is progressing on schedule and within budget. We met our debt commitment for NextView in the second quarter by raising $250 million of additional long-term debt to fund the next phase of the program and refinance the debt we incurred when we reorganized at the end of 2003 on more favorable terms."

Operating Results

The following table presents ORBIMAGE's summary reported results (unaudited) for the second quarter and year-to-date periods (in thousands, except share and per share data):

                                   Three Months              Six Months
                                   Ended June 30,           Ended June 30,
                                  2005        2004        2005        2004

    Revenues                    $ 8,501     $ 9,749    $ 17,160    $ 11,759
    Loss from operations         (3,855)     (1,970)     (6,644)     (7,910)
    Net loss                     (5,447)     (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

Revenues for the second quarter of 2005 were $8.5 million as compared to $9.7 million in the same period in 2004. Revenues for the six months ended June 30, 2005 were approximately $17.2 million, compared to $11.8 million for the same period in 2004. The decrease in revenue for the quarter resulted principally from a reduction in contract revenues on an international imagery contract renewed in 2005 at a lower amount and from a surge in production activities that took place during the second quarter of 2004 to compensate for first quarter 2004 delays in receiving source materials from our customers. The increase in 2005 year-to-date revenues as compared to 2004 was primarily due to commencement of OrbView-3 operations for the U.S. Government effective in March 2004 under the NGA ClearView program for imagery and infrastructure enhancements and in June 2004 for production services, and the commencement of OrbView-3 operations for international customers in the second quarter of 2004. Revenues generated from OrbView-3 products and services were $6.9 million and $7.2 million for the second quarter of 2005 and 2004, respectively, and $14.4 million and $7.8 million for the six months ended June 30, 2005 and 2004, respectively.

Loss from operations for the second quarter of 2005 was $3.9 million as compared to $2.0 million in the same period in 2004, which is attributable to increased sales and marketing expenditures to pursue business opportunities, increased staffing of sales and administrative functions and increased expenses associated with regulatory compliance. Loss from operations for the six months ended June 30, 2005 was $6.6 million as compared to $7.9 million in 2004. The decrease in this loss from the prior year is principally attributable to depreciation expense on the OrbView-3 satellite and related ground station assets which commenced in February 2004. Total depreciation expense recorded for these assets was $10.5 million in 2005 and $8.6 million in 2004. This increase is offset by the increased selling, general and administrative expenses in 2005 versus 2004 described above.

Net loss for the second quarter of 2005 was $5.5 million versus a net loss of $4.4 million in the same 2004 period. Net loss for the first six months of 2005 was $11.0 million versus a net loss of $12.8 million a year ago. ORBIMAGE recorded net interest expense of $1.6 million and $2.5 million during the three months ended June 30, 2005 and 2004, respectively, and $3.7 million and $4.9 million during the six months ended June 30, 2005 and 2004, respectively. On March 31, 2005, ORBIMAGE repaid its then outstanding Senior Notes due 2008 out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. This payment included an amount representing interest expense that would have been payable through June 30, 2005, the date of the initial interest payment. ORBIMAGE recorded a loss of $0.6 million associated with the early extinguishment of the Senior Notes in the first quarter of 2005.

Cash Flow and Leverage

As of June 30, 2005, ORBIMAGE had $185.4 million of cash and cash equivalents and $126.8 million of restricted cash resulting from the issuance of long-term debt as discussed below.

Net cash provided by operating activities for the six months ended June 30, 2005 was $54.9 million. During 2005, ORBIMAGE received approximately $45.3 million of milestone payments from the National Geospatial-Intelligence Agency ("NGA") related to the construction of the OrbView-5 satellite. Capital expenditures for the first six months of 2005 were $88.4 million, much of which represents expenditures associated with the OrbView-5 satellite and related systems. Net cash provided by financing activities were $158.3 million for the first six 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. In connection with this issuance, on June 29, 2005, ORBIMAGE Holdings entered into a Security Agreement with The Bank of New York ("BONY"), as Collateral Agent, pursuant to which ORBIMAGE Holdings granted a first priority lien on and security interest in substantially all of the assets of ORBIMAGE Holdings. ORBIMAGE Inc. was prohibited from issuing a guarantee of the Notes at the date of issuance due to restrictions in the indenture governing its Senior Subordinated Notes.

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:

ORBIMAGE is a leading global provider of earth imagery products and services, with digital remote sensing satellites and an integrated worldwide image receiving, processing and distribution network. In addition to the high- resolution OrbView-3 satellite, which is capable of measuring, mapping and monitoring objects smaller than automobiles and spectrally differentiating thousands of land use/land cover types, ORBIMAGE also operates the OrbView-2 ocean and land multispectral imaging satellite and the SeaStar Fisheries Information Service, which provides maps derived from essential oceanographic information to aid in commercial fishing. ORBIMAGE also produces value-added imagery products and provides advanced photogrammetric engineering services at its St. Louis, MO facility. The company distributes its products directly to the U.S. government for national security and related mapping applications. Commercial sales are primarily handled through a worldwide network of value- added resellers, regional distributors, sales agents, and select strategic partners. Over 10 million square kilometers of imagery has been collected since the launch of OrbView-3 in June 2003, which includes imagery of most of the world's capital cities, airports, and other areas of interest. The company is currently building a next-generation satellite, OrbView-5, to support the National Geospatial-Intelligence Agency's NextView image acquisition program. When OrbView-5 is launched in 2007, this next-generation commercial imaging satellite will acquire up to 700,000 square kilometers of imagery each day at the unprecedented resolution of 0.41-meters.

For more information about ORBIMAGE, please see our web site at http://www.orbimage.com

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.

CONTACT: William Warren of ORBIMAGE Holdings Inc., +1-703-480-5672, or
Email Contact

Web site: http://www.orbimage.com//