##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q/A
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-14279
 
 ORBITAL SCIENCES CORPORATION
  Delaware
    
    06-1209561(State of Incorporation of Registrant)
    
    (I.R.S. Employer Identification No.)
 21839 Atlantic Boulevard
Dulles, Virginia 20166
 (703) 406-5000
 þ o
  o þ o
 o þ




---



##### 



Explanatory Note
Restatement of Condensed Consolidated Financial Statements
         1




---



##### 



PART
I
 FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 March 31,
    
    
    December 31,2006
    
    
    2005(unaudited and
    
    
    (restated)restated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    180,559
    
    
    $
    158,849Restricted cash
    
    
    6,294
    
    
    
    6,294Receivables, net
    
    
    146,677
    
    
    
    131,251Inventories, net
    
    
    21,465
    
    
    
    19,006Deferred income taxes, net
    
    
    32,053
    
    
    
    30,614Other current assets
    
    
    4,048
    
    
    
    6,473Total current assets
    
    
    391,096
    
    
    
    352,487Property, plant and equipment,net
    
    
    86,648
    
    
    
    85,640Goodwill
    
    
    55,551
    
    
    
    55,551Deferred income taxes,net
    
    
    161,895
    
    
    
    167,835Other non-current assets
    
    
    8,668
    
    
    
    8,864Total assets
    
    $
    703,858
    
    
    $
    670,377LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    76
    
    
    $
    76Accounts payable and accrued expenses
    
    
    118,282
    
    
    
    116,153Deferred revenues
    
    
    53,243
    
    
    
    30,281Total current liabilities
    
    
    171,601
    
    
    
    146,510Long-term obligations, net of current portion
    
    
    126,441
    
    
    
    126,459Other non-current liabilities
    
    
    65
    
    
    
    87Total liabilities
    
    
    298,107
    
    
    
    273,056Commitments and contingenciesStockholders equity:Preferred Stock, par value $.01; 10,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common Stock, par value $.01; 200,000,000 shares authorized, 55,194,946 and
55,032,244 shares outstanding, respectively
    
    
    552
    
    
    
    550Additional paid-in capital
    
    
    604,450
    
    
    
    604,812Accumulated deficit
    
    
    (199,251
    )
    
    
    (208,041
    )Total stockholders equity
    
    
    405,751
    
    
    
    397,321Total liabilities and stockholders equity
    
    $
    703,858
    
    
    $
    670,377
 See accompanying notes to condensed consolidated financial statements
 2




---



##### 



ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited, in thousands, except share data)
 Quarters Ended March 31,2006
    
    
    2005(restated)Revenues
    
    $
    192,137
    
    
    $
    167,149Costs of goods sold
    
    
    154,309
    
    
    
    139,338Gross profit
    
    
    37,828
    
    
    
    27,811Research and development expenses
    
    
    2,171
    
    
    
    1,032Selling, general and administrative expenses
    
    
    19,800
    
    
    
    14,713Income from operations
    
    
    15,857
    
    
    
    12,066Interest expense
    
    
    (3,059
    )
    
    
    (2,780
    )Interest income and other
    
    
    2,357
    
    
    
    757Income before income taxes
    
    
    15,155
    
    
    
    10,043Provision for income taxes
    
    
    (6,365
    )
    
    
    (3,992
    )Net income
    
    $
    8,790
    
    
    $
    6,051Basic net income per share
    
    $
    0.16
    
    
    $
    0.11Diluted net income per share
    
    $
    0.14
    
    
    $
    0.10
 See accompanying notes to condensed consolidated financial statements
 3




---



##### 



ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Quarters Ended March 31,2006
    
    
    2005(restated)Cash Flows From Operating Activities:Net income
    
    $
    8,790
    
    
    $
    6,051Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense
    
    
    3,534
    
    
    
    3,636Deferred taxes
    
    
    4,501
    
    
    
    3,846Amortization of debt issuance costs
    
    
    153
    
    
    
    153Other
    
    
    732
    
    
    
    (53
    )Changes in assets and liabilities
    
    
    10,561
    
    
    
    (4,090
    )Net cash provided by operating activities
    
    
    28,271
    
    
    
    9,543Cash Flows From Investing Activities:Capital expenditures
    
    
    (5,651
    )
    
    
    (4,467
    )Change in cash restricted for letters of credit, net
    
    
    
    
    
    
    30Net cash used in investing activities
    
    
    (5,651
    )
    
    
    (4,437
    )Cash Flows From Financing Activities:Payments on long-term obligations
    
    
    (18
    )
    
    
    (77
    )Repurchase of common stock
    
    
    (7,954
    )
    
    
    Net proceeds from issuances of common stock
    
    
    5,523
    
    
    
    427Tax benefit of share-based compensation
    
    
    1,539
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (910
    )
    
    
    350Net increase in cash and cash equivalents
    
    
    21,710
    
    
    
    5,456Cash and cash equivalents, beginning of period
    
    
    158,849
    
    
    
    125,504Cash and cash equivalents, end of period
    
    $
    180,559
    
    
    $
    130,960
 See accompanying notes to condensed consolidated financial statements.
 4




---



##### 



ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006 and 2005
(Unaudited)
 (1) Basis of Presentation
    (2) Preparation of Condensed Consolidated Financial Statements
   5




---



##### 



(3) Restatement Related to Stock-Based Compensation Grants and Procedures
      6




---



##### 



Materiality Considering the Effects of
Prior Year Misstatements in Current Year Financial Statements
 7




---



##### 



(in thousands,
except share data)
 Quarter EndedMarch 31, 2005Selling, general and administrative expensesAs previously reported
    
    $
    14,562As restated
    
    $
    14,713Income from operationsAs previously reported
    
    $
    12,217As restated
    
    $
    12,066Provision for income taxesAs previously reported
    
    $
    4,042As restated
    
    $
    3,992Net incomeAs previously reported
    
    $
    6,152As restated
    
    $
    6,051Basic net income per shareAs previously reported
    
    $
    0.11As restated
    
    $
    0.11Diluted net income per shareAs previously reported
    
    $
    0.10As restated
    
    $
    0.10
 As of
    
    As ofMarch 31, 2006
    
    December 31, 2005Non-current deferred income taxes, netAs previously reported
    
    $
    160,308
    
    
    $
    166,248As restated
    
    $
    161,895
    
    
    $
    167,835Additional paid-in capitalAs previously reported
    
    $
    591,242
    
    
    $
    591,604As restated
    
    $
    604,450
    
    
    $
    604,812Accumulated deficitAs previously reported
    
    $
    187,630
    
    
    $
    196,420As restated
    
    $
    199,251
    
    
    $
    208,041
   8




---



##### 



(4) Industry Segment Information
   
    
    Launch Vehicles.Rockets that are used as interceptor and target vehicles for missile
defense systems, small-class space launch vehicles that place satellites into low-Earth
orbit, and suborbital launch vehicles that place payloads into a variety of high-altitude
trajectories.
    
    Satellites and Space Systems.Satellites and interplanetary spacecraft for
communications, remote sensing, scientific and military missions, satellite subsystems and
space-related technical services.
    
    Transportation Management Systems.Software-based systems that combine satellite
navigation and wireless communications to enable municipal transit and other fleet
operators to manage and dispatch vehicles.
  9




---



##### 



(in thousands)
 Quarters Ended March 31,2006
    
    2005(restated)
    
    (restated)Launch Vehicles:Revenues
    
    $
    78,712
    
    
    $
    79,977Operating income
    
    
    9,015
    
    
    
    8,988Identifiable assets
    
    
    114,141
    
    
    
    114,882
    (1)Capital expenditures
    
    
    1,283
    
    
    
    2,217Depreciation
    
    
    1,242
    
    
    
    1,390Satellites and Space Systems:Revenues(2)
    
    $
    107,484
    
    
    $
    82,410Operating income
    
    
    6,486
    
    
    
    2,833Identifiable assets
    
    
    154,752
    
    
    
    135,903
    (1)Capital expenditures
    
    
    3,579
    
    
    
    1,931Depreciation
    
    
    1,375
    
    
    
    1,207Transportation Management Systems:Revenues
    
    $
    7,948
    
    
    $
    7,067Operating income
    
    
    356
    
    
    
    396Identifiable assets
    
    
    18,496
    
    
    
    19,251
    (1)Capital expenditures
    
    
    86
    
    
    
    134Depreciation
    
    
    144
    
    
    
    168Corporate and Other:Revenues(2)
    
    $
    (2,007
    )
    
    $
    (2,305
    )Operating income(3)
    
    
    
    
    
    
    (151
    )Identifiable assets
    
    
    416,469
    
    
    
    400,341
    (1)Capital expenditures
    
    
    703
    
    
    
    185Depreciation
    
    
    773
    
    
    
    871Consolidated:Revenues
    
    $
    192,137
    
    
    $
    167,149Operating income
    
    
    15,857
    
    
    
    12,066Identifiable assets
    
    
    703,858
    
    
    
    670,377
    (1)Capital expenditures
    
    
    5,651
    
    
    
    4,467Depreciation
    
    
    3,534
    
    
    
    3,636
 
 (1)
    
    As of December 31, 2005.(2)
    
    Corporate and other revenues are comprised solely of the elimination of
intersegment sales. Satellites and space systems revenues include $1.4 million and $2.2
million of the intersegment sales in the quarters ended March 31, 2006 and 2005,
respectively.(3)
    
    Corporate and other operating income is comprised solely of stock-based
compensation expense in the quarter ended March 31, 2005 (see Note 3). (5) Receivables
 (in thousands)
 March 31, 2006
    
    
    December 31, 2005Billed
    
    $
    30,020
    
    
    $
    31,546Unbilled
    
    
    116,772
    
    
    
    99,820Allowance for doubtful accounts
    
    
    (115
    )
    
    
    (115
    )Total
    
    $
    146,677
    
    
    $
    131,251
  10




---



##### 



(6) Inventories
 (in thousands)
 March 31, 2006
    
    
    December 31, 2005Inventories
    
    $
    22,085
    
    
    $
    19,626Allowance for inventory obsolescence
    
    
    (620
    )
    
    
    (620
    )Total
    
    $
    21,465
    
    
    $
    19,006
  (7) Warranties
 (in thousands)
 Quarter Ended
    
    
    Quarter EndedMarch 31, 2006
    
    
    March 31, 2005Balance at beginning of period
    
    $
    2,028
    
    
    $
    3,145Accruals during the period
    
    
    151
    
    
    
    343Reductions during the period
    
    
    (390
    )
    
    
    (689
    )Balance at end of period
    
    $
    1,789
    
    
    $
    2,799
 (8) Earnings Per Share
 (in thousands)
 Quarter Ended
    
    
    Quarter EndedMarch 31, 2006
    
    
    March 31, 2005Weighted average of outstanding shares for basic EPS
    
    
    55,083
    
    
    
    55,157Dilutive effect of outstanding stock options, units and warrants
    
    
    7,239
    
    
    
    8,304Shares for diluted EPS
    
    
    62,322
    
    
    
    63,461
 11




---



##### 



(9) Comprehensive Income
  (10) Debt
    (11) Share-Based Compensation
  Share-Based Payment, Accounting for Stock Issued to Employees,
 12




---



##### 



Accounting for Stock-Based Compensation
  Share-Based Compensation Plans
   Share-Based Transactions
  Restricted Stock Units
    
    OptionsWeightedWeighted
    
    
    
    
    
    Weighted
    
    AverageAverage
    
    
    
    
    
    Average
    
    RemainingNumber of
    
    Grant Date
    
    Number of
    
    Exercise
    
    ContractualUnits
    
    Fair Value
    
    Shares
    
    Price
    

Term (Years)(restated)Outstanding at December 31, 2005
    
    
    745,000
    
    
    $
    12.11
    
    
    
    6,532,139
    
    
    $
    10.06
    
    
    
    5.28Granted
    
    
    8,000
    
    
    
    14.79
    
    
    
    55,000
    
    
    
    12.98Exercised
    
    
    
    
    
    
    
    
    
    
    (670,433
    )
    
    
    7.70Forfeited
    
    
    (5,000
    )
    
    
    12.11
    
    
    
    (8,538
    )
    
    
    7.05Expired
    
    
    
    
    
    
    
    
    
    
    (159,682
    )
    
    
    13.02Outstanding at March 31, 2006
    
    
    748,000
    
    
    $
    12.14
    
    
    
    5,748,486
    
    
    $
    10.28
    
    
    
    5.16
 13




---



##### 



Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    
    Number
    
    Remaining Contractual
    
    
    Average
    
    
    Number
    
    
    AverageExercise Prices
    
    
    Outstanding
    
    Life (Years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$
    1.30-$5.79
    
    
    2,052,734
    
    
    6.15
    
    
    $
    4.79
    
    
    
    1,787,349
    
    
    $
    4.646.15-12.05
    
    
    1,963,358
    
    
    5.70
    
    
    
    9.66
    
    
    
    1,560,248
    
    
    
    10.2412.18-43.31
    
    
    1,732,394
    
    
    3.39
    
    
    
    17.47
    
    
    
    1,677,394
    
    
    
    17.62$
    1.30-$43.31
    
    
    5,748,486
    
    
    5.16
    
    
    $
    10.28
    
    
    
    5,024,991
    
    
    $
    10.71
   Volatility
    
    
    51
    %Risk-free interest rate
    
    
    4.35
    %Weighted-average fair value per share at grant date
    
    $
    6.11Expected dividend yield
    
    
    Expected life of options (years)
    
    
    4.5
    14




---



##### 



(in
thousands, except per share amounts)
 (as previously reported)Net income, as reported
    
    $
    6,152Stock-based employee compensation expense per fair-value-based method
    
    
    (722
    )Pro forma net income
    
    $
    5,430Earnings per share:Basicas reported
    
    $
    0.11Basicpro forma
    
    $
    0.10Dilutedas reported
    
    $
    0.10Dilutedpro forma
    
    $
    0.09
 (restated)Net income, as reported
    
    $
    6,051Stock-based employee compensation expense per fair-value-based method,
net of APB No. 25 compensation expense
    
    
    (700
    )Pro forma net income
    
    $
    5,351Earnings per share:Basicas reported
    
    $
    0.11Basicpro forma
    
    $
    0.10Dilutedas reported
    
    $
    0.10Dilutedpro forma
    
    $
    0.08
  Volatility
    
    
    57
    %Risk-free interest rate
    
    
    3.39
    %Weighted-average fair value per share at grant date
    
    $
    5.07Expected dividend yield
    
    
    Expected life of options (years)
    
    
    3.5
 15




---



##### 



(12) Commitments and Contingencies
 U.S. Government Contracts
    Litigation
  16




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Restatement Related to Stock-Based Compensation Grants and Procedures
    17




---



##### 



Materiality Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements
 18




---



##### 



Consolidated Results of Operations for the Quarters Ended March 31, 2006 and 2005
 Revenues
 Gross Profit
 Research and Development Expenses
 19




---



##### 



Selling, General and Administrative Expenses
 Share-Based Payment,
 Interest Expense
 Interest Income and Other
 Income Taxes
 Net Income
 20




---



##### 



Segment Results for the Quarters Ended March 31, 2006 and 2005
  (in thousands)
 Quarters EndedMarch 31,2006
    
    
    2005(restated)Revenues:Launch Vehicles
    
    $
    78,712
    
    
    $
    79,977Satellites and Space Systems
    
    
    107,484
    
    
    
    82,410Transportation Management Systems
    
    
    7,948
    
    
    
    7,067Corporate and Other
    
    
    (2,007
    )
    
    
    (2,305
    )Total
    
    $
    192,137
    
    
    $
    167,149Income from Operations:Launch Vehicles
    
    $
    9,015
    
    
    $
    8,988Satellites and Space Systems
    
    
    6,486
    
    
    
    2,833Transportation Management Systems
    
    
    356
    
    
    
    396Corporate and Other
    
    
    
    
    
    
    (151
    )Total
    
    $
    15,857
    
    
    $
    12,066
 Launch Vehicles
  Satellites and Space Systems
 21




---



##### 



Transportation Management Systems
 Corporate and Other
 Backlog
   Liquidity and Capital Resources
 Cash Flow from Operating Activities
 22




---



##### 



Cash Flow from Investing Activities
 Cash Flow from Financing Activities
     Available
Cash and Future Funding
 23




---



##### 



Off-Balance Sheet Arrangements
  24




---



##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     ITEM 4. CONTROLS AND PROCEDURES
 Restatement Related to Stock-Based Compensation Grants and Procedures
  Evaluation of Disclosure Controls and Procedures
  25




---



##### 



Changes in Internal Controls
  26




---



##### 



PART II
 OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
   ITEM 1A. RISK FACTORS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    None.
 (b)
    
    None.
 27




---



##### 



MaximumTotal Number of
    
    
    Number (orShares
    
    
    ApproximatePurchased as
    
    
    Dollar Value) ofTotal
    
    
    
    
    
    
    Part of Publicly
    
    
    Shares That MayNumber of
    
    
    Average Price
    
    
    Announced
    
    
    Yet Be PurchasedShares
    
    
    Paid Per
    
    
    Plans or
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    Programs1
    
    
    Programs1January 1, 2006 to
January 31, 2006
    
    
    132,700
    
    
    $
    12.95
    
    
    
    132,700
    
    
    $
    13,713,615February 1, 2006 to
February 28, 2006
    
    
    32,300
    
    
    $
    12.96
    
    
    
    32,300
    
    
    $
    13,294,916March 1, 2006 to
March 31, 2006
    
    
    387,500
    
    
    $
    15.02
    
    
    
    387,500
    
    
    $
    7,472,881TOTAL
    
    
    552,500
    
    
    $
    14.41
    
    
    
    552,500
    
    
    $
    7,472,881
 
 (1)
    
    On April 21, 2005, we announced the companys plan, subject to certain
conditions, to repurchase up to $50 million of outstanding debt and equity
securities, including our common stock. This plan expires on April 20, 2006. ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
  ITEM 6. EXHIBITS
 (a)
    
    Exhibits  A complete listing of exhibits required is
given in the Exhibit Index.
 28




---



##### 



SIGNATURES
  ORBITAL SCIENCES CORPORATIONDATED: December 7, 2006
    
    By:
    
    /s/ David W. ThompsonDavid W. ThompsonChairman and Chief Executive Officer
 29




---



##### 



EXHIBIT INDEX
  Exhibit No.
    
    Description3.1
    
    Restated Certificate of Incorporation (incorporated by
reference to Exhibit 4.1 to the companys Registration
Statement on Form S-3 (File Number 333-08769) filed and
effective on July 25, 1996).3.2
    
    Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.2 to the companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005).3.3
    
    Certificate of Amendment to Restated Certificate of
Incorporation, dated April 29, 1997 (incorporated by reference
to Exhibit 3.3 to the companys Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).3.4
    
    Certificate of Amendment to Restated Certificate of
Incorporation, dated April 30, 2003 (incorporated by reference
to Exhibit 3.4 to the companys Quarterly Report on Form 10-Q
for the quarter ended June 30, 2003).3.5
    
    Certificate of Designation, Preferences and Rights of Series B
Junior Participating Preferred Stock, dated November 2, 1998
(incorporated by reference to Exhibit 2 to the companys
Registration Statement on Form 8-A filed on November 2, 1998).4.1
    
    Form of Certificate of Common Stock (incorporated by reference
to Exhibit 4.1 to the companys Registration Statement on Form
S-1 (File Number 33-33453) filed on February 9, 1990 and
effective on April 24, 1990).4.2
    
    Warrant Agreement, dated as of August 22, 2002, by and between
Orbital Sciences Corporation and U.S. Bank, N.A., as Warrant
Agent (incorporated by reference to Exhibit 4.2 to the
companys Current Report on Form 8-K filed on August 27,
2002).4.3
    
    Form of Common Stock Purchase Warrant for Warrants Expiring
August 15, 2006 (restricted) (incorporated by reference to
Exhibit 4.4 to the companys Current Report on Form 8-K filed
on August 27, 2002).4.4
    
    Form of Common Stock Purchase Warrant for Warrants Expiring
August 15, 2006 (registered) (incorporated by reference to
Exhibit 4.4 to the companys Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003).
 30




---



##### 



Exhibit No.
    
    Description4.5
    
    Rights Agreement dated as of October 22, 1998 between Orbital
Sciences Corporation and BankBoston N.A., as Rights Agent
(incorporated by reference to Exhibit 1 to the companys
Report on Form 8-A filed on November 2, 1998).4.6
    
    Form of Rights Certificate (incorporated by reference to
Exhibit 3 to the companys Report on Form 8-A filed on
November 2, 1998).4.7
    
    Indenture, dated as of July 10, 2003, by and between Orbital
Sciences Corporation and U.S. Bank National Association, as
Trustee (incorporated by reference to Exhibit 4.1 to the
companys Current Report on Form 8-K filed on July 18, 2003).4.8
    
    Form of 9% Senior Note due 2011 (incorporated by reference to
Exhibit 4.2 to the companys Current Report on Form 8-K filed
on July 18, 2003).31.1
    
    Certification of Chairman and Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350) (transmitted herewith).31.2
    
    Certification of Vice Chairman and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. Section 1350) (transmitted herewith).32.1
    
    Written Statement of Chairman and Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. Section 1350) (transmitted herewith).32.2
    
    Written Statement of Vice Chairman and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. Section 1350) (transmitted herewith).
 31