UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 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
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



PART I
 FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
 June 30,
    
    
    December 31,2008
    
    
    2007(see Note 3)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    303,558
    
    
    $
    235,822Receivables, net
    
    
    209,581
    
    
    
    183,507Inventories, net
    
    
    25,795
    
    
    
    26,549Deferred income taxes, net
    
    
    44,212
    
    
    
    44,420Other current assets
    
    
    4,238
    
    
    
    5,508Total current assets
    
    
    587,384
    
    
    
    495,806Investments
    
    
    22,600
    
    
    
    28,000Property, plant and equipment,net
    
    
    99,672
    
    
    
    95,713Goodwill
    
    
    55,551
    
    
    
    55,551Deferred income taxes,net
    
    
    70,978
    
    
    
    90,942Other non-current assets
    
    
    7,854
    
    
    
    9,456Total assets
    
    $
    844,039
    
    
    $
    775,468LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    175,625
    
    
    $
    131,805Deferred revenues and customer advances
    
    
    57,551
    
    
    
    79,339Total current liabilities
    
    
    233,176
    
    
    
    211,144Long-term obligations
    
    
    143,750
    
    
    
    143,750Other non-current liabilities
    
    
    6,379
    
    
    
    325Total liabilities
    
    
    383,305
    
    
    
    355,219Commitments 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, 58,678,277 and
58,753,536 shares outstanding, respectively
    
    
    587
    
    
    
    587Additional paid-in capital
    
    
    551,290
    
    
    
    554,451Accumulated other comprehensive loss
    
    
    (2,538
    )
    
    
    (6,751
    )Accumulated deficit
    
    
    (88,605
    )
    
    
    (128,038
    )Total stockholders equity
    
    
    460,734
    
    
    
    420,249Total liabilities and stockholders equity
    
    $
    844,039
    
    
    $
    775,468
 See accompanying notes to condensed consolidated financial statements
 1




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##### 



ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited, in thousands, except share data)
 Quarters Ended June 30,2008
    
    
    2007Revenues
    
    $
    301,223
    
    
    $
    261,214Cost of revenues
    
    
    242,789
    
    
    
    217,278Research and development expenses
    
    
    10,202
    
    
    
    3,944Selling, general and administrative expenses
    
    
    21,745
    
    
    
    19,074Income from operations
    
    
    26,487
    
    
    
    20,918Investment impairment charge
    
    
    (10,600
    )
    
    
    Interest income and other
    
    
    1,452
    
    
    
    3,064Interest expense
    
    
    (1,098
    )
    
    
    (1,117
    )Income from continuing operations before income taxes
    
    
    16,241
    
    
    
    22,865Provision for income taxes
    
    
    (5,459
    )
    
    
    (9,380
    )Income from continuing operations
    
    
    10,782
    
    
    
    13,485Discontinued operations, net of taxes:Income from operations
    
    
    169
    
    
    
    345Gain on sale of business
    
    
    14,800
    
    
    
    Income from discontinued operations, net of taxes
    
    
    14,969
    
    
    
    345Net income
    
    $
    25,751
    
    
    $
    13,830Basic income per share:Income from continuing operations
    
    $
    0.18
    
    
    $
    0.23Income from discontinued operations
    
    
    0.26
    
    
    
    0.00Net income
    
    $
    0.44
    
    
    $
    0.23Diluted income per share:Income from continuing operations
    
    $
    0.18
    
    
    $
    0.22Income from discontinued operations
    
    
    0.25
    
    
    
    0.01Net income
    
    $
    0.43
    
    
    $
    0.23
 See accompanying notes to condensed consolidated financial statements
 2




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##### 



ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited, in thousands, except share data)
 Six Months Ended June 30,2008
    
    
    2007Revenues
    
    $
    584,768
    
    
    $
    479,160Cost of revenues
    
    
    477,471
    
    
    
    397,916Research and development expenses
    
    
    18,406
    
    
    
    6,172Selling, general and administrative expenses
    
    
    42,413
    
    
    
    37,655Income from operations
    
    
    46,478
    
    
    
    37,417Investment impairment charge
    
    
    (10,600
    )
    
    
    Interest income and other
    
    
    3,838
    
    
    
    6,075Interest expense
    
    
    (2,143
    )
    
    
    (2,265
    )Income from continuing operations before income taxes
    
    
    37,573
    
    
    
    41,227Provision for income taxes
    
    
    (14,058
    )
    
    
    (16,914
    )Income from continuing operations
    
    
    23,515
    
    
    
    24,313Discontinued operations, net of taxes:Income from operations
    
    
    1,118
    
    
    
    969Gain on sale of business
    
    
    14,800
    
    
    
    Income from discontinued operations, net of taxes
    
    
    15,918
    
    
    
    969Net income
    
    $
    39,433
    
    
    $
    25,282Basic income per share:Income from continuing operations
    
    $
    0.40
    
    
    $
    0.41Income from discontinued operations
    
    
    0.27
    
    
    
    0.02Net income
    
    $
    0.67
    
    
    $
    0.43Diluted income per share:Income from continuing operations
    
    $
    0.39
    
    
    $
    0.40Income from discontinued operations
    
    
    0.26
    
    
    
    0.01Net income
    
    $
    0.65
    
    
    $
    0.41
 See accompanying notes to condensed consolidated financial statements
 3




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##### 



ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months Ended June 30,2008
    
    
    2007Cash Flows From Operating Activities:Net income
    
    $
    39,433
    
    
    $
    25,282Adjustments to reconcile net income to net cash provided by operating activities:Gain on sale of business, net of tax
    
    
    (14,800
    )
    
    
    Investment impairment charge
    
    
    10,600
    
    
    
    Depreciation expense
    
    
    9,156
    
    
    
    8,108Deferred income taxes
    
    
    10,927
    
    
    
    14,062Stock-based compensation and other
    
    
    4,263
    
    
    
    3,780Changes in assets and liabilities
    
    
    (16,656
    )
    
    
    (21,939
    )Net cash provided by operating activities
    
    
    42,923
    
    
    
    29,293Cash Flows From Investing Activities:Capital expenditures
    
    
    (11,855
    )
    
    
    (8,121
    )Net proceeds from sale of business
    
    
    39,882
    
    
    
    Net proceeds from sale of property
    
    
    2,193
    
    
    
    Purchases of investments
    
    
    
    
    
    
    (172,855
    )Sales of investments
    
    
    
    
    
    
    172,855Other
    
    
    1,081
    
    
    
    (1,000
    )Net cash provided by (used in) investing activities
    
    
    31,301
    
    
    
    (9,121
    )Cash Flows From Financing Activities:Repurchase of common stock
    
    
    (15,131
    )
    
    
    (10,000
    )Net proceeds from issuances of common stock
    
    
    6,216
    
    
    
    7,039Tax benefit of stock-based compensation
    
    
    2,427
    
    
    
    2,487Net cash used in financing activities
    
    
    (6,488
    )
    
    
    (474
    )Net increase in cash and cash equivalents
    
    
    67,736
    
    
    
    19,698Cash and cash equivalents, beginning of period
    
    
    235,822
    
    
    
    199,751Cash and cash equivalents, end of period
    
    $
    303,558
    
    
    $
    219,449
 See accompanying notes to condensed consolidated financial statements.
 4




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##### 



ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
(Unaudited)
 (1) Basis of Presentation
     (2) Preparation of Condensed Consolidated Financial Statements
   5




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##### 



(3) Restatement Related to Deferred Income Taxes
    Materiality Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements
 6




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##### 



(in thousands)
 Previously Reported
    
    Adjustment
    
    As RestatedNon-current deferred income taxes, net
    
    $
    103,792
    
    
    $
    (12,850
    )
    
    $
    90,942Total assets
    
    
    788,318
    
    
    
    (12,850
    )
    
    
    775,468Accumulated deficit
    
    
    115,188
    
    
    
    12,850
    
    
    
    128,038Total stockholders equity
    
    
    433,099
    
    
    
    (12,850
    )
    
    
    420,249
 (4) Adoption of SFAS No. 157 and SFAS No. 159
 Fair Value Measurements
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115.
 (5) Discontinued Operations
  (in thousands)
 Quarters Ended June 30,
    
    Six Months Ended June 30,2008
    
    2007
    
    2008
    
    2007Revenues
    
    $
    8,932
    
    
    $
    12,057
    
    
    $
    21,351
    
    
    $
    22,332Income from operations, before taxes
    
    
    278
    
    
    
    577
    
    
    
    1,842
    
    
    
    1,620Income from operations, after taxes
    
    
    169
    
    
    
    345
    
    
    
    1,118
    
    
    
    969
 7




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##### 



(6) 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 Earth orbit,
and suborbital launch vehicles that place payloads into a variety of high-altitude
trajectories.
    
    Satellites and Space Systems.Small- and medium-class spacecraft that are used to
enable global and regional communications and broadcasting, to conduct space-related
scientific research, to carry out interplanetary and other deep-space exploration missions,
to demonstrate new space technologies, to collect imagery and other remotely-sensed data
about the Earth and to enable national security applications.
    
    Advanced Space Programs.Human-rated space systems for Earth-orbit and lunar
exploration, advanced launch systems for medium-class satellites, and small satellites and
satellite subsystems primarily used for national security space programs and to demonstrate
new space technologies.
  8




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##### 



(in thousands)
 Quarters Ended June 30,
    
    Six Months Ended June 30,2008
    
    2007
    
    2008
    
    2007Launch Vehicles:Revenues
    
    $
    115,024
    
    
    $
    102,150
    
    
    $
    220,281
    
    
    $
    190,401Operating income
    
    
    13,399
    
    
    
    10,528
    
    
    
    21,014
    
    
    
    18,391Identifiable assets
    
    
    132,646
    
    
    
    115,646
    (1)
    
    
    132,646
    
    
    
    115,646
    (1)Capital expenditures
    
    
    955
    
    
    
    1,534
    
    
    
    4,957
    
    
    
    2,215Depreciation
    
    
    1,340
    
    
    
    1,292
    
    
    
    2,627
    
    
    
    2,638Satellites and Space Systems(2):Revenues(3)
    
    $
    108,078
    
    
    $
    118,546
    
    
    $
    214,480
    
    
    $
    222,762Operating income
    
    
    7,578
    
    
    
    7,573
    
    
    
    15,447
    
    
    
    14,437Identifiable assets
    
    
    172,073
    
    
    
    176,538
    (1)
    
    
    172,073
    
    
    
    176,538
    (1)Capital expenditures
    
    
    3,213
    
    
    
    1,375
    
    
    
    5,069
    
    
    
    2,947Depreciation
    
    
    2,222
    
    
    
    1,790
    
    
    
    4,363
    
    
    
    3,595Advanced Space Programs(2):Revenues
    
    $
    79,719
    
    
    $
    41,495
    
    
    $
    152,328
    
    
    $
    67,835Operating income
    
    
    5,730
    
    
    
    3,175
    
    
    
    10,572
    
    
    
    5,289Identifiable assets
    
    
    58,868
    
    
    
    23,767
    (1)
    
    
    58,868
    
    
    
    23,767
    (1)Capital expenditures
    
    
    
    
    
    
    328
    
    
    
    
    
    
    
    328Depreciation
    
    
    3
    
    
    
    51
    
    
    
    6
    
    
    
    102Corporate and Other:Revenues(3)
    
    $
    (1,598
    )
    
    $
    (977
    )
    
    $
    (2,321
    )
    
    $
    (1,838
    )Operating income (4)
    
    
    (220
    )
    
    
    (358
    )
    
    
    (555
    )
    
    
    (700
    )Identifiable assets(5)
    
    
    480,452
    
    
    
    459,517

(1) (7)
    
    
    480,452
    
    
    
    459,517

(1) (7)Capital expenditures (6)
    
    
    951
    
    
    
    1,177
    
    
    
    1,829
    
    
    
    2,631Depreciation (6)
    
    
    1,056
    
    
    
    867
    
    
    
    2,160
    
    
    
    1,773Consolidated:Revenues
    
    $
    301,223
    
    
    $
    261,214
    
    
    $
    584,768
    
    
    $
    479,160Operating income
    
    
    26,487
    
    
    
    20,918
    
    
    
    46,478
    
    
    
    37,417Identifiable assets
    
    
    844,039
    
    
    
    775,468

(1) (7)
    
    
    844,039
    
    
    
    775,468

(1) (7)Capital expenditures
    
    
    5,119
    
    
    
    4,414
    
    
    
    11,855
    
    
    
    8,121Depreciation
    
    
    4,621
    
    
    
    4,000
    
    
    
    9,156
    
    
    
    8,108
 
 (1)
    
    As of December 31, 2007.(2)
    
    Effective December 31, 2007, the company disaggregated Advanced Space Programs
from Satellites and Space Systems. The presentation for the 2007 periods has been
reclassified to conform to the 2008 presentation.(3)
    
    Corporate and other revenues are comprised solely of the elimination of
intersegment sales. Satellites and Space Systems revenues include $1.2 million and $0.6
million of intersegment sales in the quarters ended June 30, 2008 and 2007, respectively,
and $1.7 million and $1.2 million of intersegment sales for the six months ended June 30,
2008 and 2007, respectively.(4)
    
    Corporate and Other operating income consists solely of corporate general
and administrative expenses allocated to the TMS business unit (see Note 5).(5)
    
    Corporate and Other identifiable assets at December 31, 2007 include assets of
$20.5 million attributable to the TMS business unit that was sold in the second quarter of
2008.(6)
    
    Corporate and Other capital expenditures and depreciation include amounts
attributable to the TMS business
unit that was sold in the second quarter of 2008 (see Note 5).(7)
    
    Restated (see Note 3). 9




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##### 



(7) Earnings Per Share
 (in thousands)
 Quarter Ended
    
    Quarter EndedJune 30, 2008
    
    June 30, 2007Weighted-average outstanding shares for basic EPS
    
    
    58,656
    
    
    
    59,479Dilutive effect of convertible notes
    
    
    191
    
    
    
    Dilutive effect of stock options and units
    
    
    1,710
    
    
    
    1,817Shares for diluted EPS
    
    
    60,557
    
    
    
    61,296
 Six Months Ended
    
    Six Months EndedJune 30, 2008
    
    June 30, 2007Weightedaverage outstanding shares for basic EPS
    
    
    58,575
    
    
    
    59,286Dilutive effect of stock options and units
    
    
    1,708
    
    
    
    1,840Shares for diluted EPS
    
    
    60,283
    
    
    
    61,126
  (8) Receivables
 (in thousands)
 June 30, 2008
    
    
    December 31, 2007Billed
    
    $
    69,067
    
    
    $
    36,606Unbilled
    
    
    140,514
    
    
    
    146,901Total
    
    $
    209,581
    
    
    $
    183,507
   10




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##### 



(9) Inventories
 (in thousands)
 June 30, 2008
    
    
    December 31, 2007Inventories
    
    $
    26,669
    
    
    $
    27,659Allowance for inventory obsolescence
    
    
    (874
    )
    
    
    (1,110
    )Total
    
    $
    25,795
    
    
    $
    26,549
  (10) Investments
    11




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##### 



(in thousands)
 Quarter Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2008Fair value(1) at beginning of period
    
    $
    25,500
    
    
    $
    28,000Temporary impairment charge
    
    
    (100
    )
    
    
    (300
    )Other-than-temporary impairment charges
    
    
    (10,600
    )
    
    
    (10,600
    )Reversal of temporary charges
    
    
    7,800
    
    
    
    5,500Net losses recorded
    
    
    (2,900
    )
    
    
    (5,400
    )Fair value(1) at end of period
    
    $
    22,600
    
    
    $
    22,600
 
 (1)
    
    As discussed above, the company estimated the fair value of its auction-rate
securities based upon discounted cash flow analysis using the best available information. Under
SFAS No. 157, such valuation assumptions are defined as level 3 inputs. (11) Debt
 Convertible Notes
   12




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##### 



Credit Facility
  Debt Covenants
  (12) Comprehensive Income
 (in thousands)
 Quarter Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2008Net income
    
    $
    25,751
    
    
    $
    39,433Unrealized loss on investments
    
    
    (100
    )
    
    
    (300
    )Reversal of previously recorded unrealized losses on
investments
    
    
    7,800
    
    
    
    5,500Defined benefit plans, net of tax
    
    
    (377
    )
    
    
    (987
    )Total comprehensive income
    
    $
    33,074
    
    
    $
    43,646
 13




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##### 



(13) Stock-Based Compensation
 (dollars in millions, except per-option and per-unit average values)
 Restricted Stock Units
    
    Stock OptionsWeightedAverage
    
    
    
    
    
    WeightedMeasurement
    
    
    
    
    
    AverageNumber of
    
    Date
    
    Number of
    
    ExerciseUnits
    
    Fair Value
    
    Options
    
    PriceOutstanding at December 31, 2007
    
    
    1,097,188
    
    
    $
    18.81
    
    
    
    3,535,512
    
    
    $
    11.77Granted(1)
    
    
    20,145
    
    
    
    24.49
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    (491,657
    )
    
    
    10.94Vested
    
    
    (34,197
    )
    
    
    17.93
    
    
    
    
    
    
    
    Forfeited
    
    
    (48,431
    )
    
    
    19.08
    
    
    
    (4,700
    )
    
    
    7.57Expired
    
    
    
    
    
    
    
    
    
    
    (227,020
    )
    
    
    41.31Outstanding at June 30, 2008
    
    
    1,034,705
    
    
    $
    18.94
    
    
    
    2,812,135
    (2)
    
    $
    9.53
 
 (1)
    
    The fair value of restricted stock unit grants is determined based on the closing
market price of Orbitals common stock on the date of grant. Such value is recognized as
expense over the service period, net of estimated forfeitures.(2)
    
    The weighted average remaining contractual term is 3.74 years. Quarter Ended
    
    Quarter EndedJune 30, 2008
    
    June 30, 2007Stock-based compensation expense
    
    $
    1.9
    
    
    $
    1.6Income tax benefit related to stock-based compensation expense
    
    
    0.6
    
    
    
    0.5Intrinsic value of options exercised computed as the market
price on the exercise date less the price paid to exercise the
options
    
    
    5.3
    
    
    
    3.0Cash received from exercise of options
    
    
    4.0
    
    
    
    3.1Tax benefit recorded as credits to additional paid-in capital related
to stock-based compensation transactions
    
    
    1.7
    
    
    
    1.7
 Six Months Ended
    
    Six Months EndedJune 30, 2008
    
    June 30, 2007Stock-based compensation expense
    
    $
    4.0
    
    
    $
    3.5Income tax benefit related to stock-based compensation expense
    
    
    1.2
    
    
    
    1.2Intrinsic value of options exercised computed as the market
price on the exercise date less the price paid to exercise the
options
    
    
    7.1
    
    
    
    6.4Cash received from exercise of options
    
    
    5.4
    
    
    
    6.4Tax benefit recorded as credits to additional paid-in capital related
to stock-based compensation transactions
    
    
    2.4
    
    
    
    2.5
 As ofJune 30, 2008Shares of common stock available for grant under the companys stock-based incentive plans
    
    
    1.7Aggregate intrinsic value of restricted stock units that are expected to vest
    
    $
    24.4Unrecognized compensation expense related to non-vested restricted stock units, expected to
be recognized over a weighted-average period of 1.32 years
    
    
    10.7Aggregate intrinsic value of stock options outstanding, all fully vested
    
    
    39.9
 14




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##### 



(14) Research and Development
   (15) Income Taxes
  (16) Commitments and Contingencies
 U.S. Government Contracts
   15




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##### 



Litigation
 United States of America ex rel.W. Austin Sallade v. Orbital Sciences Corporation
  (17) Recent Accounting Pronouncements
 Business Combinations.
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51.
 Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants,
 16




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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
    
    Launch Vehicles.Rockets that are used as interceptor and target vehicles for missile
defense systems, small-class space launch vehicles that place satellites into Earth orbit,
and suborbital launch vehicles that place payloads into a variety of high-altitude
trajectories.
    
    Satellites and Space Systems.Small- and medium-class spacecraft that are used to
enable global and regional communications and broadcasting, to conduct space-related
scientific research, to carry out interplanetary and other deep-space exploration missions,
to demonstrate new space technologies, to collect imagery and other remotely-sensed data
about the Earth and to enable national security applications.
    
    Advanced Space Programs.Human-rated space systems for Earth-orbit and lunar
exploration, advanced launch systems for medium-class satellites, and small satellites and
satellite subsystems primarily used for national security space programs and to demonstrate
new space technologies.
   17




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##### 



Restatement Related to Deferred Income Taxes
    Materiality Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements
 18




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##### 



Consolidated Results of Operations for the Quarters and Six Months Ended June 30, 2008 and 2007
 Revenues
  Cost of Revenues
 19




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##### 



Research and Development Expenses
   Selling, General and Administrative Expenses
 20




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##### 



Investment Impairment Charge
 Interest Income and Other
 Interest Expense
 Provision for Income Taxes
  Discontinued Operations
 21




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##### 



Net Income
  Segment Results
  (in thousands)
 Quarters Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Launch Vehicles
    
    $
    115,024
    
    
    $
    102,150
    
    
    $
    220,281
    
    
    $
    190,401Satellites and Space Systems(1)
    
    
    108,078
    
    
    
    118,546
    
    
    
    214,480
    
    
    
    222,762Advanced Space Programs(1)
    
    
    79,719
    
    
    
    41,495
    
    
    
    152,328
    
    
    
    67,835Corporate and Other
    
    
    (1,598
    )
    
    
    (977
    )
    
    
    (2,321
    )
    
    
    (1,838
    )Total
    
    $
    301,223
    
    
    $
    261,214
    
    
    $
    584,768
    
    
    $
    479,160Income from Operations:Launch Vehicles
    
    $
    13,399
    
    
    $
    10,528
    
    
    $
    21,014
    
    
    $
    18,391Satellites and Space Systems(1)
    
    
    7,578
    
    
    
    7,573
    
    
    
    15,447
    
    
    
    14,437Advanced Space Programs(1)
    
    
    5,730
    
    
    
    3,175
    
    
    
    10,572
    
    
    
    5,289Corporate and Other(2)
    
    
    (220
    )
    
    
    (358
    )
    
    
    (555
    )
    
    
    (700
    )Total
    
    $
    26,487
    
    
    $
    20,918
    
    
    $
    46,478
    
    
    $
    37,417
 
 (1)
    
    Effective December 31, 2007, we disaggregated Advanced Space Programs from
Satellites and Space Systems. The presentation of 2007 periods has been reclassified to
conform to the 2008 presentation.(2)
    
    Corporate and Other operating income consists solely of corporate general and
administrative expenses allocated to the TMS business unit. 22




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##### 



Second Quarter 2008 Compared with Second Quarter 2007
 Launch Vehicles
    23




---



##### 



Satellites and Space Systems
   Advanced Space Programs
  Corporate and Other
 24




---



##### 



Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007
 Launch Vehicles
   Satellites and Space Systems
 25




---



##### 



Advanced Space Programs
  Corporate and Other
 Backlog
   26




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##### 



Liquidity and Capital Resources
 Cash Flow from Operating Activities
  Cash Flow from Investing Activities
  Cash Flow from Financing Activities
 Equity Transactions 
 Convertible Notes
   Credit Facility 
 27




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##### 



Debt Covenants 
 Available Cash and Future Funding
    Off-Balance Sheet Arrangements
  28




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##### 



Recent Accounting Pronouncements
 Business Combinations.
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51.
 Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants,
 29




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##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Uncertainties in the Credit Markets
  Foreign Currency Exchange Rate Risk
   Interest Rate Risk
    30




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##### 



Deferred Compensation Plan
  ITEM 4. CONTROLS AND PROCEDURES
 Restatement Related to Deferred Income Taxes
  Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  31




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##### 



PART II
 OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
 United States of America ex rel.W. Austin Sallade v. Orbital Sciences
Corporation
  ITEM 1A. RISK FACTORS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   32




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##### 



Total Number of
    
    
    Maximum NumberShares
    
    
    (or 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
    
    

Programs (1)
    
    
    Programs(1)April 1, 2008 to
April 30, 2008
    
    
    100
    
    
    $
    23.52
    
    
    
    100
    
    
    $
    4,804,895May 1, 2008 to May
31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    50,000,000June 1, 2008 to
June 30, 2008
    
    
    140,400
    
    
    $
    23.86
    
    
    
    140,400
    
    
    $
    46,649,606TOTAL
    
    
    140,500
    
    
    $
    23.86
    
    
    
    140,500
    
    
    $
    46,649,606
 
 (1)
    
    During the quarter ended June 30, 2008, we purchased 100 shares of
our common stock under a securities repurchase plan that expired in May 2008.
On April 25, 2008, we announced a new plan (2008 Plan), to repurchase up to
$50 million of outstanding common stock through April 24, 2009, subject to
certain conditions. During the quarter ended June 30, 2008, we repurchased
140,400 shares under the 2008 Plan. The purchases made under both plans were
made in open market transactions. ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 (a)
    
    The annual meeting of stockholders of the company was held on
April 24, 2008.
 33




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##### 



(b)
    
    Election of four directors, each serving for a three-year term ending
in 2011:
 Robert J. HermannVotes:
    
    For:
    
    
    52,271,093Withheld:
    
    
    1,037,814Janice I. ObuchowskiVotes:
    
    For:
    
    
    51,928,185Withheld:
    
    
    1,380,721Frank L. SalizzoniVotes:
    
    For:
    
    
    50,432,107Withheld:
    
    
    2,876,800David W. ThompsonVotes:
    
    For:
    
    
    52,472,419Withheld:
    
    
    836,488
  
  
 (c)
    
    The following is a brief description of the other matter voted on at
the meeting and the number of votes cast for, against or abstaining from the
matter:Ratification of PricewaterhouseCoopers LLP as the companys independent
registered public accounting firm for the fiscal year ending December 31, 2008.
 Votes:
    
    For:
    
    
    52,849,269Against:
    
    
    446,181Abstain:
    
    
    13,456
 ITEM 5. OTHER INFORMATION
  34




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##### 



ITEM 6. EXHIBITS
 (a)
    
    Exhibits  A complete listing of exhibits required is given in
the Exhibit Index.
 35




---



##### 



SIGNATURES
  ORBITAL SCIENCES CORPORATIONDATED:  August 5, 2008
    By:
    /s/ David W. ThompsonDavid W. ThompsonChairman and Chief Executive OfficerDATED:  August 5, 2008
    By:
    /s/ Garrett E. PierceGarrett E. PierceVice Chairman and Chief Financial Officer 36




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##### 



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
    
    Indenture dated as of December 13, 2006, by and between
Orbital Sciences Corporation and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1 to the
companys Current Report on Form 8-K filed on December 13,
2006).4.3
    
    Form of 2.4375% Convertible Senior Subordinated Note due 2027
(incorporated by reference to Exhibit 4.2 to the companys
Current Report on Form 8-K filed on December 13, 2006).4.4
    
    Registration Rights Agreement dated as of December 13, 2006,
by and among Orbital Sciences Corporation, Wachovia Capital
Markets, LLC and Banc of America Securities LLC (incorporated
by reference to Exhibit 4.3 to the companys Current Report on
Form 8-K filed on December 13, 2006).
 37




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##### 



Exhibit No.
    
    Description4.5
    
    Rights Agreement dated as of October 22, 1998, by and 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).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).
 38