UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2014
OR
☐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 001-34299
DIGITALGLOBE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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31-1420852
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1601 Dry Creek Drive, Suite 260
Longmont, Colorado
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80503
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(Address of principal executive office)
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(Zip Code)
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(303) 684-4000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer ☒
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☐
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of October 23, 2014, there were 75,164,240 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
DigitalGlobe, Inc.
INDEX
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Statements of Operations
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For the three months ended
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For the nine months ended
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September 30,
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September 30,
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(in millions, except per share data)
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2014
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2013
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2014
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2013
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Revenue
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$
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154.6
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$
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164.8
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$
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468.9
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$
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443.0
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Costs and expenses:
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Cost of revenue, excluding depreciation and amortization
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40.9
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46.7
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121.5
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134.9
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Selling, general and administrative
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55.8
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60.6
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167.2
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204.9
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Depreciation and amortization
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57.7
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59.4
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172.9
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165.7
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Restructuring charges
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—
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3.1
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1.1
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37.0
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Loss on abandonment of asset
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—
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—
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1.2
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—
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Income (loss) from operations
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0.2
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(5.0)
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5.0
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(99.5)
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Loss from early extinguishment of debt
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—
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—
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—
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(17.8)
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Other income, net
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0.1
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0.1
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0.2
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0.5
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Interest expense, net
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—
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(0.7)
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—
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(3.5)
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Income (loss) before income taxes
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0.3
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(5.6)
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5.2
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(120.3)
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Income tax benefit
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0.6
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3.8
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1.1
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36.9
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Net income (loss)
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0.9
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(1.8)
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6.3
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(83.4)
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Preferred stock dividends
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(1.0)
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(1.0)
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(3.0)
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(2.6)
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Net (loss) income less preferred stock dividends
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(0.1)
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(2.8)
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3.3
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(86.0)
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Income allocated to participating securities
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—
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—
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(0.1)
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—
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Net (loss) income available to common stockholders
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$
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(0.1)
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$
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(2.8)
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$
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3.2
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$
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(86.0)
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(Loss) earnings per share:
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Basic (loss) earnings per share
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$
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0.00
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$
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(0.04)
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$
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0.04
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$
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(1.21)
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Diluted (loss) earnings per share
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$
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0.00
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$
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(0.04)
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$
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0.04
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$
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(1.21)
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Weighted average common shares outstanding:
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Basic
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75.1
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74.5
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75.1
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70.8
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Diluted
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75.1
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74.5
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76.1
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70.8
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See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Balance Sheets
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September 30,
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December 31,
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(in millions, except par value)
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2014
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2013
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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127.4
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$
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229.1
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Restricted cash
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4.8
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6.9
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Accounts receivable, net of allowance for doubtful accounts of $0.6 and $2.4, respectively
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127.3
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116.3
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Short-term deferred contract costs
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10.6
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10.0
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Prepaid and current assets
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20.6
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23.8
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Deferred taxes (Note 12)
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5.5
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5.9
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Total current assets
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296.2
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392.0
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Property and equipment, net of accumulated depreciation of $1,044.2 and $880.6, respectively
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2,209.6
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2,177.5
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Goodwill
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484.2
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459.3
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Intangible assets, net of accumulated amortization of $16.7 and $8.7, respectively
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45.8
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39.9
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Aerial image library, net of accumulated amortization of $45.2 and $41.3, respectively
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5.2
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9.1
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Long-term restricted cash
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2.7
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4.5
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Long-term deferred contract costs
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42.6
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44.9
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Other assets
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34.4
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38.6
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Total assets
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$
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3,120.7
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$
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3,165.8
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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10.5
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$
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20.9
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Current portion of long-term debt
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5.5
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5.5
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Other accrued liabilities
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60.5
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80.3
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Current portion of deferred revenue
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103.8
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81.3
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Total current liabilities
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180.3
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188.0
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Deferred revenue
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329.4
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374.6
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Long-term debt, net of discount
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1,133.4
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1,137.1
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Long-term deferred tax liability, net (Note 12)
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76.8
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80.0
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Other liabilities
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6.5
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2.8
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Total liabilities
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$
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1,726.4
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$
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1,782.5
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COMMITMENTS AND CONTINGENCIES (Note 16)
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STOCKHOLDERS’ EQUITY
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DigitalGlobe, Inc. stockholders’ equity:
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Series A convertible preferred stock, $0.001 par value; 0.08 shares authorized; 0.08 shares issued and outstanding at September 30, 2014; and 0.08 shares issued and outstanding at December 31, 2013
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—
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—
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Common stock; $0.001 par value; 250.0 shares authorized; 75.9 shares issued and 75.2 shares outstanding at September 30, 2014 and 75.5 shares issued and 75.3 shares outstanding at December 31, 2013
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0.2
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0.2
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Treasury stock, at cost; 0.7 shares at September 30, 2014 and 0.2 shares at December 31, 2013
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(19.8)
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(3.5)
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Additional paid-in capital
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1,476.6
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1,457.5
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Accumulated deficit
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(64.6)
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(70.9)
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Total DigitalGlobe, Inc. stockholders’ equity
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1,392.4
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1,383.3
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Noncontrolling interest
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1.9
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—
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Total stockholders’ equity
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1,394.3
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1,383.3
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Total liabilities and stockholders’ equity
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$
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3,120.7
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$
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3,165.8
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See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
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For the nine months ended
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September 30,
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(in millions)
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss)
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$
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6.3
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$
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(83.4)
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Adjustments to reconcile net income (loss) to net cash provided by operating activities:
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Depreciation and amortization expense
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172.9
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165.7
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Amortization of aerial image library, deferred contract costs and lease incentive
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11.6
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12.6
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Non-cash stock-based compensation expense, net of capitalized stock-based compensation expense
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13.3
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19.9
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Excess tax benefit from share-based compensation
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(1.9)
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—
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Amortization of debt issuance costs and accretion of debt discount, net of capitalized interest
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—
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3.6
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Write-off of debt issuance costs and debt discount
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—
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12.8
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Deferred income taxes
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(1.3)
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(38.1)
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Loss on disposal of assets and other
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1.4
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(0.3)
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Changes in working capital, net of assets acquired and liabilities assumed in business combinations:
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Accounts receivable, net
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(8.1)
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15.8
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Deferred contract costs
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(6.4)
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(16.5)
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Other current and non-current assets
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4.5
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3.1
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Accounts payable
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(16.0)
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(3.4)
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Accrued liabilities
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(2.0)
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(37.4)
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Deferred revenue
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(25.7)
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35.3
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Cash fees paid for early extinguishment of long-term debt and debt discount
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—
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(13.8)
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Net cash flows provided by operating activities
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148.6
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75.9
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Construction in progress additions
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(193.9)
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(198.9)
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Acquisition of businesses, net of cash acquired
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(35.7)
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(524.0)
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Other property and equipment additions
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(12.0)
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(12.7)
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Decrease in restricted cash
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3.8
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4.7
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Net cash flows used in investing activities
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(237.8)
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(730.9)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from issuance of debt
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—
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1,150.0
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Repayment of debt
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(4.1)
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(483.9)
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Payment of debt issuance costs
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—
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(36.2)
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Proceeds from exercise of stock options
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8.6
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36.9
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Excess tax benefit from share-based compensation
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1.9
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—
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Preferred stock dividend payment
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(3.0)
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(2.0)
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Repurchase of common stock
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(15.0)
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—
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Principal payments on capital lease obligations
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(0.9)
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—
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Net cash flows (used in) provided by financing activities
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(12.5)
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664.8
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Net (decrease) increase in cash and cash equivalents
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(101.7)
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9.8
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Cash and cash equivalents, beginning of period
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229.1
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246.2
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Cash and cash equivalents, end of period
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$
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127.4
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$
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256.0
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SUPPLEMENTAL CASH FLOW INFORMATION:
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Cash paid for interest, net of capitalized amounts of $47.6 million and $32.6 million, respectively
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—
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—
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
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Changes to non-cash property, equipment and construction in progress accruals, including interest
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16.3
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(5.0)
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Changes to non-cash deferred contract cost accruals
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(0.3)
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(2.4)
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Additions to capital lease obligations
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(3.1)
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—
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Issuance of shares of common and convertible preferred stock for acquisition of business
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—
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837.8
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Stock-based compensation awards issued in acquisition of business, net of income taxes
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—
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13.4
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Non-cash preferred stock dividend accrual
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(1.0)
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(1.0)
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See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1.General Information
DigitalGlobe, Inc. (“DigitalGlobe” or the “Company”) is a leading global provider of geospatial information products and services that support users in a wide variety of fields including defense, intelligence and homeland security, mapping and analysis, environmental monitoring, oil and gas exploration and infrastructure management. Each day users depend on DigitalGlobe’s data, information, technology and expertise to better understand our changing planet in order to save lives, resources and time. The Company offers a range of on-line and off-line distribution options designed to enable customers to easily access and integrate the Company’s imagery into their business operations and applications.
As of September 30, 2014, DigitalGlobe owns and operates five in-orbit and fully commissioned imagery satellites, which collect panchromatic (black and white) or multispectral (color) imagery using visible and near-infrared wavelengths. In addition, on August 13, 2014, the Company successfully launched its sixth imagery satellite, WorldView-3, the world’s highest resolution and most capable commercial earth observation satellite. The Company is making enhancements to WorldView-4 and anticipates that these enhancements will be completed in the fourth quarter of 2014, at which point the satellite will be placed into storage. The Company also intends to launch and place into service its WorldView-4 satellite in the second half of 2016 for additional capacity as a result of anticipated incremental growth opportunities. Refer to Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements for further discussion.
On January 31, 2013, DigitalGlobe completed its acquisition of 100% of the outstanding stock of GeoEye, Inc. (“GeoEye”), a leading provider of geospatial intelligence solutions in a stock and cash transaction valued at approximately $1.4 billion. The acquisition of GeoEye broadened the Company’s service offerings, enabled it to optimize satellite orbits and collection of imagery, strengthened its production and analytics capabilities, increased the scale of its existing operations and diversified its customer base and product mix. The results of operations of GeoEye have been included in the Company’s Consolidated Financial Statements as of the acquisition date.
NOTE 2.Basis of Presentation and Recent Accounting Pronouncements
Principles of Consolidation and Basis of Presentation
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of DigitalGlobe and its controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.
These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s annual audited consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K filed with the SEC and other financial information filed with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the accompanying Unaudited Condensed Consolidated Financial Statements have been included. Operating results for the three month and nine month periods ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or for any future period. The December 31, 2013 Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required in the annual financial statements prepared in accordance with U.S. GAAP. Certain prior year amounts have been reclassified to conform to the current year presentation.
There have been no material changes as a result of the adoption of recent accounting pronouncements or to our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The new standard is effective January 1, 2017 and early adoption is not permitted. ASU 2014-09 permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the new standard recognized at the date of initial application. The Company continues to evaluate the impact of ASU 2014-09 and available adoption methods on its consolidated financial statements.
In August 2014 the FASB issued FASB ASU 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”). ASU 2014-15 will be effective for fiscal years and interim periods beginning after December 15, 2016 and early application is permitted. ASU 2014-15 requires that management evaluate at each annual and interim reporting period whether there is a substantial doubt about an entity’s ability to continue as a going concern within one year of the date that the financial statements are issued. We do not expect that the application of ASU 2014-15 will have an impact on the presentation of our results of operations, financial position or disclosures.
NOTE 3.Deferred Revenue
Deferred revenue represents cash received in advance of revenue recognition. The Company’s deferred revenue balance varies based on the timing of revenue recognition and the timing of payments within each period presented. The Company has $433.2 million of deferred revenue recorded on its balance sheet as of September 30, 2014. This balance is primarily attributable to the Company’s EnhancedView and NextView contracts with the National Geospatial-Intelligence Agency (“NGA”), with the remaining balance arising from upfront payments received from its Direct Access Program (“DAP”), imagery hosting arrangements, or arrangements that require that the Company refresh previously delivered imagery. A rollforward of the deferred revenue balance from December 31, 2013 to September 30, 2014 is as follows:
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U.S. Government
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Diversified Commercial
|
|
|
|
|
|
|
|
|
|
|
|
Pre-FOC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Payments
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced
|
|
Added
|
|
Related To
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
View SLA
|
|
Services
|
|
NextView
|
|
DAP
|
|
Other
|
|
Total
|
Balance, December 31, 2013
|
|
$
|
194.3
|
|
$
|
99.3
|
|
$
|
111.7
|
|
$
|
45.7
|
|
$
|
4.9
|
|
$
|
455.9
|
Deferred revenue acquired in Spatial Energy acquisition
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
2.8
|
Cash collections
|
|
|
187.5
|
|
|
39.9
|
|
|
—
|
|
|
52.4
|
|
|
37.9
|
|
|
317.7
|
Revenue recognized on deferred revenue
|
|
|
(170.5)
|
|
|
(63.7)
|
|
|
(19.1)
|
|
|
(55.5)
|
|
|
(34.4)
|
|
|
(343.2)
|
Balance, September 30, 2014
|
|
$
|
211.3
|
|
$
|
75.5
|
|
$
|
92.6
|
|
$
|
42.6
|
|
$
|
11.2
|
|
$
|
433.2
|
EnhancedView Contract and Service Level Agreement
On August 6, 2010, DigitalGlobe entered into the EnhancedView Contract with NGA. The EnhancedView Contract has a ten-year term, inclusive of nine one-year renewal options exercisable by NGA, and is subject to Congressional appropriations and the right of NGA to terminate or suspend the contract at any time. The EnhancedView Service Level Agreement (“SLA”) totals $2.8 billion over the term of the contract, payable as $250.0 million per year
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
($20.8 million monthly) for the first four contract years commencing on September 1, 2010, and $300.0 million per year ($25.0 million monthly) for the remaining six years of the contract beginning on September 1, 2014. The NGA has exercised the first four options under the EnhancedView SLA, which collectively extended the SLA through August 31, 2015.
Each monthly EnhancedView SLA payment is subject to a performance penalty of up to 4% depending upon the Company’s performance against pre-defined EnhancedView SLA performance criteria. A performance penalty is assessed in any month that NGA determines that not all of the EnhancedView SLA performance criteria were met. The Company retains the full monthly cash payment; however, the penalty amount will be applied to mutually agreeable future products and services or to a pro-rated extension of the EnhancedView SLA beyond the current contract period. Accordingly, all penalty amounts will cause the Company to defer recognition of a corresponding revenue amount until the performance penalty funds are consumed as described above. During the three and nine months ended September 30, 2014 and 2013, there were no performance penalties.
During the first quarter of 2014, DigitalGlobe and NGA agreed to certain modifications of the EnhancedView Contract that included, among other changes, flexibility in the timing of the imaging capacity step-up to accommodate a potential delay of no greater than four months in the launch of WorldView-3. Step-up in the monthly cash payments from NGA remains unchanged, and increased from $20.8 million per month to $25.0 million per month beginning on September 1, 2014. The modifications did not result in a change to the SLA accounting methodology.
The Company recognizes revenue for the EnhancedView SLA using a proportional performance method. Under this method, revenue is recognized based on the estimated amount of imaging capacity made available to NGA in any given period compared to the total estimated imaging capacity to be provided over the life of the contract. The Company will begin to recognize a material increase in revenue once WorldView-3 reaches full operational capability (“FOC”) as a result of the significant increase in satellite capacity across the constellation that will be made available to NGA at that time. As further discussed in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements, on October 1, 2014, DigitalGlobe increased constellation capacity made available to NGA and will begin recognizing revenue at the increased annualized rate.
U.S. Government Value Added Services
U.S. Government value added services include arrangements whereby the Company meets NGA’s more advanced imagery requirements using its production and dissemination capabilities. Value added services contracts generally include production and hosting of imagery for specified periods of time.
NextView
In connection with the Company’s NextView agreement with NGA (which was entered into September 2003 and was the predecessor to the current EnhancedView Contract), the Company received $266.0 million from NGA to offset the construction costs of WorldView-1, which was recorded as deferred revenue when received. When WorldView-1 reached FOC in November 2007, the Company began recognizing the deferred revenue on a straight-line basis over the estimated useful life of WorldView-1. If the life of WorldView-1 were to be modified, the amortization of deferred revenue would be modified accordingly. Based on the current estimated useful life of WorldView-1, the Company recognized $6.3 million of revenue related to the pre-FOC payments for each of the three month periods ended September 30, 2014 and 2013 and $19.1 million for each of the nine months periods ended September 30, 2014 and 2013. The Company is in the process of reviewing the useful lives of its satellites, which it expects to complete in the fourth quarter. As of September 30, 2014, the remaining balance of deferred revenue associated with the pre-FOC payments is $92.6 million.
Direct Access Program
Under the DAP, up-front fees are paid by the customer for the initial facility construction and delivery. The up-front payments are recognized ratably over the estimated customer relationship period, for which the estimated life of the
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
longest-lived satellite accessed by the customer is used. Customers may also pre-pay for their access minutes resulting in deferred revenue until the minutes are consumed.
Other Agreements
The Company enters into various commercial relationships that sometimes include obligations that are paid for in advance and recognized over a contractual period of performance. These obligations are typically related to the hosting of imagery or the obligation to refresh previously delivered imagery.
NOTE 4.Business Acquisitions
On January 31, 2013, DigitalGlobe completed its acquisition of 100% of the outstanding stock of GeoEye. DigitalGlobe is considered the acquirer and has accounted for the transaction under the acquisition method in accordance with U.S. GAAP.
GeoEye common stockholders received, in the aggregate, approximately 25.9 million shares of DigitalGlobe’s common stock and $92.8 million in cash in exchange for their shares of GeoEye common stock. In addition, each share of GeoEye’s Series A Convertible Preferred Stock was converted into one newly-designated share of Series A Preferred Stock of DigitalGlobe and $4.10 in cash for each share of GeoEye common stock into which such share of GeoEye Series A Convertible Preferred Stock was convertible. As a result, DigitalGlobe issued 80,000 shares of Series A Preferred Stock and paid approximately $11.0 million in cash to GeoEye’s Series A Convertible Preferred stockholder. The Company also assumed the awards outstanding under GeoEye’s equity incentive plans. The Company incurred total acquisition costs of $33.5 million related to the acquisition of GeoEye, of which $20.6 million was incurred in 2013. Immediately following the acquisition, the former GeoEye stockholders owned approximately 35% of DigitalGlobe’s common stock.
In accordance with the terms of the GeoEye Senior Secured Notes agreements, during the three months ended March 31, 2013, the Company redeemed the outstanding balances of GeoEye’s $400.0 million 9.625% Senior Secured Notes due in 2015 and $125.0 million 8.625% Senior Secured Notes due in 2016 and paid fees and expenses associated with the redemption totaling approximately $55.3 million and accrued interest of $16.4 million.
The total purchase price for the acquisition of GeoEye was as follows:
|
|
|
|
(in millions)
|
|
Amount
|
Net cash received
|
|
$
|
(76.2)
|
DigitalGlobe common stock
|
|
|
723.8
|
DigitalGlobe Series A Preferred Stock
|
|
|
114.0
|
DigitalGlobe equity awards issued to replace GeoEye equity awards
|
|
|
22.4
|
Long-term debt issued to redeem GeoEye’s long-term debt, including early termination penalties and accrued interest
|
|
|
596.7
|
Aggregate purchase price
|
|
$
|
1,380.7
|
The Company’s closing share price on January 31, 2013 was $27.97, whereby pursuant to the acquisition method of accounting, it is considered the fair value of each DigitalGlobe common share issued in connection with the acquisition of GeoEye.
The Company has recognized the assets and liabilities of GeoEye based on its estimate of their acquisition date fair values. The fair value of GeoEye’s property and equipment was estimated using a market approach. A market approach uses prices and other relevant information generated by market transactions involving comparable assets. The fair value of GeoEye’s satellites was estimated using a replacement cost approach and was based on the amount that would be required to replace the service capacity of the assets. Under the replacement cost approach, the Company estimated the cost of a similar satellite having the nearest equivalent utility to the satellite being valued. The Company then adjusted this value, as necessary, for physical depreciation, functional obsolescence or economic
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
obsolescence. As of the acquisition date, identifiable intangible assets, excluding technology, were measured at fair value primarily using various income approaches, which required a forecast of expected future cash flows, either for the use of a relief-from royalty method or a multi-period excess earnings method. Technology was valued using a cost approach. The excess of purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill. None of the goodwill associated with this acquisition is deductible for tax purposes.
The following represents DigitalGlobe’s final allocation of the total purchase price to the acquired assets and liabilities assumed from GeoEye at the completion of the one year measurement period:
|
|
|
|
(in millions)
|
|
Amount
|
Current assets, net of cash acquired
|
|
$
|
89.0
|
Property, plant and equipment, including satellite constellation
|
|
|
975.4
|
Identifiable intangible assets:
|
|
|
|
Technology
|
|
|
26.0
|
Customer relationships
|
|
|
14.0
|
Trademarks
|
|
|
5.0
|
FCC licenses and other
|
|
|
2.5
|
Other noncurrent assets
|
|
|
4.6
|
Current liabilities
|
|
|
(51.1)
|
Deferred revenue
|
|
|
(12.1)
|
Long-term deferred tax liability, net
|
|
|
(119.2)
|
Fair value of acquired assets and assumed liabilities
|
|
|
934.1
|
Goodwill
|
|
|
446.6
|
Aggregate purchase price
|
|
$
|
1,380.7
|
Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of DigitalGlobe and GeoEye for the period presented, as though the acquisition of GeoEye had occurred on January 1, 2013.
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
(in millions, except per share data)
|
|
September 30, 2013
|
Operating revenue
|
|
$
|
452.8
|
Net loss
|
|
|
(78.7)
|
Net loss available to common stockholders
|
|
|
(81.7)
|
Basic loss per common share
|
|
$
|
(1.11)
|
Diluted loss per common share
|
|
$
|
(1.11)
|
This pro forma information reflects certain adjustments to DigitalGlobe’s previously reported operating results, primarily:
|
·
| |
elimination of non-recurring transaction costs; |
|
·
| |
increased amortization of stock-based compensation; |
|
·
| |
increased amortization expense related to identifiable intangible assets recorded as part of the acquisition; |
|
·
| |
changes to depreciation expense as a result of the fair value adjustment to property and equipment; |
|
·
| |
decreased interest expense due to lower interest rates on long-term debt; and |
|
·
| |
related income tax effects. |
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The pro forma information does not reflect the actual results of operations had the acquisition been consummated at January 1, 2013, nor is it necessarily indicative of present or future operating results. The pro forma information does not give effect to any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition (other than those realized subsequent to the January 31, 2013 acquisition date).
Other Acquisitions
In February 2014, the Company acquired Spatial Energy, LLC. Spatial Energy complements the Company’s capabilities, primarily for the oil and gas industry vertical. The cash paid for this acquisition totaled approximately $35.7 million, net of cash acquired. The Company recorded goodwill of $25.6 million from this acquisition, of which $19.0 million is deductible for tax purposes. The determination of fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. The Company expects to complete its final determinations no later than the first quarter of 2015. The final determinations may be significantly different than those reflected in its Unaudited Condensed Consolidated Financial Statements as of September 30, 2014.
In February 2013, the Company acquired Tomnod, Inc. for $4.0 million, consisting of $3.5 million of cash and $0.5 million of accrued liabilities. The Company recorded goodwill from this acquisition of $3.3 million. The goodwill associated with this acquisition is not deductible for tax purposes.
Pro forma results for the Company’s other acquisitions have not been presented as such results would not be materially different from the Company’s actual results.
NOTE 5.Property and Equipment
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciable Life
|
|
|
|
|
|
|
(in millions)
|
|
(in years)
|
|
September 30, 2014
|
|
December 31, 2013
|
Satellites
|
|
9
|
–
|
12
|
|
$
|
1,323.6
|
|
$
|
1,323.6
|
Construction in progress
|
|
|
–
|
|
|
|
1,430.5
|
|
|
1,283.9
|
Computer equipment and software
|
|
|
3
|
|
|
|
347.5
|
|
|
307.7
|
Machinery and equipment, including ground terminals
|
|
|
5
|
|
|
|
106.3
|
|
|
98.6
|
Furniture, fixtures and other
|
|
3
|
–
|
7
|
|
|
39.3
|
|
|
37.9
|
Land and buildings
|
|
|
34
|
|
|
|
6.6
|
|
|
6.4
|
Total property and equipment
|
|
|
|
|
|
|
3,253.8
|
|
|
3,058.1
|
Accumulated depreciation and amortization
|
|
|
|
|
|
|
(1,044.2)
|
|
|
(880.6)
|
Property and equipment, net
|
|
|
|
|
|
$
|
2,209.6
|
|
$
|
2,177.5
|
Depreciation expense for property and equipment was $55.0 million and $57.1 million for the three months ended September 30, 2014, and 2013, respectively, and $164.9 million and $159.6 million for the nine months ended September 30, 2014 and 2013, respectively.
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
As of September 30, 2014, the Company operates a constellation of five in-orbit and fully commissioned satellites. The net book value of each satellite is as follows:
|
|
|
|
|
|
|
|
|
|
|
Depreciable Life
|
|
|
|
|
|
|
(in millions)
|
|
(in years)
|
|
September 30, 2014
|
|
December 31, 2013
|
Quickbird
|
|
12.2
|
|
$
|
—
|
|
$
|
0.6
|
WorldView-1
|
|
10.5
|
|
|
163.2
|
|
|
197.0
|
WorldView-2
|
|
11
|
|
|
263.2
|
|
|
294.7
|
IKONOS
|
|
9
|
(1)
|
|
—
|
|
|
—
|
GeoEye-1
|
|
9
|
(1)
|
|
141.2
|
|
|
173.0
|
Satellites, net
|
|
|
|
$
|
567.6
|
|
$
|
665.3
|
|
(1)
| |
Remaining depreciable life determined as of January 31, 2013, the acquisition date of GeoEye, was 0.5 years for IKONOS and 5 years for GeoEye-1. |
Construction in progress includes the WorldView-3 and WorldView-4 satellites, ground station construction, infrastructure projects, certain internally developed software costs and capitalized interest. The Company completed construction and launched its WorldView-3 satellite on August 13, 2014. As of September 30, 2014, WorldView-3 had not yet reached FOC, and thus remains classified as construction in progress as of that date. As described in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements, the Company has completed the needed calibrations on WorldView-3 to enable it to provide visible spectrum imagery to its customers. Accordingly, the satellite will be classified as depreciable property and equipment beginning on October 1, 2014.
The Company is currently completing enhancements to its WorldView-4 satellite and anticipates that those will be completed in the fourth quarter of 2014, at which time the satellite will be placed into storage. Costs, including interest, associated with enhancements to satellite capability, will be capitalized. Capitalization of all costs associated with this satellite will cease during the period in which it is in storage and during which no additional enhancements are made. Storage costs and all other incremental costs that result from placing the satellite into storage will be expensed as incurred. The Company intends to launch and place into service its WorldView-4 satellite in the second half of 2016 for additional capacity as a result of anticipated incremental growth opportunities.
When the Company places the WorldView-4 satellite into service, all costs associated with removing it from storage and other incremental costs that result from the storage process will be expensed as incurred. However, costs incurred to launch the satellite and perform in-orbit testing prior to the satellite reaching its FOC will be capitalized as these costs are necessary to place the satellite into service. After the satellite has been successfully placed into service, it will be removed from construction-in-process and recorded as depreciable property and equipment.
The capitalized costs of the Company’s satellites and related ground systems include internal and external direct labor costs, internally developed software and direct material costs which support the construction and development of the satellites and related ground systems. The cost of DigitalGlobe’s satellites also includes capitalized interest incurred during the construction, development and initial in-orbit testing period. The portion of the launch insurance premium allocable to the period from launch through in-orbit calibration and commissioning has been capitalized as part of the cost of the satellites and is amortized over the useful life of the satellites.
The expected depreciable life of a satellite is determined in the reporting period that the satellite has reached FOC. A satellite’s expected depreciable life is determined by considering certain factors including: (i) the orbit in which the satellite is placed; (ii) the supply of fuel; (iii) environmental stress; (iv) the anticipated environmental degradation of solar panels and other components; (v) the anticipated levels of solar radiation; (vi) the probability of design failure of the satellite’s components from design or manufacturing defect; and (vii) the quality of the satellite’s construction. The Company depreciates the cost of a satellite, after the satellite has been successfully placed into
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
service, over its expected useful life using the straight-line method of depreciation as the Company anticipates that the satellite will provide consistent levels of imagery over its useful life. The Company is in the process of reviewing the useful lives of its in-orbit and fully commissioned satellites, which it expects to complete in the fourth quarter. Additionally, the Company is evaluating the estimated useful life of its WorldView-3 satellite, which will be determined in the fourth quarter, as discussed in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements.
If a satellite were to fail to launch or fail while in orbit, the resulting loss would be charged to expense in the period in which such loss was to occur. The amount of any such loss would be reduced to the extent of insurance proceeds received as a result of the launch or in-orbit failure.
NOTE 6.Goodwill and Other Intangibles
The following table summarizes the change in goodwill during the nine month period ended September 30, 2014:
|
|
|
|
(in millions)
|
|
Amount
|
Balance, December 31, 2013
|
|
$
|
459.3
|
Purchase accounting adjustment
|
|
|
(0.7)
|
Acquisition
|
|
|
25.6
|
Balance, September 30, 2014
|
|
$
|
484.2
|
The following table summarizes the Company’s acquired intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
September 30, 2014
|
|
December 31, 2013
|
|
|
Life
|
|
Gross
|
|
|
|
|
Net
|
|
Gross
|
|
|
|
|
Net
|
|
|
(in
|
|
Carrying
|
|
Accumulated
|
|
Carrying
|
|
Carrying
|
|
Accumulated
|
|
Carrying
|
(in millions)
|
|
years)
|
|
Amount
|
|
Amortization
|
|
Amount
|
|
Amount
|
|
Amortization
|
|
Amount
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
3
|
–
|
5
|
|
$
|
27.2
|
|
$
|
(9.2)
|
|
$
|
18.0
|
|
$
|
26.9
|
|
$
|
(5.0)
|
|
$
|
21.9
|
Customer relationships
|
|
10
|
–
|
12
|
|
|
27.0
|
|
|
(2.8)
|
|
|
24.2
|
|
|
14.0
|
|
|
(1.1)
|
|
|
12.9
|
Trademarks
|
|
|
3
|
|
|
|
5.6
|
|
|
(2.9)
|
|
|
2.7
|
|
|
5.0
|
|
|
(1.5)
|
|
|
3.5
|
FCC licenses and other
|
|
2
|
–
|
20
|
|
|
2.7
|
|
|
(1.8)
|
|
|
0.9
|
|
|
2.7
|
|
|
(1.1)
|
|
|
1.6
|
Total
|
|
|
|
|
|
$
|
62.5
|
|
$
|
(16.7)
|
|
$
|
45.8
|
|
$
|
48.6
|
|
$
|
(8.7)
|
|
$
|
39.9
|
The gross carrying amounts of intangible assets are removed when the recorded amounts have been fully amortized. During the nine month period ended September 30, 2014, the Company added approximately $13.9 million of intangible assets that were related to the acquisition of Spatial Energy.
The Company is in the process of finalizing the valuation of goodwill and intangible assets acquired in the first quarter of 2014. Such valuations will be completed within one year of purchase. Accordingly, these amounts represent preliminary estimates, which are subject to change upon finalization of purchase accounting, and any such change may have a material effect on the Company’s results of operations.
Total intangible amortization expense was $2.7 million and $2.3 million during the three month periods ended September 30, 2014 and 2013, respectively, and $8.0 million and $6.1 million during the nine month periods ended
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2014 and 2013, respectively. The estimated future annual amortization expense for acquired intangible assets is as follows:
|
|
|
|
(in millions)
|
|
|
Fiscal Years Ending, December 31,
|
|
Amount
|
2014(1)
|
|
$
|
2.8
|
2015
|
|
|
10.1
|
2016
|
|
|
8.2
|
2017
|
|
|
7.7
|
2018
|
|
|
2.9
|
Thereafter
|
|
|
14.1
|
Total amortization expense
|
|
$
|
45.8
|
|
(1)
| |
Represents estimated amortization for the three month period ended December 31, 2014. |
The Company performs its annual test for impairment of goodwill, finite-lived intangible assets, and long-lived tangible assets as of October 1 or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no indicators of impairment of such assets during the nine months ended September 30, 2014 or 2013.
NOTE 7.Other Accrued Liabilities
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
(in millions)
|
|
2014
|
|
2013
|
Compensation and other employee benefits
|
|
$
|
20.4
|
|
$
|
23.0
|
Construction in progress accruals
|
|
|
10.5
|
|
|
19.0
|
Accrued interest payable
|
|
|
5.3
|
|
|
13.2
|
Accrued restructuring costs
|
|
|
—
|
|
|
2.4
|
Accrued taxes
|
|
|
2.8
|
|
|
2.6
|
Other accrued expense
|
|
|
21.5
|
|
|
20.1
|
Total other accrued liabilities
|
|
$
|
60.5
|
|
$
|
80.3
|
Compensation and other employee benefits include payroll, accrued bonus expense and vacation accrual. Construction in progress accruals include amounts for milestone payments due on the procurement and construction of the WorldView-3 and WorldView-4 satellites. Other accruals consist of third party commission expense, professional fees, remote ground terminal maintenance, deferred contract costs and the current portion of deferred lease incentives.
NOTE 8.Debt
2013 Credit Facility
In connection with the acquisition of GeoEye on January 31, 2013, the Company entered into a seven-year $550.0 million Senior Secured Term Loan Facility and a five-year $150.0 million Senior Secured Revolving Credit Facility (collectively, the “2013 Credit Facility”). The 2013 Credit Facility requires quarterly principal payments of $1.375 million starting June 30, 2013 with the remaining balance due February 1, 2020. Borrowings under the 2013 Credit Facility bear interest at an adjusted LIBOR rate, plus a 2.75% margin subject to a 1.0% LIBOR floor. The LIBOR margin becomes 2.5% when the ratio of total debt to Adjusted EBITDA is 2.5:1.0 or lower. The Company is also required to pay a commitment fee between 37.5 to 50.0 basis points, payable quarterly, on the average daily unused amount of the revolving credit facility based on the Company’s leverage ratio. After February 1, 2014, there is no pre-payment penalty for early repayment of the 2013 Credit Facility. At the closing of the 2013 Credit Facility, the
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Company borrowed the full amount of the Senior Secured Term Loan Facility. As of September 30, 2014, the Company had not drawn any amounts under the Senior Secured Revolving Credit Facility.
The Company’s obligations under the 2013 Credit Facility are guaranteed by certain of its existing and future direct and indirect wholly-owned domestic subsidiaries. The Company’s obligations and the obligations of the guarantor subsidiaries under the 2013 Credit Facility are collateralized by substantially all of the Company’s assets and the assets of the guarantor subsidiaries.
The 2013 Credit Facility contains affirmative and negative covenants that the Company believes are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with its affiliates. The 2013 Credit Facility also requires that the Company comply with a maximum leverage ratio and minimum interest coverage ratio. The Company was in compliance with its debt covenants as of September 30, 2014.
Senior Notes
Also in connection with the acquisition of GeoEye on January 31, 2013, the Company issued $600.0 million of Senior Notes (“Senior Notes”), which bear interest at 5.25% per year. Interest on the Senior Notes is payable on February 1 and August 1 of each year, beginning on August 1, 2013. The Senior Notes were issued at par and mature on February 1, 2021. The Company may redeem some or all of the Senior Notes at any time and from time to time on or after February 1, 2017, at the redemption prices set forth in the indenture governing the Senior Notes. The initial redemption price for the Senior Notes is 102.625% of their principal amount plus accrued and unpaid interest to the date of redemption. The Company may redeem some or all of the Senior Notes at any time prior to February 1, 2017, at a redemption price equal to 100% of their principal amount, plus a “make whole” premium, together with accrued and unpaid interest to the date of redemption. In addition, on or prior to February 1, 2016, the Company may redeem up to 35% of the principal amount of the Senior Notes using the net cash proceeds from sales of certain types of capital stock at a redemption price equal to 105.250% of the principal amount of the Senior Notes, plus accrued and unpaid interest to the date of redemption, subject to certain other provisions as set forth in the indenture governing the Senior Notes. If a change of control occurs, the Company must give holders of the Senior Notes an opportunity to sell the Company their Senior Notes at a purchase price of 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest to the date of purchase.
The Senior Notes are senior unsecured obligations, ranking equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness and are senior to its existing and future subordinated indebtedness. The Senior Notes are unconditionally guaranteed, jointly and severally, by all of the Company’s existing and certain of its future direct and indirect wholly-owned domestic subsidiaries. Each guarantor’s guarantee ranks pari passu in right of payment with all future senior indebtedness of the guarantor.
The Senior Notes have not been registered under the Securities Act of 1933, as amended (“Securities Act”). The Company agreed to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement, pursuant to a registration rights agreement if the Senior Notes were not freely transferable on February 1, 2014 under Rule 144 of the Securities Act, by persons that are not “affiliates” (as defined under Rule 144) of the Company. As of February 1, 2014, the Senior Notes are freely transferable and are eligible for resale pursuant to Rule 144 under the Securities Act.
The Company paid $41.6 million of underwriting and other fees and expenses in connection with the 2013 Credit Facility and the Senior Notes, of which $5.0 million was included in “Loss from early extinguishment of debt” for the nine months ended September 30, 2013 because a portion of the refinancing was accounted for as a modification and $36.6 million was capitalized as debt issuance costs and included in other assets.
The net proceeds of the 2013 Credit Facility and Senior Notes were used, along with cash on hand, to refinance the Company’s $500.0 million senior secured term loan and $100.0 million senior secured revolving credit facility, to fund the discharge and redemption of GeoEye’s $400.0 million 9.625% Senior Secured Notes due in 2015 and $125.0 million 8.625% Senior Secured Notes due in 2016 assumed in connection with the acquisition of GeoEye, to
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
pay the cash consideration under the merger agreement with GeoEye and to pay fees and expenses related to the foregoing transactions.
The following table represents the Company’s future debt payments as of September 30, 2014:
|
|
|
|
|
|
Long-term debt
|
|
|
(excluding interest
|
(in millions)
|
|
payments)
|
2014(1)
|
|
$
|
1.4
|
2015
|
|
|
5.5
|
2016
|
|
|
5.5
|
2017
|
|
|
5.5
|
2018
|
|
|
5.5
|
Thereafter
|
|
|
1,118.4
|
Total
|
|
$
|
1,141.8
|
|
(1)
| |
Represents long-term debt principal payment for the three month period ending December 31, 2014. |
Letters of Credit
At each of September 30, 2014 and December 31, 2013, DigitalGlobe had $1.2 million in letters of credit under the lease agreement for its headquarters in Longmont, Colorado. Additionally, at September 30, 2014 and December 31, 2013, the Company had $1.1 million in letters of credit under the lease agreement for its office location in Herndon, Virginia. At September 30, 2014 and December 31, 2013, the Company had $5.2 million and $9.1 million, respectively, in letters of credit and performance guarantees used in the ordinary course of business primarily to support its obligations to customers under certain of the DAP contracts. These letters of credit are secured by restricted cash. The letters of credit and related restricted cash amounts are released when the respective contractual obligations have been fulfilled by the Company.
Interest Expense, net
The following table summarizes the Company’s interest expense, accretion of debt discount, amortization of the deferred financing fees, line of credit fees, interest capitalized and interest income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
September 30,
|
|
September 30,
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Interest
|
|
$
|
13.2
|
|
$
|
13.4
|
|
$
|
39.4
|
|
$
|
37.7
|
Accretion of debt discount, deferred financing amortization and line of credit fees
|
|
|
1.8
|
|
|
1.8
|
|
|
5.4
|
|
|
5.1
|
Capitalized interest
|
|
|
(14.9)
|
|
|
(14.4)
|
|
|
(44.6)
|
|
|
(39.0)
|
Interest expense
|
|
$
|
0.1
|
|
$
|
0.8
|
|
$
|
0.2
|
|
$
|
3.8
|
Interest income
|
|
|
(0.1)
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
(0.3)
|
Interest expense, net
|
|
$
|
—
|
|
$
|
0.7
|
|
$
|
—
|
|
$
|
3.5
|
NOTE 9.Fair Values of Financial Instruments
The fair value guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of inputs are defined as follows:
|
·
| |
Level 1 — quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
|
·
| |
Level 2 — quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|
·
| |
Level 3 — unobservable inputs when little or no market data is available. |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following table provides information about the assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 and indicates the valuation technique utilized by the Company to determine the fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
Other
|
|
Significant
|
|
|
|
|
|
in Active
|
|
Observable
|
|
Unobservable
|
|
|
Total Carrying
|
|
Markets
|
|
Inputs
|
|
Inputs
|
(in millions)
|
|
Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Cash equivalents at September 30, 2014
|
|
$
|
83.5
|
|
$
|
83.5
|
|
$
|
—
|
|
$
|
—
|
Cash equivalents at December 31, 2013
|
|
|
79.1
|
|
|
79.1
|
|
|
—
|
|
|
—
|
The Company’s cash equivalents consist of investments acquired with maturity dates of less than 90 days, are quoted from market rates and are classified within Level 1 of the valuation hierarchy. At September 30, 2014 and December 31, 2013, the Company’s cash equivalents consisted of funds held in U.S. Treasury money markets. The Company does not have any Level 2 or Level 3 financial instruments as of September 30, 2014 and December 31, 2013.
The carrying value of our long-term debt was $1,138.9 million and $1,142.6 million at September 30, 2014 and December 31, 2013, respectively. The estimated fair value of our long-term debt based upon trading activity among lenders was $1,106.8 and $1,132.9 at September 30, 2014 and December 31, 2013, respectively, and are classified within Level 2 of the valuation hierarchy.
NOTE 10.Stockholders’ Equity
Stock-Based Compensation Program
The Company has equity incentive plans that provide for grants to employees of stock options, restricted stock and unrestricted shares. The date of grant of the awards is used as the measurement date. The awards are valued as of the measurement date and are amortized on a straight-line basis over the requisite vesting period.
The Company recognized total stock-based compensation expense of $5.5 and $4.0 during the three month periods ended September 30, 2014 and 2013, respectively, and $14.0 and $20.5 during the nine month periods ended September 30, 2014 and 2013, respectively. Stock-based compensation capitalized to assets under construction was $0.2 million and $0.1 million during the three month periods ended September 30, 2014 and 2013, and $0.7 million and $0.6 million during the nine month periods ended September 30, 2014 and 2013, respectively.
During the nine month period ended September 30, 2014, the Company awarded 0.7 million unvested restricted stock units at an average grant date price of $38.14 per share. Of this amount, 0.1 million stock units represents the target amount of grants made to certain key employees whereby vesting is contingent on meeting both a service requirement and either a Company financial performance condition or a Company stock market performance condition. The number of units granted with the financial performance condition that ultimately will vest is based on a return on invested capital measurement over the three year vesting period of the awards. The awards granted
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
with a financial performance condition have a grant date fair value of $37.37 per share. The number of units granted with the stock market performance condition that ultimately will vest is based on a measurement of the change in the Company’s average stock price compared to the change in value of the Russell 2000 stock index as determined over the three year vesting period of the awards. The awards granted with the stock market performance condition were valued at a grant date fair value of $54.10 per share using a Monte Carlo simulation. For both types of awards with performance conditions, the number of shares that ultimately vest could range from 50% to 200% of the target amount, or zero percent if the minimum threshold is not achieved.
As of September 30, 2014, total unrecognized compensation expense related to share options is $2.2 million, net of estimated forfeitures, and will be recognized over a weighted-average remaining vesting period of 1.2 years. As of September 30, 2014, the number of options outstanding was 2.1 million at a weighted-average exercise price of $20.42 and the number of options exercisable was 1.6 million at a weighted-average exercise price of $21.90 per share.
As of September 30, 2014, total unrecognized compensation expense related to unvested restricted stock awards and restricted stock units is $29.0 million, net of estimated forfeitures, and will be recognized over a weighted-average remaining vesting period of 2.4 years. Approximately $4.8 million of the total unrecognized compensation cost, net of estimated forfeitures, is related to awards whereby vesting is contingent on meeting certain financial performance and stock market performance conditions.
Certain equity incentive plan participants elect to have the Company withhold shares to pay for minimum taxes due at the time their restricted stock vests. The quantity and value of the shares withheld during the three and nine month periods ended September 30, 2014 and 2013 were immaterial and have been included in treasury shares.
Series A Convertible Preferred Stock
In January 2013, upon the closing of the acquisition of GeoEye, the Company issued 80,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) with a par value of $0.001 per share to Cerberus Satellite, LLC. In March 2014, Cerberus Satellite, LLC transferred the 80,000 shares of Series A Preferred Stock to Citigroup Global Markets, Inc. Cumulative dividends on the Series A Preferred Stock are payable at a rate of five percent per annum on the $1,000 liquidation preference per share. At the Company’s option, dividends may be declared and paid in cash out of funds legally available when declared by the Board of Directors or the Audit Committee of the Company. If not paid in cash, an amount equal to the cash dividends due is added to the liquidation preference. Dividends payable in cash are recorded in current liabilities. All dividends payable, whether in cash or as an addition to the liquidation preference, are recorded as a reduction to the Company’s equity. The Company declared dividends on the Series A Preferred Stock of $1.0 million during each of the three months ended September 30, 2014 and September 30, 2013, which were included in current liabilities for the periods then ended. The Company declared dividends on the Series A Preferred Stock of $3.0 million during each of the nine month periods ended September 30, 2014 and September 30, 2013. For the nine months ended September 30, 2013, $0.4 million of the dividend was recorded by GeoEye as a pre-acquisition obligation. The Series A Preferred Stock is convertible at the option of the holders, at a conversion price of $26.17 per common share, which would convert to 3.1 million shares of common stock of the Company. If at any time after September 22, 2016 the weighted average price of the Company’s common stock exceeds $45.80 per share, in effect for 30 consecutive trading days, the Company has the option to redeem all of the Series A Preferred Stock at an amount equal to the liquidation preference plus accrued dividends as of the redemption date. The Series A Preferred Stock is classified as equity on the Company’s unaudited condensed consolidated balance sheet.
Share Repurchase Program
On July, 23, 2014, the Company’s Board of Directors authorized a program to repurchase up to $75.0 million of the Company’s outstanding common stock through December 31, 2015. The Company may repurchase shares through open market purchases, privately negotiated transactions, structured or derivative transactions such as puts, calls, options, forwards, collars, accelerated share repurchase transactions (with or without collars), other equity contracts or other methods of acquiring shares, in each case on such terms and at such times as shall be permitted by
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
applicable securities laws and determined by management. The stock repurchase program does not obligate the Company to acquire any stock, and it may be limited or terminated at any time without notice.
During the three and nine months ended September 30, 2014, the Company repurchased 495,870 shares, or $15.0 million, of its common stock in the open market at an average purchase price of $30.27 per share. These shares are held in treasury stock at September 30, 2014. The Company made no open market repurchases of its common stock during the three and nine months ended September 30, 2013.
Comprehensive Income
For the three and nine months ended September 30, 2014 and 2013, there were no material differences between net income (loss) and comprehensive income (loss).
NOTE 11.Net Earnings (Loss) Per Share
Basic net earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period excluding issued, but unvested, restricted shares. Diluted EPS is computed by giving effect to all dilutive potential common stock outstanding during the period, including stock options and restricted stock awards. The Company includes as potential common shares the weighted average dilutive effects of outstanding stock options and restricted shares using the treasury stock method. Securities that contain non-forfeitable rights to dividend equivalents (whether paid or unpaid) are participating securities and are required to be included in the computation of basic EPS and dilutive EPS pursuant to the two-class method. Net losses are not allocated to the Company’s participating securities. The shares of the Company’s Series A Preferred Stock are participating securities.
The following table sets forth the number of weighted average shares used to compute basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
(in millions, except per share data)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.9
|
|
$
|
(1.8)
|
|
$
|
6.3
|
|
$
|
(83.4)
|
Preferred stock dividends
|
|
|
(1.0)
|
|
|
(1.0)
|
|
|
(3.0)
|
|
|
(2.6)
|
Net (loss) income less preferred stock dividends
|
|
|
(0.1)
|
|
|
(2.8)
|
|
|
3.3
|
|
|
(86.0)
|
Income allocated to participating securities
|
|
|
—
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
Net (loss) income available to common stockholders
|
|
$
|
(0.1)
|
|
$
|
(2.8)
|
|
$
|
3.2
|
|
$
|
(86.0)
|
Basic weighted average number of common shares outstanding
|
|
|
75.1
|
|
|
74.5
|
|
|
75.1
|
|
|
70.8
|
Assuming exercise of stock options and restricted shares
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
Diluted weighted average number of common shares outstanding
|
|
|
75.1
|
|
|
74.5
|
|
|
76.1
|
|
|
70.8
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.00
|
|
$
|
(0.04)
|
|
$
|
0.04
|
|
$
|
(1.21)
|
Diluted
|
|
$
|
0.00
|
|
$
|
(0.04)
|
|
$
|
0.04
|
|
$
|
(1.21)
|
The potential common shares from the conversion of Series A Preferred Stock that were excluded from the computation of diluted EPS, due to their anti-dilutive impact on weighted common share equivalents were 3.1 million for the three and nine month periods ended September 30, 2014 and 2013. The number of options and non-vested restricted stock awards that were assumed to be repurchased under the treasury stock method were 2.7 million and 3.1 million for the three and nine month periods ended September 30, 2014, respectively. The number of options and non-vested restricted stock awards that were excluded from the computation of diluted EPS because the effects thereof were antidilutive were 4.1 million and 4.7 million for the three and nine month periods ended September 30, 2013, respectively.
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 12.Income Taxes
In connection with the preparation of the Company’s Unaudited Condensed Consolidated Financial Statements for the quarter ended March 31, 2014, the Company determined that it had incorrectly classified a $37.2 million deferred tax asset as a current asset that should have been classified as a noncurrent asset at December 31, 2013. The Company concluded that the impact of the error was not material to the previously issued financial statements. However, the Company has elected to revise its previously issued December 31, 2013 Consolidated Balance Sheet to facilitate comparison among periods. The deferred tax current asset and long-term deferred tax liability, net balances were $43.1 million and $117.2 million as originally reported, respectively, and were revised to $5.9 million and $80.0 million, respectively, as of December 31, 2013.
For interim income tax reporting the Company estimates its annual effective tax rate and applies this effective tax rate to its year to date pre-tax income (loss). For the three and nine month periods ended September 30, 2014, the Company recognized a tax benefit on pre-tax income as a result of the impact of discrete period items.
NOTE 13.Restructuring Charges
During the first quarter of 2013, following the acquisition of GeoEye, the Company initiated a series of restructuring activities intended to align its infrastructure with demand by its customers so as to optimize its operational efficiency. The Company believes that the restructuring enhanced its ability to provide cost-effective customer service offerings, which it anticipates will enable it to retain and expand its existing relationships with customers and attract new business. These restructuring activities primarily consisted of reducing redundant workforce, consolidating office and production facilities, consolidating certain ground terminals and systems and other exit costs.
The components of the restructuring liability were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Severance
|
|
Facilities
|
|
Other costs
|
|
Total
|
Balance, December 31, 2013
|
|
$
|
2.3
|
|
$
|
—
|
|
$
|
0.1
|
|
$
|
2.4
|
Provision for restructuring charges (1)
|
|
|
0.3
|
|
|
0.7
|
|
|
—
|
|
|
1.0
|
Cash payments
|
|
|
(2.2)
|
|
|
(0.7)
|
|
|
—
|
|
|
(2.9)
|
Balance, March 31, 2014
|
|
|
0.4
|
|
|
—
|
|
|
0.1
|
|
|
0.5
|
Cash payments
|
|
|
(0.4)
|
|
|
—
|
|
|
(0.1)
|
|
|
(0.5)
|
Balance, June 30, 2014
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Cash payments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Balance, September 30, 2014
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
(1)
| |
Restructuring charges for the three months ended March 31, 2014 exclude $0.1 million of share-based compensation associated with the accelerated vesting of stock awards as such charges are not components of the restructuring liability. |
NOTE 14.Non-Controlling Interest
In connection with the acquisition of Spatial Energy completed in February 2014, the Company obtained a majority interest in a subsidiary, and control of the subsidiary’s board of directors. A third party investor owns approximately 25% of the outstanding shares of the subsidiary. Accordingly, the Unaudited Condensed Consolidated Financial Statements include the financial position of this subsidiary as of September 30, 2014 and the results of operations of this subsidiary since the date of acquisition. The Company has recognized the carrying value of the non-controlling interest as a component of stockholders’ equity. The operating results of the subsidiary attributable to the non-controlling interest are immaterial for all of the periods presented and are included in Other income, net.
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 15.Related Party Transactions
Investment in Joint Venture
In June 2012, the Company made an investment of approximately $0.3 million for a less than 20% ownership interest in a joint venture in China. During the nine months ended September 30, 2014 and 2013, the joint venture purchased $5.0 million and $7.6 million in products and services from the Company, respectively. Amounts owed to the Company by the joint venture at September 30, 2014 and December 31, 2013, were $1.6 million and $6.7 million, respectively.
NOTE 16.Commitments and Contingencies
The Company enters into agreements in the ordinary course of business with customers, vendors and others. Most of these agreements require the Company to indemnify the other party against third-party claims alleging that one of its products infringes or misappropriates a patent, copyright, trademark, trade secret or other intellectual property right. Certain of these agreements require the Company to indemnify the other party against claims relating to property damage, personal injury or acts or omissions by the Company, its employees, agents or representatives. In addition, from time to time the Company has made guarantees regarding the performance of its systems to its customers. The majority of these agreements do not limit the maximum potential future payments the Company could be obligated to make. The Company evaluates and estimates potential losses from such indemnification based on the likelihood that the future event will occur. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such indemnification and guarantees in the Company’s financial statements.
The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business. The Company defends itself vigorously against any such claims. Although the outcome of these matters is currently not determinable, management does not expect that the amount of losses or other costs to resolve these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows.
NOTE 17.Significant Customers and Geographic Information
DigitalGlobe recognized revenue related to contracts with the U.S. Government, its largest customer, of $87.8 million and $100.8 million for the three months ended September 30, 2014 and 2013, respectively, and $280.9 million and $261.0 million for the nine months ended September 30, 2014 and 2013, respectively. This represented 56.8% and 61.2% of the Company’s total revenue for the three months ended September 30, 2014 and 2013, respectively, and 59.9% and 58.9% for the nine months ended September 30, 2014 and 2013, respectively. The Company sells to the U.S. Government primarily through direct sales, with sales arising from sub-contract relationships to a lesser extent.
DigitalGlobe has organized its sales leadership and marketing efforts around two customer groups (i) U.S. Government and (ii) Diversified Commercial. Revenue recognized for services provided to U.S. Government customers consist primarily of the EnhancedView SLA, amortization of pre-FOC payments related to the NextView agreement and other value added services. Diversified Commercial revenue consists of the Company’s DAP as well as customers in international defense and intelligence, civil government, location-based services and industry verticals. The following table summarizes revenue for these two groups:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
September 30,
|
|
September 30,
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
U.S. Government
|
|
$
|
87.8
|
|
$
|
100.8
|
|
$
|
280.9
|
|
$
|
261.0
|
Diversified Commercial
|
|
|
66.8
|
|
|
64.0
|
|
|
188.0
|
|
|
182.0
|
Total revenue
|
|
$
|
154.6
|
|
$
|
164.8
|
|
$
|
468.9
|
|
$
|
443.0
|
Table of Contents
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Total U.S. and international revenue was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
September 30,
|
|
September 30,
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
U.S.
|
|
$
|
106.6
|
|
$
|
116.7
|
|
$
|
326.5
|
|
$
|
307.0
|
International
|
|
|
48.0
|
|
|
48.1
|
|
|
142.4
|
|
|
136.0
|
Total revenue
|
|
$
|
154.6
|
|
$
|
164.8
|
|
$
|
468.9
|
|
$
|
443.0
|
NOTE 18. Subsequent Event
We evaluate subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. We identified the following as a non-recognized subsequent event:
On August 13, 2014, DigitalGlobe successfully launched WorldView-3, the world’s highest resolution and most capable commercial earth observation satellite. On October 1, 2014, the Company completed the needed calibrations on WorldView-3 to enable it to provide visible spectrum imagery to its customers. Also, on October 1, 2014, as a result of increased constellation capacity made available to NGA, the Company expects to recognize an increase of approximately $27.0 million of revenue from the EnhancedView SLA for the three months ended December 31, 2014. Additionally, effective October 1, 2014, the Company will begin depreciating the satellite and related infrastructure and will cease capitalizing interest related to the WorldView-3 satellite. We are currently unable to estimate the increase in depreciation expense for the three months ended December 31, 2014 due to the ongoing evaluation of the estimated useful life of WorldView-3, which will be completed during the fourth quarter.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein and other of our reports, filings, and public announcements may contain or incorporate forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words, although not all forward-looking statements contain these words.
Any forward-looking statements are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions. A number of important factors could cause our actual results or performance to differ materially from those indicated by such forward looking statements, including: the loss, reduction or change in terms of any of our primary contracts or decisions by customers not to exercise renewal options; the availability of government funding for our products and services both domestically and internationally; changes in government and customer priorities and requirements (including cost-cutting initiatives, the potential deferral of awards, terminations or reduction of expenditures to respond to the priorities of Congress and the administration, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011); the risk that U.S. government sanctions against specified companies and individuals in Russia may limit our ability to conduct business with potential or existing customers; the risk that anticipated benefits and synergies from the strategic combination of the Company and GeoEye, Inc. cannot be fully realized or may take longer to realize than expected; the outcome of pending or threatened litigation; the loss or impairment of any of our satellites; delays in the construction and launch of any of our satellites or our ability to achieve and maintain full operational capacity of all our satellites; delays in implementation of planned ground system and infrastructure enhancements; loss or damage to the content contained in our imagery archives; interruption or failure of our ground system and other infrastructure, decrease in demand for our imagery products and services; increased competition, including possibly from companies with substantial financial and other resources and services, that may reduce our market share or cause us to lower our prices; our inability to fully integrate acquisitions or to achieve planned synergies; changes in satellite imaging technology; our failure to obtain or maintain required regulatory approvals and licenses; changes in U.S. or foreign law or regulation that may limit our ability to distribute our imagery products and services; the costs associated with being a public Company; and other important factors, all as described more fully in our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2013, as updated by our Form 10-Q for the quarter ended March 31, 2014.
We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on any of these forward looking statements.
References in this filing to “DigitalGlobe,” “Company,” “we,” “us,” and “our” refer to DigitalGlobe, Inc. and its consolidated subsidiaries.
Overview
We are a leading global provider of geospatial information products and services. Sourced from our own advanced satellite constellation, our products and services support a wide variety of uses, including defense, intelligence and homeland security applications, mapping and analysis, environmental monitoring, oil and gas exploration, and infrastructure management. Each day users depend on our data, information, technology and expertise to better understand our changing planet in order to save lives, resources and time. Our principal customers are U.S. and
foreign governments, civil agencies and providers of location-based services (“LBS”). Additionally, we serve a wide variety of companies in industry verticals, such as the financial services, energy, telecommunications, utility, forestry, mining, environmental and agricultural industries. The imagery that forms the foundation of our products and services is collected daily from our five high-resolution imaging satellites and maintained in our imagery archive, which we refer to as our ImageLibrary. We believe that our ImageLibrary is the largest, most up-to-date and comprehensive archive of high-resolution earth imagery commercially available, containing more than 5.1 billion square kilometers of imagery, an area the equivalent of 35 times the landmass of the earth, accumulated since 1999. As of September 30, 2014, our collection capacity was approximately 1.2 billion square kilometers of imagery per year, or the equivalent of roughly eight times the earth’s land surface area.
In June 2014, the U.S. Department of Commerce granted us permission to sell the highest resolution imagery possible from our satellite constellation as follows:
|
|
|
Satellite
|
|
Best Ground Resolution
|
WorldView-3(1)
|
|
31-centimeters
|
WorldView-2
|
|
46-centimeters
|
WorldView-1
|
|
50-centimeters
|
GeoEye-1
|
|
41-centimeters
|
QuickBird
|
|
50-centimeters
|
IKONOS
|
|
82-centimeters
|
|
(1)
| |
Subject to the commissioning into operation of WorldView-3, six months after the satellite becomes operational, we will be permitted to provide customers with the satellite’s best ground resolution. |
On August 13, 2014, the Company successfully launched its sixth imagery satellite, WorldView-3, the world’s highest resolution and most capable commercial earth observation satellite. The Company will begin to recognize a material increase in revenue as a result of the significant increase in satellite capacity across the constellation that will be made available to NGA once WorldView-3 reaches full operational capability (“FOC”). As further discussed in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements, on October 1, 2014, DigitalGlobe increased constellation capacity made available to the NGA and will begin recognizing revenue at the increased annualized rate.
We are completing enhancements to our WorldView-4 satellite and anticipate that those will be completed in the fourth quarter of 2014, at which time the satellite will be placed into storage. Capitalization of all costs associated with this satellite will cease during the period in which the satellite is in storage and during which no additional enhancements are made. Storage costs and all other incremental costs that result from placing the satellite into storage will be expensed as incurred. Costs associated with enhancements to satellite capability will be capitalized. We intend to launch and place into service our WorldView-4 satellite in the second half of 2016 for additional capacity as a result of anticipated incremental growth opportunities.
When we place the WorldView-4 satellite into service, all costs associated with removing the satellite from storage and other incremental costs that result from the storage process will be expensed as incurred. However, costs incurred to launch the satellite and perform in-orbit testing prior to the satellite reaching its FOC will be capitalized as these costs are necessary to place the satellite into service. After the satellite has been successfully placed into service, it will be removed from construction-in-process and recorded as a fixed asset. While satellite technology is highly sophisticated, satellite imaging technology has not changed significantly over time. As a result, we do not anticipate that the imaging technology and capabilities of the WorldView-4 satellite will experience any significant obsolescence during the satellite storage period. We do not anticipate commencing depreciation of the satellite until it is placed into service.
Our WorldView-3 and WorldView-4 satellites are expected to have useful lives similar to those of our most recently launched satellites. We include the WorldView-3 and WorldView-4 satellites in our assessment of impairment of our satellite constellation long-lived assets group. All of our assets, including our satellites and ground terminals, comprise a single asset group as separately identifiable cash flows attributable to any given satellite cannot be derived. Accordingly, our impairment testing is performed at the DigitalGlobe entity level. Our impairment analysis
includes anticipated future cash flows from our satellite constellation as well as costs necessary to complete the construction of our satellites. We test this long-lived asset group for impairment annually or whenever events or changes in circumstances indicate that the asset group’s carrying amount may not be recoverable.
The Company is in the process of reviewing the useful lives of its satellites, which it expects to complete in the fourth quarter of 2014. Please refer to “Estimated Useful Lives of Satellites” section below for further detail.
On January 31, 2013, we completed the acquisition of 100% of the outstanding stock of GeoEye, Inc. (“GeoEye”), a leading provider of geospatial intelligence solutions in a stock and cash transaction valued at approximately $1.4 billion. The acquisition of GeoEye increased the scale of our existing operations, diversified our customer base and product mix, broadened our service offerings, enabled us to optimize our satellite orbits and collection of imagery, and strengthened our production and analytics capabilities. Refer to Note 4 “Business Acquisitions” to the Unaudited Condensed Consolidated Financial Statements for further discussion. We incurred the following combination-related costs in conjunction with the acquisition of GeoEye during the three month and nine month periods ended September 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2014
|
|
Three months ended September 30, 2013
|
|
(in millions)
|
|
Expensed
|
|
Capitalized
|
|
Total
|
|
Expensed
|
|
Capitalized
|
|
Total
|
|
Restructuring costs
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3.1
|
|
$
|
—
|
|
$
|
3.1
|
|
Integration costs
|
|
|
3.5
|
|
|
5.2
|
|
|
8.7
|
|
|
8.0
|
|
|
6.8
|
|
|
14.8
|
|
Acquisition costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total combination-related costs
|
|
$
|
3.5
|
|
$
|
5.2
|
|
$
|
8.7
|
|
$
|
11.1
|
|
$
|
6.8
|
|
$
|
17.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2014
|
|
Nine months ended September 30, 2013
|
|
(in millions)
|
|
Expensed
|
|
Capitalized
|
|
Total
|
|
Expensed
|
|
Capitalized
|
|
Total
|
|
Restructuring costs
|
|
$
|
1.1
|
|
$
|
—
|
|
$
|
1.1
|
|
$
|
37.0
|
|
$
|
—
|
|
$
|
37.0
|
|
Integration costs
|
|
|
12.9
|
|
|
30.7
|
|
|
43.6
|
|
|
23.1
|
|
|
13.1
|
|
|
36.2
|
|
Acquisition costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.6
|
|
|
—
|
|
|
20.6
|
|
Debt related costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17.8
|
|
|
36.6
|
|
|
54.4
|
|
Total combination-related costs
|
|
$
|
14.0
|
|
$
|
30.7
|
|
$
|
44.7
|
|
$
|
98.5
|
|
$
|
49.7
|
|
$
|
148.2
|
|
During the first quarter of 2013, we initiated a series of restructuring activities intended to improve our operational efficiency as a result of our acquisition of GeoEye. These restructuring activities primarily consisted of reducing redundant workforce, consolidating office and production facilities, consolidating certain ground terminals and systems, and other exit costs, including contract termination charges to effect the restructuring activities. These restructuring activities were completed in March 2014, and we do not currently expect additional restructuring charges in 2014.
Integration costs that are expensed consist primarily of professional fees incurred to assist us with system and process improvements associated with integrating operations. Capitalized costs relating to integration primarily consist of property, equipment and leasehold improvements necessary to consolidate operations. Integration-related expenses ended in the third quarter of 2014; however, we will continue to capitalize certain costs until our integration related projects are completed.
Acquisition costs were costs incurred to effect the acquisition, such as advisory, legal, accounting, consulting and other professional fees.
Debt-related costs were attributable to entering into a seven-year $550.0 million Senior Secured Term Loan Facility and a five-year $150.0 million Senior Secured Revolving Credit Facility (collectively, the “2013 Credit Facility”), in addition to issuing $600.0 million of 5.25% Senior Notes due 2021. The proceeds were used to refinance our $500.0 million senior secured term loan and our $100.0 million senior secured revolving credit facility, and fund the discharge and redemption of GeoEye’s $400.0 million 9.625% Senior Secured Notes due 2015 and $125.0 million 8.625% Senior Secured Notes due 2016 we assumed in the acquisition.
Synergies from our acquisition of GeoEye are principally from labor cost reductions and operational infrastructure savings resulting from our restructuring and integration efforts as compared with the pre-acquisition combined operating expenses of GeoEye and DigitalGlobe, including adjustments for planned expenditures related to project commitments, infrastructure investments and compensation increases. These synergies, however, are partially offset by higher operating costs associated with growth in our business.
Backlog
The following table represents our backlog as of September 30, 2014. “Next 12 Months” backlog refers to the backlog expected to be recognized as revenue during the period between October 1, 2014 and September 30, 2015.
|
|
|
|
|
|
|
|
|
|
Backlog to be recognized
|
|
(in millions)
|
|
Next 12 Months
|
|
Life of Contracts
|
|
U.S. Government:
|
|
|
|
|
|
|
|
EnhancedView SLA
|
|
$
|
337.1
|
|
$
|
1,994.2
|
|
Amortization of pre-FOC payments related to NextView
|
|
|
25.5
|
|
|
92.5
|
|
Other revenue and value added services
|
|
|
80.4
|
|
|
143.5
|
|
Total U.S. Government
|
|
|
443.0
|
|
|
2,230.2
|
|
|
|
|
|
|
|
|
|
Diversified Commercial:
|
|
|
|
|
|
|
|
DAP
|
|
|
49.9
|
|
|
101.5
|
|
Other Diversified Commercial(1)
|
|
|
80.7
|
|
|
134.3
|
|
Total Diversified Commercial
|
|
|
130.6
|
|
|
235.8
|
|
|
|
|
|
|
|
|
|
Total Backlog
|
|
$
|
573.6
|
|
$
|
2,466.0
|
|
(1)Other Diversified Commercial backlog consists of firm orders, minimum commitments under signed customer contracts, remaining amounts under pre-paid subscriptions, firm fixed price reimbursement and funded and unfunded task orders from Diversified Commercial customers.
Backlog consists of all contractual commitments, including those under the anticipated ten-year term of the EnhancedView Contract with NGA, amounts committed under Direct Access Program (“DAP”) agreements, firm orders, remaining pre-paid subscriptions and task orders from our government customers. Our backlog also includes amounts of obligated funding on indefinite delivery/indefinite quantity (“IDIQ”) contracts for products and services that we believe we are qualified to provide.
The EnhancedView Contract is structured as a ten-year term, inclusive of nine annual renewal options that may be exercised by NGA. The EnhancedView Contract contains multiple deliverables, including a service level agreement (“EnhancedView SLA”) described below, infrastructure enhancements and other services. Although the NGA may terminate the contract at any time and is not obligated to exercise any of the remaining five renewal options, we include the full remaining term in backlog. We believe it is NGA’s intention to exercise the remaining options, subject only to annual Congressional appropriation of funding and the federal budget process. Such funding contains an inherent level of uncertainty in the current budget environment. As discussed in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements, on October 1, 2014, DigitalGlobe increased constellation capacity made available to NGA and will begin recognizing revenue at the increased annualized rate. Accordingly, the next 12 months backlog for the Enahanced View SLA is reported above at this increased annualized rate.
The amortization of pre-FOC payments related to our NextView agreement with NGA will be recognized over the expected useful life of WorldView-1. The recognition of this revenue has no effect on our ability to generate additional revenue from the usage of the satellite, and we do not consider it a reduction in our capacity to generate additional sales. Additionally, if the life of WorldView-1 were to be modified, the amortization of deferred revenue would be modified and either reduced in the event that the life of WorldView-1 is extended, or increased in the event the life of WorldView-1 is reduced.
As discussed above, the Company is in the process of reviewing the useful lives of its satellites, which it expects to complete in the fourth quarter of 2014. Please refer to “Estimated Useful Lives of Satellites” section below for further detail.
Although backlog reflects business that is considered to be firm, terminations, amendments or cancellations may occur, which could result in a reduction in our total backlog. In addition, failure to receive task orders under IDIQ contracts could also result in a reduction in our total backlog. Any such terminations, amendments or cancellations of contractual commitments, or failure to receive task orders under IDIQ contracts may also negatively impact the timing of our realization of backlog.
Significant Customer
EnhancedView Service Level Agreement
Our largest customer is the U.S. Government, which includes our EnhancedView SLA with the NGA. The EnhancedView SLA totals $2.8 billion over the term of the contract, payable as $250.0 million per year ($20.8 million monthly) for the first four contract years commencing September 1, 2010, and $300.0 million per year ($25.0 million monthly) for the remaining six years of the contract beginning September 1, 2014. The NGA has exercised the first four options under the EnhancedView SLA, which collectively extended the SLA through August 31, 2015.
During the first quarter of 2014, DigitalGlobe and NGA agreed to certain modifications of the EnhancedView Contract that included, among other changes, flexibility in the timing of the imaging capacity step-up to accommodate a potential delay of no greater than four months in the launch of WorldView-3. Step-up in the monthly cash payments from NGA remains unchanged, and increased from $20.8 million per month to $25.0 million per month beginning on September 1, 2014. The modifications did not result in a change to the SLA accounting methodology.
The Company recognizes revenue for the EnhancedView SLA using a proportional performance method. Under this method, revenue is recognized based on the estimated amount of imaging capacity made available to NGA in any given period compared to the total estimated imaging capacity to be provided over the life of the contract. The Company will begin to recognize a material increase in revenue once WorldView-3 reaches full operational capability (“FOC”) as a result of the significant increase in satellite capacity across the constellation that will be made available to NGA at that time. As further discussed in Note 18 “Subsequent Event” to the Unaudited Condensed Consolidated Financial Statements, on October 1, 2014, DigitalGlobe increased constellation capacity made available to the NGA and will begin recognizing revenue at the increased annualized rate.
Results of Operations
The following tables summarize our results of operations for the three months ended September 30, 2014 compared to the three months ended September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Change
|
|
(in millions)
|
|
2014
|
|
2013
|
|
$
|
Percent
|
|
Results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government revenue
|
|
$
|
87.8
|
|
$
|
100.8
|
|
|
(13.0)
|
(12.9)
|
%
|
Diversified Commercial revenue
|
|
|
66.8
|
|
|
64.0
|
|
|
2.8
|
4.4
|
|
Total revenue
|
|
|
154.6
|
|
|
164.8
|
|
|
(10.2)
|
(6.2)
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
40.9
|
|
|
46.7
|
|
|
(5.8)
|
(12.4)
|
|
Selling, general and administrative
|
|
|
55.8
|
|
|
60.6
|
|
|
(4.8)
|
(7.9)
|
|
Depreciation and amortization
|
|
|
57.7
|
|
|
59.4
|
|
|
(1.7)
|
(2.9)
|
|
Restructuring charges
|
|
|
—
|
|
|
3.1
|
|
|
(3.1)
|
*
|
|
Income (loss) from operations
|
|
|
0.2
|
|
|
(5.0)
|
|
|
5.2
|
*
|
|
Other income, net
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
*
|
|
Interest expense, net
|
|
|
—
|
|
|
(0.7)
|
|
|
0.7
|
*
|
|
Income (loss) before income taxes
|
|
|
0.3
|
|
|
(5.6)
|
|
|
5.9
|
*
|
|
Income tax benefit
|
|
|
0.6
|
|
|
3.8
|
|
|
(3.2)
|
(84.2)
|
|
Net income (loss)
|
|
$
|
0.9
|
|
$
|
(1.8)
|
|
|
2.7
|
*
|
|
* Not meaningful
The following tables summarize our results of operations for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
Change
|
|
(in millions)
|
|
2014
|
|
2013
|
|
$
|
Percent
|
|
Results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government revenue
|
|
$
|
280.9
|
|
$
|
261.0
|
|
|
19.9
|
7.6
|
%
|
Diversified Commercial revenue
|
|
|
188.0
|
|
|
182.0
|
|
|
6.0
|
3.3
|
|
Total revenue
|
|
|
468.9
|
|
|
443.0
|
|
|
25.9
|
5.8
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
121.5
|
|
|
134.9
|
|
|
(13.4)
|
(9.9)
|
|
Selling, general and administrative
|
|
|
167.2
|
|
|
204.9
|
|
|
(37.7)
|
(18.4)
|
|
Depreciation and amortization
|
|
|
172.9
|
|
|
165.7
|
|
|
7.2
|
4.3
|
|
Restructuring charges
|
|
|
1.1
|
|
|
37.0
|
|
|
(35.9)
|
(97.0)
|
|
Loss on abandonment of asset
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
*
|
|
Income (loss) from operations
|
|
|
5.0
|
|
|
(99.5)
|
|
|
104.5
|
*
|
|
Loss from early extinguishment of debt
|
|
|
—
|
|
|
(17.8)
|
|
|
17.8
|
*
|
|
Other income, net
|
|
|
0.2
|
|
|
0.5
|
|
|
(0.3)
|
(60.0)
|
|
Interest expense, net
|
|
|
—
|
|
|
(3.5)
|
|
|
3.5
|
*
|
|
Income (loss) before income taxes
|
|
|
5.2
|
|
|
(120.3)
|
|
|
125.5
|
*
|
|
Income tax benefit
|
|
|
1.1
|
|
|
36.9
|
|
|
(35.8)
|
(97.0)
|
|
Net income (loss)
|
|
$
|
6.3
|
|
$
|
(83.4)
|
|
|
89.7
|
*
|
|
* Not meaningful
Revenue
The following table summarizes revenue as a percentage of totals for U.S. Government and Diversified Commercial customers:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Revenue as a Percent of Total:
|
|
|
|
|
|
|
|
|
|
U.S. Government
|
|
56.8
|
%
|
61.2
|
%
|
59.9
|
%
|
58.9
|
%
|
Diversified Commercial
|
|
43.2
|
|
38.8
|
|
40.1
|
|
41.1
|
|
Total revenue
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Total U.S. and international revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
106.6
|
|
$
|
116.7
|
|
$
|
326.5
|
|
$
|
307.0
|
|
International
|
|
|
48.0
|
|
|
48.1
|
|
|
142.4
|
|
|
136.0
|
|
Total revenue
|
|
$
|
154.6
|
|
$
|
164.8
|
|
$
|
468.9
|
|
$
|
443.0
|
|
The following table summarizes our percentage of direct and reseller and partner sales on a consolidated basis:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Reseller and Direct Sales:
|
|
|
|
|
|
|
|
|
|
Direct
|
|
89.6
|
%
|
89.1
|
%
|
91.2
|
%
|
87.7
|
%
|
Resellers
|
|
10.4
|
|
10.9
|
|
8.8
|
|
12.3
|
|
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Our principal source of revenue is the licensing of our earth imagery products and other services to end users and resellers and partners.
We operate in a single segment in which we provide imagery and imagery information products and services to customers around the world. In order to serve our customers, we use a common infrastructure and technology to collect, process and distribute those imagery products and services to all customers.
We have organized our sales leadership and marketing efforts around two customer groups (i) U.S. Government and (ii) Diversified Commercial. Revenue recognized for services provided to U.S. Government customers consist primarily of the EnhancedView SLA, amortization of pre-FOC payments related to the NextView agreement and other value added services. Diversified Commercial revenue consists of DAP revenue, other international defense and intelligence revenue, and revenue from civil governments, providers of LBS and industry verticals.
Our imagery products and services are comprised of imagery that we process to varying levels according to our customers’ specifications. We deliver our products and services using the distribution method suited to our customers’ needs. Customers can purchase satellite or aerial images that are archived in our ImageLibrary. Customers can also order imagery content by placing custom orders, which requires tasking of our satellites, for a specific area of interest or as a bundle of imagery and data for a region or type of location, such as cities, ports, harbors or airports.
U.S. Government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
U.S. Government Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnhancedView SLA
|
|
$
|
56.9
|
|
$
|
56.9
|
|
$
|
170.5
|
|
$
|
170.5
|
|
Other revenue and value added services
|
|
|
24.6
|
|
|
37.6
|
|
|
91.3
|
|
|
71.4
|
|
Amortization of pre-FOC payments related to NextView
|
|
|
6.3
|
|
|
6.3
|
|
|
19.1
|
|
|
19.1
|
|
Total U.S. Government revenue
|
|
$
|
87.8
|
|
$
|
100.8
|
|
$
|
280.9
|
|
$
|
261.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reseller and Direct Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
|
99.9
|
%
|
|
99.9
|
%
|
|
99.9
|
%
|
|
99.5
|
%
|
Resellers
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.5
|
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
The U.S. Government, through NGA, purchases our imagery products and services on behalf of various entities within the U.S. Government, including the military and other government agencies. EnhancedView SLA revenue comprised 36.8% and 34.5% of our revenue for the three months ended September 30, 2014 and 2013, respectively, and 36.4% and 38.5% of our revenue for the nine months ended September 30, 2014 and 2013, respectively. We also sell to other U.S. defense and intelligence customers, including defense and intelligence contractors who provide an additional outlet for our imagery by providing value-added services with our imagery to deliver a final end product to a customer. Other revenue and value added services comprised 15.9% and 22.8% of our revenue for the three months ended September 30, 2014 and 2013, respectively, and 19.5% and 16.1% of our revenue for the nine months ended September 30, 2014 and 2013, respectively.
Our U.S. Government customers focus on image quality, including resolution, accuracy, spectral diversity, frequency of area revisit and coverage, as well as ensuring availability of a certain amount of our capacity as they integrate our products and services into their operational planning. Our customers typically operate under contracts with purchase commitments through which we receive monthly or quarterly payments in exchange for delivering specific orders to the customer. Our revenue from customers in the U.S. Government has historically been largely from service level agreements and tasking orders, with a smaller portion from sales of imagery from our ImageLibrary. We sell to the U.S. Government primarily through direct sales, with sales arising from sub-contract relationships to a lesser extent, and expect this trend to continue.
Diversified Commercial Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Diversified Commercial Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DAP
|
|
$
|
27.2
|
|
$
|
25.6
|
|
$
|
84.3
|
|
$
|
72.3
|
|
Other diversified commercial
|
|
|
39.6
|
|
|
38.4
|
|
|
103.7
|
|
|
109.7
|
|
Total Diversified Commercial revenue
|
|
$
|
66.8
|
|
$
|
64.0
|
|
$
|
188.0
|
|
$
|
182.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Reseller and Direct Sales:
|
|
|
|
|
|
|
|
|
|
Direct
|
|
76.2
|
%
|
72.0
|
%
|
78.4
|
%
|
70.7
|
%
|
Resellers
|
|
23.8
|
|
28.0
|
|
21.6
|
|
29.3
|
|
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Our Diversified Commercial customers are located throughout the world. They purchase our products and services on an as-needed basis, or through contracts that span one or more years, depending on the solution that best suits their application. We sell to these customers through a combination of direct sales and through resellers.
We earn revenue from sales of the DAP facility hardware and software, as well as from service fees to access our satellite constellation. The revenue to access our satellite constellation is recognized over time based on minutes of actual usage. The revenue and costs associated with the sales of a DAP facility are deferred until we commission into operation the ground terminal and can provide contractually specified access to our satellites. The facilities related revenue and costs are then recognized ratably over the customer relationship period, which is based on the estimated useful life of the satellite being accessed, except when deferred contract costs are in excess of deferred revenue, in which case the excess costs are recognized over the initial contract period. If more than one satellite is used, the satellite with the longest remaining useful life is used as the basis for the amortization of revenue. We have DAP agreements in 10 countries.
Other Diversified Commercial revenue also includes revenue from international civil governments, providers of LBS, industry verticals and international defense and intelligence customers. Our customers are primarily government agencies, energy, telecommunications, utility and agricultural companies who, like our U.S. Government customers, use our content for mapping, monitoring, analysis and planning activities. Providers of LBS include internet portals, connected devices and digital mapmakers, who use our imagery products and services to create or expand their products and services. Customers in our industry verticals include financial services, energy, telecommunications, utility, forestry, mining, environmental and agricultural industries.
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Revenue decreased $10.2 million, or 6.2%, to $154.6 million for the three months ended September 30, 2014 from $164.8 million for the three months ended September 30, 2013.
U.S Government revenue decreased $13.0 million, or 12.9%, to $87.8 million during the three months ended September 30, 2014 from $100.8 million for the three months ended September 30, 2013. This was the result a decrease in other revenue and value added services primarily attributable to a one-time recognition of $8.6 million related to Global EGD in the prior period, in addition to a decrease in the scope of various value added projects of approximately $4.4 million.
Diversified Commercial revenue increased $2.8 million, or 4.4%, to $66.8 million for the three months ended September 30, 2014 from $64.0 million for the three months ended September 30, 2013. This resulted from an increase in DAP revenue of $1.6 million primarily due to one direct access customer that was activated in the first quarter of 2014. Additionally, other diversified commercial revenue increased $1.2 million primarily due to growth of $2.8 million related to location-based services, a $2.3 million increase in revenue generated from other industry verticals, largely as a result of growth within the oil and gas vertical, partially offset by a decrease in revenue from emerging market customers.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Revenue increased $25.9 million, or 5.8%, to $468.9 million for the nine months ended September 30, 2014 from $443.0 million for the nine months ended September 30, 2013.
U.S Government revenue increased $19.9 million, or 7.6%, to $280.9 million during the nine months ended September 30, 2014 from $261.0 million for the nine months ended September 30, 2013. This increase was the result of a $19.9 million increase in other revenue and value added services primarily attributable to expanded services being delivered, including Global EGD and an additional month of revenue from services provided to customers from the GeoEye acquisition in 2014 as compared to 2013.
Diversified Commercial revenue increased $6.0 million, or 3.3%, to $188.0 million for the nine months ended September 30, 2014 from $182.0 million for the nine months ended September 30, 2013. This resulted from an increase in DAP revenue of $12.0 million primarily due to the $10.0 million year over year impact of activating two direct access customers and an additional month of revenue from GeoEye totaling $2.2 million. Additionally, other diversified commercial revenue decreased $6.0 million primarily due to decreased revenue from customers in Russia of approximately $8.8 million, in addition to data deliveries to two customers totaling $6.3 million during the nine months ended September 30, 2013 that did not recur during the nine months ended September 30, 2014. These
decreases were partially offset by revenue generated from other industry verticals, largely as a result of growth within the oil and gas vertical.
Expenses
The following table summarizes our results of operations for the three and nine months ended September 30, 2014 and 2013 as a percentage of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Expenses as a percentage of net revenue:
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Cost of revenue excluding depreciation and amortization
|
|
26.5
|
|
28.3
|
|
25.9
|
|
30.5
|
|
Selling, general and administrative
|
|
36.1
|
|
36.8
|
|
35.7
|
|
46.3
|
|
Depreciation and amortization
|
|
37.3
|
|
36.0
|
|
36.9
|
|
37.4
|
|
Restructuring charges
|
|
—
|
|
1.9
|
|
0.2
|
|
8.3
|
|
Loss on abandonment of asset
|
|
—
|
|
—
|
|
0.2
|
|
—
|
|
Income (loss) from operations
|
|
0.1
|
|
(3.0)
|
|
1.1
|
|
(22.5)
|
|
Loss on early extinguishment of debt
|
|
—
|
|
—
|
|
—
|
|
(4.0)
|
|
Other income, net
|
|
0.1
|
|
—
|
|
—
|
|
0.1
|
|
Interest expense, net
|
|
—
|
|
(0.4)
|
|
—
|
|
(0.8)
|
|
Income (loss) before income taxes
|
|
0.2
|
|
(3.4)
|
|
1.1
|
|
(27.2)
|
|
Income tax benefit
|
|
0.4
|
|
2.3
|
|
0.2
|
|
8.4
|
|
Net income (loss)
|
|
0.6
|
%
|
(1.1)
|
%
|
1.3
|
%
|
(18.8)
|
%
|
Cost of Revenue
The following table summarizes our cost of revenue, excluding depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013(1)
|
|
2014
|
|
2013(1)
|
|
Labor and labor related costs
|
|
$
|
17.4
|
|
$
|
18.5
|
|
$
|
52.0
|
|
$
|
55.2
|
|
Facilities, subcontracting and equipment costs
|
|
|
18.0
|
|
|
20.7
|
|
|
54.4
|
|
|
60.6
|
|
Consulting and professional fees
|
|
|
1.7
|
|
|
4.0
|
|
|
4.5
|
|
|
8.2
|
|
Aerial imagery
|
|
|
1.0
|
|
|
1.9
|
|
|
3.9
|
|
|
5.9
|
|
Other direct costs
|
|
|
2.8
|
|
|
1.6
|
|
|
6.7
|
|
|
5.0
|
|
Total cost of revenue, excluding depreciation and amortization
|
|
$
|
40.9
|
|
$
|
46.7
|
|
$
|
121.5
|
|
$
|
134.9
|
|
|
(1)
| |
Certain immaterial 2013 amounts have been reclassified to conform to the current year presentation. |
Most of the costs of a satellite are related to the pre-operation capital expenditures required to build and launch a satellite. There is not a significant direct relationship between our cost of revenue and changes in our revenue. Our cost of revenue consists primarily of the cost of personnel, as well as the costs of operating our satellites, retrieving information from the satellites and processing the data retrieved. Costs of acquiring aerial imagery from third parties have been capitalized and are amortized on an accelerated basis as a cost of revenue.
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Cost of revenue decreased $5.8 million, or 12.4%, to $40.9 million during the three months ended September 30, 2014 from $46.7 million for the three months ended September 30, 2013. Labor and labor related costs decreased $1.1 million primarily resulting from our restructuring efforts. Facilities, subcontracting and equipment costs
decreased $2.7 million primarily due to a reduction in costs primarily resulting from the consolidation of ground terminals and related telecommunication contracts acquired in connection with our acquisition of GeoEye. The decrease in consulting and professional fees of $2.3 million is primarily due to reduced third-party services needed to support the integration of GeoEye.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Cost of revenue decreased $13.4 million, or 9.9%, to $121.5 million during the nine months ended September 30, 2014 from $134.9 million for the nine months ended September 30, 2013. Labor and labor related costs decreased $3.2 million primarily due to a reduction in expenses of approximately $6.4 million resulting from our restructuring efforts, partially offset by an additional month of expense for employees assumed in connection with our acquisition of GeoEye totaling $3.2 million. Facilities, subcontracting and equipment costs decreased $6.2 million primarily due to a reduction in costs of approximately $9.2 million due to the consolidation of ground terminals and related telecommunications contracts acquired in connection with our acquisition of GeoEye. This reduction was partially offset by an additional month of expense associated with the remaining ground terminal facilities acquired from GeoEye totaling $2.0 million and a net increase in direct access facility costs of $1.0 million resulting from additional facilities that came online during the current year, partially offset by a decrease in expenses from existing facilities. The decrease in consulting and professional fees of $3.7 million is primarily due to reduced services needed to support the integration of GeoEye.
Selling, General and Administrative
The following table summarizes our selling, general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013(1)
|
|
2014
|
|
2013(1)
|
|
Acquisition costs
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
20.6
|
|
Labor and labor related costs
|
|
|
33.0
|
|
|
29.6
|
|
|
96.4
|
|
|
94.2
|
|
Consulting and professional fees
|
|
|
10.9
|
|
|
16.7
|
|
|
35.1
|
|
|
50.8
|
|
Rent and facilities
|
|
|
2.8
|
|
|
3.5
|
|
|
8.5
|
|
|
10.9
|
|
Satellite insurance
|
|
|
2.2
|
|
|
3.4
|
|
|
6.9
|
|
|
9.7
|
|
Other
|
|
|
6.9
|
|
|
7.4
|
|
|
20.3
|
|
|
18.7
|
|
Total selling, general and administrative
|
|
$
|
55.8
|
|
$
|
60.6
|
|
$
|
167.2
|
|
$
|
204.9
|
|
(1)Certain immaterial 2013 amounts have been reclassified to conform to the current year presentation.
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Selling, general and administrative expenses decreased $4.8 million, or 7.9%, to $55.8 million during the three months ended September 30, 2014 from $60.6 million for the three months ended September 30, 2013. Labor and labor related costs increased $3.4 million primarily due to additional headcount arising from conversion of external contractors to full time employees of approximately $2.2 million and severance related expenses totaling $1.2 million. The decrease in consulting and professional fees of $5.8 million is primarily due to reduced combination related costs associated with the integration of GeoEye. Satellite insurance decreased $1.2 million due to a reduction in current year rates to insure our in-orbit satellites.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Selling, general and administrative expenses decreased $37.7 million, or 18.4%, to $167.2 million during the nine months ended September 30, 2014 from $204.9 million for the nine months ended September 30, 2013. The reduction in acquisition costs of $20.6 million was for the acquisition of GeoEye in 2013. Labor and labor related costs increased $2.2 million primarily due to $3.0 million in severance related expenses and an additional month of expense for employees assumed in connection with our acquisition of GeoEye of approximately $2.5 million,
partially offset by a reduction in expenses of approximately $3.3 million resulting from our restructuring efforts. Consulting and professional fees decreased $15.7 million primarily due to reduced combination related costs associated with the integration of GeoEye. Rent and facilities expenses decreased $2.4 million primarily due to consolidation of facilities and telecommunication contracts. Satellite insurance decreased $2.8 million due to a reduction in current year rates to insure our on-orbit satellites.
Depreciation and Amortization
Depreciation and amortization consists primarily of depreciation of our satellites and other operating assets.
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Depreciation and amortization expense decreased $1.7 million, or 2.9%, to $57.7 million for the three months ended September 30, 2014 from $59.4 million for the three months ended September 30, 2013 due to a $3.0 million decrease in expense primarily from fully depreciated assets, partially offset by approximately $0.9 million in expense related to assets placed into service in the current year, in addition to $0.4 million in expense for intangible assets assumed as part of our acquisition of Spatial Energy.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Depreciation and amortization expense increased $7.2 million, or 4.3%, to $172.9 million for the nine months ended September 30, 2014 from $165.7 million for the nine months ended September 30, 2013 primarily due to an additional month of expense for property, equipment and intangible assets assumed as part of our acquisition of GeoEye totaling $7.1 million. In addition, we recognized increased depreciation expense of approximately $6.7 million when certain of our construction in process projects were placed into service during the current year, and $1.0 million in expense for intangible assets assumed as part of our acquisition of Spatial Energy. These increases were partially offset by a $7.6 million decrease in expense from fully depreciated assets.
Restructuring Charges
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
There were no restructuring charges for the three months ended September 30, 2014 compared with $3.1 million for the three months ended September 30, 2013 as our restructuring activities related to the acquisition of GeoEye were completed in March 2014.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Restructuring charges decreased $35.9 million, or 97.0%, to $1.1 million for the nine months ended September 30, 2014 from $37.0 million for the nine months ended September 30, 2013.
The restructuring charges we incurred following our acquisition of GeoEye were designed to realign our infrastructure with demand by our customers so as to optimize our operational efficiency. These restructuring activities primarily consisted of reducing redundant workforce, consolidating office and production facilities, consolidating certain ground terminals and systems and other exit costs. We completed our restructuring activities related to the acquisition of GeoEye in March 2014. We currently do not expect additional restructuring charges in 2014.
Loss from Early Extinguishment of Debt
In connection with the acquisition of GeoEye, we entered into the 2013 Credit Facility, issued $600.0 million of Senior Notes, which bear interest at 5.25%, and retired our previous credit facility. We recorded a loss of $17.8 million during 2013 due to the write-off of $12.8 million of unamortized deferred financing fees and debt discount associated with the previous credit facility and $5.0 million of fees paid in connection with the 2013 Credit Facility and Senior Notes.
Interest Expense, net
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Interest expense, net of capitalized interest and interest income, decreased $0.7 million to $0 for the three months ended September 30, 2014. This decrease is attributable to 99.3% of our interest capitalized to capital projects during the three months ended September 30, 2014 compared to 94.7% during the three months ended September 30, 2013.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Interest expense, net of capitalized interest and interest income, decreased $3.5 million to $0 for the nine months ended September 30, 2014. This decrease is attributable to 99.6% of our interest capitalized to capital projects during the nine months ended September 30, 2014 compared to 91.1% during the nine months ended September 30, 2013, with the remainder of interest expense offset by interest income.
The majority of our capitalized interest is related to our WorldView-3 and WorldView-4 satellites. Capitalization of interest related to WorldView-3 will cease once the satellite reaches FOC in October 2014. Capitalization of interest related to WorldView-4 will cease once the satellite is placed in storage, which we anticipate occurring in the fourth quarter of 2014.
Income Tax Expense (Benefit)
For the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Income tax benefit decreased $3.2 million, or 84.2%, to $0.6 million for the three months ended September 30, 2014 from an income tax benefit of $3.8 million for the three months ended September 30, 2013. The lower tax benefit in 2014 is due to the impact of discrete period items on pre-tax income for the period, whereas the tax benefit in 2013 was principally due to pre-tax book loss reported in the period.
For the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013
Income tax benefit decreased $35.8 million, or 97.0%, to $1.1 million for the nine months ended September 30, 2014 from an income tax benefit of $36.9 million for the nine months ended September 30, 2013. The lower tax benefit in 2014 is due to the impact of discrete period items on pre-tax income for the period, whereas the tax benefit in 2013 was principally due to pre-tax book loss reported in the period.
Balance Sheet Measures
Total assets decreased $45.1 million, or 1.4%, to $3,120.7 million at September 30, 2014 from $3,165.8 million at December 31, 2013 primarily due to a decrease in cash and cash equivalents, partially offset by increases in goodwill and intangible assets as a result of an acquisition completed during the first quarter of 2014, and property and equipment, net of accumulated depreciation, primarily from current quarter costs to complete and insure our WorldView-3 satellite prior to launch. Costs incurred to build our WorldView-4 satellite and other infrastructure projects were offset by depreciation.
Total liabilities decreased $56.1 million, or 3.1%, to $1,726.4 million at September 30, 2014 from $1,782.5 million at December 31, 2013 primarily due to a decrease in deferred revenue, in addition to reductions in accounts payable and accrued liabilities resulting from reduced operating costs in 2014.
Liquidity and Capital Resources
As of September 30, 2014, we had $127.4 million in cash and cash equivalents. We believe that the combination of funds currently available to us and funds expected to be generated from operations will be adequate to finance our operations and development activities for the next twelve months. The U.S. Government accounted for 59.9% of our consolidated revenue for the nine months ended September 30, 2014, of which the EnhancedView SLA comprised
36.4% of our consolidated revenue. If the U.S. Government were not to renew or extend the EnhancedView SLA at similar levels or similar terms, we believe we would be able to maintain operations at a reduced level with existing cash, cash equivalents and proceeds from operations for at least the next twelve months.
On July 23, 2014, the Company’s Board of Directors authorized a program to repurchase up to $75.0 million of the Company’s outstanding common stock through December 31, 2015, of which 495,870 shares, or $15.0 million, has been repurchased at an average purchase price of $30.27 as of September 30, 2014. The Company may repurchase shares through open market purchases, privately negotiated transactions, structured or derivative transactions such as puts, calls, options, forwards, collars, accelerated share repurchase transactions (with or without collars), other equity contracts or other methods of acquiring shares, in each case on such terms and at such times as shall be permitted by applicable securities laws and determined by management. The stock repurchase program does not obligate the Company to acquire any stock, and it may be limited or terminated at any time without notice.
In summary, our cash flows were:
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
Net cash provided by operating activities
|
|
$
|
148.6
|
|
$
|
75.9
|
|
Net cash used in investing activities
|
|
|
(237.8)
|
|
|
(730.9)
|
|
Net cash (used in) provided by financing activities
|
|
|
(12.5)
|
|
|
664.8
|
|
Cash provided by operating activities was $148.6 million for the nine months ended September 30, 2014 compared to cash provided by operating activities of $75.9 million for the nine months ended September 30, 2013. The $72.7 million increase in cash provided by operating activities was primarily due to net income in 2014 compared with a loss in 2013, which was largely the result of merger related expenditures incurred in connection with our acquisition of GeoEye.
Cash used in investing activities was $237.8 million for the nine months ended September 30, 2014 compared to $730.9 million for the nine months ended September 30, 2013. The $493.1 million decrease in cash used in investing activities was primarily due to cash expenditures for the acquisition of GeoEye incurred in 2013, partially offset by an acquisition completed in 2014. We continue to make capital expenditures primarily related to WorldView-4 to enhance its capabilities and expect to complete those enhancements in the fourth quarter of 2014.
Cash used in financing activities was $12.5 million for the nine months ended September 30, 2014 compared to cash provided by financing activities of $664.8 million for the nine months ended September 30, 2013. The $677.3 million decrease in cash provided by financing activities was primarily due to $632.6 million in net proceeds received in 2013 from refinancing our debt in connection with the acquisition of GeoEye. In addition, cash proceeds from the exercise of stock options decreased $28.3 million to $8.6 million for the nine months ended September 30, 2014 from $36.9 million for the nine months ended September 30, 2013 primarily as a result of former GeoEye executives exercising their options following the acquisition. Furthermore, the Company repurchased $15.0 million of its common stock on the open market as part of its share repurchase program.
2013 Credit Facility
In connection with the acquisition of GeoEye on January 31, 2013, we entered into the 2013 Credit Facility, which includes a seven-year $550.0 million Senior Secured Term Loan Facility and a five-year $150.0 million Senior Secured Revolving Credit Facility. At the closing of the 2013 Credit Facility, we borrowed the full amount of the Senior Secured Term Loan Facility. As of September 30, 2014, we have not drawn any amounts under the Senior Secured Revolving Credit Facility. The 2013 Credit Facility requires quarterly principal payments of $1.375 million, which began on June 30, 2013 and will continue through February 1, 2020. As of February 1, 2014, there is no penalty for the early repayment of the Senior Secured Term Loan Facility. Borrowings under the 2013 Credit Facility bear interest at an adjusted LIBOR rate, plus a 2.75% margin subject to a 1.0% LIBOR floor. The LIBOR margin becomes 2.5% when our ratio of total debt to Adjusted EBITDA is 2.5:1.0 or lower. The Senior Secured Term Loan Facility currently bears interest based upon the LIBOR-based rate. The Company is also required to pay
a commitment fee of between 37.5 to 50.0 basis points, payable quarterly, on the average daily unused amount of the revolving credit facility based on our leverage ratio.
Our obligations under the 2013 Credit Facility are guaranteed by certain of our existing and future direct and indirect wholly-owned domestic subsidiaries. Our obligations and the obligations of our guarantor subsidiaries under the 2013 Credit Facility are collateralized by substantially all of our assets and the assets of the guarantor subsidiaries.
The 2013 Credit Facility contains affirmative and negative covenants that we believe are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with its affiliates. The 2013 Credit Facility also requires that the Company comply with a maximum leverage ratio and minimum interest coverage ratio. As of September 30, 2014, we were in compliance with our debt covenants.
Senior Notes
In connection with the acquisition of GeoEye, we issued the Senior Notes, which bear interest at 5.25% per year. Interest on the Senior Notes is payable on February 1 and August 1 of each year, beginning on August 1, 2013. The Senior Notes were issued at par and mature on February 1, 2021. We may redeem some or all of the Senior Notes at any time on or after February 1, 2017, at the redemption prices set forth in the indenture governing the Senior Notes. The initial redemption price for the Senior Notes is 102.625% of their principal amount plus accrued and unpaid interest to the date of redemption. We may redeem some or all of the Senior Notes at any time prior to February 1, 2017, at a redemption price equal to 100% of their principal amount, plus a “make whole” premium, together with accrued and unpaid interest to the date of redemption. In addition, on or prior to February 1, 2016, we may redeem up to 35% of the principal amount of the Senior Notes using the net cash proceeds from sales of certain types of capital stock at a redemption price equal to 105.250% of the principal amount of the Senior Notes, plus accrued and unpaid interest to the date of redemption, subject to certain other provisions as set forth in the offering memorandum. If a change of control occurs, we must give holders of the Senior Notes an opportunity to sell us their Senior Notes at a purchase price of 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest to the date of purchase.
The Senior Notes are senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness and senior to our existing and future subordinated indebtedness. The Senior Notes are unconditionally guaranteed, jointly and severally, by all of our existing and certain of our future domestic subsidiaries, including GeoEye and its domestic subsidiaries, which also guarantee our 2013 Credit Facility. Each guarantor’s guarantee ranks parri passu in right of payment with all future senior indebtedness of the guarantor.
The Senior Notes have not been registered under the Securities Act of 1933, as amended (“Securities Act”). We agreed to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement, pursuant to a registration rights agreement if the Senior Notes were not freely transferable on February 1, 2014 under Rule 144 of the Securities Act, by persons that are not our “affiliates” (as defined under Rule 144). As of February 1, 2014, the Senior Notes were freely transferable and eligible for resale pursuant to Rule 144 under the Securities Act.
The net proceeds of the 2013 Credit Facility and Senior Notes were used, along with cash on hand, to refinance our $500.0 million senior secured term loan and $100.0 million senior secured revolving credit facility entered into on October 12, 2011, to fund the discharge and redemption of GeoEye’s $400.0 million 9.625% Senior Secured Notes due 2015 and $125.0 million 8.625% Senior Secured Notes due 2016 assumed in connection with the acquisition, to pay the cash consideration under the merger agreement and to pay fees and expenses related to the transactions.
Contractual Obligations
As of September 30, 2014, there were no significant changes to the contractual obligations table presented in our Annual Report on Form 10-K for the year ended December 31, 2013.
Non-U.S. GAAP Financial Measures
Reconciliation of Net Cash Flows Provided by Operating Activities to Free Cash Flow
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
Net cash flows provided by operating activities
|
|
$
|
148.6
|
|
$
|
75.9
|
|
Net cash flows used in investing activities
|
|
|
(237.8)
|
|
|
(730.9)
|
|
Acquisition of businesses, net of cash acquired
|
|
|
35.7
|
|
|
524.0
|
|
Free cash flow
|
|
$
|
(53.5)
|
|
$
|
(131.0)
|
|
Free cash flow is defined as net cash provided by operating activities less net cash flows used in investing activities (excluding acquisition of businesses, net of cash acquired). Free cash flow is not a recognized term under U.S. GAAP and may not be defined similarly by other companies. Free cash flow should not be considered an alternative to “operating income (loss),” “net income (loss),” “net cash flows provided by (used in) operating activities” or any other measure determined in accordance with U.S. GAAP. Since free cash flow includes investments in operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most comparable U.S. GAAP measure — “net cash flows provided by (used in) operating activities” because it provides information about the amount of cash generated after acquisitions of businesses that is then available to repay debt obligations, make investments, fund acquisitions, and for certain other activities. There are limitations to using non-U.S. GAAP financial measures, including the difficulty associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Net income (loss)
|
|
$
|
0.9
|
|
$
|
(1.8)
|
|
$
|
6.3
|
|
$
|
(83.4)
|
|
Depreciation and amortization
|
|
|
57.7
|
|
|
59.4
|
|
|
172.9
|
|
|
165.7
|
|
Interest expense, net
|
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
3.5
|
|
Income tax benefit
|
|
|
(0.6)
|
|
|
(3.8)
|
|
|
(1.1)
|
|
|
(36.9)
|
|
EBITDA
|
|
|
58.0
|
|
|
54.5
|
|
|
178.1
|
|
|
48.9
|
|
Loss from early extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17.8
|
|
Loss on abandonment of asset
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
Restructuring charges (1)
|
|
|
—
|
|
|
3.1
|
|
|
1.1
|
|
|
37.0
|
|
Acquisition costs (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.6
|
|
Integration costs (1)
|
|
|
3.5
|
|
|
8.0
|
|
|
12.9
|
|
|
23.1
|
|
Adjusted EBITDA
|
|
$
|
61.5
|
|
$
|
65.6
|
|
$
|
193.3
|
|
$
|
147.4
|
|
|
(1)
| |
Restructuring, acquisition and integration costs consist of non-recurring charges related to the combination with GeoEye. |
EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and may not be defined similarly by other companies. EBITDA and Adjusted EBITDA should not be considered alternatives to net income as indications of financial performance or as alternatives to cash flow from operations as measures of liquidity. There are limitations to using non-U.S. GAAP financial measures, including the difficulty associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.
EBITDA and Adjusted EBITDA are key measures used in our internal operating reports by management and our Board of Directors to evaluate the performance of our operations and are also used by analysts, investment banks and lenders for the same purpose. EBITDA, excluding certain acquisition costs, is a measure being used as a key element of the company-wide bonus incentive plan.
We believe that the presentation of EBITDA and Adjusted EBITDA enables a more consistent measurement of period to period performance of our operations and facilitates comparison of our operating performance to companies in our industry. We believe that EBITDA and Adjusted EBITDA measures are particularly important in a capital intensive industry such as ours, in which our current period depreciation is not a good indication of our current or future period capital expenditures. The cost to construct and launch a satellite and to build the related ground infrastructure may vary greatly from one satellite to another, depending on the satellite’s size, type and capabilities. For example, our QuickBird satellite cost significantly less than our WorldView-1 and WorldView-2 satellites. Current depreciation expense is not indicative of the revenue generating potential of the satellites.
EBITDA excludes interest income, interest expense and income taxes because these items are associated with our capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of prior capital expenditure decisions which are not indicative of future capital expenditure requirements.
Adjusted EBITDA further adjusts EBITDA to exclude the loss on the early extinguishment of debt and the loss on abandonment of asset because these are not related to our primary operations. Additionally, it excludes restructuring costs, acquisition costs and integration costs as these are non-core items. Restructuring costs are costs incurred to realize efficiencies from the acquisition with GeoEye, such as reducing excess workforce, consolidating facilities and systems, and relocating ground terminals. Acquisition costs are costs incurred to effect the acquisition, such as advisory, legal, accounting, consulting and other professional fees. Integration costs consist primarily of professional fees incurred to assist us with system and process improvements associated with integrating operations. Loss on early extinguishment of debt is related to entering into the 2013 Credit Facility and Senior Notes, the proceeds of which were used to refinance our $500.0 million senior secured term loan and $100.0 million senior secured revolving credit facility, and to fund the discharge and redemption of GeoEye’s $525.0 million senior secured notes that we assumed in the acquisition.
We use EBITDA and Adjusted EBITDA in conjunction with traditional U.S. GAAP operating performance measures as part of our overall assessment of our performance and we do not place undue reliance on these Non-GAAP measures as our only measures of operating performance. EBITDA and Adjusted EBITDA should not be considered as substitutes for other measures of financial performance reported in accordance with U.S. GAAP.
Off-Balance Sheet Arrangements, Guaranty and Indemnification Obligations
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of September 30, 2014.
Guaranty and Indemnification Obligations
We enter into agreements in the ordinary course of business with resellers and others. Most of these agreements require us to indemnify the other party against third-party claims alleging that one of our products infringes or misappropriates a patent, copyright, trademark, trade secret or other intellectual property right. Certain of these agreements require us to indemnify the other party against claims relating to property damage, personal injury or acts or omissions by us, our employees, agents or representatives. In addition, from time to time we have made guarantees regarding the performance of our systems to our customers.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions.
Refer to the accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013, where we discuss our more significant judgments and estimates used in the preparation of the Unaudited Condensed Consolidated Financial Statements. We have made no significant changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, 2013.
Estimated Useful Lives of Satellites
As discussed above, the Company is in the process of reviewing the useful lives of its satellites, which it expects to complete in the fourth quarter of 2014. If the evaluation results in a lengthening of satellite lives, revenue and depreciation expense would be impacted as estimated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Effect on the 3 Months Ended December 31, 2014 (in $millions, except years of useful life)
|
|
|
|
WorldView-2
|
|
WorldView-1
|
|
GeoEye-1
|
|
Increase in Useful Life
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
Decrease in Revenue
|
|
(0.2)
|
|
(0.3)
|
|
(0.4)
|
|
(1.4)
|
|
(2.3)
|
|
(3.0)
|
|
-
|
|
-
|
|
-
|
|
Decrease in Depreciation Expense
|
|
(1.4)
|
|
(2.5)
|
|
(3.4)
|
|
(2.4)
|
|
(4.0)
|
|
(5.1)
|
|
(2.4)
|
|
(4.0)
|
|
(5.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Effect on the 12 Months Ended December 31, 2015 (in $millions, except years of useful life)
|
|
|
|
WorldView-2
|
|
WorldView-1
|
|
GeoEye-1
|
|
Increase in Useful Life
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
+ 1 year
|
|
+ 2 years
|
|
+ 3 years
|
|
Decrease in Revenue
|
|
(0.8)
|
|
(1.4)
|
|
(1.8)
|
|
(5.5)
|
|
(9.1)
|
|
(11.9)
|
|
-
|
|
-
|
|
-
|
|
Decrease in Depreciation Expense
|
|
(5.8)
|
|
(10.2)
|
|
(13.6)
|
|
(9.7)
|
|
(16.0)
|
|
(20.4)
|
|
(9.8)
|
|
(15.9)
|
|
(20.1)
|
|
Impacted revenue is primarily related to the amortization of pre-FOC payments from our NextView agreement with NGA, which is recognized over the expected useful life of WorldView-1. The above presented revenue decreases would be directly impactful to EBITDA. None of the changes presented in the table above impact our future cash flows. EBITDA is a non-U.S. GAAP financial measure. Refer to ‘Non-U.S. GAAP Financial Measures’ section above for further detail.
New Accounting Pronouncements
See Note 2 “Summary of Significant Accounting Policies” of our Unaudited Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements and our expectation of their impact on our Unaudited Condensed Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. However, due to the inherent uncertainties in making estimates, actual results could materially differ from those estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposure to market risk since December 31, 2013. Refer to Item 7A of our 2013 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (our principal executive officer and our principal financial officer, respectively), we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of September 30, 2014. Based upon that evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2014.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which, we believe, would have a material adverse effect on our business, operating results, financial condition or cash flows.
ITEM 1A. RISK FACTORS
Investment in our securities involves risk. In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on February 26, 2014. There have been no material changes to our Risk Factors from those included in our Annual Report on Form 10-K, as updated under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on May 1, 2014.
ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
Share repurchase activity during the three and nine months ended September 30, 2014 was as follows:
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Total Number
|
|
|
Approximate
|
|
|
|
|
|
|
|
of Shares
|
|
|
Dollar Value
|
|
|
Total
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|
|
Average
|
|
Purchased as Part
|
|
|
of Shares That
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|
|
Number
|
|
|
Price
|
|
of Publicly
|
|
|
May Yet be
|
|
|
of Shares
|
|
|
Paid Per
|
|
Announced
|
|
|
Purchased
|
(in millions, except per share data)
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|
Purchased
|
|
|
Share
|
|
Program
|
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|
Under Program
|
August 12, 2014 through September 17, 2014
|
|
495,870
|
|
$
|
30.27
|
|
495,870
|
|
$
|
59,991,462
|
On July, 23, 2014, the Company’s Board of Directors authorized a program to repurchase up to $75.0 million of the Company’s outstanding common stock through December 31, 2015. During the three and nine months ended September 30, 2014, the Company repurchased 495,870 shares, or $15.0 million, of its common stock in the open market at an average purchase price of $30.27 per share. The remaining $60.0 million in the table represents the amount available to repurchase shares under the authorized share repurchase program as of September 30, 2014.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBIT INDEX
The exhibits listed in the Exhibit Index (following the signatures page of this Form 10-Q) are filed with, or incorporated by reference in, this Form 10-Q.
SIGNATURE
DIGITALGLOBE, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: October 30, 2014
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/s/Fred Graffam
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Fred Graffam
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Senior Vice President and Interim Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
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EXHIBIT INDEX
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Incorporated by Reference
|
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Exhibit No
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Exhibit Description
|
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Form
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SEC File No.
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|
Exhibit
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Filing Date
|
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Filed Herewith
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10.1#
|
|
Modification P000012 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
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X
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10.2+
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Employment Agreement, dated as of July 23, 2014, by and between the Company and Jeffrey. R. Tarr.
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8-K
|
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001-34299
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10.1
|
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7/29/2014
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31.1
|
|
Certification of the Company’s Chief Executive Officer, Jeffrey R. Tarr, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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X
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31.2
|
|
Certification of the Company’s Interim Chief Financial Officer, Fred Graffam, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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|
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X
|
32.1††
|
|
Certification of the Company’s Chief Executive Officer, Jeffrey R. Tarr, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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X
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32.2††
|
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Certification of the Company’s Interim Chief Financial Officer, Fred Graffam, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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X
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101
|
|
The following materials for the DigitalGlobe, Inc. Annual Report on Form 10-Q for the quarter ended September 30, 2014, filed on October 30, 2014, Commission File No. 001-34299, formatted in eXtensible Business Reporting Language (XBRL): (i.) Unaudited Condensed Consolidated Statements of Operations (ii.) Unaudited Condensed Consolidated Balance Sheets (iii.) Unaudited Condensed Consolidated Statements of Cash Flows (iv.) Related notes, tagged or blocks of text
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X
|
#Certain portions of this exhibit have been omitted by redacting a portion of the text. This exhibit has been filed separately with the U.S. Securities and Exchange Commission pursuant to a request for confidential treatment.
+Management contract or compensatory plan arrangement.
††Furnished herewith.
Exhibit 10.1
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
UNCLASSIFIED
|
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|
|
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT
|
Contract ID Code
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Page
|
1 of 10 Pages
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|
2. AMENDMENT/MODIFICATION NO.
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3. EFFECTIVE DATE
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4. REQUISITION/PURCHASE REQ. NO.
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PROJECT NO. (If applicable)
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P00012
|
09/01/2014
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See Schedule
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6. ISSUED BY
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CODE HM0210
|
7. ADMINISTERED BY (If other than Item 6)
|
CODE [**Redacted**]
|
[**Redacted**]
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|
[**Redacted**]
|
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|
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code)
|
(x)
|
9A. AMENDMENT OF SOLICITATION NO.
|
DIGITALGLOBE, INC.
|
Attn: DIGITALGLOBE, INC.
|
|
9B. DATED (SEE ITEM 11)
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1601 DRY CREEK DRIVE SUITE 260
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LONGMONT CO 805036493
|
X
|
10A. MODIFICATION OF CONTRACT/ORDER NO.
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|
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HM021013CN002
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|
|
|
CODE 1CGQ7
|
FACILITY CODE
|
|
10B. DATED (SEE ITEM 13)
|
|
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|
07/30/2013
|
|
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
|
|
|
|
☐
|
The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers
|
☐is extended. ☐ is not extended.
|
|
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers . FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER If by virtue of this amendment you desire to change an offer already submitted , such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment and is received prior to the opening hour and date specified.
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12. ACCOUNTING AND APPROPRIATION DATA(required)
|
Net Increase:
|
[**Redacted**]
|
See Schedule
|
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|
13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
|
|
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CHECK ONE
|
A.
|
THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
|
|
B.
|
THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b) .
|
|
C.
|
THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
|
X
|
D.
|
OTHER (Specify type of modification and authority)
Option Exercise in accordance with (IAW) H.24 and Incrementa l Funding IAW Paragraph B.lO
|
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|
E. IMPORTANT:
|
Contractor
|
☐ is not.
|
☐ is required to sign this document and return 0
|
copies to the issuing office .
|
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible .)
Tax ID Number: 31-1420852
DUNS Number: 789638418
The purpose of this modification is to exercise Option 4 Contract Year 5 effective 01-September-2014 for contract line item (CLIN) 0401 Service Level Agreement For Pixel & Imagery Acquisition/Operations (Baseline Collection Capacity), CLIN 0404 Value-Added Products And Services, CLIN 0405 Physical Media Delivery and CLIN 0406 System Engineering Services Support.
Additionally, this modification:
A. Provides incremental funding in the amount [**Redacted**] under CLIN 0401, Service Level
Continued ...
Except as provided herein, all terms and conditions of the document referenced in Item 9 A or 10A, as heretofore changed, remains unchanged and in full force and effect.
|
|
15A. NAME AND TITLE OF SIGNER (Type or print)
|
16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
|
|
[**Redacted**]
|
|
|
|
15B. CONTRACTOR/OFFEROR
|
15C. DATE SIGNED
|
16C. DATE SIGNED
|
[**Redacted**]
|
|
[**Redacted**]
|
(Signature of person authorized to sign)
|
|
STANDARD FORM 30 (REV. 10-83)
|
NSN 7540-01-152-8070
Previous edition unusable
|
|
Prescribed by GSA
FAR (48 CFR) 53.243
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
2
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
Agreement (informational Sub-CLINs 040101 through
040103).
B. Provides incremental funding in the amount of
[**Redacted**] under CLIN 0406, allocated as follows:
(i) [**Redacted**] under informational
Sub-CLIN 040601 for EV Engineering RDT&E tasks;
(ii) [**Redacted**] under informational Sub-CLINs 040602 and 040603 for [**Redacted**] RDT&E task; and
(iii) [**Redacted**] under informational Sub-CLINs 040604 and 040605 for the [**Redacted**] O&M task.
C. Reallocates Value-Added Products And Services unused indefinite-quantity ordering CLIN ceiling value from CLIN 0304 (Option 3 Contract Year 4) to CLIN 0404; and
D. Reallocates System Engineering Services Support unused time and material CLIN ceiling value from CLIN 0306 (Option 3 Contract Year 4)
to CLIN 0406.
The CLIN ceiling value reallocations have been mutually agreed to by the Parties (reference NGA and DigitalGlobe, Inc. emails dated July 17, 2014).
Total funding obligated under the contract increases by [**Redacted**] from [**Redacted**] to [**Redacted**].
The total value of the contract, including unexercised options, remains unchanged.
These Options are exercised in accordance with the terms and conditions of the contract. The performance period is extended through
31-August-2015. Accordingly, the contract is modified as follows:
1. Under Section B, Supplies or Services and Prices/Costs, Paragraph B.7 Total Contract Price/Total Contract Funding (change pages 21, 22 and 23 are attached hereto):
a. Under CLIN Series 0300, Contract Year 4:
Continued ...
|
|
|
|
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGF COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
3
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
(1) Under CLIN 0304, the Maximum Total Price is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. Funds obligated remain at zero.
(2) Under CLIN 0306, the Maximum Total Price is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. Funds obligated are unchanged.
(3) Under Subtotal Contract Year 4 the Maximum Total Price is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. Funds obligated are unchanged.
b. Under CLIN Series 0400, Contract Year 5:
(1) Under CLIN 0401, the Obligated Amount column is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Maximum Total Price is unchanged.
(2) Under CLIN 0404, the Maximum Total Price is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. Funds obligated remain at zero.
(3) Under CLIN 0406, the Maximum Total Price is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. Obligated Amount column is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is increased to [**Redacted**] as a result of the combined changes to the Maximum Total Price and Obligated Amount.
(4) Under Subtotal Contract Year 5, the Maximum Total Price is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Obligated Amount column is Continued ...
|
|
|
|
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
4
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
0304
|
increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased to [**Redacted**] as a result of the combined changes to the Maximum Total Price and Obligated Amount.
c. Under Total Contract Value with Options, the Obligated Amount column is increased by [**Redacted**] from [**Redacted**] to [**Redacted**]. The Unfunded Amount column is decreased [**Redacted**] from [**Redacted**] to [**Redacted**]. The Maximum Total Price is unchanged.
2. Under Section G, Contract Administration Data, Paragraph G.6, Accounting and Appropriation Data, the table is revised to reflect the [**Redacted**] obligation under CLIN 0401 informational Sub-CLINs 040101 through 040103 and the [**Redacted**] obligation under CLIN 0406 informational Sub-CLINs 040601 through 040605. Change page 33 is attached hereto.
Period Of Performance End Date changed from 31-AUG-14 to 31-AUG-15
Discount Terms:
Net 30 Payment:
[**Redacted**]
FOB: Destination
Period of Performance: 09/01/2013 to 08/31/2015
Change Item 0304 to read as follows(amount shown is the obligated amount):
Commercial Satellite Imagery - Value-Added Products and Services.
Obligated Amount: [**Redacted**]
Award Type: Indefinite-quantity Min. Qty: N/A| Max. Quantity: N/A
Min. Amt: [**Redacted**]
|Max. Amount:
[**Redacted**] Minimum Guaranteed: N
Continued ...
|
|
|
|
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
5
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Period of Performance: 09/01/2013 to 08/31/2014
Change Item 0306 to read as follows(amount shown
is the obligated amount):
|
|
|
|
|
0306
|
Commercial Satellite Imagery - System Engineering Services Support.
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NID8G13161AS01, NS38G83298AS02, NSU8G83107AS28
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2013 to 08/31/2014
Change Item 0401 to read as follows(amount shown is the obligated amount):
|
|
|
|
[**Redacted**]
|
0401
|
Commercial Satellite Imagery - Service Level Agreement For Pixel & Imagery Acquisition/Operations (Baseline Collection Capacity). Firm Fixed Price $300,000,000.00
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS38G84181AS19
Continued ...
|
|
|
|
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
6
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
|
|
|
|
|
040101
|
Add Item 040101 as follows:
Commercial Satellite Imagery - SLA Funding
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS38G84181AS19
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040102 as follows:
|
|
|
|
[**Redacted**]
|
040102
|
Commercial Satellite Imagery - SLA Funding
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS38G84181AS19
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040103 as follows:
|
|
|
|
[**Redacted**]
|
040103
|
Commercial Satellite Imagery - SLA Funding
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES,
CHARTS, & GLOBES
Requisition No: NS38G84181AS19
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Continued ...
|
|
|
|
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
7
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
0404
|
Change Item 0404 to read as follows(amount shown is the obligated amount):
Commercial Satellite Imagery - Value-Added Products and Services.
Obligated Amount: [**Redacted**]
Award Type: Indefinite-quantity
Min. Qty: N/A| Max. Quantity: N/A
Min. Amt: [**Redacted**]| Max. Amount:
[**Redacted**]
Minimum Guaranteed: N
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Period of Performance: 09/01/2014 to 08/31/2015
Change Item 0405 to read as follows(amount shown is the obligated amount):
|
|
|
|
|
0405
|
Commercial Satellite Imagery - Physical Media Delivery.
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code:7640
Product/Service Description: MAPS, ATLASES,
CHARTS, & GLOBES
Requisition No: NS38G84181AS19
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Change Item 0406 to read as follows(amount shown
is the obligated amount):
|
|
|
|
[**Redacted**]
|
0406
|
Commercial Satellite Imagery - System Engineering Services Support. Ceiling Price [**Redacted**]
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS38G84196AS23
Accounting Info:
Continued ...
|
|
|
|
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURIRIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
8
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040601 as follows:
|
|
|
|
|
040601
|
System Engineering Services Support. Funding for RDT&E task(s) as directed
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES,
CHARTS, & GLOBES
Requisition No: NS38G84196AS23
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040602 as follows:
|
|
|
|
[**Redacted**]
|
040602
|
System Engineering Services Support. Funding for [**Redacted**] RDT&E tasks
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES,
CHARTS, & GLOBES
Requisition No: NID8G14183AS01
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040603 as follows:
|
|
|
|
[**Redacted**]
|
040603
|
System Engineering Services Support. Funding for [**Redacted**] RDT&E tasks
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES,
CHARTS, & GLOBES
Requisition No: NID8G14183AS01
Continued ...
|
|
|
|
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
9
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040604 as follows:
|
|
|
|
|
040604
|
System Engineering Services Support. Funding for [**Redacted**] O&M tasks
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS28G84177AS02
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
Add Item 040605 as follows:
|
|
|
|
[**Redacted**]
|
040605
|
System Engineering Services Support. Funding for O&M [**Redacted**] tasks
Award Type: Time-and-materials
CLIN VALUE [**Redacted**]
Incrementally Funded Amount: [**Redacted**]
Product/Service Code: 7640
Product/Service Description: MAPS, ATLASES, CHARTS, & GLOBES
Requisition No: NS28G84177AS02
Accounting Info:
[**Redacted**]
Period of Performance: 09/01/2014 to 08/31/2015
G-1 Accounting and Appropriation Data
|
|
|
|
[**Redacted**]
|
|
[**Redacted**]
[**Redacted**]
Continued ...
|
|
|
|
Amount
[**Redacted**]
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
CONTINUATION SHEET
|
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HM021013CN002/P00012
|
PAGE
|
OF
|
10
|
10
|
NAME OF OFFEROR OR CONTRACTOR
DIGITALGLOBE, INC.
|
|
|
D)
|
|
|
ITEM NO.
(A)
|
SUPPLIES/SERVICES
(B)
|
QUANTITY
(C)
|
UNIT
(D)
|
UNIT PRICE
(E)
|
AMOUNT
(F)
|
|
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
Total:
|
|
|
|
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
[**Redacted**]
|
|
|
NSN 7540-01-152-8067
|
OPTIONAL FORM 336 (4-86)
|
|
Sponsored by GSA
|
|
FAR (48 CFR) 53.110
|
UNCLASSIFIED
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
HM0210-13-C-N002-P00012
UNCLASSIFIED//FOROFFICIALUSEONLY
WHEN SEPARATED FROM ATTACHMENT 1
(U) SECTION A – See Standard Form (SF) 1449, Solicitation, Offer and Award
(U) SECTION B - Supplies or Services/Prices
Contract Line Item Number (CLIN) Series 0000, 0100 and 0200 are “RESERVED” under this reissued contract,
HM0210-13-C-N002. The effort under the aforementioned CLIN Series was accomplished under the predecessor contract, HM0210-10-C-0002. The remaining CLIN Series, including options, are shown in this reissued contract.
(U)BASE PERIOD: [**Redacted**] (Reference Contract HM0210-10-C-0002)
|
B.1
| |
(U) CLINs 0001, 0101 and 0201: [**Redacted**] |
|
B.2
| |
(U) CLINs 0002, 0102 and 0202: [**Redacted**] |
|
B.3
| |
(U) CLINs 0003, 0103 and 0203: [**Redacted**] |
|
B.4
| |
(U) CLINs 0004, 0104 and 0204: [**Redacted**] |
|
B.5
| |
(U) CLINs 0005, 0105 and 0205: [**Redacted**] |
|
B.6
| |
(U) CLINs 0006, 0106 and 0206: [**Redacted**] |
|
B.7
| |
(U) TOTAL CONTRACT PRICE/TOTAL CONTRACT FUNDING |
This Table is UNCLASSIFIED
|
CLIN
|
Maximum Total Price
|
Obligated Amount
|
Unfunded Amount
|
|
|
|
|
CLIN Series 0000
|
[**Redacted**]
(reference Contract HM0210-10-C-0002)
|
Contract Year 1: 0001, 0002, 0003,
0004, 0005, 0006 and [**Redacted**]
|
|
|
|
|
CLIN Series 0100
|
[**Redacted**]
(reference Contract HM0210-10-C-0002)
|
Contract Year 2: 0101, 0102, 0103,
0104, 0105, 0106 and [**Redacted**]
|
|
|
|
|
CLIN Series 0200
|
[**Redacted**]
(reference Contract HM0210-10-C-0002)
|
Contract Year 3: 0201, 0202, 0203,
0204, 0205, 0206 and [**Redacted**]
|
|
|
|
|
CLIN Series 0300
|
|
|
|
0301
|
$250,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0302
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0303
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0304
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0305
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0306
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 4
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
Contract Page 21 of 64
UNCLASSIFIED//FOR OFFICIAL USE ONLY
WHEN SEPARATED FROM ATTACHMENT 1
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
HM0210-13-C-N002-P00012
UNCLASSIFIED//FOROFFICIALUSEONLY
WHEN SEPARATED FROM ATTACHMENT 1
|
|
|
|
This Table is UNCLASSIFIED
|
CLIN
|
Maximum Total Price
|
Obligated Amount
|
Unfunded Amount
|
CLIN Series 0400
|
|
|
|
0401
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0402
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0403
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0404
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0405
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0406
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 5
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
CLIN Series 0500
|
|
|
|
0501
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0502
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0503
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0504
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0505
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0506
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 6
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
CLIN Series 0600
|
|
|
|
0601
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0602
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0603
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0604
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0605
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0606
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 7
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
CLIN Series 0700
|
|
|
|
0701
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0702
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0703
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0704
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0705
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0706
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 8
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
CLIN Series 0800
|
|
|
|
0801
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0802
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0803
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0804
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0805
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0806
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 9
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
Contract Page 22 of 64
UNCLASSIFIED//FOR OFFICIAL USE ONLY
WHEN SEPARATED FROM ATTACHMENT 1
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
HM0210-13-C-N002-P00012
UNCLASSIFIED//FOROFFICIALUSEONLY
WHEN SEPARATED FROM ATTACHMENT 1
|
|
|
|
This Table is UNCLASSIFIED
|
CLIN
|
Maximum Total Price
|
Obligated Amount
|
Unfunded Amount
|
CLIN Series 0900
|
|
|
|
0901
|
$300,000,000.00
|
[**Redacted**]
|
[**Redacted**]
|
0902
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0903
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0904
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0905
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
0906
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
Subtotal Contract Year 10
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
|
|
Total Contract Value with Options
|
$2,585,780,000.00
|
[**Redacted**]
|
[**Redacted**]
|
(U) In accordance with this contract, the Contractor shall furnish all materials, labor, equipment and facilities, except as specified herein to be furnished by the Government, and shall do all that which is necessary or incidental to the satisfactory and timely performance of CLINs 0301 through 0306 (and Option CLINs if exercised) as stated below.
(U) This is a hybrid Firm Fixed Price (FFP) and Time and Material contract (predominately FFP), with base and option periods as specified in Section/Paragraph F.5.
(U)OPTION PERIODS
|
B.10
| |
(U) OPTION CLINs 0301, 0401, 0501, 0601, 0701, 0801 and 0901 – COMMERCIAL SATELLITE IMAGERY - SERVICE LEVEL AGREEMENT FOR PIXEL & IMAGERY ACQUISITION/OPERATIONS (BASELINE COLLECTION CAPACITY) |
(U) The scope of this FFP CLIN Series for the acquisition and delivery of imagery and associated imagery support data under a SLA from the Contractor’s satellite constellation is defined in Contract Attachment 1, EnhancedView Imagery Acquisition Statement of Work, and in accordance with Special Contract Requirement H.24, Exercise of Options. This effort is priced at the amounts set forth below.
This Table is UNCLASSIFIED
|
Options: Contract Years 2 through 10
|
CLIN Series 0x01
|
Baseline Quantity (sqnmi/day)
|
Firm Fixed Price (12 Months)
|
Option CLIN 0101 (Contract Year 2)
|
[**Redacted**] (reference HM0210-10-C-0002)
|
Option CLIN 0201 (Contract Year 3)
|
[**Redacted**] (reference HM0210-10-C-0002)
|
Option CLIN 0301 (Contract Year 4)
|
[**Redacted**]
|
$250,000,000.00
|
* See Special Contract Requirement [**Redacted**]
|
Option CLIN 0401 (Contract Year 5) *
|
[**Redacted**]
|
$300,000,000.00
|
Option CLIN 0501 (Contract Year 6) *
|
[**Redacted**]
|
$300,000,000.00
|
Option CLIN 0601 (Contract Year 7) *
|
[**Redacted**]
|
$300,000,000.00
|
Option CLIN 0701 (Contract Year 8) *
|
[**Redacted**]
|
$300,000,000.00
|
Option CLIN 0801 (Contract Year 9) *
|
[**Redacted**]
|
$300,000,000.00
|
Option CLIN 0901 (Contract Year 10) *
|
[**Redacted**]
|
$300,000,000.00
|
Contract Page 23 of 64
UNCLASSIFIED//FOR OFFICIAL USE ONLY
WHEN SEPARATED FROM ATTACHMENT 1
FOIA CONFIDENTIAL TREATMENT REQUESTED
PORTIONS OF THE EXHIBIT MARKED BY [**Redacted**] HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
HM0210-13-C-N002-P00012
UNCLASSIFIED//FOROFFICIALUSEONLY
WHEN SEPARATED FROM ATTACHMENT 1
|
B.5
| |
(U) NGA: PAYMENT INSTRUCTIONS FOR MULTIPLE ACCOUNTING CLASSIFICATION CITATIONS (SEP 2003) |
(U) In accordance with DFARS 204.7107, the following instructions are provided for payment of CLINs with multiple lines of accounting: FROM THE OLDEST LINES OF ACCOUNTING FIRST.
|
B.6
| |
(U) ACCOUNTING AND APPROPRIATION DATA |
This Table is UNCLASSIFIED
|
Action
|
CLIN
|
ACRN
|
Fund Cite
|
Obligated
Funding
|
Cumulative
Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
|
Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
|
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Total
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[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
|
|
|
Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
|
|
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Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
|
|
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Total
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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|
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Total
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
|
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Total
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
|
[**Redacted**]
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|
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Total
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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[**Redacted**]
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Total
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Contract Page 33 of 64
UNCLASSIFIED//FOR OFFICIAL USE ONLY
WHEN SEPARATED FROM ATTACHMENT 1
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification
I, Jeffrey R. Tarr, certify that:
|
1)
| |
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 of DigitalGlobe, Inc.; |
|
2)
| |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3)
| |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4)
| |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a)
| |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b)
| |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c)
| |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d)
| |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5)
| |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a)
| |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b)
| |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
Date: October 30, 2014
|
|
|
|
/s/ Jeffrey R. Tarr
|
|
Jeffrey R. Tarr
|
|
President and Chief Executive Officer
|
|
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Section 302 Certification
I, Fred Graffam certify that:
|
1)
| |
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 of DigitalGlobe, Inc.; |
|
2)
| |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3)
| |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4)
| |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a)
| |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b)
| |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c)
| |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d)
| |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5)
| |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a)
| |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b)
| |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
Date: October 30, 2014
|
|
|
|
/s/ Fred Graffam
|
|
Fred Graffam
|
|
Senior Vice President and Interim Chief Financial Officer
|
|
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. § 1350)
In connection with the Quarterly Report of DigitalGlobe, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the quarter ended September 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), the undersigned officer of the Company does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
|
(1)
| |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2)
| |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
DIGITALGLOBE, INC.,
a Delaware corporation
/s/ Jeffrey R. Tarr
|
|
Jeffrey R. Tarr
|
|
President and Chief Executive Officer
|
|
Date: October 30, 2014
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. § 1350)
In connection with the Quarterly Report of DigitalGlobe, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the quarter ended September 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), the undersigned officer of the Company does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
|
(1)
| |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2)
| |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
DIGITALGLOBE, INC.,
a Delaware corporation
Red Graff
|
|
/s/ Fred Graffam
|
|
Fred Graffam
|
|
Senior Vice President and Interim Chief Financial Officer
|
|
Date: October 30, 2014
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