UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended: September 30, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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)
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Common Stock, par value $0.001 per share
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New York Stock Exchange
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(Title of each class)
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(Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the Act: Not Applicable
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
x
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
x
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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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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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
x
As of October 28, 2011 there were 46,270,665 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
DigitalGlobe, Inc.
INDEX
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Page 1 of 34
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PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Statements of Operations
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For the Three Months Ended
September 30,
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For the Nine Months Ended
September 30,
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(in millions, except per share data)
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2010
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2011
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2010
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2011
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Revenue
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$
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80.5
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$
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81.3
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$
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238.6
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$
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240.1
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Costs and expenses:
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Cost of revenue, excluding depreciation and amortization
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11.0
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17.6
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31.2
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43.8
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Selling, general and administrative
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28.2
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30.7
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81.2
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94.5
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Depreciation and amortization
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29.2
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29.1
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89.3
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87.5
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Income from operations
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12.1
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3.9
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36.9
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14.3
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Other income (expense), net
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—
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—
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—
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0.1
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Interest income (expense), net
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(10.0
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(4.6
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(30.6
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(17.8
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Income (loss) before income taxes
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2.1
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(0.7
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)
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6.3
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(3.4
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)
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Income tax (expense) benefit
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(1.3
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)
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1.8
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(3.5
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)
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3.4
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Net income (loss)
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$
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0.8
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$
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1.1
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$
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2.8
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$
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—
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Earnings (loss) per share:
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Basic earnings (loss) per share
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$
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0.02
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$
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0.02
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$
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0.06
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$
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0.00
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Diluted earnings (loss) per share
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$
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0.02
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$
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0.02
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$
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0.06
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$
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0.00
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Weighted average common shares outstanding:
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Basic
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43.6
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46.3
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44.2
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46.2
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Diluted
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46.3
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46.7
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46.3
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46.8
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See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
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Page 2 of 34
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DigitalGlobe, Inc.
Unaudited Condensed Consolidated Balance Sheets
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(in millions, except share and per share data)
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December 31,
2010
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September 30,
2011
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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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179.3
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$
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148.7
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Restricted cash
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6.7
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5.6
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Accounts receivable, net of allowance for doubtful accounts of $1.0 and $1.8, respectively
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45.3
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43.1
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Prepaid and current assets
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19.4
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19.8
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Deferred taxes
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62.7
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50.6
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Total current assets
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313.4
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267.8
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Property and equipment, net of accumulated depreciation of $478.2 and $565.6, respectively
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879.1
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993.1
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Goodwill
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8.7
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8.7
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Intangibles, net of accumulated amortization of $7.7 and $7.4, respectively
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0.3
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0.1
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Aerial image library, net of accumulated amortization of $21.1 and $23.7, respectively
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1.9
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8.9
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Long-term restricted cash
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13.6
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10.5
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Long-term deferred contract costs
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42.1
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45.8
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Other assets, net
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7.2
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5.8
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Total assets
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$
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1,266.3
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$
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1,340.7
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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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15.0
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$
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8.5
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Accrued interest
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6.2
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15.5
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Other accrued liabilities
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26.3
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44.4
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Current portion of deferred revenue
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38.9
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34.6
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Total current liabilities
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86.4
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103.0
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Long-term accrued liability
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6.0
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1.4
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Non-current portion of deferred rev
e
nue
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246.2
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309.6
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Deferred lease incentive
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4.6
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3.6
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Long-term debt, net of discount
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346.1
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348.0
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Long-term deferred tax liability
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76.7
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61.3
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Total liabilities
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$
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766.0
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$
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826.9
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COMMITMENTS AND CONTINGENCIES (Note 12)
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STOCKHOLDERS’ EQUITY
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Preferred stock, $0.001 par value; 24,000,000 shares authorized; no shares issued and outstanding at December 31, 2010 and
September 30, 2011
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—
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—
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Common stock; $0.001 par value; 250,000,000 shares authorized; 46,073,691 shares issued and outstanding at
December 31, 2010 and 46,314,205 shares issued and outstanding at September 30, 2011
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0.2
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0.2
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Treasury stock, at cost; 44,039 shares at December 31, 2010 and 65,820 shares at September 30,
2011
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(0.7
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)
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(1.2
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Additional paid-in capital
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512.7
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526.7
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Accumulated deficit
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(11.9
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)
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(11.9
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Total stockholders’ equity
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500.3
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513.8
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Total liabilities and stockholders’ equity
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$
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1,266.3
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$
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1,340.7
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See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
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Page 3 of 34
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DigitalGlobe, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
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(in millions)
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For the Nine Months Ended
September 30,
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2010
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2011
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss)
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$
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2.8
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$
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—
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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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89.3
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87.5
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EnhancedView SLA deferred revenue
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—
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74.5
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Recognition of NextView pre-FOC payments
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(19.1
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)
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(19.1
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)
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Amortization of aerial image library, deferred contract costs and lease incentive
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5.5
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8.7
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Non-cash stock compensation expense
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4.6
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11.2
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Amortization of debt issuance costs and debt discount
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3.4
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2.9
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Deferred income taxes
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2.3
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(3.4
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)
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Changes in working capital, net of investing activities:
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Accounts receivable, net
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2.9
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2.2
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Prepaids and other assets
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(1.0
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)
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(8.2
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)
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Accounts payable
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0.3
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4.1
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Accrued liabilities
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20.7
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0.6
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Deferred contract costs
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(14.2
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)
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(8.0
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Deferred revenue
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14.3
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3.7
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Net cash flows provided by operating activities
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111.8
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156.7
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Construction in progress additions
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(25.6
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)
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(188.1
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)
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Other property, equipment and intangible additions
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(7.5
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)
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(4.7
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)
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Change in restricted cash
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2.8
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4.2
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Net cash flows used in investing activities
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(30.3
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)
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(188.6
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Costs associated with initial public offering
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(0.3
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)
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|
—
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Proceeds from exercise of stock options
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9.6
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|
1.8
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Cash paid for treasury stock
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|
|
—
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|
(0.5
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)
|
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|
|
|
|
|
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Net cash flows provided by financing activities
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9.3
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1.3
|
|
|
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Net increase (decrease) in cash and cash equivalents
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|
90.8
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|
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(30.6
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)
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Cash and cash equivalents, beginning of period
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|
|
97.0
|
|
|
|
179.3
|
|
|
|
|
|
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|
|
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Cash and cash equivalents, end of period
|
|
$
|
187.8
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|
|
$
|
148.7
|
|
|
|
|
|
|
|
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SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash received (paid) for income taxes
|
|
$
|
1.2
|
|
|
$
|
(1.2
|
)
|
|
Cash paid for interest, net of capitalized amounts $6.8 and $6.0, respectively
|
|
|
(11.8
|
)
|
|
|
(12.6
|
)
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Changes to non-cash construction in progress and property, equipment and intangibles accruals, including interest
|
|
|
(20.6
|
)
|
|
|
(13.1
|
)
|
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
|
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Page 4 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in millions except for share and per share data, unless otherwise noted)
NOTE 1. General Information
DigitalGlobe, Inc. (“DigitalGlobe”, the “Company” or “we”) is a leading global provider of commercial
high-resolution earth imagery products and services that 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. We own and operate three imagery satellites – QuickBird, WorldView-1 and WorldView-2 – which collect panchromatic (black and white) and color imagery using visible and near-infrared wavelengths. We also offer a range of on-line
and off-line distribution options designed to enable customers to easily access and integrate our imagery into their business operations and applications.
NOTE 2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
Our accompanying unaudited condensed consolidated financial statements for the three and nine month periods ended September 30, 2010 and 2011, included herein have been prepared in accordance with
accounting principles generally accepted in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not
include all of the information and notes required by GAAP for complete financial statements. All amounts included in the condensed consolidated financial statements for the three and nine month periods ended September 30, 2010 and 2011, are
unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the accompanying condensed consolidated financial statements, have been included. Operating
results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011 or for any future period. The December 31, 2010 condensed balance
sheet was derived from audited financial statements, but does not include all disclosures required, in the annual financial statements, by GAAP.
Use of Estimates
The preparation of financial statements in conformity with 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 revenues and
expenses during the reporting period. However, due to the inherent uncertainties in making estimates, actual results could differ from those estimates.
Included in the results of operations for the three and nine months ended September 30, 2011 we have recorded out of period adjustments primarily to increase interest expense of $0.6 million ($0.3 million
after tax) and $0.3 million ($0.1 million after tax), respectively, as we determined the effects to be immaterial to the current and prior periods.
Revenue Recognition
Our principal source of revenue is the licensing of earth
imagery products and services for end users and resellers. Revenue is recognized when the following criteria have been met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or
determinable and the collection of funds is reasonably assured. Our revenue is generated from: (i) sales of or royalties arising from licenses of imagery; and (ii) subscription services and other service arrangements.
Sales of Licenses.
Revenue from sales of imagery licenses is recognized when the images are physically delivered to the customer or, in the case
of electronic delivery, when the customer is able to directly download the image from our system. In certain customer arrangements, we must satisfy certain acceptance provisions. For these arrangements, revenue is recognized upon acceptance by these
customers. Revenue is recognized net of contractually agreed discounts.
Royalties.
Revenue from royalties is based on agreements
or licenses with third parties that allow the third party to incorporate our product into their value added product for commercial distribution. Revenue from these royalty arrangements is recorded in the period earned or on a systematic basis over
the term of the license agreement. For those royalties that are due to third parties based on our revenue sharing arrangements, we report royalty revenue on a net basis.
Subscriptions.
The Company sells online subscriptions to our products. These arrangements allow customers access to our products via the internet for a set period of time and a fixed fee. The
subscription revenue is recorded as deferred revenue and recognized ratably over the subscription period. In addition, we have other arrangements in which customers pay for their subscription to one of the Company’s web-based products by paying
for a predetermined amount of access (for example, each time users click on an image of their home). In the case of prepayment, each time a product is accessed, a portion of the customer’s prepayment is earned. These prepayments are recorded as
deferred revenue when received and the revenue is recognized based on the number of times the product is accessed. Revenue is recognized net of contractually agreed discounts.
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Page 5 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Service Level Agreements (SLA).
We recognize service level agreement revenue net of any
allowances resulting from failure to meet certain stated monthly performance metrics. Net revenue is either recognized ratably over time for a defined and fixed level of service, or based on proportional performance when the level of service changes
based on certain criteria stated in the agreement.
Multiple Deliverable Arrangements
. The Company enters into revenue arrangements
that may consist of multiple deliverables of its product and service offerings based on the needs of its customers. These arrangements may include products delivered at the onset of the agreement, as well as products or services that are delivered
over multiple reporting periods.
In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements” and ASU
2009-14, “Certain Revenue Arrangements That Include Software Elements.” The Company concurrently adopted ASU 2009-13 and ASU 2009-14 prospectively on January 1, 2011. ASU 2009-13 changes the requirements for establishing separate
units of accounting in a multiple deliverable arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective
evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or best estimate selling price (BESP) if neither VSOE nor TPE is available. ASU 2009-14 excludes software that is contained in a tangible product from the scope of
software revenue guidance if the software is essential to the tangible product’s functionality.
The Company has generally been unable to
establish VSOE for any of our products due to the Company infrequently selling each deliverable separately or only having a limited sales history, such as in the case of new or emerging products. As of September 30, 2011, the Company has been
unable to establish TPE for any of our offerings due to the unique nature of our products and services and the limited number of competitors. As the Company is unable to establish price on the basis of VSOE or TPE, we use BESP to determine the
allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a standalone basis. The Company determines BESP for a product or service by
considering multiple factors, including but not limited to market conditions, competitive landscape, internal costs, gross margin objectives, product technology lifecycles, pricing practices, and the Company’s go-to-market strategy.
The adoption of ASU 2009-13 and ASU 2009-14 was not material to our financial results for the three and nine months ended September 30, 2011. We are
not able to reasonably estimate the effect of adopting these standards on future periods as the impact will vary based on the nature and volume of new or materially modified multiple element arrangements transacted in any given period.
While multiple deliverable arrangements occur throughout our business, the EnhancedView contract (EnhancedView) with National Geospatial-Intelligence
Agency (NGA) and the Direct Access Program (DAP) make up the majority of our multiple deliverable arrangement activity. EnhancedView and four of our DAP agreements were entered into prior to the January 1, 2011 adoption of ASU 2009-13 and ASU
2009-14 and none have been subsequently materially modified. As the Company adopted the new guidance on a prospective basis, the agreements will continue to be accounted for under the pre-adoption guidance unless they are materially modified. The
following is a description of the accounting for these arrangements.
EnhancedView.
The EnhancedView contract contains multiple
deliverables, including an SLA, infrastructure enhancements, and other services. We determined that these deliverables do not qualify as separate units of accounting due to a lack of standalone value for the delivered elements and a lack of
objective reliable evidence of fair value for any of the undelivered elements in the arrangement. We recognize revenue on a single unit of accounting using a proportional performance method based on the estimated capacity of our constellation made
available to NGA compared to the total estimated capacity to be provided over the life of the contract.
Direct Access
Program.
Revenues under the direct access program include construction of the direct access facility and an arrangement to allow the customer access to the satellite to task and download imagery. In these arrangements the facility is
delivered upon completion and customer acceptance, and the maintenance and access services occur over several subsequent reporting periods. These arrangements have been treated as a single unit of accounting due to a lack of standalone value for the
delivered elements and a lack of objective reliable evidence of fair value for any of the undelivered items. Accordingly, all funds received are initially recorded as deferred revenue and all direct costs of these arrangements are recorded as
deferred contract costs. As the direct access facilities are brought into service, the deferred revenue and deferred contracts costs are amortized ratably over the estimated customer relationship period, which is consistent with the estimated
remaining useful life of the satellite being used.
NOTE 3. Significant Customer
In September 2003, we entered into the NextView agreement with NGA under which we agreed to provide a minimum of $531.0 million of
imagery products and services from our WorldView-1 satellite. Of this amount, $266.0 million was received between September 2003 and November 2007, the month WorldView-1 became operational. The $266.0 million was used to offset the
construction costs of WorldView-1, and was recorded as deferred revenue when received. When WorldView-1 reached full
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Page 6 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
operational capacity (FOC) in November 2007, we began recognizing the deferred revenue on a straight line basis over the estimated useful life of WorldView-1. Based on the current estimated
useful life of WorldView-1, we recognized $19.1 million of revenue related to the pre-FOC payments for the nine months ended September 30, 2010 and 2011.
On August 6, 2010, we entered into the EnhancedView contract with NGA. The SLA portion of the EnhancedView contract (Enhanced View SLA) became effective on September 1, 2010, commencing upon the
expiration of the NextView SLA. The EnhancedView contract has a ten year term, inclusive of nine one-year options exercisable by NGA, and is subject to Congressional appropriations and the right of NGA to terminate or suspend the contract at any
time.
We recognize revenue for the $2.8 billion in services to be provided under the EnhancedView SLA using a proportional performance method
based upon the percentage of capacity of our constellation made available to NGA compared to the total capacity to be provided over the life of the contract. The contract requires the Company to increase capacity of the constellation through the
installation of seven additional remote ground terminals above the number the Company operated prior to the EnhancedView contract, which communicate directly with our satellites, as well as the addition of a new satellite, WorldView-3. As capacity
is added to our constellation, and as contractually agreed to by NGA, we recognize revenue in direct proportion to the amount of incremental capacity that is made available to NGA. For the three months ended September 30, 2011, we recognized
approximately $39.3 million of revenue and we recorded $24.8 million of deferred revenue related to the EnhancedView SLA contract. For the nine months ended September 30, 2011, we recognized approximately $114.6 million of
revenue and we recorded $74.5 million of deferred revenue related to the EnhancedView SLA contract. As of September 30, 2011, there was $99.3 million in total deferred revenue from the inception of the EnhancedView SLA.
Under the EnhancedView SLA, and assuming all option years under the agreement are exercised and funded, we will receive a monthly non-refundable cash
payment of approximately $20.8 million from NGA during the first four years of the EnhancedView contract, with an increase to $25.0 million per month in years five through ten. Each month is subject to a holdback, up to 10% of the monthly
payment, depending upon the Company’s performance against pre-defined criteria. If NGA certifies that we have performed all requirements in the agreement each month, no holdback will be applied to that month. If funds are held back, the Company
retains the cash. The retained cash, however, can be applied to future products and services or will fund a pro-rated extension beyond the current contract period. Accordingly, all amounts held back will cause the Company to defer recognition of a
corresponding revenue amount until such additional products or services have been provided. During the nine months ended September 30, 2011, there was $0.2 million of holdback, all of which has been applied to other products and recognized
as revenue as of September 30, 2011. There was no holdback for the three months ended September 30, 2011.
On July 25, 2011,
NGA provided the Company with an Amendment of Solicitation/Modification of Contract (the Amendment) to the EnhancedView contract. The Amendment exercises the first option under the EnhancedView SLA to extend the EnhancedView SLA for the period of
September 1, 2011 through August 31, 2012.
NOTE 4. Information on Segments and Major Customers
We conduct our business through two segments: (i) defense and intelligence and (ii) commercial. Our imagery products and
services consist of imagery that we process to varying levels according to the customer’s specifications. Customers can purchase satellite or aerial images that are archived in our ImageLibrary. Customers can also order imagery content by
placing custom orders, which require 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 and harbors or airports.
We have organized our business around the defense and intelligence and commercial segments because we believe that customers in these two groups are
functionally and identifiably similar in terms of their purchasing habits. We deliver our products and services using the distribution method that best suits our customers’ needs.
The vast majority of the dollar value of our fixed assets are the satellites and the ground based production and support facilities that are common to all segments. There are no significant identifiable
assets specifically dedicated to either segment.
Only those costs directly associated with the two segments are shown in cost of revenue and
selling, general and administrative expenses in those segments. All expenses which are common to both segments and/or represent corporate operating costs are included in the unallocated cost section. Substantially all of the Company’s assets
are located in the United States.
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Page 7 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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Three months ended
September
30,
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Nine months ended
September 30,
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(in millions)
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2010
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2011
|
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2010
|
|
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2011
|
|
|
Defense and Intelligence
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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Revenue
|
|
$
|
63.2
|
|
|
$
|
64.8
|
|
|
$
|
188.9
|
|
|
$
|
189.6
|
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
2.7
|
|
|
|
6.1
|
|
|
|
8.3
|
|
|
|
12.5
|
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Selling, general and administrative
|
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|
2.4
|
|
|
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2.3
|
|
|
|
8.1
|
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|
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7.6
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|
|
|
|
|
|
|
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|
|
|
|
|
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Segment results of operations
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|
58.1
|
|
|
|
56.4
|
|
|
|
172.5
|
|
|
|
169.5
|
|
|
|
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|
|
|
|
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Commercial
|
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|
|
|
|
|
|
|
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|
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Revenue
|
|
|
17.3
|
|
|
|
16.5
|
|
|
|
49.7
|
|
|
|
50.5
|
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
1.7
|
|
|
|
1.1
|
|
|
|
5.1
|
|
|
|
3.4
|
|
|
Selling, general and administrative
|
|
|
3.5
|
|
|
|
4.7
|
|
|
|
9.8
|
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment results of operations
|
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|
12.1
|
|
|
|
10.7
|
|
|
|
34.8
|
|
|
|
32.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Unallocated Common Costs
|
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|
|
|
|
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|
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|
|
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|
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Cost of revenue excluding depreciation and amortization
|
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|
6.6
|
|
|
|
10.4
|
|
|
|
17.8
|
|
|
|
27.9
|
|
|
Selling, general and administrative
|
|
|
22.3
|
|
|
|
23.7
|
|
|
|
63.3
|
|
|
|
72.7
|
|
|
Depreciation and amortization
|
|
|
29.2
|
|
|
|
29.1
|
|
|
|
89.3
|
|
|
|
87.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Unallocated costs
|
|
|
58.1
|
|
|
|
63.2
|
|
|
|
170.4
|
|
|
|
188.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
12.1
|
|
|
|
3.9
|
|
|
|
36.9
|
|
|
|
14.3
|
|
|
Other income (loss), net
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|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
Interest income (expense), net
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|
|
(10.0
|
)
|
|
|
(4.6
|
)
|
|
|
(30.6
|
)
|
|
|
(17.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Income (loss) before income taxes
|
|
$
|
2.1
|
|
|
$
|
(0.7
|
)
|
|
$
|
6.3
|
|
|
$
|
(3.4
|
)
|
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|
|
|
|
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|
|
|
|
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|
|
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NOTE 5. Property and Equipment
Property and equipment consisted of the following as of:
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(in millions)
|
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December 31, 2010
|
|
|
September 30, 2011
|
|
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Construction in progress
|
|
$
|
79.0
|
|
|
$
|
256.1
|
|
|
Computer equipment
|
|
|
126.4
|
|
|
|
143.2
|
|
|
Machinery and equipment
|
|
|
25.9
|
|
|
|
33.1
|
|
|
Furniture and fixtures
|
|
|
15.2
|
|
|
|
15.5
|
|
|
WorldView-2 satellite
|
|
|
463.2
|
|
|
|
463.2
|
|
|
WorldView-1 satellite
|
|
|
473.2
|
|
|
|
473.2
|
|
|
QuickBird satellite
|
|
|
174.4
|
|
|
|
174.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
$
|
1,357.3
|
|
|
$
|
1,558.7
|
|
|
Accumulated depreciation
|
|
|
(478.2
|
)
|
|
|
(565.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
879.1
|
|
|
$
|
993.1
|
|
|
|
|
|
|
|
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|
Construction in progress includes our WorldView-3 satellite, ground station construction, certain internally developed
software costs and capitalized interest. Depreciation expense for property and equipment was $28.7 million and $29.1 million for the three months ended September 30, 2010 and 2011, respectively, and $88.2 million and
$87.4 million for the nine months ended September 30, 2010 and 2011, respectively.
The capitalized costs of our 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 our satellites, and related ground systems. The cost of our 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.
Following each satellite
launch, and at least annually thereafter, we review the expected operational life of our satellites. We determine a satellite’s expected operational life by considering certain factors including: (i) the probabilities of failure of the
satellite’s components from design or manufacturing defects, (ii) environmental stresses or other causes, (iii) the quality of construction, (iv) the supply of fuel, (v) the expected gradual environmental degradation of
solar panels and other components, (vi) projected levels of solar radiation, (vii) the durability of various satellite components, and (viii) the orbits in which the satellites are placed.
We have generally aligned the annual assessment of the useful life of the operating satellites with the timing of our insurance renewals in the second
half of the calendar year, and we perform the annual assessment of the useful life of the QuickBird, WorldView-1 and
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Page 8 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
WorldView-2 satellites in the second half of the calendar year or when events or circumstances dictate that a reevaluation of the useful life should be done at an earlier date. An adjustment will
be made to the estimated depreciable life of the satellite if deemed necessary by the assessment performed. Changes to the estimated useful life of our satellites and related impact on the depreciation expense will be accounted for on a prospective
basis as of the date of the change.
Commencing on March 21, 2011, the Company initiated an increase in the altitude of the QuickBird
satellite. The change in altitude was completed April 7, 2011, and resulted in an increase in the anticipated useful life of the QuickBird satellite by approximately 17 months through the third quarter of 2013. There will be no material change
to the products and solutions DigitalGlobe is able to produce using the QuickBird satellite.
NOTE 6. Other Accrued Liabilities and Long-Term Accrued Liabilities
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|
|
|
|
|
|
|
|
(in millions)
|
|
December 31, 2010
|
|
|
September 30, 2011
|
|
|
Compensation and other employee benefits
|
|
$
|
11.0
|
|
|
$
|
8.7
|
|
|
Accrued taxes
|
|
|
2.1
|
|
|
|
0.6
|
|
|
Accrued expense
|
|
|
7.0
|
|
|
|
5.2
|
|
|
Construction in progress accruals
|
|
|
1.0
|
|
|
|
23.9
|
|
|
Other
|
|
|
5.2
|
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other accrued liabilities
|
|
$
|
26.3
|
|
|
$
|
44.4
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and other employee benefits include accrued bonus expense and vacation accrual. Accrued expense primarily
represents the current portion of payments to third parties for work performed on our direct access facilities. Construction in progress accruals include amounts due for milestone payments due on the procurement and construction of our WorldView-3
satellite. Other accruals consist of third party commission expense, professional fees and the current portion of deferred lease incentives.
Long-term accrued liabilities consist of future payments related to the construction of a direct access facility.
NOTE 7. Debt
Letters of Credit
At December 31, 2010 and September 30, 2011, we had $1.2 million of restricted cash under the lease agreement for our headquarters in Longmont, Colorado. At December 31, 2010 and
September 30, 2011, we had $19.1 million and $14.9 million, respectively, in letters of credit and performance guarantees used in the ordinary course of business to support advanced payments from customers under certain of our DAP
contracts. These letters of credit are secured by restricted cash that has been recorded in our financial statements. The letters of credit, and related restricted cash amounts are released when the respective contractual obligations have been
fulfilled by the Company.
Senior Secured Notes
We issued $355.0 million principal amount of our senior secured notes in April 2009, net of the issuance discount of $13.2 million and paid fees and expenses of $10.2 million, which are
recorded in deferred financing costs. As of December 31, 2010 and September 30, 2011, the senior secured notes had a carrying value of $346.1 million and $348.0 million, respectively, and a maturity date of May 1, 2014. The
Company had the right to call the senior secured notes at a predetermined price beginning on May 1, 2012. The senior secured notes were guaranteed by certain of our subsidiaries and secured by nearly all of our assets, including the shares of
capital stock of certain of our subsidiaries, and the QuickBird, WorldView-1 and WorldView-2 satellites. Assets collateralizing the senior secured notes had a net book value of $1,246.0 million and $1,324.6 million as of December 31,
2010 and September 30, 2011, respectively. DigitalGlobe, Inc. (the parent company) was the issuer and certain of our subsidiaries were guarantors under the senior secured notes. Each of the subsidiary guarantors is 100% owned by the parent
company and the guarantees were full and unconditional and joint and several. The financial condition, results of operations and cash flows of the guarantor subsidiaries are discussed in more detail in Note 14. The senior secured notes bore interest
at the rate of 10.5% per annum, which was payable semi-annually on May 1 and November 1 each year. The Company used the effective interest rate methodology to amortize the deferred financing costs and to accrete the discount on the
notes over the term of the notes.
In May 2010, the Company offered to exchange up to $355.0 million aggregate principal amount of the
senior secured notes for notes that have been registered under the Securities Act of 1933, as amended (the Securities Act). The terms of the registered notes were the same as the terms of the original notes, except that the notes were registered
under the Securities Act and the transfer restrictions, registration rights and additional interest provisions are not applicable to the registered notes. The Company has accepted the exchange of $355.0 million aggregate principal amount of the
senior secured notes that were properly tendered.
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Page 9 of 34
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DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Interest expense, accretion of debt discount and amortization of the deferred financing fees were
$9.3 million, $0.6 million and $0.5 million, respectively, for the three months ended September 30, 2010 of which $0.6 million was capitalized to assets under construction. Interest expense, accretion of debt discount and
amortization of the deferred financing fees for the three months ended September 30, 2011 were $9.3 million, $0.7 million and $0.5 million, respectively, of which $5.9 million was capitalized to assets under construction.
Interest expense, accretion of debt discount and amortization of the deferred financing fees were $27.9 million, $1.9 million and $1.5 million, respectively, for the nine months ended September 30, 2010, respectively, of which
$1.4 million was capitalized to assets under construction. Interest expense, accretion of debt discount and amortization of the deferred financing fees were $27.9 million, $1.9 million and $1.5 million, respectively, for the nine
months ended September 30, 2011, of which $14.2 million was capitalized to assets under construction.
As of September 30, 2011
our future debt payments included the maturity of the senior secured notes in May 2014, at which time we would have owed the full obligation amount of $355.0 million. On October 12, 2011 the Company entered into a new senior secured loan
facility and has subsequently paid the full obligation under the senior secured notes. See Note 13 for further information.
NOTE 8. Fair Values of Financial Instruments
The following table provides information about the assets and liabilities measured at fair value on a recurring basis as of
December 31, 2010 and September 30, 2011 and indicates the valuation technique utilized by the Company to determine the fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Total
Carrying
Value
|
|
|
Quoted Prices
In Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Cash equivalents at December 31, 2010
|
|
$
|
98.7
|
|
|
$
|
98.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash equivalents at September 30, 2011
|
|
|
109.0
|
|
|
|
109.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Our 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 December 31, 2010 and September 30, 2011, our cash equivalents consisted of funds held in U.S. Treasury money markets. The Company has not identified any Level 2 or
Level 3 financial instruments as of December 31, 2010 and September 30, 2011.
The Company’s senior secured notes were traded
on an active market. The fair value of the senior secured notes was based on quoted market rates.
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Senior Secured Notes at December 31, 2010
|
|
$
|
346.1
|
|
|
$
|
403.8
|
|
|
Senior Secured Notes at September 30, 2011
|
|
|
348.0
|
|
|
|
390.9
|
|
NOTE 9. Shareholders’ Equity
On May 14, 2009, the Company completed an IPO consisting of 14.7 million shares of common stock at $19.00 per share. The
offering included 13.3 million shares sold by selling stockholders and 1.4 million shares sold by the Company. On September 15, 2010, the Company priced a secondary offering of shares of common stock at $30.25 per share. The Company
did not receive proceeds from the sale of the shares of its common stock in the secondary offering, therefore we expensed the $0.4 million of the costs associated with the offering. At September 30, 2011, the Company has 250.0 million
authorized shares of common stock. At September 30, 2011, 46.3 million shares of common stock were issued and 46.2 million were outstanding.
Treasury Stock
There were no repurchases of our common stock during 2010. During
2011, certain participants elected to have the Company withhold 21,781 shares to pay for minimum taxes due, in accordance with the 2007 Employee Stock Option Plan, at the time their restricted stock vested. Such shares have been included in treasury
shares.
Stock-Based Compensation Programs
The Company has equity incentive plans that provide for the grant to employees of stock-based compensation. To date, issued equity awards have consisted 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.
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Page 10 of 34
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|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
A summary of stock option activity for the nine months ended September 30, 2011 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
(in years)
|
|
|
Aggregate
Intrinsic
Value
(in millions)
(1)
|
|
|
Outstanding – December 31, 2010
|
|
|
2,991,850
|
|
|
$
|
22.96
|
|
|
|
7.65
|
|
|
$
|
26.2
|
|
|
Granted
|
|
|
541,668
|
|
|
|
28.57
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
81,701
|
|
|
|
21.60
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
108,862
|
|
|
|
27.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding – September 30, 2011
|
|
|
3,342,955
|
|
|
$
|
23.75
|
|
|
|
7.30
|
|
|
$
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable – December 31, 2010
|
|
|
1,786,744
|
|
|
$
|
21.72
|
|
|
|
6.92
|
|
|
$
|
17.9
|
|
|
Exercisable – September 30, 2011
|
|
|
2,082,988
|
|
|
$
|
22.08
|
|
|
|
6.42
|
|
|
$
|
2.1
|
|
|
(1)
|
Represents the total pretax intrinsic value for stock options with an exercise price less than the Company’s calculated common stock price as of
December 31, 2010 and September 30, 2011, respectively, which option holders would have realized had they exercised their options as of that date.
|
During the first nine months of 2011, the Company awarded 156,868 shares of restricted stock to certain employees, which will vest over four years and 17,170 unrestricted shares to independent members of
our board of directors pursuant to applicable compensation plans which vested immediately on the date of grant. A summary of restricted stock activity for the nine months ended September 30, 2011 is shown below.
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
No. of Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
|
Un-vested at December 31, 2010
|
|
|
217,860
|
|
|
$
|
30.45
|
|
|
Granted
|
|
|
174,038
|
|
|
|
29.21
|
|
|
Forfeited
|
|
|
2,531
|
|
|
|
31.54
|
|
|
Vested
|
|
|
85,595
|
|
|
|
29.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Un-vested at September 30, 2011
|
|
|
303,772
|
|
|
$
|
30.09
|
|
|
|
|
|
|
|
|
|
|
|
On April 4, 2011, Ms. Jill D. Smith, former Chief Executive Officer of the Company, terminated her
employment relationship with the Company. The provisions in Ms. Smith’s Amended and Restated Employment agreement provided for a modification in the option and stock awards that she previously received. This modification included continued
vesting of her equity awards through the two year term of her non-compete agreement and included an extension of the exercise period for her options to 90 days following the expiration of her non-compete agreement with the Company. This modification
resulted in a $5.1 million non-cash charge to stock compensation expense during the second quarter of 2011.
NOTE 10. Earnings (Loss) Per Share
Basic earnings (loss) per share (EPS) is computed by dividing 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 dividing net income (loss) by the weighted average number of common shares outstanding and dilutive potential
common shares for the period. The Company includes as potential common shares the weighted average dilutive effects of outstanding stock options and restricted shares using the treasury stock method.
|
|
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|
|
|
|
|
|
Page 11 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table sets forth the number of weighted average shares used to compute basic and diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
(in millions, except per share data)
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.8
|
|
|
$
|
1.1
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
43.6
|
|
|
|
46.3
|
|
|
|
44.2
|
|
|
|
46.2
|
|
|
Assuming exercise of stock options and restricted shares
|
|
|
2.7
|
|
|
|
0.4
|
|
|
|
2.1
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding
|
|
|
46.3
|
|
|
|
46.7
|
|
|
|
46.3
|
|
|
|
46.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No options were excluded from the computation of diluted EPS because, for the three months ended September 30, 2010,
no shares were anti-dilutive for that period. The number of options that were excluded from the computation of diluted EPS, because the effects thereof were anti-dilutive, were 2.1 million for the three months ended September 30, 2011, and
0.8 million and 1.1 million for the nine months ended September 30, 2010 and 2011, respectively.
NOTE 11. Related Party Transactions
Morgan Stanley / Morgan Stanley & Co. Incorporated
On September 21, 2010, the Company consummated a secondary offering of 6.9 million shares of common stock, on behalf of selling shareholders, at $30.25 per share. Morgan Stanley served as a
joint book-runner, and was a seller of the majority of the shares included in the offering, and received compensation in the amount of $5.7 million.
As discussed in Note 13, on October 12, 2011, we entered into our new senior secured credit facility and completed the tender offer and consent solicitation regarding our senior secured notes
pursuant to which we repurchased all of our previously outstanding senior secured notes. Morgan Stanley Senior Funding, Inc. served as a joint lead arranger and joint bookrunner for the new credit facility and Morgan Stanley served as a dealer
manager in connection with the tender offer. As a result of these transactions, Morgan Stanley and its affiliates received compensation in the amount of $3.4 million.
At December 31, 2010 and September 30, 2011, Morgan Stanley and its affiliates held 7.5 million shares, or 16.2% and 16.1%, respectively, of the Company’s common stock. Pursuant to the
Investor Agreement between the Company and Morgan Stanley, five of our current board of directors were originally Morgan Stanley’s designees. The Directors who were Morgan Stanley designees are Mr. Zervigon, Mr. Albert,
Mr. Jenson, Mr. Whitehurst and Mr. Cyprus. Mr. Albert, Mr. Jenson, Mr. Whitehurst and Mr. Cyprus are independent directors, as defined under the applicable rules of the New York Stock Exchange. As a result of the
reduction in Morgan Stanley’s ownership percentage subsequent to the sale of shares in the September 2010 secondary offering, Morgan Stanley currently has the right to propose three directors for nomination to the Board of Directors, all of
whom must be independent.
NOTE 12. Commitments and Contingencies
The Company is obligated under certain non-cancelable operating leases for office space and equipment. We currently lease 199,476
square feet of office and operations space in two locations in Longmont, Colorado. This space includes our principal executive offices. The rent varies in amounts per year through its expiration date in August 2015. Lease expense for the Longmont
location has been recorded on the straight line basis over the term of the lease. The Company received approximately $9.1 million of certain rent incentives that we have deferred and are amortizing over the life of the lease. We have
$3.6 million and $2.6 million of net leasehold improvements at December 31, 2010 and September 30, 2011, respectively, which we are amortizing ratably over the shorter of the remaining lease term or the useful life of the
leasehold improvement.
Rent expense net of sublease income approximated $0.6 million and $0.6 million, for the three months ended
September 30, 2010 and 2011, respectively, and $2.0 million and $1.8 million for the nine months ended September 30, 2010 and 2011, respectively.
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.
|
|
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|
|
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|
|
|
Page 12 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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.
NOTE 13. Subsequent Events
On October 12, 2011, the Company entered into a $500 million, seven-year senior secured term loan facility and a $100 million,
five-year senior secured revolving credit facility, the terms of which are set forth in a Credit and Guaranty Agreement dated as of October 12, 2011 among the Company, the guarantors party thereto, the lenders named therein and J.P. Morgan
Chase Bank, N.A., as administrative agent and as collateral agent (the “Credit Agreement”). The Company has borrowed the full amount of the term loan facility to fund its cash tender offer to purchase all of its senior secured notes. The
Company received net cash proceeds from the term loan facility of approximately $66.0 million following the payment of approximately $410.9 million for the tender of the senior secured notes, $11 million in estimated underwriting and other
fees and expenses incurred in connection with the tender offer and the Credit Agreement, and net of the term loan issuance discount of $12.5 million. The transaction will result in an estimated loss on extinguishment of debt of approximately
$51 million, during the fourth quarter of 2011. As a result of the tender offer, 100% of all bonds were tendered and retired by the Company. The Company will use the remaining cash proceeds for general corporate purposes, which may include
acquisitions and share repurchases. As of the date of this filing, the revolving credit facility remains undrawn.
The obligations of the
Company under the credit facility are guaranteed by certain of the Company’s domestic subsidiaries and are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions. The Credit Agreement
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 the Company’s affiliates. The Credit Agreement also requires the Company to comply with a maximum leverage ratio and minimum interest coverage ratio.
Borrowings under the Credit Agreement will bear interest, at the Company’s option, at a rate equal to either an adjusted LIBOR rate or a base rate,
in each case plus the applicable margin. The applicable margin for borrowings under the term loan facility is 4.50% for adjusted LIBOR loans or 3.50% for base rate loans. The applicable margin for borrowings under the revolving credit facility may
change depending on the Company’s leverage ratio, up to a maximum of 4.50%. The term loan facility current bears interest based upon the LIBOR-based rate. The Company will also 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 the Company’s leverage ratio.
NOTE 14. Guarantor Subsidiaries
The Company’s payment obligations for the senior secured notes (Note 7) were guaranteed by certain of our subsidiaries. Each of
the subsidiary guarantors is 100% owned by the parent company and the guarantees were full and unconditional and joint and several. For the three and nine months ended September 30, 2011, the income of the subsidiary guarantors was greater than
3% of our total pretax income, thus, we have provided the financial information below for the parent and subsidiary guarantors. Financial information for our non-guarantor subsidiary has not been presented as the financial condition, results of
operations and cash flows of our non-guarantor subsidiary are minor.
For this guarantor financial information, investments in subsidiaries
are accounted for by each entity using the equity method of accounting. Net income (loss) of the guarantor subsidiaries is, therefore, reflected in the parent company’s investments in subsidiaries. Net income (loss) of the guarantor and
non-guarantor subsidiaries is reflected in parent company as equity income (loss) in consolidated subsidiaries. The elimination entries eliminate investments in subsidiaries and the equity income (loss) in subsidiaries as well as intercompany
balances and transactions for consolidated reporting purposes.
|
|
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|
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|
Page 13 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Supplemental Unaudited Condensed Consolidating Statement of Operations
For the three months ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent
Company
|
|
|
100%
Owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
81.3
|
|
|
$
|
3.5
|
|
|
$
|
(3.5
|
)
|
|
$
|
81.3
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
17.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17.6
|
|
|
Selling, general and administrative
|
|
|
30.8
|
|
|
|
3.4
|
|
|
|
(3.5
|
)
|
|
|
30.7
|
|
|
Depreciation and amortization
|
|
|
29.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
3.8
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
3.9
|
|
|
Other income (expense), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest income (expense), net
|
|
|
(4.6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(0.8
|
)
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(0.7
|
)
|
|
Income tax (expense) benefit
|
|
|
1.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income (loss) of consolidated subsidiaries
|
|
|
1.0
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
1.1
|
|
|
Equity in income of consolidated subsidiaries
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1.1
|
|
|
$
|
0.1
|
|
|
$
|
(0.1
|
)
|
|
$
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Unaudited Condensed Consolidating Statement of Operations
For the three months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent
Company
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
80.5
|
|
|
$
|
2.2
|
|
|
$
|
(2.2
|
)
|
|
$
|
80.5
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
11.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11.0
|
|
|
Selling, general and administrative
|
|
|
28.3
|
|
|
|
2.1
|
|
|
|
(2.2
|
)
|
|
|
28.2
|
|
|
Depreciation and amortization
|
|
|
29.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
12.0
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
12.1
|
|
|
Interest income (expense), net
|
|
|
(10.0
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2.0
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
2.1
|
|
|
Income tax (expense) benefit
|
|
|
(1.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income (loss) of consolidated subsidiaries
|
|
|
0.7
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.8
|
|
|
Equity in income of consolidated subsidiaries
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.8
|
|
|
$
|
0.1
|
|
|
$
|
(0.1
|
)
|
|
$
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Unaudited Condensed Consolidating Statement of Operations
For the nine months ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent
Company
|
|
|
100%
Owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
240.1
|
|
|
$
|
10.8
|
|
|
$
|
(10.8
|
)
|
|
$
|
240.1
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
43.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43.8
|
|
|
Selling, general and administrative
|
|
|
95.0
|
|
|
|
10.3
|
|
|
|
(10.8
|
)
|
|
|
94.5
|
|
|
Depreciation and amortization
|
|
|
87.4
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
87.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
13.9
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
14.3
|
|
|
Other income (expense), net
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
Interest income (expense), net
|
|
|
(17.8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(17.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(3.8
|
)
|
|
|
0.4
|
|
|
|
—
|
|
|
|
(3.4
|
)
|
|
Income tax (expense) benefit
|
|
|
3.5
|
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income (loss) of consolidated subsidiaries
|
|
|
(0.3
|
)
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
Equity in income of consolidated subsidiaries
|
|
|
0.3
|
|
|
|
—
|
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
(0.3
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 14 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Supplemental Unaudited Condensed Consolidating Statement of Operations
For the nine months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent Company
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
238.6
|
|
|
$
|
6.3
|
|
|
$
|
(6.3
|
)
|
|
$
|
238.6
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
31.2
|
|
|
|
—
|
|
|
|
|
|
|
|
31.2
|
|
|
Selling, general and administrative
|
|
|
81.5
|
|
|
|
6.0
|
|
|
|
(6.3
|
)
|
|
|
81.2
|
|
|
Depreciation and amortization
|
|
|
89.2
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
89.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
36.7
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
36.9
|
|
|
Interest income (expense), net
|
|
|
(30.6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(30.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
6.1
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
6.3
|
|
|
Income tax (expense) benefit
|
|
|
(3.5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) before equity in income (loss) of consolidated subsidiaries
|
|
|
2.6
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
2.8
|
|
|
Equity in income of consolidated subsidiaries
|
|
|
0.2
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2.8
|
|
|
$
|
0.2
|
|
|
$
|
(0.2
|
)
|
|
$
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Unaudited Condensed Consolidating Balance Sheet
As of September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except share and per share data)
|
|
Parent
|
|
|
100% owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
148.6
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
148.7
|
|
|
Restricted cash
|
|
|
5.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.6
|
|
|
Accounts receivable
|
|
|
43.1
|
|
|
|
1.6
|
|
|
|
(1.6
|
)
|
|
|
43.1
|
|
|
Prepaid and current assets
|
|
|
19.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19.8
|
|
|
Deferred taxes
|
|
|
50.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
267.7
|
|
|
|
1.7
|
|
|
|
(1.6
|
)
|
|
|
267.8
|
|
|
Property and equipment
|
|
|
993.0
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
993.1
|
|
|
Goodwill
|
|
|
8.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.7
|
|
|
Intangibles
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
Aerial image library
|
|
|
8.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.9
|
|
|
Long-term restricted cash
|
|
|
10.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10.5
|
|
|
Long-term deferred contract costs
|
|
|
45.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45.8
|
|
|
Other assets, net
|
|
|
5.7
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
5.8
|
|
|
Investments in subsidiaries
|
|
|
1.0
|
|
|
|
—
|
|
|
|
(1.0
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,341.4
|
|
|
$
|
1.9
|
|
|
$
|
(2.6
|
)
|
|
$
|
1,340.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
10.1
|
|
|
$
|
—
|
|
|
$
|
(1.6
|
)
|
|
$
|
8.5
|
|
|
Accrued interest
|
|
|
15.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15.5
|
|
|
Other accrued liabilities
|
|
|
43.5
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
44.4
|
|
|
Current portion of deferred revenue
|
|
|
34.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
103.7
|
|
|
|
0.9
|
|
|
|
(1.6
|
)
|
|
|
103.0
|
|
|
Long-term accrued liability
|
|
|
1.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.4
|
|
|
Non-current portion of deferred rev
e
nue
|
|
|
309.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
309.6
|
|
|
Deferred lease incentive
|
|
|
3.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.6
|
|
|
Long-term debt, net of discount
|
|
|
348.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
348.0
|
|
|
Long-term deferred tax liability
|
|
|
61.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
61.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
827.6
|
|
|
$
|
0.9
|
|
|
$
|
(1.6
|
)
|
|
$
|
826.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
513.8
|
|
|
|
1.0
|
|
|
|
(1.0
|
)
|
|
|
513.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,341.4
|
|
|
$
|
1.9
|
|
|
$
|
(2.6
|
)
|
|
$
|
1,340.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 15 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Supplemental Unaudited Condensed Consolidating Balance Sheet
As of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except share and per share data)
|
|
Parent
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminating
Entries
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
179.2
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
179.3
|
|
|
Restricted cash
|
|
|
6.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6.7
|
|
|
Accounts receivable
|
|
|
45.3
|
|
|
|
1.4
|
|
|
|
(1.4
|
)
|
|
|
45.3
|
|
|
Prepaid and current assets
|
|
|
19.3
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
19.4
|
|
|
Deferred taxes
|
|
|
62.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
313.2
|
|
|
|
1.6
|
|
|
|
(1.4
|
)
|
|
|
313.4
|
|
|
Property and equipment
|
|
|
879.0
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
879.1
|
|
|
Goodwill
|
|
|
8.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.7
|
|
|
Intangibles
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
|
Aerial image library
|
|
|
1.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.9
|
|
|
Long-term restricted cash
|
|
|
13.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13.6
|
|
|
Long-term deferred contract costs
|
|
|
42.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
42.1
|
|
|
Other assets, net
|
|
|
7.1
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
7.2
|
|
|
Investments in subsidiaries
|
|
|
0.7
|
|
|
|
—
|
|
|
|
(0.7
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,266.6
|
|
|
$
|
1.8
|
|
|
$
|
(2.1
|
)
|
|
$
|
1,266.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
16.2
|
|
|
$
|
0.2
|
|
|
$
|
(1.4
|
)
|
|
$
|
15.0
|
|
|
Accrued interest
|
|
|
6.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6.2
|
|
|
Other accrued liabilities
|
|
|
25.4
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
26.3
|
|
|
Current portion of deferred revenue
|
|
|
38.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
86.7
|
|
|
|
1.1
|
|
|
|
(1.4
|
)
|
|
|
86.4
|
|
|
Long-term accrued liability
|
|
|
6.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6.0
|
|
|
Non-current portion of deferred rev
e
nue
|
|
|
246.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
246.2
|
|
|
Deferred lease incentive
|
|
|
4.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.6
|
|
|
Long-term debt, net of discount
|
|
|
346.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
346.1
|
|
|
Long-term deferred tax liability, net
|
|
|
76.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
766.3
|
|
|
$
|
1.1
|
|
|
$
|
(1.4
|
)
|
|
$
|
766.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
500.3
|
|
|
|
0.7
|
|
|
|
(0.7
|
)
|
|
|
500.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,266.6
|
|
|
$
|
1.8
|
|
|
$
|
(2.1
|
)
|
|
$
|
1,266.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 16 of 34
|
|
|
DigitalGlobe, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Supplemental Unaudited Condensed Statement of Cash Flows
For the nine months ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Consolidated
|
|
|
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
|
|
$
|
156.7
|
|
|
$
|
—
|
|
|
$
|
156.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction in progress additions
|
|
|
(188.1
|
)
|
|
|
—
|
|
|
|
(188.1
|
)
|
|
Other property, equipment and intangible additions
|
|
|
(4.7
|
)
|
|
|
—
|
|
|
|
(4.7
|
)
|
|
Decrease in restricted cash
|
|
|
4.2
|
|
|
|
—
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(188.6
|
)
|
|
|
—
|
|
|
|
(188.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
1.8
|
|
|
|
—
|
|
|
|
1.8
|
|
|
Cash paid for treasury stock
|
|
|
(0.5
|
)
|
|
|
—
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by financing activities
|
|
|
1.3
|
|
|
|
—
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash and cash equivalents
|
|
|
(30.6
|
)
|
|
|
—
|
|
|
|
(30.6
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
179.2
|
|
|
|
0.1
|
|
|
|
179.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
148.6
|
|
|
|
0.1
|
|
|
|
148.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received (paid) for income taxes
|
|
|
(1.2
|
)
|
|
|
—
|
|
|
|
(1.2
|
)
|
|
Cash paid for interest, net of capitalized amounts $6.0
|
|
|
(12.6
|
)
|
|
|
—
|
|
|
|
(12.6
|
)
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes to non-cash construction in progress and property, equipment and intangibles accruals, including interest
|
|
$
|
(13.1
|
)
|
|
$
|
—
|
|
|
$
|
(13.1
|
)
|
Supplemental Unaudited Condensed Statement of Cash Flows
For the nine months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Parent
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Consolidated
|
|
|
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
|
|
$
|
111.7
|
|
|
$
|
0.1
|
|
|
$
|
111.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction in progress additions
|
|
|
(25.6
|
)
|
|
|
—
|
|
|
|
(25.6
|
)
|
|
Other property, equipment and intangible additions
|
|
|
(7.5
|
)
|
|
|
—
|
|
|
|
(7.5
|
)
|
|
Decrease in restricted cash
|
|
|
2.8
|
|
|
|
—
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(30.3
|
)
|
|
|
—
|
|
|
|
(30.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from initial public offering, net of issuance costs
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
(0.3
|
)
|
|
Proceeds from exercise of stock options
|
|
|
9.6
|
|
|
|
—
|
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by financing activities
|
|
|
9.3
|
|
|
|
—
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
90.7
|
|
|
|
0.1
|
|
|
|
90.8
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
97.0
|
|
|
|
—
|
|
|
|
97.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
187.7
|
|
|
|
0.1
|
|
|
|
187.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received (paid) for income taxes
|
|
|
1.2
|
|
|
|
—
|
|
|
|
1.2
|
|
|
Cash paid for interest, net of capitalized amounts $6.8
|
|
|
(11.8
|
)
|
|
|
—
|
|
|
|
(11.8
|
)
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes to non-cash construction in progress and property, equipment and intangibles, accruals, including
interest
|
|
$
|
(20.6
|
)
|
|
|
—
|
|
|
|
(20.6
|
)
|
|
|
|
|
|
|
|
|
|
Page 17 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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; the loss or
impairment of our satellites; delays in the construction and launch of WorldView-3; delays in implementation of planned ground system and infrastructure enhancements; loss or damage to the content contained in our ImageLibrary; interruption or
failure of our ground system and other infrastructure, decrease in demand for our imagery products and services; increased competition that may reduce our market share or cause us to lower our prices; our failure to obtain or maintain required
regulatory approvals and licenses; changes in U.S. 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 Securities and Exchange Commission, including our Annual Report on Form 10-K.
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.
Overview
We are a leading global provider of commercial high-resolution earth imagery products and services. 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. Our principal customers include U.S. and foreign defense and intelligence agencies and a wide variety of commercial
customers, such as internet portals, companies in the energy, telecommunications, utility and agricultural industries, and U.S. and foreign civil government agencies. The imagery that forms the foundation of our products and services is collected
daily via our three high-resolution imagery satellites and managed in our content archive, which we refer to as our ImageLibrary. We believe our ImageLibrary is the largest, most up-to-date and comprehensive archive of high resolution earth imagery
commercially available, containing more than 1.8 billion square kilometers of imagery, with new imagery added every day. As of September 30, 2011, our collection capacity was approximately 840 million square kilometers per year.
Products and Services
We
offer earth imagery products and services that are comprised of imagery from our three-satellite constellation, and aerial imagery that we acquire from third party suppliers. We process our imagery to varying levels according to the customer’s
specifications and deliver our products using the distribution method that best suits 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 require 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 and harbors or airports. For example CitySphere, an
ImageLibrary product, features color imagery for 300 of the world’s largest cities that is refreshed on a routine basis.
Customers
specify how they want the imagery content that they are purchasing from us to be produced. We deliver our satellite imagery content at three processing levels: (i) basic imagery with the least amount of processing; (ii) standard imagery
with radiometric and geometric correction; and (iii) ortho-rectified imagery with radiometric, geometric, and topographic correction. Radiometric correction enables images to appear uniformly illuminated with the right level of brightness.
Geometric correction allows a user to identify the latitudinal, longitudinal and altitudinal location of any point in an image. Topographic correction accounts for terrain and projects images onto the earth as they would be seen by the human eye.
All of our aerial imagery is delivered as ortho-rectified imagery.
|
|
|
|
|
|
|
|
|
Page 18 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
We also use enhanced processing to produce mosaic and stereo imagery products. The mosaic process takes
multiple imagery scenes, collected at different times and dates, and merges them into a single seamless imagery product. We use specialized collection and enhanced processing to produce stereo imagery products. Stereo imagery products consist of two
images collected from two different viewpoints along the satellite orbit track that are produced as basic products, but can be viewed in stereo (3-D) using specialized software. Stereo imagery products are used for the creation of digital elevation
maps, for the more accurate creation of 3-D maps and for flight simulations.
We offer a range of on- and off-line distribution options
designed to enable customers to easily access and integrate our imagery into their business operations and applications, including desktop software applications, web services that provide for direct on-line access to our ImageLibrary, File Transfer
Protocol (FTP), and physical media such as CD, DVD, and hard drive. We offer an additional distribution option through our Direct Access Program (DAP) that allows certain customers, approved by the U.S. government, to task and download data directly
from our WorldView-1 and WorldView-2 satellites within their regional area of interest. DAP is designed to meet the enhanced information and operational security needs of a select and limited number of defense and intelligence customers and certain
commercial customers. To date, we have signed five customer contracts for our DAP.
We sell our products and services through a combination of
direct and indirect channels, a global network of resellers, strategic partners, direct enterprise sales and web services.
Significant
Customer
In September 2003, we entered into the NextView agreement with the National Geospatial-Intelligence Agency (NGA) under which we
agreed to provide a minimum of $531.0 million of imagery products and services from our WorldView-1 satellite. Of this amount, $266.0 million was received between September 2003 and November 2007, the month WorldView-1 became operational.
The $266.0 million was used to offset the construction costs of WorldView-1, and was recorded as deferred revenue when received. When WorldView-1 reached fully operational capacity (FOC) in November 2007, we began recognizing the deferred
revenue on a straight line basis over the estimated useful life of WorldView-1. The remaining $265.0 million commitment was to be received upon the delivery of imagery once WorldView-1 achieved FOC. In January 2008, we amended the NextView
agreement from image-based ordering to a service level agreement (NextView SLA) and increased the amount we received under the NextView agreement from $265.0 million to $311.0 million. On June 25, 2009, the NextView SLA agreement was
further amended to extend the term from July 31, 2009 through March 31, 2010 in consideration for payment of an additional $100.0 million, payable at $12.5 million per month during the extended term. On February 9, 2010, the
NextView agreement was amended to provide NGA with an option to extend the agreement for three months on the same terms from April 1, 2010 to June 30, 2010 and six additional options each for a one month period with the last option term
expiring on December 31, 2010. The NextView SLA expired August 31, 2010.
On August 6, 2010, we entered into the EnhancedView
agreement with NGA. The SLA portion of the EnhancedView agreement, (EnhancedView SLA) has an effective date of September 1, 2010, commencing upon the expiration of the NextView SLA. The EnhancedView agreement has a ten year term, inclusive of
nine one-year renewal options exercisable by NGA, and is subject to Congressional appropriations and the federal budget process, and the right of NGA to terminate or suspend the contract at any time. On July 25, 2011, NGA exercised the first
option under the EnhancedView SLA to extend the EnhancedView SLA for the period of September 1, 2011 through August 31, 2012.
The
EnhancedView SLA portion of the award is $2.8 billion over the ten-year term of the contract assuming NGA exercises all of its options, all are funded through the appropriations process and we perform as specified; $250.0 million annually, or
$20.8 million per month, for the first four contract years, commencing September 1, 2010, with an increase to $300.0 million annually, or $25.0 million per month, for the remaining six years of the contract term. The award also
provides for up to $750.0 million for value added products, infrastructure enhancements and other services, including the option for NGA to require us to lower the altitude of WorldView-2 to an altitude of 496 km at any time after
September 1, 2013. DigitalGlobe will be required to meet certain service level requirements related to the operational performance of the satellites comprising the WorldView constellation and related ground systems. To support requirements
under this agreement, we are constructing our next satellite, WorldView-3, as well as implementing certain other infrastructure enhancements.
We recognize revenue for the $2.8 billion in services to be provided under the EnhancedView SLA using a proportional performance method based upon the
estimated capacity of our constellation made available to NGA compared to the total capacity to be provided over the life of the contract. The contract requires the Company to increase capacity of the constellation through the installation of seven
additional remote ground terminals above the number the Company operated prior to the EnhancedView contract, which communicate directly with our satellites, as well as the addition of a new satellite, WorldView-3. Our WorldView-3 satellite is
expected to be ready for launch in the second half of 2014. As capacity is added to our constellation, and as contractually agreed to by NGA, we recognize revenue in direct proportion to the amount of incremental capacity that is made available to
NGA. We recognized approximately $12.5 million of revenue monthly through August 31, 2011, under the EnhancedView SLA. As of September 1, 2011,
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Page 19 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
the Company increased the capacity of the constellation made available to NGA and will now recognize approximately $14.1 million per month under the EnhancedView SLA. For the three months
ended September 30, 2011, we recognized approximately $39.3 million of revenue and we recorded $24.8 million of deferred revenue related to the EnhancedView SLA contract. For the nine months ended September 30, 2011, we
recognized approximately $114.6 million of revenue and we recorded $74.5 million of deferred revenue related to the EnhancedView SLA contract. As of September 30, 2011, there was $99.3 million in total deferred revenue from the
inception of the EnhancedView SLA.
Under the EnhancedView SLA, and assuming all option years under the agreement are exercised and funded, we
will receive a consistent, monthly non-refundable cash payment of approximately $20.8 million from NGA during the first four years of the EnhancedView contract, with an increase to $25.0 million per month in years five through ten. Each
month is subject to a holdback, up to 10% of the monthly payment, depending upon the Company’s performance against pre-defined criteria. If NGA certifies that we have performed all requirements in the agreement each month, no holdback will be
applied to that month. If funds are held back, the Company retains the cash; however, those funds can be applied to future products and services or will fund a pro-rated extension beyond the current contract period. Accordingly, all amounts held
back will cause the Company to defer recognition of a corresponding revenue amount until such additional products or services have been provided. During the nine months ended September 30, 2011, there was $0.2 million of holdback, all of
which has been applied to other products and recognized as revenue as of September 30, 2011. There was no holdback for the three months ended September 30, 2011.
Revenue
Our principal source of revenue is the licensing of our earth imagery products and
services to end users and resellers.
We conduct our business through two segments: (i) defense and intelligence and
(ii) commercial. We have organized our business into these two segments because we believe that customers in these two groups are functionally similar in terms of their purchasing habits. Our imagery products and services are comprised of
imagery that we process to varying levels according to the customers’ specifications. We deliver our products and services using the distribution method that best suits 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 require 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 and harbors or airports.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense and Intelligence
|
|
$
|
63.2
|
|
|
$
|
64.8
|
|
|
$
|
188.9
|
|
|
$
|
189.6
|
|
|
Commercial
|
|
|
17.3
|
|
|
|
16.5
|
|
|
|
49.7
|
|
|
|
50.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
80.5
|
|
|
$
|
81.3
|
|
|
$
|
238.6
|
|
|
$
|
240.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue as a percent of total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense and Intelligence
|
|
|
78.5
|
%
|
|
|
79.7
|
%
|
|
|
79.2
|
%
|
|
|
79.0
|
%
|
|
Commercial
|
|
|
21.5
|
|
|
|
20.3
|
|
|
|
20.8
|
|
|
|
21.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. and foreign sales were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
57.0
|
|
|
$
|
56.3
|
|
|
$
|
170.5
|
|
|
$
|
163.6
|
|
|
Foreign
|
|
|
23.5
|
|
|
|
25.0
|
|
|
|
68.1
|
|
|
|
76.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
80.5
|
|
|
$
|
81.3
|
|
|
$
|
238.6
|
|
|
$
|
240.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense and Intelligence Revenue
Our defense and intelligence segment consists of customers who are principally defense and intelligence agencies of U.S. or foreign governments. 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 commands and other government agencies. 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 to our imagery to deliver a final end product to a customer.
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Page 20 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our other defense and intelligence customers focus on image quality, including resolution, 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 other customers in this segment 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 our defense and intelligence customers has historically been largely from tasking orders, with
a smaller portion from sales of imagery from our ImageLibrary. We believe this trend will continue. We sell to our defense and intelligence customers both directly and through resellers.
By the second half of 2010, we had commissioned four DAP customers’ ground terminals and began generating revenue from providing satellite access time to these customers. We do not recognize revenue
from a DAP customer until we commission into operation the ground terminal and can provide contractually specified access to our operational satellites. We earn revenue based on facility and maintenance amortization and access minute fees. We
currently expect to commission our fifth DAP customer’s ground terminal during the first quarter of 2012.
The costs associated with the
facilities are deferred until the commencement of operations, and are being amortized to cost of revenue. We amortize the cost of each facility ratably over the customer relationship period, which is consistent with the estimated remaining useful
life of the satellite being used.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Defense and Intelligence revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGA SLA
|
|
$
|
37.5
|
|
|
$
|
39.3
|
|
|
$
|
112.6
|
|
|
$
|
114.6
|
|
|
Other revenue and value added services
|
|
|
6.9
|
|
|
|
5.7
|
|
|
|
22.9
|
|
|
|
16.0
|
|
|
Amortization of pre-FOC payments related to NextView
|
|
|
6.4
|
|
|
|
6.4
|
|
|
|
19.1
|
|
|
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. and Canada revenue
|
|
|
50.8
|
|
|
|
51.4
|
|
|
|
154.6
|
|
|
|
149.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenue, excluding Canada
|
|
|
1.9
|
|
|
|
1.8
|
|
|
|
9.2
|
|
|
|
6.3
|
|
|
DAP revenue
|
|
|
10.5
|
|
|
|
11.6
|
|
|
|
25.1
|
|
|
|
33.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total international revenue, excluding Canada
|
|
|
12.4
|
|
|
|
13.4
|
|
|
|
34.3
|
|
|
|
39.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total defense and intelligence revenue
|
|
$
|
63.2
|
|
|
$
|
64.8
|
|
|
$
|
188.9
|
|
|
$
|
189.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue as a Percent of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada
|
|
|
80.4
|
%
|
|
|
79.3
|
%
|
|
|
81.8
|
%
|
|
|
79.0
|
%
|
|
International, excluding Canada
|
|
|
19.6
|
%
|
|
|
20.7
|
%
|
|
|
18.2
|
%
|
|
|
21.0
|
%
|
|
Reseller and Direct Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Sales
|
|
|
88.3
|
%
|
|
|
98.5
|
%
|
|
|
88.9
|
%
|
|
|
98.2
|
%
|
|
Resellers
|
|
|
11.7
|
%
|
|
|
1.5
|
%
|
|
|
11.1
|
%
|
|
|
1.8
|
%
|
Revenue percentages from all customers whose revenue exceeded 10% of the total company revenue were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
NGA
|
|
|
60.8
|
%
|
|
|
62.7
|
%
|
|
|
63.1
|
%
|
|
|
61.8
|
%
|
|
Hitachi Solutions, Ltd.
|
|
|
9.3
|
%
|
|
|
9.8
|
%
|
|
|
8.8
|
%
|
|
|
10.0
|
%
|
Commercial Revenue
Our commercial business consists of a variety of customers that use our content for mapping, monitoring, analysis and planning activities. These customers include among others, but are not limited to,
civil governments and agencies, internet portals, map makers, energy, telecommunications, utility and agricultural companies. Our commercial business also includes customers that add our content to enhance and expand the information products and
services that they develop and sell to the commercial market.
Our commercial customers purchase our imagery products and services by placing
tasking orders or through contracts to access our imagery archive. Our commercial customers are located throughout the world. We sell to these customers both directly and through resellers. The Company has defined Americas to include North America,
South America and Central America and International to include all commercial revenue outside of the Americas.
|
|
|
|
|
|
|
|
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Page 21 of 34
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|
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the three months ended September 30, 2010 and 2011, we generated approximately 29.1% and 53.6%
of our commercial revenue from paid tasking, respectively, and 70.9% and 46.4% from our ImageLibrary, respectively. For the nine months ended September 30, 2010 and 2011, we generated approximately 30.6% and 46.8% of our commercial revenue from
paid tasking, respectively, and 69.4% and 53.2% from our ImageLibrary, respectively. The shift in revenue mix between ImageLibrary and tasking sales is related to the completion of certain contracts in 2011 which had substantial proportions of
imagery deliveries from paid tasking. However, given the nature of backlog growth among our Commercial customers, we expect the proportion of revenue from the ImageLibrary to increase in future periods.
For the three months ended September 30, 2010 and September 30, 2011, our top five commercial customers accounted for 56.1% and 48.4% of our
commercial revenue, respectively. For the nine months ended September 30, 2010 and September 30, 2011, our top five commercial customers accounted for 46.7% and 44.3% of our commercial revenue, respectively. We believe that we will have
additional growth opportunities internationally especially in countries with rapidly developing economies and as a result, we expect that long-term sales growth in our commercial segment will be higher outside of the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September
30,
|
|
|
Nine Months Ended
September
30,
|
|
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Commercial Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
8.4
|
|
|
$
|
7.2
|
|
|
$
|
21.7
|
|
|
$
|
20.2
|
|
|
International
|
|
|
8.9
|
|
|
|
9.3
|
|
|
|
28.0
|
|
|
|
30.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial revenue
|
|
$
|
17.3
|
|
|
$
|
16.5
|
|
|
$
|
49.7
|
|
|
$
|
50.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue as a Percent of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
48.6
|
%
|
|
|
43.6
|
%
|
|
|
43.7
|
%
|
|
|
40.0
|
%
|
|
International
|
|
|
51.4
|
%
|
|
|
56.4
|
%
|
|
|
56.3
|
%
|
|
|
60.0
|
%
|
|
Reseller and Direct Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct sales
|
|
|
49.3
|
%
|
|
|
27.7
|
%
|
|
|
42.9
|
%
|
|
|
41.3
|
%
|
|
Resellers
|
|
|
50.7
|
%
|
|
|
72.3
|
%
|
|
|
57.1
|
%
|
|
|
58.7
|
%
|
Expenses
Most of our revenue is generated by the sale of products and services comprised of imagery from our QuickBird, WorldView-1 and WorldView-2 satellites. Our
cost of revenue, excluding depreciation, consists primarily of the cost of personnel, as well as the cost of operations directly associated with operating our satellites, retrieving information from the satellites, and processing the data retrieved.
Costs of acquiring aerial imagery from third-parties are capitalized and amortized on an accelerated basis as a cost of revenue.
Our selling,
general and administrative expenses consist primarily of labor, benefits, travel, rent, insurance, utilities and related overhead costs, third-party consultant payments, sales commissions and marketing expenses. Our total selling, general and
administrative expenses have been increasing in recent years, and we expect the increase in costs to continue as we expand our sales and administrative resources to enable our revenue growth and increase capacity for product sales and distribution.
The increase in selling, general and administrative expenses are offset by the capitalization of direct labor costs incurred in the
development of new assets, especially during the construction of a new satellite. Since the initiation of our WorldView-3 satellite and other capital investments related to the EnhancedView program, we have been capitalizing increasing amounts of
direct labor costs that are associated with the development of these programs.
Depreciation and amortization consist primarily of
depreciation of our satellites and other operating assets.
Our interest charges consist primarily of interest payments on borrowings and may
be capitalized as a cost of our satellite construction, as well as other discrete projects. As we increase capital expenditures, primarily related to the construction of our WorldView-3 satellite and related ground stations, we expect the interest
that is capitalized to increase until the successful commission of our satellite.
|
|
|
|
|
|
|
|
|
Page 22 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Backlog
The following table represents our estimated backlog as of September 30, 2011:
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
EnhancedView SLA
|
|
$
|
2,709.2
|
|
|
DAP
|
|
|
142.3
|
|
|
Amortization of pre-FOC payments related to NextView
|
|
|
169.1
|
|
|
Other
(1)
|
|
|
116.1
|
|
|
|
|
|
|
|
|
Total Backlog
|
|
$
|
3,136.7
|
|
|
1)
|
Other 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 U.S. and International D&I and Commercial customers.
|
Backlog
consists of all contractual commitments, including those under the anticipated term of the EnhancedView contract through September 1, 2020, amounts committed under DAP agreements, firm orders, remaining pre-paid subscriptions and task orders
from our government customers. The EnhancedView contract is structured as a multi-year term, inclusive of annual renewal options that may be exercised by NGA. Although NGA may terminate the contract at any time and is not obligated to exercise any
of the nine option years, we include the remaining term in backlog, because we believe it is NGA’s intention to exercise all subsequent option years, subject to annual appropriation of congressional funding and federal budget process.
The pre-FOC balance will be recognized over 10.5 years from the FOC of WorldView-1. We recognize it ratably over the estimated satellite
life, but the recognition of this revenue has no effect on our ability to generate additional revenue from the usage of our satellite and therefore should not be considered a reduction in our capacity to generate additional sales.
Although backlog reflects business that is considered to be firm, terminations, amendments or cancellations may occur from time to time which could
result in a reduction in our total backlog. Any such terminations, amendments or cancellations may also negatively impact the timing of our realization of backlog.
Results of Operations
For the Three Months Ended September 30, 2011 Compared to
the Three Months Ended September 30, 2010
Included in the results of operations for the three months ended September 30, 2011 we have
recorded out of period adjustments primarily to increase interest expense of $0.6 million ($0.3 million after tax), as we determined the effects to be immaterial to the current and prior periods.
The following tables summarize our historical results of operations for the three months ended September 30, 2011 compared to the three months ended
September 30, 2010, and our expenses as a percentage of revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Change
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
$
|
|
|
Percent
|
|
|
Historical results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense and Intelligence revenue
|
|
$
|
63.2
|
|
|
$
|
64.8
|
|
|
$
|
1.6
|
|
|
|
2.5
|
%
|
|
Commercial revenue
|
|
|
17.3
|
|
|
|
16.5
|
|
|
|
(0.8
|
)
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
80.5
|
|
|
|
81.3
|
|
|
|
0.8
|
|
|
|
1.0
|
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
11.0
|
|
|
|
17.6
|
|
|
|
6.6
|
|
|
|
60.0
|
|
|
Selling, general and administrative
|
|
|
28.2
|
|
|
|
30.7
|
|
|
|
2.5
|
|
|
|
8.9
|
|
|
Depreciation and amortization
|
|
|
29.2
|
|
|
|
29.1
|
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
12.1
|
|
|
|
3.9
|
|
|
|
(8.2
|
)
|
|
|
(67.8
|
)
|
|
Interest income (expense), net
|
|
|
(10.0
|
)
|
|
|
(4.6
|
)
|
|
|
(5.4
|
)
|
|
|
(54.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2.1
|
|
|
|
(0.7
|
)
|
|
|
(2.8
|
)
|
|
|
133.3
|
|
|
Income tax (expense) benefit
|
|
|
(1.3
|
)
|
|
|
1.8
|
|
|
|
3.1
|
|
|
|
238.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.8
|
|
|
$
|
1.1
|
|
|
$
|
0.3
|
|
|
|
37.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Page 23 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2010
|
|
|
2011
|
|
|
Expenses as a percentage of revenue:
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
13.7
|
|
|
|
21.6
|
|
|
Selling, general and administrative
|
|
|
35.0
|
|
|
|
37.8
|
|
|
Depreciation and amortization
|
|
|
36.3
|
|
|
|
35.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
15.0
|
|
|
|
4.8
|
|
|
Interest income (expense), net
|
|
|
(12.4
|
)
|
|
|
(5.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2.6
|
|
|
|
(0.9
|
)
|
|
Income tax (expense) benefit
|
|
|
1.6
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1.0
|
%
|
|
|
(1.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
Revenue increased $0.8 million from $80.5 million for the three months ended September 30, 2010 to $81.3 million for
the three months ended September 30, 2011.
There was an increase of $1.6 million in Defense and Intelligence revenue during the three
months ended September 30, 2011, to $64.8 million from $63.2 million for the three months ended September 30, 2010. This increase was a result of $1.8 million of additional revenue recognized under the NGA SLA due to increased capacity
made available to NGA as of September 1, 2011 and $1.1 million increase in direct access program revenue. These increases were offset by a $1.2 million decrease in value added services primarily due to a decrease in funding available for NGA
projects. Included in value added services is $3.7 million recognized upon completion of a one-time discrete project delivered to NGA during the third quarter of 2011. The decrease of $0.8 million in Commercial revenue to $16.5 million for the three
months ended September 30, 2011 from $17.3 million for the three months ended September 30, 2010, was due to $1.2 million decrease in consumer revenue in the Americas offset by a $0.4 million increase in international sales, primarily in
Europe.
Cost of revenue increased $6.6 million during the three months ended September 30, 2011 to $17.6 million from $11.0 million for
the three months ended September 30, 2010. This increase is attributed to (i) a $3.0 million increase in costs associated with a one-time discrete project delivered to NGA during the third quarter of 2011, (ii) a $2.5 million increase
in costs related to ground system operations due to additional remote ground terminals being put into service during the quarter and (iii) a $1.4 million increase in labor related costs due to headcount growth. For the three months ended
September 30, 2011, cost of revenue as a percentage of revenue was 21.6%, a 7.9% increase from 13.7% for the three months ended September 30, 2010.
Selling, general and administrative costs increased $2.5 million for the three months ended September 30, 2011, to $30.7 million from $28.2 million for the three months ended September 30, 2010.
This increase was attributable to (i) a $1.8 million increase in consulting, (ii) a $1.2 million increase in bad debt expense, (iii) a $0.4 million increase in labor related costs, primarily stock compensation, and (iv) a $0.3
million increase in general software and maintenance fees. These increases were offset by a $1.4 million decrease in costs to insure our satellite constellation, primarily due to a reduced insurance premium for WorldView-2 as the satellite is in
year two of on-orbit insurance. For the three months ended September 30, 2011, selling, general and administrative expenses as a percentage of revenue were 37.8%, a 2.8% increase from 35.0% for the three months ended September 30, 2010.
Depreciation and amortization decreased by $0.1 million for the three months ended September 30, 2011, to $29.1 million from $29.2
million for the three months ended September 30, 2010. Due to the significant amount of depreciation generated by our satellites, we do not anticipate large fluctuations in depreciation and amortization until a satellite or other large projects
are put into service.
Interest expense, net of capitalized interest, decreased by $5.4 million for the three months ended September 30,
2011 to $4.6 million from $10.0 million during the three months ended September 30, 2010. This decrease is attributed to approximately 53% of our interest being capitalized to capital projects during the three months ended September 30,
2011. During the third quarter of 2010, the Company started the construction of the WorldView-3 satellite. As a result of this construction, we expect our capital expenditures to increase during the construction of the WorldView-3 satellite. We
therefore anticipate that more of our interest will be capitalized during this period.
In order to calculate our income tax expense, we
performed an analysis of our projected 2011 operating results to determine an effective overall tax rate to be applied for the nine months ended September 30, 2011. In the third quarter of 2011 the Company completed a research and
experimentation tax credit study that resulted in a $1.6 million discrete tax benefit. This discrete item increased the overall effective tax rate for the three and nine months ending September 30, 2011.
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|
Page 24 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
For the Nine Months Ended September 30, 2011 Compared to the Nine Months Ended
September 30, 2010
Included in the results of operations for the nine months ended September 30, 2011 we have recorded out of period
adjustments primarily to increase interest expense of $0.3 million ($0.1 million after tax), as we determined the effects to be immaterial to the current and prior periods.
The following tables summarize our historical results of operations for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010, and our expenses as a
percentage of revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
$
|
|
|
Percent
|
|
|
Historical results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defense and Intelligence revenue
|
|
$
|
188.9
|
|
|
$
|
189.6
|
|
|
$
|
0.7
|
|
|
|
0.3
|
%
|
|
Commercial revenue
|
|
|
49.7
|
|
|
|
50.5
|
|
|
|
0.8
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
238.6
|
|
|
|
240.1
|
|
|
|
1.5
|
|
|
|
0.6
|
|
|
Cost of revenue excluding depreciation and amortization
|
|
|
31.2
|
|
|
|
43.8
|
|
|
|
12.6
|
|
|
|
40.4
|
|
|
Selling, general and administrative
|
|
|
81.2
|
|
|
|
94.5
|
|
|
|
13.3
|
|
|
|
16.4
|
|
|
Depreciation and amortization
|
|
|
89.3
|
|
|
|
87.5
|
|
|
|
(1.8
|
)
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
36.9
|
|
|
|
14.3
|
|
|
|
(22.6
|
)
|
|
|
(61.2
|
)
|
|
Other income (expense), net
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
—
|
|
|
Interest income (expense), net
|
|
|
(30.6
|
)
|
|
|
(17.8
|
)
|
|
|
12.8
|
|
|
|
(41.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
6.3
|
|
|
|
(3.4
|
)
|
|
|
(9.7
|
)
|
|
|
(154.0
|
)
|
|
Income tax (expense) benefit
|
|
|
(3.5
|
)
|
|
|
3.4
|
|
|
|
6.9
|
|
|
|
197.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
(2.8
|
)
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2010
|
|
|
2011
|
|
|
Expenses as a percentage of revenue:
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of revenue, excluding depreciation and amortization
|
|
|
13.1
|
|
|
|
18.2
|
|
|
Selling, general and administrative
|
|
|
34.0
|
|
|
|
39.4
|
|
|
Depreciation and amortization
|
|
|
37.4
|
|
|
|
36.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
15.5
|
|
|
|
6.0
|
|
|
Other income (expense), net
|
|
|
—
|
|
|
|
—
|
|
|
Interest income (expense), net
|
|
|
(12.8
|
)
|
|
|
(7.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2.7
|
|
|
|
(1.4
|
)
|
|
Income tax (expense) benefit
|
|
|
(1.5
|
)
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1.2
|
%
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
Revenue increased $1.5 million from $238.6 million for the nine months ended September 30, 2011 to $240.1 million
for the nine months ended September 30, 2010.
There was an increase of $0.7 million in Defense and Intelligence revenue during the nine
months ended September 30, 2011, to $189.6 million from $188.9 million for the nine months ended September 30, 2010. This increase was the result of an $8.5 million increase in our direct access programs due to all four DAP customers being
fully operational during the nine months ended September 30, 2011. Three of the DAP customers were brought into service throughout 2010. There was also a $1.8 million increase in revenue recognized under the EnhancedView SLA due to increased
capacity made available to NGA beginning September 1, 2011. These increases were offset by a $6.9 million decrease in value added services primarily due to a decrease in funding available for NGA projects. Included in value added services is
$3.7 million recognized upon completion of a one-time discrete project delivered to NGA during the third quarter of 2011. There was also a $2.9 million decrease in Defense and Intelligence international sales as a result of those customers who are
now operating under our direct access program no longer purchasing certain imaged products. The $0.8 million increase in Commercial revenue to $50.5 million for the nine months ended September 30, 2011 was due to a $2.3 million increase in
international sales, primarily in Europe, offset by a $1.5 million decrease in consumer revenue in the Americas.
Cost of revenue increased
$12.6 million during the nine months ended September 30, 2011 to $43.8 million from $31.2 million for the nine months ended September 30, 2010. Included in cost of revenue is $3.0 million associated with a one-time discrete project
delivered to NGA during the third quarter of 2011. During the nine months ended September 30, 2010 we had a similar amount of costs related to other discrete projects. The increase in cost of revenue is primarily attributable to (i) a $5.3
million increase in labor related costs due to headcount growth, of which $0.7 million of the increase is related to stock compensation, (ii) a $4.6 million increase related to our ground system operations due to increased usage and additional
remote ground terminals being put into service during the year, (iii) a $2.1 million increase in general software licenses and support due to increased headcount and (iv) an approximate $0.6 million increase in other overhead related
expenses. For the nine months ended September 30, 2011 cost of revenue as a percentage of revenue was 18.2%, a 5.1% increase from 13.1% for the nine months ended September 30, 2010.
Selling, general and administrative costs increased $13.3 million for the nine months ended September 30, 2011, to $94.5 million from
|
|
|
|
|
|
|
|
|
Page 25 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
$81.2 million for the nine months ended September 30, 2010. This increase was primarily attributable to (i) a $9.9 million increase in labor related costs including stock compensation,
of which $5.1 million of stock compensation was related to the termination of the prior CEO, (ii) a $3.2 million increase in consulting services, (iii) a $2.6 million increase in bad debt expenses, (iv) a $1.4 million increase in
general software and maintenance fees and (v) a $0.5 million increase in general overhead costs. These increases were offset by a decrease of $4.4 million in insurance costs primarily related to our satellite constellation, due to a reduced
insurance premium for WorldView-2 as the satellite is in the second year of on-orbit insurance. For the nine months ended September 30, 2011, selling, general and administrative expenses as a percentage of revenue was 39.4%, a 5.4% increase
from 34.0% in the nine months ended September 30, 2010.
Depreciation and amortization decreased by $1.8 million for the nine months
ended September 30, 2011, to $87.5 million from $89.3 million for the nine months ended September 30, 2010. The decrease is primarily related to extending the life of the Quickbird satellite during the second quarter of 2011.
Other income (expense), net, increased to $0.1 million for the nine months ended September 30, 2011 as compared to the first nine months of 2010.
This increase was due to the accelerated on-orbit incentive payment that we paid in full, during the first quarter of 2011, which resulted in a nominal gain upon settlement.
Interest expense, net of capitalized interest, decreased $12.8 million for the nine months ended September 30, 2011 to $17.8 million from $30.6 million for the nine months ended September 30,
2010. This decrease is attributed to approximately 44% of our interest being capitalized to capital projects during the nine months ended September 30, 2011 as compared to 5% during the nine months ended September 30, 2010. During the
third quarter of 2010, the Company started the construction of the WorldView-3 satellite. As we expect our capital expenditures to increase during the construction of the WorldView-3 satellite, we therefore anticipate that more of our interest will
be capitalized during this period.
In order to calculate our income tax expense, we performed an analysis of our projected 2011 operating
results to determine an effective overall tax rate to be applied for the nine months ended September 30, 2011. In the third quarter of 2011 the Company completed a research and experimentation tax credit study that resulted in a $1.6 million
discrete tax benefit. This discrete item increased the overall effective tax rate for the three and nine months ending September 30, 2011.
Balance Sheet Measures
Total assets
increased $74.4 million, from $1,266.3 million at December 31, 2010 to $1,340.7 million at September 30, 2011. Total assets increased primarily as a result of an increase in property and equipment of $114.0 million, from $879.1 million at
December 31, 2010 to $993.1 million at September 30, 2011. The increase in property and equipment is attributable to an increase in the WorldView-3 satellite project and other infrastructure projects. The aerial image library increase of
$7.0 million, from $1.9 million at December 31, 2010 to $8.9 million at September 30, 2011, is due to receipt of increased imagery acquired from a third party provider. These increases were offset by a decrease in cash and cash equivalents
of $30.6 million due to increased operating costs and increased capital expenditures related to World-View 3.
Total liabilities increased
$60.9 million, from $766.0 million at December 31, 2010 to $826.9 million at September 30, 2011. This increase was due to a net $59.1 million increase in total deferred revenue from $285.1 million at December 31, 2010 to $344.2 at
September 30, 2011 primarily due to payments received from NGA under the EnhancedView SLA, offset by the recognition of the pre-FOC payments received under the NextView agreement. Accrued interest increased $9.3 million from $6.2 million at
December 31, 2010 to $15.5 million at September 30, 2011, due to the timing of interest payments. Under the senior secured credit facility in place as of September 30, 2011, we paid interest on May 1 and November 1 each
year. Total accounts payable, other accrued liabilities and long-term accrued liabilities increased a net of $7.0 million from $47.3 million at December 31, 2010 to $54.3 million at September 31, 2011. The increase is primarily related to
the timing of accruals and milestone payments on capital projects.
Liquidity and Capital Resources
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. Our NextView agreement with NGA was replaced by the EnhancedView agreement which was signed during August 2010. We cannot assure you that the U.S. government will continue to purchase
earth imagery from us at similar levels or similar terms. All of our contracts with the U.S. government agencies are subject to risks of termination or reduction in scope due to changes in U.S. government policies and priorities, or reduced
Congressional funding level commitments. Pursuant to the contract terms, U.S. government agencies can terminate, modify or suspend our contracts at any time with or without cause. The U.S. government accounted for approximately 62.7% and 61.8% of
our consolidated revenue for the three and nine months ended September 30, 2011, respectively. If the U.S. government were to not renew or extend our contract at similar levels or similar terms, we believe we would be able to maintain
operations with existing cash and cash equivalents for the next twelve months.
|
|
|
|
|
|
|
|
|
Page 26 of 34
|
|
|
DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In summary, our cash flows were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
Net cash provided by operating activities
|
|
$
|
111.8
|
|
|
$
|
156.7
|
|
|
Net cash used in investing activities
|
|
|
(30.3
|
)
|
|
|
(188.6
|
)
|
|
Net cash provided by financing activities
|
|
$
|
9.3
|
|
|
$
|
1.3
|
|
Cash provided by operating activities increased from $111.8 million in the nine months ending September 30, 2010 to
$156.7 million in the nine months ending September 30, 2011. The $44.9 million increase was primarily the result of an increase in deferred revenue due to the EnhancedView SLA contract, offset by a decrease from net changes in working capital
accounts.
Cash used in investing activities increased from $30.3 million in the nine months ending September 30, 2010 to $188.6 million
in the nine months ending September 30, 2011. The $158.3 million increase was primarily due to an increase in capital expenditures related to the construction of the WorldView-3 satellite and related infrastructure. We anticipate capital
expenditures to increase throughout the remainder of 2011 and thereafter, until the completion of WorldView-3.
Cash provided by financing
activities decreased from $9.3 million in the nine months ending September 30, 2010 to $1.3 million in the nine months ending September 30, 2011. The $8.0 decrease was primarily due to a reduction in proceeds from stock option exercises in
2011 relative to 2010.
Senior Secured Notes and Senior Credit Facility
On April 28, 2009, we issued $355.0 million principal amount of our senior secured notes. Gross proceeds of $341.8 million were used to repay our senior credit facility and senior
subordinated notes in full and pay fees and expenses associated with the transaction. The senior secured notes were scheduled to mature on May 1, 2014. The senior secured notes were guaranteed by certain of our subsidiaries and secured by
nearly all of our assets, including the shares of capital stock of certain of our subsidiaries, and the QuickBird, WorldView-1 and WorldView-2 satellites in operation. The senior secured notes bore interest at the rate of 10.5% per annum.
Interest was payable semi-annually on May 1 and November 1 of each year.
The indenture governing the senior secured notes contained
a number of significant restrictions and covenants that, among other things, limited our ability to incur additional indebtedness, make investments, pay dividends or make distributions to our stockholders, grant liens on our assets, sell assets,
enter into a new or different line of business, enter into transactions with our affiliates, merge or consolidate with other entities or transfer all or substantially all of our assets, and enter into sale and leaseback transactions. The indenture
was amended on October 5, 2011 in connection with the tender offer described below and the related consent solicitation to eliminate or modify substantially the restrictions and covenants contained in the indenture.
On October 12, 2011, the Company entered into a $500 million, seven-year senior secured term loan facility and a $100 million, five-year senior
secured revolving credit facility, the terms of which are set forth in a Credit and Guaranty Agreement dated as of October 12, 2011 among the Company, the guarantors party thereto, the lenders named therein and J.P. Morgan Chase Bank, N.A., as
administrative agent and as collateral agent (the “Credit Agreement”). The Company has borrowed the full amount of the term loan facility to fund its cash tender offer to purchase all of its 2014 senior secured notes. The Company received
net cash proceeds from the term loan facility of approximately $66.0 million following the payment of approximately $410.9 million for the tender of the senior secured notes, $11 million in estimated underwriting and other fees and
expenses incurred in connection with the tender offer and the Credit Agreement, and net of the term loan issuance discount of $12.5 million. The transaction will result in an estimated loss on extinguishment of debt of approximately
$51 million, during the fourth quarter of 2011. As a result of the tender offer, 100% of all senior secured notes were tendered and retired by the Company. The Company will use the remaining cash proceeds for general corporate purposes, which
may include acquisitions and share repurchases. As of the date of this filing, the revolving credit facility remains undrawn.
The obligations
of the Company under the credit facility are guaranteed by certain of the Company’s domestic subsidiaries and are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions. The Credit Agreement
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 the Company’s affiliates. The Credit Agreement also requires the Company to comply with a maximum leverage ratio and minimum interest coverage ratio.
Borrowings under the Credit Agreement will bear interest, at the Company’s option, at a rate equal to either an adjusted LIBOR rate or a base rate,
in each case plus the applicable margin. The applicable margin for borrowings under the term loan facility is 4.50% for adjusted LIBOR loans or 3.50% for base rate loans. The applicable margin for borrowings under the revolving credit facility may
change depending on the Company’s leverage ratio, up to a maximum of 4.50%. The term loan facility current bears interest based upon the LIBOR-based rate. The Company will also 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 the Company’s leverage ratio.
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Page 27 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Off-Balance Sheet Arrangements, Guaranty and Indemnification Obligations
Off-Balance Sheet Arrangements
We had no
off-balance sheet arrangements as of September 30, 2011.
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.
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.
Non-GAAP Disclosures
Reconciliation of Net Income (loss) to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September
30,
|
|
|
Nine months ended
September 30,
|
|
|
(in millions)
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
Net income (loss)
|
|
$
|
0.8
|
|
|
$
|
1.1
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
Depreciation and amortization
|
|
|
29.2
|
|
|
|
29.1
|
|
|
|
89.3
|
|
|
|
87.5
|
|
|
Interest (income) expense, net
|
|
|
10.0
|
|
|
|
4.6
|
|
|
|
30.6
|
|
|
|
17.8
|
|
|
Income tax expense (benefit)
|
|
|
1.3
|
|
|
|
(1.8
|
)
|
|
|
3.5
|
|
|
|
(3.4
|
)
|
|
Non-cash stock compensation expense
|
|
|
1.7
|
|
|
|
2.2
|
|
|
|
4.6
|
|
|
|
11.2
|
|
|
EnhancedView deferred revenue
|
|
|
8.3
|
|
|
|
16.5
|
|
|
|
8.3
|
|
|
|
66.2
|
|
|
EnhancedView outstanding invoices not yet paid by NGA
|
|
|
—
|
|
|
|
6.7
|
|
|
|
—
|
|
|
|
6.7
|
|
|
Amortization of pre-FOC payment related to NextView
|
|
|
(6.4
|
)
|
|
|
(6.4
|
)
|
|
|
(19.1
|
)
|
|
|
(19.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
44.9
|
|
|
$
|
52.0
|
|
|
$
|
120.0
|
|
|
$
|
166.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
Adjusted EBITDA is not a recognized term under generally accepted accounting principles, or GAAP, in the United States and may not be defined similarly by other companies. Adjusted EBITDA should not be
considered an alternative to net income, as an indication of financial performance, or as an alternative to cash flow from operations as a measure of liquidity. There are limitations to using non-GAAP financial measures, including the difficulty
associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.
Adjusted EBITDA is a key measure used in internal operating reports by management and the board of directors to evaluate the performance of our
operations and is also used by analysts, investment banks and lenders for the same purpose. Adjusted EBITDA is also a key driver of the company bonus incentive plan. Adjusted EBITDA is a measure of our current period operating performance, excluding
charges for capital, depreciation related to prior period capital expenditures and items which are generally non-core in nature, and including EnhancedView deferred revenue and EnhancedView outstanding invoices not yet paid by NGA and excluding the
amortization of pre-FOC payments related to our NextView contract. EnhancedView outstanding invoices not yet paid by NGA represent an irrevocable right to be paid in cash by NGA.
We believe that the elimination of material non-cash, non-operating items enables a more consistent measurement of period to period performance of our operations. In addition, we believe that elimination
of these items in combination with the addition of the nonrefundable EnhancedView deferred revenue and EnhancedView outstanding invoices not yet paid by NGA as well as the elimination of amortization of pre-FOC payments related to NextView,
facilitate comparison of our operating performance to companies in our industry. We believe that this Adjusted EBITDA measure is 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
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Page 28 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
cost to construct and launch a satellite and 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 satellite.
Adjusted EBITDA excludes interest income, interest expense, income taxes and loss on early extinguishment of debt because these items are associated with
our capitalization and tax structures. Adjusted 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 excludes non-cash stock compensation expense because these items are non-cash expenses, and loss on derivative instrument and disposal of assets because these are not related to our primary operations.
We use Adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our
performance and we do not place undue reliance on this measure as our only measure of operating performance. Adjusted EBITDA should not be considered an alternative to, or a substitute for, net income, cash flows or other measures of financial
performance reported in accordance with GAAP.
Critical Accounting Policies
Our critical accounting policies are described under the caption “Critical Accounting Policies” in our Annual Report on Form 10-K, filed with the SEC on February 28, 2011. Due to the
adoption of ASU 2009-13, “Multiple –Deliverable revenue arrangements” and ASU 2009-14, “Certain Revenue Arrangements That Include Software Elements”, we have updated our critical accounting policies to reflect this adoption.
Revenue Recognition
Our principal source of revenue is the licensing of earth imagery products and services for end users and resellers. Revenue is recognized when the
following criteria have been met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and the collection of funds is reasonably assured. Our revenue is generated from:
(i) sales of or royalties arising from licenses of imagery; and (ii) subscription services and other service arrangements.
Sales
of Licenses.
Revenue from sales of imagery licenses is recognized when the images are physically delivered to the customer or, in the case of electronic delivery, when the customer is able to directly download the image from our system. In
certain customer arrangements, we must satisfy certain acceptance provisions. For these arrangements, revenue is recognized upon acceptance by these customers. Revenue is recognized net of contractually agreed discounts.
Royalties.
Revenue from royalties is based on agreements or licenses with third parties that allow the third party to incorporate our product
into their value added product for commercial distribution. Revenue from these royalty arrangements is recorded in the period earned or on a systematic basis over the term of the license agreement. For those royalties that are due to third parties
based on our revenue sharing arrangements, we report royalty revenue on a net basis.
Subscriptions.
The Company sells online
subscriptions to our products. These arrangements allow customers access to our products via the internet for a set period of time and a fixed fee. The subscription revenue is recorded as deferred revenue and recognized ratably over the subscription
period. In addition, we have other arrangements in which customers pay for their subscription to one of the Company’s web-based products by paying for a predetermined amount of access (for example, each time users click on an image of their
home). In the case of prepayment, each time a product is accessed, a portion of the customer’s prepayment is earned. These prepayments are recorded as deferred revenue when received and the revenue is recognized based on the number of times the
product is accessed. Revenue is recognized net of contractually agreed discounts.
Service Level Agreements (SLA).
We recognize service
level agreement revenue net of any allowances resulting from failure to meet certain stated monthly performance metrics. Net revenue is either recognized ratably over time for a defined and fixed level of service, or based on proportional
performance when the level of service changes based on certain criteria stated in the agreement.
Multiple Deliverable Arrangements
.
The Company enters into revenue arrangements that may consist of multiple deliverables of its product and service offerings based on the needs of its customers. These arrangements may include products delivered at the onset of the agreement, as well
as products or services that are delivered over multiple reporting periods.
In October 2009, the FASB issued ASU 2009-13,
“Multiple-Deliverable Revenue Arrangements” and ASU 2009-14, “Certain Revenue Arrangements That Include Software Elements.” The Company concurrently adopted ASU 2009-13 and ASU 2009-14 prospectively on January 1, 2011. ASU
2009-13 changes the requirements for establishing separate units of accounting in a multiple
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Page 29 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
deliverable arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on
vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or best estimate selling price (BESP) if neither VSOE nor TPE is available. ASU 2009-14 excludes software that is contained in a tangible
product from the scope of software revenue guidance if the software is essential to the tangible product’s functionality.
The Company
has generally been unable to establish VSOE for any of our products due to the Company infrequently selling each deliverable separately or only having a limited sales history, such as in the case of new or emerging products. As of September 30,
2011, the Company has been unable to establish TPE for any of our offerings due to the unique nature of our products and services and the limited number of competitors. As the Company is unable to establish price on the basis of VSOE or TPE, we use
BESP to determine the allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a standalone basis. The Company determines BESP for a
product or service by considering multiple factors, including but not limited to market conditions, competitive landscape, internal costs, gross margin objectives, product technology lifecycles, pricing practices, and the Company’s go-to-market
strategy.
The adoption of ASU 2009-13 and ASU 2009-14 was not material to our financial results for the three and nine months ended
September 30, 2011. We are not able to reasonably estimate the effect of adopting these standards on future periods as the impact will vary based on the nature and volume of new or materially modified multiple element arrangements transacted in
any given period.
While multiple deliverable arrangements occur throughout our business, the EnhancedView contract (EnhancedView) with
National Geospatial-Intelligence Agency (NGA) and the Direct Access Program (DAP) make up the majority of our multiple deliverable arrangement activity. EnhancedView and four of our DAP agreements were entered into prior to the January 1, 2011
adoption of ASU 2009-13 and ASU 2009-14 and none have been subsequently materially modified. As the Company adopted the new guidance on a prospective basis, the agreements will continue to be accounted for under the pre-adoption guidance unless they
are materially modified. The following is a description of the accounting for these arrangements.
EnhancedView.
The EnhancedView
contract contains multiple deliverables, including an SLA, infrastructure enhancements, and other services. We determined that these deliverables do not qualify as separate units of accounting due to a lack of standalone value for the delivered
elements and a lack of objective reliable evidence of fair value for any of the undelivered elements in the arrangement. We recognize revenue on a single unit of accounting using a proportional performance method based on the estimated capacity of
our constellation made available to NGA compared to the total estimated capacity to be provided over the life of the contract.
Direct
Access Program.
Revenues under the direct access program include construction of the direct access facility and an arrangement to allow the customer access to the satellite to task and download imagery. In these arrangements the facility is
delivered upon completion and customer acceptance, and the maintenance and access services occur over several subsequent reporting periods. These arrangements have been treated as a single unit of accounting due to a lack of standalone value for the
delivered elements and a lack of objective reliable evidence of fair value for any of the undelivered items. Accordingly, all funds received are initially recorded as deferred revenue and all direct costs of these arrangements are recorded as
deferred contract costs. As the direct access facilities are brought into service, the deferred revenue and deferred contracts costs are amortized ratably over the estimated customer relationship period, which is consistent with the estimated
remaining useful life of the satellite being used.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
As of September 30, 2011 we did not have any material interest rate risk with respect to our senior secured notes as the
notes bore interest at a fixed rate.
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Page 30 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are exposed to market risks from changes in interest rates under our senior secured credit facility
dated October 12, 2011. The facility provides for a $500 million term loan facility and a $100 million revolving credit facility. At the closing of the facility, we borrowed the full amount of the term loan facility to fund our cash tender
offer for the senior secured notes and for general corporate purposes. As of October 31, 2011, we had not drawn any amounts under the revolving credit facility.
Borrowings under the senior credit facility bear interest, at our option, at a rate equal to either an adjusted LIBOR rate or a base rate, in each case, plus the applicable margin. The applicable margin
for borrowings under the term loan facility is 4.5% for adjusted LIBOR loans or 3.5% for base rate loans. The applicable margin for borrowings under the revolving credit facility may change depending upon our leverage ratio, up to a maximum of 4.5%.
Our term loan facility current bears interest based upon the LIBOR-based rate.
Based upon the amounts outstanding under the term loan
facility as of October 31, 2011 and assuming that the facility is outstanding for a full calendar quarter, a 100 basis point increase in interest rates would result in an increase in our quarterly interest expense under the facility of
approximately $1.3 million. We may decide in the future to engage in various hedging transactions in order to hedge the interest rate risk under our senior secured credit facility but have not done so at this time.
We are exposed to various market risks that arise from transactions entered into in the normal course of business. Certain contractual relationships with
customers and vendors mitigate risks from currency exchange rate changes that arise from normal purchasing and normal sales activities.
We do
not currently have any material foreign currency exposure. Our revenue contracts are primarily denominated in U.S. dollars and the majority of our purchase contracts are denominated in U.S. dollars.
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 our disclosure
controls and procedures (as defined in Securities Exchange Act Rule 13a -15(e)) as of September 30, 2011. Based upon that evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and
procedures were effective.
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 28,
2011. There have been no material changes to our Risk Factors since the filing of our Annual Report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
2.1 UNREGISTERED SALES OF EQUITY SECURITIES
None.
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Page 31 of 34
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DigitalGlobe, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2.2 USE OF PROCEEDS FROM PUBLIC OFFERING OF COMMON STOCK
On May 13, 2009, our registration statement (File No. 333-150235) was declared effective for our IPO, pursuant to which we sold 1,366,256 shares
of common stock.
As a result of the offering, we received net proceeds of approximately $19.0 million, after deducting underwriting fees of
$1.8 million and additional offering-related expenses of approximately $3.3 million, for total expenses to us of approximately $5.1 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their
associates). A portion of the underwriting fee was paid to Morgan Stanley & Co., Incorporated, an affiliate which owns 10% or more of our equity securities. There has been no material change in the planned use of proceeds from our IPO from
that described in the Prospectus filed with the SEC pursuant to Rule 424(b). Proceeds of $19.0 million are currently being held in an investment account that is classified as short term and is included in cash and cash equivalents.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 5. Other Information
None.
ITEM 6. EXHIBIT INDEX
EXHIBIT INDEX
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
4.1
|
|
First Supplemental Indenture, dated as of October 5, 2011, between the Company and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1
to the Company’s Current Report on Form 8-K filed on October 7, 2011).
|
|
|
|
|
10.1†#
|
|
Amendment to EnhancedView Imagery Acquisition Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated July 25,
2011.
|
|
|
|
|
10.2*
|
|
Offer Letter by and between DigitalGlobe, Inc. and Timothy Hascall, dated September 25, 2011 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on October 5, 2011).
|
|
|
|
|
10.3*
|
|
Severance Protection Agreement by and between DigitalGlobe, Inc. and Timothy Hascall, dated September 30, 2011 (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on October 5, 2011).
|
|
|
|
|
10.4
|
|
Credit Agreement, dated October 12, 2011, by and among DigitalGlobe, Inc., the guarantors party thereto, the lenders named therein and J.P. Morgan Chase Bank, N.A., as
administrative agent and as collateral agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2011).
|
|
|
|
|
31.1†
|
|
Certification of Chief Executive Officer of DigitalGlobe, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2†
|
|
Certification of Chief Financial Officer of DigitalGlobe, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.1†
|
|
Certification of Chief Executive Officer of DigitalGlobe, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.2†
|
|
Certification of Chief Financial Officer of DigitalGlobe, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101†/+
|
|
The following materials for the DigitalGlobe, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed on November 1, 2011 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
|
|
†
|
Filed or furnished herewith.
|
|
#
|
Certain portions of this exhibit have been omitted by redacting a portion of the text. This exhibit has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
|
|
*
|
Management contract or compensatory plan arrangement.
|
|
+
|
XBRL (eXtensible Business Reporting Language) Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or
12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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Page 32 of 34
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|
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SIGNATURE
DIGITALGLOBE, INC.
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
Date: November 1, 2011
|
|
/
S
/ Y
ANCEY
L. S
PRUILL
|
|
|
|
Yancey L. Spruill
|
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer and Duly Authorized Officer)
|
EXHIBIT INDEX
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
4.1
|
|
First Supplemental Indenture, dated as of October 5, 2011, between the Company and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed on October 7, 2011).
|
|
|
|
|
10.1†#
|
|
Amendment to EnhancedView Imagery Acquisition Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated July 25,
2011.
|
|
|
|
|
10.2*
|
|
Offer Letter by and between DigitalGlobe, Inc. and Timothy Hascall, dated September 25, 2011 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on October 5, 2011).
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10.3*
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Severance Protection Agreement by and between DigitalGlobe, Inc. and Timothy Hascall, dated September 30, 2011 (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on October 5, 2011).
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10.4
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Credit Agreement, dated October 12, 2011, by and among DigitalGlobe, Inc., the guarantors party thereto, the lenders named therein and J.P. Morgan Chase Bank, N.A., as
administrative agent and as collateral agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2011).
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31.1†
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Certification of Chief Executive Officer of DigitalGlobe, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2†
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Certification of Chief Financial Officer of DigitalGlobe, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1†
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Certification of Chief Executive Officer of DigitalGlobe, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2†
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Certification of Chief Financial Officer of DigitalGlobe, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101†/+
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The following materials for the DigitalGlobe, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed on November 1, 2011 formatted in eXtensible Business
Reporting Language (XBRL):
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(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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†
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Filed or furnished herewith.
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#
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Certain portions of this exhibit have been omitted by redacting a portion of the text. This exhibit has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
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*
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Management contract or compensatory plan arrangement.
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+
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XBRL (eXtensible Business Reporting Language) Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or
12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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