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ORBCOMM 10-Q 2016

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
orbc-10q_20160930.htm

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      

Commission File Number 001-33118

 

ORBCOMM INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

41-2118289

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

395 W. Passaic Street, Rochelle Park, New Jersey 07662

(Address of principal executive offices)

703-433-6300

(Registrant’s telephone number)

N/A

(Former name, former address and formal fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of the registrant’s common stock as of October 31, 2016 is 71,016,117.

 

 

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015

3

Condensed Consolidated Statements of Operations (unaudited) for the quarters and nine months ended September 30, 2016 and September 30, 2015

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the quarters and nine months ended September 30, 2016 and September 30, 2015

5

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2016 and September 30, 2015

6

Condensed Consolidated Statements of Changes in Equity (unaudited) for the nine months ended September 30, 2016 and September 30, 2015

7

Notes to the Condensed Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures about Market Risks

34

Item 4. Disclosure Controls and Procedures

35

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

35

Item 6. Exhibits

36

SIGNATURES

37

EXHIBIT INDEX

38

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ORBCOMM Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

(Unaudited)

 

 

September 30,

 

 

December 31,

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

21,273

 

 

$

27,077

 

Accounts receivable, net of allowance for doubtful accounts of $1,596

   and $1,233, respectively

 

34,493

 

 

 

29,816

 

Inventories

 

21,718

 

 

 

20,712

 

Prepaid expenses and other current assets

 

4,357

 

 

 

5,646

 

Restricted cash

 

-

 

 

 

1,000

 

Deferred income taxes

 

508

 

 

 

508

 

Total current assets

 

82,349

 

 

 

84,759

 

Satellite network and other equipment, net

 

218,505

 

 

 

229,970

 

Goodwill

 

114,002

 

 

 

112,425

 

Intangible assets, net

 

85,644

 

 

 

93,172

 

Other assets

 

7,378

 

 

 

6,573

 

Total assets

$

507,878

 

 

$

526,899

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

10,654

 

 

$

13,895

 

Accrued liabilities

 

27,399

 

 

 

24,186

 

Current portion of deferred revenue

 

7,565

 

 

 

7,652

 

Total current liabilities

 

45,618

 

 

 

45,733

 

Note payable - related party

 

1,275

 

 

 

1,241

 

Note payable

 

150,000

 

 

 

150,000

 

Deferred revenue, net of current portion

 

3,622

 

 

 

6,024

 

Deferred tax liabilities

 

19,409

 

 

 

18,440

 

Other liabilities

 

3,714

 

 

 

5,705

 

Total liabilities

 

223,638

 

 

 

227,143

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

ORBCOMM Inc. stockholders' equity

 

 

 

 

 

 

 

Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares

   authorized; 35,757 and 35,759 shares issued and outstanding at September 30, 2016

   and December 31, 2015

 

357

 

 

 

357

 

Common stock, par value $0.001; 250,000,000 shares authorized; 71,043,788 and

   70,613,642 shares issued at September 30, 2016 and December 31, 2015

 

71

 

 

 

71

 

Additional paid-in capital

 

385,435

 

 

 

381,659

 

Accumulated other comprehensive income (loss)

 

(304

)

 

 

(1,174

)

Accumulated deficit

 

(101,737

)

 

 

(81,424

)

Less treasury stock, at cost; 29,990 shares at September 30, 2016 and

   December 31, 2015

 

(96

)

 

 

(96

)

Total ORBCOMM Inc. stockholders' equity

 

283,726

 

 

 

299,393

 

Noncontrolling interest

 

514

 

 

 

363

 

Total equity

 

284,240

 

 

 

299,756

 

Total liabilities and equity

$

507,878

 

 

$

526,899

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

3


ORBCOMM Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

28,846

 

 

$

25,048

 

 

$

83,454

 

 

$

72,833

 

Product sales

 

 

17,442

 

 

 

21,036

 

 

 

56,458

 

 

 

60,464

 

Total revenues

 

 

46,288

 

 

 

46,084

 

 

 

139,912

 

 

 

133,297

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

9,791

 

 

 

8,766

 

 

 

28,330

 

 

 

24,788

 

Cost of product sales

 

 

13,218

 

 

 

15,424

 

 

 

41,868

 

 

 

44,162

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

12,031

 

 

 

10,668

 

 

 

34,843

 

 

 

33,134

 

Product development

 

 

1,217

 

 

 

1,202

 

 

 

5,126

 

 

 

4,628

 

Depreciation and amortization

 

 

11,158

 

 

 

6,331

 

 

 

31,668

 

 

 

19,426

 

Impairment loss - satellite network

 

 

10,680

 

 

 

 

 

 

10,680

 

 

 

12,748

 

Acquisition - related and integration costs

 

 

246

 

 

 

500

 

 

 

1,179

 

 

 

4,061

 

(Loss) income from operations

 

 

(12,053

)

 

 

3,193

 

 

 

(13,782

)

 

 

(9,650

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

100

 

 

 

90

 

 

 

283

 

 

 

246

 

Other income (expense)

 

 

426

 

 

 

(85

)

 

 

335

 

 

 

307

 

Interest expense

 

 

(2,471

)

 

 

(1,332

)

 

 

(6,615

)

 

 

(3,906

)

Total other (expense)

 

 

(1,945

)

 

 

(1,327

)

 

 

(5,997

)

 

 

(3,353

)

(Loss) income before income taxes

 

 

(13,998

)

 

 

1,866

 

 

 

(19,779

)

 

 

(13,003

)

Income taxes

 

 

(9

)

 

 

221

 

 

 

369

 

 

 

312

 

Net (loss) income

 

 

(13,989

)

 

 

1,645

 

 

 

(20,148

)

 

 

(13,315

)

Less: Net income attributable to the noncontrolling

   interests

 

 

52

 

 

 

54

 

 

 

158

 

 

 

175

 

Net (loss) income attributable to ORBCOMM Inc.

 

$

(14,041

)

 

$

1,591

 

 

$

(20,306

)

 

$

(13,490

)

Net (loss) income attributable to ORBCOMM Inc.

   common stockholders

 

$

(14,048

)

 

$

1,582

 

 

$

(20,313

)

 

$

(13,517

)

Per share information-basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.20

)

 

$

0.02

 

 

$

(0.29

)

 

$

(0.19

)

Per share information-diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.20

)

 

$

0.02

 

 

$

(0.29

)

 

$

(0.19

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

70,997

 

 

 

70,460

 

 

 

70,866

 

 

 

70,376

 

Diluted

 

 

70,997

 

 

 

71,918

 

 

 

70,866

 

 

 

70,376

 

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

4


ORBCOMM Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net (loss) income

 

$

(13,989

)

 

$

1,645

 

 

$

(20,148

)

 

$

(13,315

)

Other comprehensive income (loss) - Foreign currency translation adjustments

 

 

191

 

 

 

186

 

 

 

863

 

 

 

(358

)

Other comprehensive income (loss)

 

 

191

 

 

 

186

 

 

 

863

 

 

 

(358

)

Comprehensive loss

 

 

(13,798

)

 

 

1,831

 

 

 

(19,285

)

 

 

(13,673

)

Less: Comprehensive (income) loss attributable to noncontrolling interests

 

 

(51

)

 

 

(50

)

 

 

(151

)

 

 

(225

)

Comprehensive loss attributable to ORBCOMM Inc.

 

$

(13,849

)

 

$

1,781

 

 

$

(19,436

)

 

$

(13,898

)

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

5


ORBCOMM Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(20,148

)

 

$

(13,315

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

146

 

 

 

167

 

Change in the fair value of acquisition-related contingent consideration

 

(213

)

 

 

(674

)

Amortization of the fair value adjustment related to warranty liabilities acquired through

   acquisitions

 

(57

)

 

 

(12

)

Amortization of deferred financing fees

 

611

 

 

 

348

 

Depreciation and amortization

 

31,668

 

 

 

19,426

 

Impairment loss - satellite network

 

10,680

 

 

 

12,748

 

Stock-based compensation

 

3,824

 

 

 

3,214

 

Foreign exchange loss (gain)

 

482

 

 

 

(419

)

Deferred income taxes

 

538

 

 

 

62

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

(3,925

)

 

 

3,408

 

Inventories

 

(336

)

 

 

(4,275

)

Prepaid expenses and other assets

 

134

 

 

 

(470

)

Accounts payable and accrued liabilities

 

(1,013

)

 

 

(8,730

)

Deferred revenue

 

(2,540

)

 

 

(118

)

Other liabilities

 

(664

)

 

 

(175

)

Net cash provided by operating activities

 

19,187

 

 

 

11,185

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(3,452

)

 

 

(133,078

)

Capital expenditures

 

(22,519

)

 

 

(32,106

)

Cash held for acquisition

 

 

 

 

123,000

 

Change in restricted cash

 

1,000

 

 

 

 

Other

 

(198

)

 

 

 

Net cash used in investing activities

 

(25,169

)

 

 

(42,184

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds received from issuance of long-term debt

 

 

 

 

10,000

 

Cash paid for debt issuance costs

 

 

 

 

(842

)

Proceeds received from exercise of stock options

 

 

 

 

244

 

Payment of deferred purchase consideration

 

(342

)

 

 

(1,106

)

Principal payment of note payable

 

 

 

 

(10,000

)

Principal payments of capital leases

 

 

 

 

(72

)

Net cash used in financing activities

 

(342

)

 

 

(1,776

)

Effect of exchange rate changes on cash and cash equivalents

 

520

 

 

 

(300

)

Net decrease in cash and cash equivalents

 

(5,804

)

 

 

(33,075

)

Beginning of period

 

27,077

 

 

 

91,565

 

End of period

$

21,273

 

 

$

58,490

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for

 

 

 

 

 

 

 

Interest

$

6,581

 

 

$

6,747

 

Income taxes

$

(110

)

 

$

584

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

Capital expenditures incurred not yet paid

$

1,090

 

 

$

2,030

 

Capital expenditure milestone payable incurred not yet paid

$

5,070

 

 

$

130

 

Stock-based compensation related to capital expenditures

$

219

 

 

$

27

 

Series A convertible preferred stock dividend paid in kind

$

7

 

 

$

 

Common stock issued as payment for MPUs

$

 

 

$

358

 

Common stock issued as payment for contingent consideration

$

352

 

 

$

542

 

Acquisition-related contingent consideration

$

514

 

 

$

 

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

6


ORBCOMM Inc.

Condensed Consolidated Statements of Changes in Equity

Nine Months Ended 2016 and 2015

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

Treasury stock

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

income

 

 

deficit

 

 

Shares

 

 

Amount

 

 

interests

 

 

equity

 

Balances, January 1, 2016

 

 

35,759

 

 

$

357

 

 

 

70,613,642

 

 

$

71

 

 

$

381,659

 

 

$

(1,174

)

 

$

(81,424

)

 

 

29,990

 

 

$

(96

)

 

$

363

 

 

$

299,756

 

Vesting of restricted stock

   units

 

 

 

 

 

 

 

 

261,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,417

 

Conversion of preferred

   stock to common stock

 

 

(708

)

 

 

(7

)

 

 

1,178

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible

   preferred stock dividend

 

 

706

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

Payment of contingent

   consideration

 

 

 

 

 

 

 

 

35,464

 

 

 

 

 

 

352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

352

 

Exercise of SARs

 

 

 

 

 

 

 

 

131,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,306

)

 

 

 

 

 

 

 

 

158

 

 

 

(20,148

)

Foreign currency

   translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

870

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

863

 

Balances, September 30, 2016

 

 

35,757

 

 

$

357

 

 

 

71,043,788

 

 

$

71

 

 

$

385,435

 

 

$

(304

)

 

$

(101,737

)

 

 

29,990

 

 

$

(96

)

 

$

514

 

 

$

284,240

 

Balances, January 1, 2015

 

 

90,973

 

 

$

909

 

 

 

70,109,488

 

 

$

70

 

 

$

376,297

 

 

$

(583

)

 

$

(68,137

)

 

 

29,990

 

 

$

(96

)

 

$

49

 

 

$

308,509

 

Vesting of restricted stock

   units

 

 

 

 

 

 

 

 

227,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

3,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,222

 

Common stock issued as

   payment for MPUs

 

 

 

 

 

 

 

 

54,801

 

 

 

 

 

 

358