GeoEye Releases Second Quarter 2008 Earnings and Explanation of Financial
Restatements
DULLES, Va., Aug. 12 /PRNewswire-FirstCall/ -- GeoEye, Inc. (Nasdaq: GEOY)
reported today that the Company is restating its financial statements for the
years ended December 31, 2005, 2006 and 2007 and quarterly information for
such periods and for each of the quarters ended September 30, 2007 and
March 31, 2008, for the following reasons:
(Logo: http://www.newscom.com/cgi-bin/prnh/20080625/LAW528LOGO)
(1) As part of the NextView program, the National Geospatial-Intelligence
Agency agreed to pay approximately $237 million to share the cost of
constructing the Company's GeoEye-1 satellite. The Company completed a
detailed study analyzing its tax accounting methods in which the Company
discovered that it had not correctly included cost-share payments received
from the U.S. Government under the NextView program in its taxable income. As
a result, the Company must include previously unrecorded expenses for interest
and penalties on unpaid taxes which will reduce net income for 2005, 2006 and
2007 and create a deferred tax asset and corresponding liability on the
balance sheet, as indicated in the table below. However, the Company filed an
application for change in method of accounting with the Internal Revenue
Service ("IRS") on August 8, 2008 which management believes will eliminate all
of the interest and penalties for unpaid taxes. As a result, management
expects that the financial impact of these interest and penalties will be
reversed in the third quarter of 2008. Management believes that such reversal
will result in an increase in net income for the third quarter of 2008 equal
to the reduction in net income in 2005, 2006 and 2007 relating to unpaid
taxes. Management also believes a second result of this accounting method
change is a change in the timing of the payment of taxes on the cost-sharing
payments, as described in more detail in its Current Report on Form 8-K, filed
on August 12, 2008.
(2) The Company completed a detailed study regarding the application of
Section 382 of the Internal Revenue Code of 1986 ("Section 382") on ownership
changes. Application of the findings of this study confirmed that, as
previously reported, the Company had lost the use of net operating losses
although we lost fewer net operating losses than reported on the Company's
Report on Form 10-K for the year ended December 31, 2007. This resulted in a
decrease in income tax expense and related tax liabilities from the amounts
reported on the 2007 Form 10-K because the previously identified ownership
change occurred earlier than previously reported and thus eliminated fewer net
operating losses.
(3) In connection with an internal review, the Company identified a
decrease of $3.0 million in direct expenses in 2007 due to an overstatement of
imagery purchased from third parties associated with imagery sales in 2007.
The net after tax impact of these restatements is shown in the table
below:
$ Millions Net Income (NI) Amount expected to
be reversed in 2008
2005 2006 2007 as an increase to NI
As Reported ($24.3) $23.4 $42.4
- Impact of Cost
Share related issue ($2.0) ($13.4) ($15.6) $31.0
- Impact of revised
NOL availability $4.3 $0.0
- Impact of reduced
direct expenses $2.0 $0.0
Restated ($26.3) $10.0 $33.1
The Company intends to file the required restatements as soon as
practicable.
Second Quarter Operating Performance
GeoEye also reported that its revenues for the second quarter of 2008 were
$34.2 million as compared to $48.3 million for the second quarter of 2007.
(Revenue for the second quarter of 2007 is unchanged in the restatement.)
Income from operations for the quarter was $5.3 million as compared to
$25.7 million for the second quarter of 2007. (Income from operations for the
second quarter of 2007 is unchanged in the restatement.) Net Income for the
second quarter of 2008 was $2.4 million vs. a restated $11.2 million net
income for the second quarter of 2007. (Net income for the second quarter of
2007 was restated down by $12.2 million from $23.4 million for the tax issues
discussed above.)
The primary reason for the revenue and net income decreases is a reduction
in orders from the National Geospatial-Intelligence Agency (NGA). The Company
believes in light of the delay of GeoEye-1, NGA may have re-allocated imagery
orders to our competitor because their NextView satellite was launched last
fall and is now operational. As reported earlier today, GeoEye-1's planned
target launch date is moving to September 4, 2008.
For the first half of the year, revenues were $68.6 million through June
30, 2008 as compared to $85.1 million for the first half of 2007. (Revenue for
the first half of 2007 is unchanged in the restatement.) Again, the primary
reason for the revenue decrease is a reduction in orders from NGA.
Net income for the six-month period ending June 30, 2008 was $3.4 million.
This compares to a restated loss for the first half of 2007 of $2.4 million.
(2007 net loss for the first six months of 2007 was restated down by
$4.4 million from $6.8 million to a net loss $2.4 million for the tax issues
discussed above. Net income for the six-month period ending June 30, 2008 was
also restated.)
GeoEye's cash balance at June 30, 2008 was $221.5 million as compared to
$234.3 million at December 31, 2007. This cash balance, coupled with the
remaining milestone payments from NGA of $43.5 million, provides more than
sufficient cash to fund the remaining amounts due to complete the GeoEye-1
program. As of June 30, 2008, we have expended approximately $421 million of
the $502 million program. The remaining $81 million includes insurance
premium payments (which were made in July and August, 2008), final amounts due
to contractors and contingencies. In addition, we have accrued -- but not yet
paid -- amounts due to contractors of $43 million. Total cash needs to
complete the program, including contingencies, are $124 million.
Selected quarter-end operating results for the Company are as follows
(dollars in thousands):
GEOEYE, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(As restated) (As restated)
Revenues $34,219 $48,254 $68,621 $85,050
Direct expenses 19,335 15,162 39,095 34,272
Gross profit 14,884 33,092 29,526 50,778
Selling, general and
administrative expenses 9,604 7,385 18,544 13,979
Income from operations 5,280 25,707 10,982 36,799
Net loss (gain) on satellite
insurance proceeds (9) - 1,141 36,053
Interest expense, net 1,366 1,897 2,449 5,119
Unrealized (gain) loss on
derivative instrument (97) (839) 1,668 999
Income (loss) before
provision for income taxes 4,020 24,649 5,724 (5,372)
Provision for income taxes 1, 600 13,462 2,278 (2,934)
Net income (loss) $2,420 $11,187 3,446 $(2,438)
Earnings per common
share - basic $0.13 $0.64 $0.19 $(0.14)
Earnings per common
share - diluted $0.12 $0.58 $0.17 $(0.14)
Above financial statements also include the restated results of the quarter
end March 31, 2008.
GEOEYE, INC.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share data)
June 30, December 31,
2008 2007
ASSETS (As restated)
Current assets:
Cash and cash equivalents $221,498 $234,324
Receivables net of allowances of $342 and
$738, respectively 27,845 44,517
Other current assets 11,320 6,419
Total current assets 260,663 285,260
Property, plant and equipment, at cost, less
accumulated depreciation of $14,654 and
$11,817, respectively 97,396 88,418
Satellites and related rights, at cost, less
accumulated depreciation and amortization of
$12,219 and $10,311, Respectively 368,423 346,267
Goodwill 32,612 32,612
Intangible assets 15,702 17,068
Other non-current assets 14,096 16,653
Deferred tax asset
107,139 106,406
Total assets $896,031 $892,684
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $23,665 $17,684
Amounts payable to subcontractors 42,818 55,967
Accrued interest payable 17,188 17,292
Current portion of deferred revenue 13,823 9,499
Income tax payable 25,924 30,142
Income tax reserve-FIN 48 55,958 51,103
Total current liabilities 179,376 181,687
Long-term debt 247,145 246,789
Deferred revenue, net of current portion 193,860 193,860
Income tax reserve-FAS 5 78,091 78,091
Total liabilities 698,472 700,427
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01; 50,000,000
shares authorized; 17,997,441 shares and
17,868,153 issued and outstanding at
June 30, 2008 and December 31, 2007,
respectively 146 147
Additional paid-in capital 201,826 199,969
Retained earnings (4,413) (7,859)
Total stockholders' equity 197,559 192,257
Total liabilities and stockholders' equity $896,031 $892,684
Above financial statements also include the restated results of the quarter
end March 31, 2008.
For more information about the launch of the GeoEye-1 satellite, please
visit: http://launch.geoeye.com. To receive timely, ongoing details about
the development of GeoEye-1 products and services, sign up at
http://launch.geoeye.com/LaunchSite/news/signup.aspx.
About GeoEye
GeoEye is the premier provider of geospatial information for the national
security community, strategic partners, resellers and commercial customers to
help them better map, measure and monitor the world. The Company is recognized
as the industry's trusted imagery expert for delivering reliable service and
the exceptional quality of its imagery products and solutions. It operates a
constellation of Earth imaging satellites, mapping aircraft and has an
international network of ground stations, a robust imagery archive, and
advanced imagery processing capabilities for developing innovative geospatial
products and solutions. The Company also provides support to academic
institutions and non-governmental organizations through the GeoEye Foundation.
Headquartered in Dulles, Virginia, GeoEye is a public company listed on the
Nasdaq stock exchange under the symbol GEOY. It maintains a comprehensive
Quality Management System (QMS) and has achieved company-wide ISO
accreditation. For more information, visit http://www.geoeye.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995
This release contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Securities Exchange Act of 1934, as
amended. Statements including words such as "anticipate", "believe", or
"expect" and statements in the future tense are forward-looking statements.
These forward-looking statements involve known and unknown risks and
uncertainties. GeoEye's actual financial and operational results could differ
materially from those anticipated. Additional information regarding these
risk factors and uncertainties is described more fully in the Company's SEC
filings. A copy of all SEC filings may be obtained from the SEC's EDGAR web
site, http://www.sec.gov, or by contacting: William L. Warren, Senior Vice
President, General Counsel and Secretary, at 703-480-5672.
SOURCE GeoEye, Inc.
Mark Brender of GeoEye, +1-703-480-9562, brender.mark@geoeye.com; or Amy Estes
of LeGrand Hart, +1-303-298-8470, ext. 218, for GeoEye
