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<SEC-DOCUMENT>0000950133-99-000563.txt : 19990222
<SEC-HEADER>0000950133-99-000563.hdr.sgml : 19990222
ACCESSION NUMBER:		0000950133-99-000563
CONFORMED SUBMISSION TYPE:	10-Q/A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	19980930
FILED AS OF DATE:		19990219

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ORBITAL SCIENCES CORP /DE/
		CENTRAL INDEX KEY:			0000820736
		STANDARD INDUSTRIAL CLASSIFICATION:	SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812]
		IRS NUMBER:				061209561
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q/A
		SEC ACT:		
		SEC FILE NUMBER:	001-14279
		FILM NUMBER:		99546110

	BUSINESS ADDRESS:	
		STREET 1:		21700 ATLANTIC BLVD
		CITY:			DULLES
		STATE:			VA
		ZIP:			20166
		BUSINESS PHONE:		7034065000

	MAIL ADDRESS:	
		STREET 1:		21700 ATLANTIC BLVD
		STREET 2:		21700 ATLANTIC BLVD
		CITY:			DULLES
		STATE:			VA
		ZIP:			20166

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ORBITAL SCIENCES CORP II
		DATE OF NAME CHANGE:	19900212
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q/A
<SEQUENCE>1
<DESCRIPTION>FORM 10-Q/A DATED 9/30/98
<TEXT>

<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                   FORM 10-Q/A

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


                              For the quarter ended

                               SEPTEMBER 30, 1998


                          ORBITAL SCIENCES CORPORATION


                         Commission file number 0-18287



                DELAWARE                                     06-1209561
        ------------------------                     ---------------------------
        (State of Incorporation)                     (IRS Identification number)

        21700 ATLANTIC BOULEVARD
         DULLES, VIRGINIA 20166                            (703) 406-5000
- ----------------------------------------                 ------------------
(Address of principal executive offices)                 (Telephone number)



The registrant has (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, and
(2) has been subject to such filing requirements for the past 90 days.

As of November 4, 1998 36,826,023 shares of the registrant's common stock were
outstanding.



<PAGE>   2



                                     PART 1
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                          ORBITAL SCIENCES CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                          A S S E T S
                                                          -----------
                                                                                                   RESTATED
                                                                                                 SEPTEMBER 30,      DECEMBER 31,
                                                                                                     1998              1997
                                                                                                 -------------      ------------
<S>                                                                                              <C>                <C>
CURRENT ASSETS:                                                                                                     
          Cash and cash equivalents                                                                $  39,482         $  12,553
          Short-term investments, at market                                                              225             2,573
          Receivables, net                                                                           218,278           190,204
          Inventories, net                                                                            41,733            50,925
          Deferred income taxes and other assets                                                      10,673             8,190
                                                                                                   ---------         ---------
            TOTAL CURRENT ASSETS                                                                     310,391           264,445
                                                                                                                    
PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED                                                            
    depreciation and amortization of $98,755 and $79,347, respectively                               148,620           137,498
                                                                                                                    
INVESTMENTS IN AND ADVANCES TO AFFILIATES, NET                                                       223,180           159,230
                                                                                                                    
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,                                                                  
    less accumulated amortization of $25,567 and $19,794, respectively                               180,631           181,955
                                                                                                                    
DEFERRED INCOME TAXES AND OTHER ASSETS                                                                28,995            28,511
                                                                                                   ---------         ---------
            TOTAL ASSETS                                                                           $ 891,817         $ 771,639
                                                                                                   =========         =========
                                                                                                                    
                                                                                                                    
                                             LIABILITIES AND STOCKHOLDERS' EQUITY                                              
                                             ------------------------------------                                              
                                                                                                                    
CURRENT LIABILITIES:                                                                                                
          Short-term borrowings and current portion of                                                              
              long-term obligations                                                                $  40,065         $  29,317
          Accounts payable                                                                            42,730            36,217
          Accrued expenses                                                                            81,065           100,274
          Deferred revenues                                                                           49,054            46,138
                                                                                                   ---------         ---------
            TOTAL CURRENT LIABILITIES                                                                212,914           211,946
                                                                                                                    
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION                                                        152,803           198,394
                                                                                                                    
OTHER LIABILITIES                                                                                      1,936             2,443
                                                                                                   ---------         ---------
            TOTAL LIABILITIES                                                                        367,653           412,783
                                                                                                                    
NON-CONTROLLING INTERESTS IN                                                                                        
     NET ASSETS OF CONSOLIDATED SUBSIDIARIES                                                          (3,817)            3,755
                                                                                                                    
COMMITMENTS AND CONTINGENCIES                                                                                       
                                                                                                                    
STOCKHOLDERS' EQUITY:                                                                                               
          Preferred Stock, par value $.01; 10,000,000 shares authorized:                                            
             Series A Special Voting Preferred Stock, none and one share                                            
               authorized and outstanding, respectively                                                   --                --
          Common Stock, par value $.01; 80,000,000 shares authorized,                                               
             36,955,050 and 32,481,719 shares outstanding, respectively                                             
               after deducting 20,877 shares held in treasury                                            370               325
          Additional paid-in capital                                                                 486,919           326,187
          Unrealized gains on short-term investments                                                     387               272
          Cumulative translation adjustments                                                          (6,134)           (4,943)
          Retained earnings                                                                           46,439            33,260
                                                                                                   ---------         ---------
            TOTAL STOCKHOLDERS' EQUITY                                                               527,981           355,101
                                                                                                   ---------         ---------
            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $ 891,817         $ 771,639
                                                                                                   =========         =========
</TABLE>




     SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       2
<PAGE>   3



                          ORBITAL SCIENCES CORPORATION
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                  (Unaudited; in thousands, except share data)

<TABLE>
<CAPTION>
                                                  FOR THE THREE MONTHS ENDED
                                                         SEPTEMBER 30,

                                                   RESTATED
                                                 ----------------------------
                                                     1998             1997
                                                 ------------    ------------
<S>                                              <C>             <C>         
REVENUES                                         $    187,688    $    164,670

COSTS OF GOODS SOLD                                   141,195         118,655
                                                 ------------    ------------
GROSS PROFIT                                           46,493          46,015

RESEARCH AND DEVELOPMENT EXPENSES                      14,239           6,476
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES           20,979          26,334
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
        NET ASSETS ACQUIRED                             1,983             956
                                                 ------------    ------------
INCOME FROM OPERATIONS                                  9,292          12,249


NET INVESTMENT INCOME (EXPENSE)                           977           1,007
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES              (9,465)         (6,929)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
    OF CONSOLIDATED SUBSIDIARIES                        2,458             533
                                                 ------------    ------------
INCOME BEFORE PROVISION FOR INCOME TAXES                3,262           6,860

PROVISION FOR INCOME TAXES                                826             730
                                                 ------------    ------------
NET INCOME                                       $      2,436    $      6,130
                                                 ============    ============



NET INCOME PER COMMON SHARE                      $       0.07    $       0.18


SHARES USED IN COMPUTING NET INCOME
         PER COMMON SHARE                          36,757,055      33,347,734
                                                 ============    ============



NET INCOME PER COMMON SHARE, ASSUMING DILUTION   $       0.06    $       0.18


SHARES USED IN COMPUTING NET INCOME
         PER COMMON SHARE, ASSUMING DILUTION       41,172,222      34,492,637
                                                 ============    ============
</TABLE>





     SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>   4



                          ORBITAL SCIENCES CORPORATION
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                  (UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                   FOR THE NINE MONTHS ENDED 
                                                          SEPTEMBER 30,
                                                   RESTATED
                                                 ----------------------------
                                                     1998             1997
                                                 ------------    ------------
<S>                                              <C>             <C>         
REVENUES                                         $    558,363    $    429,008

COSTS OF GOODS SOLD                                   409,645         309,642
                                                 ------------    ------------
GROSS PROFIT                                          148,718         119,366

RESEARCH AND DEVELOPMENT EXPENSES                      34,255          18,170
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES           77,634          69,456
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
    NET ASSETS ACQUIRED                                 5,921           2,439
                                                 ------------    ------------
INCOME FROM OPERATIONS                                 30,908          29,301


NET INVESTMENT INCOME (EXPENSE)                         1,391           1,317
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES             (28,355)        (13,590)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
    OF CONSOLIDATED SUBSIDIARIES                        7,573           1,717
GAIN ON SALE OF SUBSIDIARY STOCK                        4,793              --
                                                 ------------    ------------

INCOME BEFORE PROVISION FOR INCOME TAXES               16,310          18,745

PROVISION FOR INCOME TAXES                              3,131           1,918
                                                 ------------    ------------
NET INCOME                                       $     13,179    $     16,827
                                                 ============    ============



NET INCOME PER COMMON SHARE                      $       0.37    $       0.51


SHARES USED IN COMPUTING NET INCOME PER SHARE      35,199,984      32,941,540
                                                 ============    ============



NET INCOME PER COMMON SHARE, ASSUMING DILUTION   $       0.37    $       0.50


SHARES USED IN COMPUTING NET INCOME
    PER COMMON SHARE, ASSUMING DILUTION            39,925,234      33,960,724
                                                 ============    ============
</TABLE>




     SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>   5



                          ORBITAL SCIENCES CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED; IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                        FOR THE NINE MONTHS ENDED
                                                                                              SEPTEMBER 30,
                                                                                        RESTATED
                                                                                        -------------------------
                                                                                          1998             1997
                                                                                        ---------       ---------
<S>                                                                                     <C>             <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                  
     NET INCOME                                                                         $  13,179       $  16,827
     ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH                                                   
           PROVIDED BY (USED IN) OPERATING ACTIVITIES:                                                 
                Depreciation and amortization expense                                      27,858          18,435
                Equity in losses of affiliates                                             28,355          13,590
                Non-controlling interests in losses of consolidated subsidiaries           (7,573)         (1,717)
                Gain on sale of subsidiary stock                                           (4,793)             --
                Foreign currency translation adjustment                                    (1,191)           (528)
           CHANGES IN ASSETS AND LIABILITIES:                                                          
                (Increase) decrease in current and other non-current assets               (30,333)         (2,656)
                Increase (decrease) in current and other non-current liabilities          (10,336)        (15,715)
                                                                                        ---------       ---------
           NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                             15,166          28,236
                                                                                        ---------       ---------
                                                                                                       
                                                                                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                  
     Capital expenditures                                                                 (33,259)        (31,757)
     Proceeds from sales of fixed assets                                                       --          34,699
     Payments for business combinations                                                        --         (44,116)
     Purchases, sales and maturities of available-for-sale investment securities, net       2,348         (14,028)
     Investments in and advances to affiliates                                            (83,260)       (104,394)
                                                                                        ---------       ---------
           NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                           (114,171)       (159,596)
                                                                                        ---------       ---------
                                                                                                       
                                                                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                  
     Short-term borrowings, net of (repayments)                                            17,440         (14,712)
     Principal payments on long-term obligations                                          (79,283)        (22,690)
     Net proceeds from issuance of long-term obligations                                   27,000         159,223
     Net proceeds from issuances of common stock                                          160,777           1,803
                                                                                        ---------       ---------
           NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                            125,934         123,624
                                                                                        ---------       ---------
                                                                                                       
                                                                                                       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       26,929          (7,736)
                                                                                                       
                                                                                                       
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                             12,553          26,859
                                                                                        ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                $  39,482       $  19,123
                                                                                        =========       =========
</TABLE>




     SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>   6



ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)

BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to instructions, rules and regulations prescribed by the Securities and Exchange
Commission. Although the company believes that the disclosures provided are
adequate to make the information presented not misleading, these unaudited
interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the footnotes
thereto included in the company's Annual Report on Form 10-K for the year ended
December 31, 1997. Operating results for the three- and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results expected for
the full year.

Orbital Sciences Corporation is hereafter referred to as "Orbital" or the
"company."

(1) RESTATEMENT
The accompanying condensed consolidated financial statements for the three- and
nine-month periods ended September 30, 1998 have been restated. Based on
accounting decisions made in connection with the preparation of the company's
consolidated year-end financial statements, the company has restated the
aforementioned financial statements to consistently apply accounting policies
to certain transactions recorded in the three- and nine-month periods ended
September 30, 1998, as summarized below.

In the company's Space and Ground Infrastructure Systems sector (the "SGIS
sector"), the company adjusted profits previously recognized on long-term
contracts accounted for using the percentage of completion method during the
three- and nine-month periods. The adjustments were (i) to reduce revenue
previously recognized pursuant to a long-term contract at its MacDonald
Dettwiler and Associates subsidiary by $5,800,000 and (ii) to increase costs of
goods sold related to a satellite contract acquired in a prior business
combination by $2,200,000. For the three- and nine-month periods, the company
reduced costs of goods sold by $1,600,000 to correct previously overstated
inventory obsolescence charges established during the quarter related to its
Magellan subsidiary (before considering the associated minority interests of
$544,000) in the Satellite Access sector. The company recorded $2,500,000 and
$5,000,000 for the three- and nine-month periods, respectively, of additional
research and development expenses related to certain product enhancements at
Magellan that had been previously capitalized (before considering the
associated minority interests of $850,000 and $1,700,000). The company also
reduced general and administrative expenses in the SGIS sector by approximately
$2,000,000 and $1,800,000 for the three- and nine-month periods, respectively,
related to stock option compensation expense. This adjustment relates primarily
to compensation expense incorrectly recorded for a subsidiary's stock option
plan. For the nine-month period ended September 30, 1998, the company recorded
$1,200,000 of additional general and administrative expenses in the SGIS 



                                       6

<PAGE>   7



sector for estimated post-retirement health benefit obligations related to a
plan acquired in a prior business combination (none for the three-month period
ended September 30, 1998). In the SGIS sector, the company reduced net interest
expense by approximately $200,000 and $800,000 for the three- and nine-month
periods ended September 30, 1998, respectively, to reflect the appropriate
amount of interest capitalized on certain assets in process. In addition, the 
company recorded other adjustments in the SGIS sector to properly capitalize
costs associated with launch vehicle equipment, and the associated depreciation
of such equipment, which together had the effect of increasing operating income
by approximately $100,000 for the three- and nine-month periods. Lastly, the
company revised its tax provision to reflect the impact of these adjustments
and to reflect the company's revised estimate of its effective tax rate for the
year.


<TABLE>
<CAPTION>
                               Three Months Ended                  Nine Months Ended
                                  Sept 30, 1998                      Sept 30, 1998

                           As Reported      As Restated       As Reported       As Restated
                           -----------      -----------       -----------       -----------
<S>                        <C>              <C>               <C>               <C>        
Retained Earnings          $55,809,000      $46,439,000       $55,809,000       $46,439,000

Net Income                 $ 8,611,000      $ 2,436,000       $22,549,000       $13,179,000

Diluted EPS                $      0.21      $      0.06       $      0.62       $      0.37
</TABLE>


The restatement noted above is included in the accompanying condensed 
consolidated financial statements.

(2) PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Management periodically assesses and
evaluates the sufficiency and/or deficiency of estimated liabilities recorded
for various operational and business risks and uncertainties. Actual results
could differ from these estimates.

Certain reclassifications have been made to the 1997 financial statement to
conform to the 1998 financial statement presentation. All financial amounts are
stated in U.S. dollars unless otherwise indicated.

(3) INVENTORIES
Inventories consist of components inventory, work-in-process inventory and
finished goods inventory and are generally stated at the lower of cost or net
realizable value on a first-in, first-out, or specific identification basis, net
of allowances for estimated obsolescence.

Components and raw materials are purchased to support future production efforts.
Work-in-process inventory consists primarily of (i) costs incurred under
long-term fixed-price contracts accounted for using the percentage-
of-completion method of accounting applied on a units of delivery basis and (ii)
partially assembled commercial products, and generally includes direct
production costs and certain allocated indirect costs (including an allocation
of general and administrative costs). Work-in-process inventory has been reduced
by contractual progress 



                                       7
<PAGE>   8



payments received. Finished goods inventory consists of fully assembled
commercial products awaiting shipment.

(4) INVESTMENTS IN AND ADVANCES TO AFFILIATES AND EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED
The company provided $22,500,000 in cash and $53,737,000 in vendor financing
(approximately one-half of the vendor financing has been advanced to Orbital by
an affiliate of Teleglobe Inc.) to its affiliate ORBCOMM Global, L.P.
("ORBCOMM") during the first nine months of 1998.

In August 1998, the company entered into a Stock Purchase Agreement (the
"Agreement") with CCI International N.V. ("CCI") pursuant to which the company
agreed, subject to the satisfaction by CCI of certain conditions and achievement
of certain milestones, to purchase up to $50,000,000 of CCI's nonvoting Series A
Convertible Preferred Stock (the "Preferred Shares"), with an option to purchase
an additional $50,000,000 of Preferred Shares. In addition, the company agreed
to provide vendor financing contingent on CCI meeting such milestones.
Concurrently with the execution of the Agreement, the company and CCI entered
into a satellite and launch vehicle procurement contract valued at approximately
$480,000,000 for the satellites and a price for the launch vehicles to be
determined. As of September 30, 1998, the company had purchased $22,000,000 of
the Preferred Shares and had not provided any vendor financing.

During 1998, as a result of additional information becoming available with
respect to the fair value of the acquired assets and liabilities, increases were
made to the excess of purchase price over net assets acquired related to the
1997 acquisition of certain assets of CTA Incorporated.

(5) EARNINGS PER SHARE
Net income per common share is calculated using the weighted average number of
common shares outstanding during the periods. Net income per common share
assuming dilution is calculated using the weighted average number of common and
common equivalent shares outstanding during the periods, plus the effects of an
assumed conversion of the company's convertible notes, after giving effect to
all net income adjustments that would result from the assumed conversion. Net
income and outstanding shares of common stock used in calculating earnings per
share differed from those amounts reported in the consolidated financial
statements as follows:


<TABLE>
<CAPTION>
                                                   Net Income Per          Net Income Per Common
                                                    Common Share         Share, Assuming Dilution
                                                    ------------         ------------------------
<S>                                                <C>                   <C>
Three months ended September 30, 1998:
  Net income                                        $  2,436,000               $  2,436,000
  Assuming conversion of convertible notes                   N/A                    224,000
                                                    ------------               ------------
      Net income, as adjusted                       $  2,436,000               $  2,660,000
                                                    ============               ============

  Outstanding common shares                           36,955,050                 36,955,050
  Effect of weighting outstanding shares                (197,995)                  (197,995)
  Stock options (treasury method)                            N/A                    843,738
  Convertible notes                                          N/A                  3,571,429
                                                    ------------               ------------
      Adjusted shares                                 36,757,055                 41,172,222
                                                    ============               ============
</TABLE>




                                       8
<PAGE>   9



<TABLE>
<CAPTION>
<S>                                                 <C>                        <C>
Nine months ended September 30, 1998:
  Net income                                        $  13,179,000              $ 13,179,000
  Assuming conversion of convertible notes                    N/A                 1,484,000
                                                    -------------              ------------
      Net income, as adjusted                       $  13,179,000              $ 14,663,000
                                                    =============              ============

  Outstanding common shares                            36,955,050                36,955,050
  Effect of weighting outstanding shares               (1,755,066)               (1,755,066)
  Stock options (treasury method)                             N/A                 1,153,821
  Convertible notes                                           N/A                 3,571,429
                                                    -------------              ------------
      Adjusted shares                                  35,199,984                39,925,234
                                                    =============              ============
</TABLE>

<TABLE>
<CAPTION>

                                                    Net Income Per          Net Income Per Common
                                                     Common Share         Share, Assuming Dilution
                                                     ------------         ------------------------
<S>                                                 <C>                   <C>
Three months ended September 30, 1997:
  Net income                                        $   6,130,000              $  6,130,000
  Assuming conversion of convertible notes                    N/A                       N/A
                                                    -------------              ------------
      Net income, as adjusted                       $   6,130,000              $  6,130,000
                                                    =============              ============

  Outstanding common shares                            32,269,326                32,269,326
  Effect of weighting outstanding shares                1,078,408                    40,083
  Stock options (treasury method)                             N/A                 1,587,990
  Convertible notes                                           N/A                   595,238
                                                    -------------              ------------
      Adjusted shares                                  33,347,734                34,492,637
                                                    =============              ============

Nine months ended September 30, 1997:
  Net income                                        $  16,827,000              $ 16,827,000
  Assuming conversion of convertible notes                    N/A                       N/A
                                                    -------------              ------------
      Net income, as adjusted                       $  16,827,000              $ 16,827,000
                                                    =============              ============

  Outstanding common shares                            32,269,326                32,269,326
  Effect of weighting outstanding shares                  672,214                   (26,686)
  Stock options (treasury method)                             N/A                 1,519,671
  Convertible notes                                           N/A                   198,413
                                                    -------------              ------------
      Adjusted shares                                  32,941,540                33,960,724
                                                    =============              ============
</TABLE>

(6) INCOME TAXES
The company has recorded its interim income tax provision based on estimates of
the company's effective tax rate expected to be applicable for the full fiscal
year. Estimated effective rates recorded during interim periods may be
periodically revised, if necessary, to reflect current estimates.

(7) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income."
Disclosure requirements with respect to comprehensive income, as of and for the
nine months ended September 30, 1998 and 1997, are as follows:





                                       9
<PAGE>   10



<TABLE>
<CAPTION>
                                                                1998                     1997
                                                                ----                     ----
<S>                                                         <C>                     <C>
Differences between net income, as 
  reported, and comprehensive income:
         Net income, as reported                            $  13,179,000           $  16,827,000
         Unrealized gains on short-term investments               115,000                  30,000
         Translation adjustments                               (1,191,000)               (528,000)
                                                            -------------           -------------
           Comprehensive income                             $  12,103,000           $  16,329,000
                                                            =============           =============

Accumulated differences between net income, 
  as reported, and comprehensive income:
         Beginning of period                                $  (4,671,000)          $  (3,667,000)
         Unrealized gains (losses)
           on short-term investments                               115,000                 30,000
         Translation adjustments                               (1,191,000)               (528,000)
                                                            -------------           -------------
         End of period                                      $  (5,747,000)          $  (4,165,000)
                                                            =============           =============
</TABLE>

(8) COMMON STOCK
In April 1998, the company sold 3,450,000 shares of its common stock in a public
offering at $45.81 per share, generating net proceeds to the company of
approximately $150,000,000 after deducting underwriters' discounts and other
offering expenses.

(9) SUBSEQUENT EVENT
In October 1998, the company's Board of Directors adopted a stockholder rights
plan in which preferred stock purchase rights will be granted as a dividend at
the rate of one right for each share of common stock to stockholders of record
on November 13, 1998. The plan is designed to deter coercive or unfair takeover
tactics. The rights become exercisable only if a person or group in the future
becomes the beneficial owner of 15% or more of Orbital's common stock, or
announces a tender or exchange offer that would result in its ownership of 15%
or more of the Company's common stock. The rights are generally redeemable by
the Company's Board of Directors at a redemption price of $0.005 per right and
expire on October 31, 2008.







                                       10
<PAGE>   11



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997

Certain statements included in this discussion relating to future revenues,
expenses, growth rates, net income, new business, operational performance,
schedules, sources and uses of funds, "Year 2000" issues, and the performance of
the company's affiliates, Orbital Imaging Corporation ("ORBIMAGE") and ORBCOMM
Global, L.P. ("ORBCOMM"), are forward-looking statements that involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance and achievements of the company to differ materially from
any future results, performance, achievements expressed or implied by such
forward-looking statements. Such factors include: general and economic business
conditions, launch results, product performance, risks associated with
government contracts, market acceptance of consumer products, the introduction
of products and services by competitors, risks associated with acquired
businesses including their successful integration into the company in terms of
operating efficiencies, among other things, availability of required capital,
the ability of the company itself, customers and suppliers to assess and correct
timely and accurately "Year 2000" issues, market acceptance of new products and
technologies, and other factors that are described more fully in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Outlook: Issues and Uncertainties" incorporated in the company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.

The company's products and services are grouped into three business sectors:
Space and Ground Infrastructure Systems, Satellite Access Products and Satellite
Services. Space and Ground Infrastructure Systems include launch vehicles,
satellites, electronics and sensor systems, and satellite ground systems. The
company's Satellite Access Products sector consists of consumer, high-precision
and automotive satellite-based navigation products, satellite communications
products and transportation management systems. The company's Satellite Services
sector includes satellite-based two-way mobile data communications services and
satellite-based imagery services, conducted through the company's ORBCOMM and
ORBIMAGE affiliates, respectively. The company does not control the operational
and financial affairs of ORBCOMM or ORBIMAGE, and consequently their financial
results are not consolidated with the company's results.

RECENT DEVELOPMENTS. In July 1998, the company's stock began trading on the New
York Stock Exchange under the ticker symbol "ORB." The company's stock had
previously traded on the Nasdaq National Market under the symbol "ORBI." In
April 1998, the company sold 3,450,000 shares of its common stock in a public
offering at $45.81 per share, generating net proceeds of approximately
$150,000,000 (see Liquidity and Capital Resources).

In July 1998, ORBCOMM Corporation announced that it elected to postpone its
proposed initial public offering of common stock. ORBCOMM Corporation was
organized for the sole purpose of investing in and acting as a general partner
of ORBCOMM. Orbital, through its subsidiary



                                       11
<PAGE>   12



Orbital Communications Corporation, and Teleglobe Mobile Partners, an affiliate
of Teleglobe Inc., the existing fifty-percent partners in ORBCOMM, each has
reaffirmed its commitment to provide funding to ORBCOMM while considering
options for future financing at ORBCOMM (see Liquidity and Capital Resources).

In August 1998, the company entered into a Stock Purchase Agreement (the
"Agreement") with CCI International, N.V. ("CCI") pursuant to which the company
agreed, subject to the satisfaction by CCI of certain conditions prior to
December 31, 1998, including meeting certain milestones, to purchase up to
$50,000,000 of CCI's nonvoting Series A Convertible Preferred Stock (the
"Preferred Shares"), with an option to purchase an additional $50,000,000 of
Preferred Shares. Concurrently with the execution of the Agreement, the company
and CCI entered into a satellite and launch vehicle procurement contract valued
at approximately $480,000,000 for the satellites and a price to be determined
for the launch vehicles. In addition, Orbital agreed to provide vendor financing
contingent on CCI meeting such milestones. As of September 30, 1998, the company
had purchased $22,000,000 of the Preferred Shares and had not provided any
vendor financing. Should CCI not ultimately achieve its financial or operational
milestones, some of which entail raising capital, Orbital may be required to
write-off all, or a portion of, its investment.

In October 1998, the company adopted a stockholder rights plan in which
preferred stock purchase rights will be granted as a dividend at the rate of one
right for each share of common stock to stockholders of record on November 13,
1998. The plan is designed to deter coercive or unfair takeover tactics. The
rights become exercisable only if a person or group in the future becomes the
beneficial owner of 15% or more of Orbital's common stock, or announces a tender
or exchange offer that would result in its ownership of 15% of more of the
Company's common stock. The rights are generally redeemable by the Company's
Board of Directors at a redemption price of $0.005 per right and expire on
October 31, 2008. For more information regarding Orbital's stockholders rights
plan, refer to the company's Form 8-K filed with the Securities and Exchange
Commission on October 22, 1998.

REVENUES. Orbital's revenues for the three-month periods ended September 30,
1998 and 1997 were $187,688,000 and $164,670,000, respectively. Revenues for the
nine-month periods ended September 30, 1998 and 1997 were $558,363,000 and
$429,008,000, respectively.

Space and Ground Infrastructure Systems. Revenues from the company's Space and
Ground Infrastructure Systems sector totaled $160,586,000 and $149,387,000 for
the three months ended September 30, 1998 and 1997, respectively. Revenues from
this sector totaled $472,628,000 and $378,109,000 for the nine months ended
September 30, 1998 and 1997, respectively.

Revenues from the company's launch vehicles increased to $34,636,000 in the
third quarter of 1998 from $29,905,000 in the third quarter of 1997, and to
$128,063,000 for the nine months ended September 30, 1998 from $87,022,000 for
the nine months ended September 30, 1997. The increase in revenues in 1998 as
compared to 1997 is attributable to a number of factors, including (i) increased
work performed under contracts received for the company's Taurus launch vehicle,
(ii) a significant increase in new orders received during 1997 for the company's
Pegasus and suborbital launch vehicles and (iii) increased work performed on the
X-34 reusable launch vehicle.


                                       12
<PAGE>   13



For the three months ended September 30, 1998, satellite revenues were
$75,529,000 as compared to $74,485,000 for the three months ended September 30,
1997. Satellite revenues were $194,112,000 for the nine months ended September
30, 1998 as compared to $161,679,000 for the nine months ended September 30,
1997. Revenues included sales generated by the satellite business acquired from
CTA Incorporated ("CTA") in August 1997 of approximately $21,903,000 and
$51,775,000, respectively, for the three- and nine-month periods ended September
30, 1998, and of approximately $21,964,000 for the three-month period ended
September 30, 1997. The company periodically assesses and evaluates the
recoverability of the related excess of purchase price over net assets acquired
based on current facts and circumstances and the operational performance of the
acquired CTA business.

Revenues from electronics and sensor systems were $25,715,000 for the three
months ended September 30, 1998 as compared to $26,915,000 for the three months
ended September 30, 1997, and increased to $82,527,000 for the nine months ended
September 30, 1998 from $77,108,000 for the nine months ended September 30,
1997. Although consistent on a quarter-to-quarter basis, the increase in overall
1998 revenues is primarily due to work performed in 1998 on new orders for
defense electronics products received during the second half of 1997 and in
early 1998.

Revenues from the company's ground systems products increased to $24,706,000 for
the three months ended September 30, 1998 from $18,802,000 for the three months
ended September 30, 1997. Ground systems products revenues increased to
$67,926,000 for the nine months ended September 30, 1998 from $52,210,000 for
the nine months ended September 30, 1997. The increase in 1998 revenues is
primarily due to work performed on orders received in 1997 and in early 1998,
including work on a new remote imaging system.

Although overall infrastructure revenues increased, revenues under procurement
agreements with ORBCOMM and ORBIMAGE for the three months ended September 30,
1998 decreased significantly to $28,299,000 from $45,408,000 for the three
months ended September 30, 1997. Revenues from sales to ORBCOMM and ORBIMAGE
were $109,077,000 for the nine months ended September 30, 1998 as compared to
$108,062,000 for the nine months ended September 30, 1997. The decrease in the
current quarter's revenues is primarily due to reduced work under the ORBCOMM
procurement agreement as it nears completion.

Satellite Access Products. Revenues from sales of satellite-based navigation,
communications and transportation management systems and products increased to
$26,963,000 for the three months ended September 30, 1998 from $15,261,000 for
the three months ended September 30, 1997. Satellite access products revenues
were $85,273,000 for the nine months ended September 30, 1998 as compared to
$50,796,000 for the nine months ended September 30, 1997. The three- and
nine-month periods ended September 30, 1998 included approximately $10,654,000
and $32,557,000, respectively, of sales generated by the company's
high-precision navigation products that were acquired as a result of the
December 1997 merger of Ashtech Inc. ("Ashtech") with the company's subsidiary,
Magellan Corporation ("Magellan").

Although 1998 revenues from satellite access products were greater than 1997
revenues, revenues are below management's expectations due to increased
competition in consumer 



                                       13
<PAGE>   14



products and slower sales of automotive navigation products. Such revenue
levels, combined with costs associated with the integration and restructuring of
Ashtech and Magellan, have led to operating losses within this segment for the
1998 periods. While the company expects this trend to continue for the next
several months, Magellan believes the trend will reverse with the introduction
of new products and the implementation of further cost-related efficiencies
during the same period.

GROSS PROFIT/COSTS OF GOODS SOLD. Costs of goods sold include the costs of
personnel, materials, subcontracts and overhead related to sales of commercial
products and revenue earned under various long-term contracts. Gross profit
depends on a number of factors, including the company's mix of contract types
and costs incurred thereon in relation to estimated costs. The company's gross
profit for the third quarter of 1998 was $46,493,000 as compared to $46,015,000
in the third quarter of 1997. The company's gross profit for the first nine
months of 1998 was $148,718,000 as compared to $119,366,000 for the first nine
months of 1997. Gross profit as a percentage of revenues was between 25% and 28%
for all periods.

Space and Ground Infrastructure Systems. Gross profit from the company's Space
and Ground Infrastructure Systems sector was $38,607,000 and $41,820,000 for the
three months ended September 30, 1998 and 1997, respectively (or approximately
24% and 28% of revenues, respectively for each period). Gross profit for this
sector was $123,436,000 and $104,182,000 for the nine months ended September 30,
1998 and 1997, respectively, (or approximately 26% and 27.5% of revenues,
respectively, for each period).

Gross profit margins from the company's space and ground infrastructure systems
for the three- and nine-month periods ended September 30, 1998 were generally
consistent with comparable 1997 periods. Gross profit margins for the company's
launch vehicles decreased to 25% for the nine months ended September 30, 1998
from 29% for the nine months ended September 30, 1997, primarily due to work
performed on a lower margin Taurus contract and increased activity on the lower
margin X-34 contract.

Satellite Access Products. Gross profit for satellite access products was
$8,784,000 (or 33% of revenues) and $4,271,000 (or 28% of revenues) for the
three months ended September 30, 1998 and 1997, respectively, and $28,475,000
(or 33% of revenues) and $15,321,000 (or 30% of revenues) for the nine months
ended September 30, 1998 and 1997, respectively. The overall increase in gross
margins for the nine-month period is due to the inclusion of higher margin
high-precision navigation product lines acquired from Ashtech offset, in part,
by lower margins achieved on consumer and automotive navigation product sales.

During the nine months ended September 30, 1998, Magellan disposed of
approximately $12,500,000 of certain obsolete inventory for which reserves had
been previously provided. Magellan continues to face changing market conditions,
which places significant pressure on inventory components and individual product
lifetimes and inventory levels.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses represent
Orbital's self-funded product development activities and exclude direct
customer-funded development. Research and development expenses for the three
months ended September 30, 1998 and 1997 were $14,239,000 (or 8% of revenues)
and $6,476,000 (or 4% of revenues), respectively.



                                       14
<PAGE>   15



Research and development expenses were $34,255,000 (or 6% of revenues) and
$18,170,000 (or 4% of revenues) for the nine months ended September 30, 1998 and
1997, respectively. Research and development expenses for the three and nine
months ended September 30, 1998 included approximately $3,000,000 and
$5,000,000, respectively, of costs related to identifying and addressing
technical issues arising on certain ORBCOMM advanced data communications
satellites. Current year expenses also include increased research and
development efforts for satellite access products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include the costs of marketing, advertising, promotional
and other selling expenses as well as the costs of the finance, administrative
and general management functions of the company. Selling, general and
administrative expenses for the three months ended September 30, 1998 and 1997
were $20,979,000 (or 11% of revenues) and $26,334,000 (or 16% of revenues),
respectively. Selling, general and administrative expenses for the nine months
ended September 30, 1998 and 1997 were $77,634,000 (or 14% of revenues) and
$69,456,000 (or 16% of revenues), respectively. The decrease in selling, general
and administrative expenses as a percentage of revenues during 1998 as compared
to 1997 was primarily attributable to operational efficiencies gained as a
result of the acquisition of CTA's space business.

INTEREST INCOME AND INTEREST EXPENSE. Interest income for the periods reflects
interest earnings on cash equivalents and short-term investments. Interest
expense includes the cost of borrowings on Orbital's convertible subordinated
notes, revolving credit facilities and other secured and unsecured debt.
Interest income and interest expense, net of amounts capitalized, were
$1,002,000 and $25,000, respectively, for the three months ended September 30,
1998 as compared to interest income of $1,007,000 (there was no interest
expense) for the three months ended September 30, 1997. The company's interest
income and interest expense for the first nine months of 1998 were $2,875,000
and $1,484,000, respectively, while for the first nine months of 1997, the
company earned interest income and incurred interest expense of $1,405,000 and
$88,000, respectively. Interest expense has been reduced by capitalized interest
of $4,152,000 and $4,052,000 for the three months ended September 30, 1998 and
1997, respectively, and by $13,559,000 and $7,024,000 for the nine months ended
September 30, 1998 and 1997, respectively.

EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN
(EARNINGS) LOSSES OF CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of
affiliates net of non-controlling interests in (earnings) losses of consolidated
subsidiaries were ($7,007,000) and ($6,396,000) for the three months ended
September 30, 1998 and 1997, respectively, and were ($20,782,000) and
($11,873,000) for the nine months ended September 30, 1998 and 1997,
respectively. These amounts primarily represent (i) elimination of proportionate
profits or losses on sales of infrastructure products to ORBCOMM and ORBIMAGE,
(ii) the company's pro rata share of ORBCOMM's, ORBCOMM International Partners,
L.P.'s and ORBIMAGE's current period earnings and losses and (iii)
non-controlling stockholders' pro rata share of ORBCOMM USA L.P.'s and
Magellan's current period earnings and losses. The increase in total losses
during 1998 is primarily due to increased start-up expenses and resulting losses
at ORBCOMM.



                                       15
<PAGE>   16



PROVISION FOR INCOME TAXES. The company recorded an income tax provision of
$826,000 and $730,000 for the three months ended September 30, 1998 and 1997,
respectively, and of $3,131,000 and $1,918,000 for the nine months ended
September 30, 1998 and 1997, respectively. The company records its interim
income tax provisions based on estimates of the company's effective tax rate
expected to be applicable for the full fiscal year. Estimated effective rates
recorded during interim periods may be periodically revised, if necessary, to
reflect current estimates. At December 31, 1997, Orbital had approximately
$150,000,000 of U.S. Federal net operating loss carryforwards and $3,000,000 of
U.S. Federal research and experimental tax credit carryforwards, which are
available to reduce future income tax obligations, subject to certain annual
limitations and other restrictions.

NET INCOME (LOSS). The company's Space and Ground Infrastructure Systems
provided net income of approximately $15,091,000 in the quarter ended September
30, 1998 as compared to net income of $13,505,000 for the 1997 third quarter.
This sector provided net income of $48,763,000 in the first nine months of 1998
as compared to 1997 comparable net income of $32,172,000. The company's
Satellite Access Products sector reported a net loss in the third quarter of
1998 of $2,681,000 compared to net income of $117,000 in the 1997 quarter. This
sector reported a net loss of $10,209,000 in the first nine months of 1998 as
compared to net income of $1,468,000 in the 1997 nine-month period.

LIQUIDITY AND CAPITAL RESOURCES

The company's growth has required substantial capital to fund expanding working
capital needs, investments in ORBCOMM and ORBIMAGE, certain business
acquisitions, new business initiatives, research and development and capital
expenditures. The company has funded these requirements to date, and expects to
fund its future requirements, through cash generated by operations, working
capital, loan facilities, asset-based financings, joint venture arrangements and
private and public equity and debt offerings. The company expects to continue to
pursue potential acquisitions and equity investments that it believes would
enhance its businesses and to fund such transactions through existing cash and
loan facilities, joint ventures or the issuance of equity and/or debt
securities, asset-based financings, and cash generated by operations.

In April 1998, the company sold 3,450,000 shares of its common stock in a public
offering, generating net proceeds of approximately $150,000,000 (the
"Offering"). Orbital plans to continue to use the net proceeds from the Offering
for (i) investments in ORBCOMM, new projects or emerging space-related
businesses, such as CCI, (ii) expanded research and development for new
products, (iii) acquisitions of businesses and/or product lines complementary to
the company's existing businesses, and (iv) for other general corporate
purposes.

In July 1998, ORBCOMM Corporation announced that it elected to postpone its
proposed initial public offering of common stock. The company provided
$22,500,000 in cash and $53,737,000 in vendor financing (approximately one-half
of the vendor financing has been advanced to Orbital by an affiliate of
Teleglobe Inc.) to ORBCOMM during the first nine months of 1998. Orbital,
through its subsidiary Orbital Communications Corporation, and Teleglobe Mobile
Partners, an affiliate of Teleglobe Inc., the existing fifty-percent partners in
ORBCOMM, each has reaffirmed its commitment to provide funding to ORBCOMM while
considering options for 



                                       16
<PAGE>   17



future financing at ORBCOMM. The company currently estimates that its additional
funding obligation could be as much as $10,000,000 through the remainder of
1998. Orbital expects to fund its share of ORBCOMM's capital needs through
existing resources, including credit facilities.

Cash, cash equivalents and short-term investments were $39,482,000 at September
30, 1998, and the company had total debt obligations outstanding of
approximately $192,868,000 at September 30, 1998. The outstanding debt is
comprised of the company's convertible subordinated notes, advances under the
company's line of credit facilities, secured and unsecured notes, and
asset-based financings.

The company's primary revolving credit facility provides for total borrowings
from an international syndicate of six banks of up to $100,000,000. No
borrowings were outstanding under the facility at September 30, 1998. Borrowings
are secured by contract receivables, and the facility prohibits the payment of
cash dividends, contains certain covenants with respect to the company's working
capital, fixed charge ratio, leverage ratio and consolidated net worth, and
expires in August 2001. The company is currently in discussions with its lead
bank to amend and restate its primary credit facility, and to increase the
amount of total borrowings. The company (or its subsidiaries) also maintains
additional, smaller revolving credit facilities, under which approximately
$25,940,000 was outstanding at September 30, 1998 at a weighted average interest
rate of approximately 7%. Additional borrowing capacity on these other
agreements was approximately $5,100,000 at September 30, 1998.

The company's operations provided net cash of approximately $15,166,000 during
the first nine months of 1998. Also, during the first nine months of 1998, in
addition to its investment in ORBCOMM, the company invested approximately
$22,000,000 in CCI and $33,259,000 in capital expenditures for various satellite
and launch vehicle equipment and other production, manufacturing, test and
office equipment.

Orbital plans to expand its offices and its satellite-related engineering,
manufacturing and operations facilities adjacent to its Dulles, Virginia
headquarters. The company anticipates that the new construction will be
conducted in two phases during 1999 and 2000-2001. To finance the expansion,
Orbital is currently pursuing various financing alternatives, including
third-party debt financings and "built-to-suit" agreements. Consequently, the
company does not expect to use existing resources to finance this expansion.

Orbital expects that its capital needs for the remainder of 1998 will be
provided by working capital, cash flows from operations, existing credit
facilities, and operating lease arrangements.

YEAR 2000 ISSUES
The company has developed a plan to prepare for potential "Year 2000" issues
with respect to various operational, technical and financial computer-related
systems. The plan has been designed to minimize risk to the company and its
customers using a standard industry five-phase approach. The five phases are
awareness, assessment, renovation, validation and implementation. The company
has substantially completed the awareness and assessment phases,



                                       17
<PAGE>   18



including a comprehensive inventory of potentially affected systems. In many
cases renovation work is well underway and validation testing has begun with
respect to certain critical systems.

The company currently plans to achieve its overall goal of Year 2000 readiness
in mid-1999. During the remainder of 1998, the company expects to complete the
assessment phase, and the first half of 1999 will be devoted to renovating,
validating and implementing its corrective action plan by (i) reprogramming
affected software when appropriate and feasible, (ii) obtaining vendor-provided
software upgrades when available and (iii) completely replacing affected systems
when necessary.

The total costs to implement the plan, which costs include the already planned
replacement of existing systems to support the company's overall growth, are
estimated to be well less than one percent of anticipated 1998 annual revenues.
Approximately 70% of the estimated costs to implement the plan have been
incurred to date and the remaining costs are expected to be incurred over the
remainder of 1998 and 1999. All costs, including the cost of internal personnel,
outside consultants, system replacements and other equipment, will be expensed
as incurred, except for long-lived assets, which will be capitalized in
accordance with the company's capitalization policies. The company has not
postponed the implementation or upgrade of other systems as a result of focusing
on the Year 2000 plan.

As part of the plan, formal communication with the company's suppliers,
customers and other service providers has been initiated. To date, however, the
company has not determined whether "Year 2000" issues affecting key suppliers,
significant customers (including the U.S. government), or critical service
providers will materially impact the company's cash flows or operating results.
A "reasonably likely worst case" scenario of the Year 2000 issue for Orbital
could include: isolated performance problems with engineering, financial and
administrative systems; isolated interruption of deliveries from critical
suppliers; product liability or warranty issues; and the temporary inability of
key customers to pay amounts due to the company. Contingency plans are being
prepared, and will be implemented if necessary, including having sufficient
liquidity available to sustain a temporary interruption of cash receipts during
early 2000 and the identification of alternative suppliers for critical
components. There can be no assurance that the company has identified, or will
identify, all "Year 2000" affected systems, suppliers, customers and service
providers, or that its corrective action plan will be timely and successful.








                                       18
<PAGE>   19



                          ORBITAL SCIENCES CORPORATION
                                     PART II

                                OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
Not applicable.

ITEM 2. CHANGES IN SECURITIES
Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY- HOLDERS
Not applicable.

ITEM 5. OTHER INFORMATION
Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
         (a)   Exhibits - A complete listing of exhibits required is given in
               the Exhibit Index that precedes the exhibits filed with this
               report.

         (b)   Reports on Form 8-K.

               (i)  On July 2, 1998, the Company filed a Current Report on Form
                    8-K, dated July 2, 1998, disclosing ORBCOMM Corporation's
                    election to postpone its proposed initial public offering of
                    common stock.

               (ii) On July 23, 1998, the Company filed a Current Report on Form
                    8-K, dated July 21, 1998, disclosing the financial results
                    of the Company for the quarter ended June 30, 1998.



                                       19
<PAGE>   20



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             ORBITAL SCIENCES CORPORATION


DATED:  February 19, 1999    By: /s/ David W. Thompson
                                 -----------------------------------------------
                                 David W. Thompson, President
                                 and Chief Executive Officer


DATED:  February 19, 1999    By: /s/ Jeffrey V. Pirone                       
                                 -----------------------------------------------
                                 Jeffrey V. Pirone, Executive Vice President and
                                 Principal Financial Officer






                                       20
<PAGE>   21



                                  EXHIBIT INDEX


         The following exhibits are filed as part of this report.

<TABLE>
<CAPTION>
Exhibit No.                                             Description
- -----------                                             -----------
<S>                 <C>
  10.2.6            Sixth Amendment to Note Agreement dated as of August 14, 1998 between Orbital
                    Sciences Corporation and The Northwestern Mutual Life Insurance Company
                    (previously filed).

    11              Statement re: Computation of Earnings Per Share (transmitted herewith).

    27              Financial Data Schedule (such schedule is furnished for the information of the
                    Securities and Exchange Commission and is not to be deemed "filed" as part of the
                    Form 10Q/A, or otherwise subject to the liabilities of Section 18 of the
                    Securities Act of 1934) (transmitted herewith).
</TABLE>





                                       21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>2
<DESCRIPTION>COMPUTATION OF EARNINGS PER SHARE
<TEXT>

<PAGE>   1


EXHIBIT 11.

STATEMENT re: COMPUTATION OF EARNINGS PER SHARE

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                              RESTATED
                                                             RESTATED         ASSUMING
                                                               BASIC        DILUTION (2)
                                                             ----------     ------------
<S>                                                         <C>             <C>        
WEIGHTED AVERAGE OF OUTSTANDING SHARES                       36,757,055      36,757,055
                                                                           
COMMON EQUIVALENT SHARES:                                                  
     OUTSTANDING STOCK OPTIONS                                      N/A         843,738
                                                                           
OTHER POTENTIALLY DILUTIVE SECURITIES:                                     
     CONVERTIBLE NOTES (1)                                          N/A       3,571,429
                                                            -----------     -----------
SHARES USED IN COMPUTING                                                   
NET INCOME PER COMMON SHARE                                  36,757,055      41,172,222
                                                            ===========     ===========
                                                                           
                                                                           
NET INCOME                                                  $ 2,436,000     $ 2,436,000
                                                                           
ADJUSTMENTS ASSUMING DILUTION:                                             
     INTEREST EXPENSE ADJUSTMENT, NET OF APPLICABLE TAXES           N/A         224,000
                                                            -----------     -----------
NET INCOME                                                  $ 2,436,000     $ 2,660,000
                                                            ===========     ===========
                                                                           
NET INCOME PER COMMON SHARE                                 $      0.07     $      0.06
                                                            ===========     ===========
</TABLE>




NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                               RESTATED
                                                               RESTATED        ASSUMING
                                                                BASIC        DILUTION (2)
                                                              ----------     ------------
<S>                                                           <C>            <C>        
WEIGHTED AVERAGE OF OUTSTANDING SHARES                        35,199,984      35,199,984

COMMON EQUIVALENT SHARES:
     OUTSTANDING STOCK OPTIONS                                       N/A       1,153,821

OTHER POTENTIALLY DILUTIVE SECURITIES:
     CONVERTIBLE NOTES (1)                                           N/A       3,571,429
                                                            ------------     -----------
SHARES USED IN COMPUTING
NET INCOME PER COMMON SHARE                                   35,199,984      39,925,234
                                                            ============     ===========


NET INCOME                                                  $ 13,179,000     $13,179,000

ADJUSTMENTS ASSUMING DILUTION:
     INTEREST EXPENSE ADJUSTMENT, NET OF APPLICABLE TAXES            N/A       1,484,000
                                                            ------------     -----------
NET INCOME                                                  $ 13,179,000     $14,663,000
                                                            ============     ===========

NET INCOME PER COMMON SHARE                                 $       0.37     $      0.37
                                                            ============     ===========
</TABLE>


NOTES:

(1)- On September 16, 1997, the company sold $100 million of 5% convertible
     subordinated notes due October 2002. The notes are convertible at the
     option of the holders into Orbital common stock at a conversion price of
     $28.00 per share.

(2)- Subsidiary stock options that enable holders to obtain subsidiary's common
     stock pursuant to effective stock option plans are included in computing
     the subsidiary's earnings per share, to the extent dilutive. Those earnings
     per share data are included in the company's per share computations based
     on the company's holdings of the subsidiary's stock. For the three and six
     months ended June 30, 1998, all such subsidiary stock options were
     anti-dilutive.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>3
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000820736
<NAME> ORBITAL SCIENCES CORP/DE/
<MULTIPLIER> 1000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               SEP-30-1998
<CASH>                                          39,482
<SECURITIES>                                       225
<RECEIVABLES>                                  226,379
<ALLOWANCES>                                   (8,101)
<INVENTORY>                                     41,733
<CURRENT-ASSETS>                               310,391
<PP&E>                                         247,375
<DEPRECIATION>                                (98,755)
<TOTAL-ASSETS>                                 891,817
<CURRENT-LIABILITIES>                          212,914
<BONDS>                                        152,803
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           370
<OTHER-SE>                                     527,611
<TOTAL-LIABILITY-AND-EQUITY>                   891,817
<SALES>                                        558,363
<TOTAL-REVENUES>                               558,363
<CGS>                                          409,645
<TOTAL-COSTS>                                  409,645
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                   721
<INTEREST-EXPENSE>                               1,484
<INCOME-PRETAX>                                 16,310
<INCOME-TAX>                                     3,131
<INCOME-CONTINUING>                             13,179
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    13,179
<EPS-PRIMARY>                                     0.37
<EPS-DILUTED>                                     0.37
        

</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----