A problem with a communications satellite built for Spain’s HISPASAT S.A. and inserted into orbit last month led Orbital Sciences Corp. [ORB] on Thursday to report lower net income and sales in its first quarter, although the company largely left intact its guidance for the year.
Orbital said it discovered an anomaly on the Amazonas 4A communications satellite during in-orbit testing. The satellite was launched aboard an Ariane 5 rocket by France’s Arianespace on March 22.
Orbital said the testing is ongoing but it believes the satellite’s capacity could be diminished, which would impact its fees associated with the sale of the spacecraft. The company reduced its first quarter sales by $13 million and operating income by $6.4 million to account for the problem.
Net income in the quarter dropped 30 percent to $13.8 million, 23 cents earnings per share (EPS), from $19.6 million (33 cents EPS). Free cash flow was a record $87 million, due to achieving the first operational cargo mission to the International Space Station under NASA’s Commercial Resupply Services (CRS) contract.
Operating income fell in all three of the company’s segments, with Satellites and Space Systems the biggest contributor due to the Amazonas anomaly while Launch Vehicles and Advanced Space Programs were down on lower activity for certain target launch vehicles and lower sales.
Sales in the quarter fell 3 percent due to the Amazonas 4A issue, but also due to lower revenues on science and remote sensing satellites and lower activity on national security satellite contracts and the CRS contract. Sales in the Launch Vehicles segment were up slightly on more missile defense interceptors and space launch vehicles.
Despite the Amazonas satellite problem, sales for the year are still expected to be around $1.5 billion and per share earnings between $1.10 and $1.20. Free cash flow guidance was raised by $10 million to between $130 million and $150 million.