Form 8-K DIGITALGLOBE, INC. For: Feb 25

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 25, 2016

 

 

DIGITALGLOBE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

1300 W. 120th Avenue

Westminster, Colorado  80234

(Address of principal executive offices, including zip code)

 

(303) 684-4000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

 

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

Item 2.02.  Results of Operations and Financial Condition.

 

On February 25, 2016, DigitalGlobe, Inc. (“Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2015.  A copy of the Company’s press release is furnished herewith as Exhibit 99.1.

 

The information contained in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed ”filed” for the purposes of Section 18 of the U.S. Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities under that section and shall not be deemed incorporated by reference into any filing by the Company under the U.S. Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language contained in such filing, unless otherwise expressly stated in such filing.

 

Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

(b)Departure of Named Executive Officer.

 

On February 25, 2016 (“Effective Date”), the Company entered into a separation agreement (“Separation Agreement”) with David B. Turner, Jr., the Company’s Senior Vice President, Diversified Commercial Sales and Marketing.  Mr. Turner served DigitalGlobe since 2012 in a variety of senior sales roles.  In order to implement certain strategy modifications communicated by the Company on its third quarter 2015 earnings call, the Company has chosen to embed sales with product management within several of its business units, thereby eliminating the need for a Senior Vice President, Diversified Commercial Sales and Marketing reporting to the CEO.  After discussion with management, Mr. Turner has chosen to pursue other career aspirations. Mr. Turner has served the Company well and the management team and board of directors thank him for his many contributions.

 

The Separation Agreement provides that Mr. Turner will be entitled to a lump sum cash severance payment of $500,230 within 30 days following his last day of employment with the Company on February 29, 2016.  The Company’s obligation to provide these benefits is subject to Mr. Turner executing a general release of claims in favor of the Company and his compliance with certain restrictive covenants in favor of the Company.  

 

 

(c)Appointment of Principal Accounting Officer.

 

Effective February 26, 2016, Jose Torres, Senior Vice President and Chief Accounting Officer, was appointed as the Company’s Principal Accounting Officer.

 

Prior to joining DigitalGlobe in January 2016, Mr. Torres, 41, served in various roles at The ADT Corporation (“ADT”) from February 2012 through December 2015, most recently as Vice President of Accounting, Financial Reporting and MIS.   Prior to joining ADT, Mr. Torres served in various roles at Tyco International from March 2004 through January 2012, including North America Regional Assistant Controller, and Corporate Controller at SimplexGrinnell, Tyco’s North America Fire Business Unit.  Mr. Torres started his career in New York as a public accountant with Arthur Andersen.  Mr. Torres has a BS in Accounting and Business Management from Boston College, an MBA from Florida Atlantic University and is a Certified Public Accountant.

 

In connection with his appointment, the Company’s Board of Directors approved compensation for Mr. Torres as follows:

 

Cash Compensation: Mr. Torres will be entitled to an annual base salary of $280,000 and have the opportunity to earn an annual cash bonus at a target rate of 50% of his annualized base salary if target levels of performance (as established by the Compensation Committee of the Board) are achieved for the applicable calendar year. 

 

New Hire Equity Award: Mr. Torres received a one-time award of restricted stock units with a grant date fair value of $375,000 effective upon his start date on January 4, 2016. The restricted stock units will vest in equal installments on each anniversary of the award date over a four year period, provided Mr. Torres remains employed at the Company. 

 

2016 Long-Term Incentive Grant: Effective upon his start date, Mr. Torres received a long-term incentive grant award having a grant date fair value of $250,000 in the form of:

 

 

 

Mr. Torres has entered into a standard indemnification agreement with the Company in the form previously approved by the Board of Directors, which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities Exchange Commission on October 3, 2013 and is incorporated by reference herein.

 

There are no arrangements or understandings between Mr. Torres and any other person pursuant to which Mr. Torres was appointed as Senior Vice President and Chief Accounting Officer. There are no family relationships between Mr. Torres and any of the Company’s directors and executive officers, and Mr. Torres is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)  Exhibits.

 

 

 

SIGNATURES

 

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

 

 

 

Exhibit Index

 

 

 

Exhibit 99.1

PRESS RELEASE

 

DigitalGlobe Reports Full Year and Fourth Quarter 2015 Results

 

~Revenue up 7% to $702 million~

~ Net cash flows from operations up 47% to $330 million~

~Exceeds Revised 2015 Guidance Range and Provides 2016 Outlook~

 

Westminster, Colo., February 25, 2016 – DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of commercial high-resolution earth observation and advanced geospatial solutions, today reported financial results for the full year and fourth quarter ended December 31, 2015.

 

Full Year Financial Summary:

 

Fourth Quarter Financial Summary:

 

Recent Highlights:

 

"We are pleased to report solid Adjusted EBITDA margin expansion and strong free cash flow growth resulting from our continued focus on operational excellence,” said Jeffrey R. Tarr, DigitalGlobe CEO. “We are also encouraged by the performance of our International Defense and Intelligence business, highlighted by strong growth in the quarter, unprecedented early demand for WorldView-4, and our expanded partnership with KACST, a long time direct access customer."

 

 

2016 Revenue and Adjusted EBITDA Outlook:

 

 

Conference Call Information:

DigitalGlobe’s management will host a conference call today, February 25, 2016 at 5 p.m. ET to discuss its 2015 fourth quarter and full year financial and operating results.

 

The conference call dial-in numbers are as follows:

U.S./Canada dial-in: (855) 212-2368

International dial-in: (315) 625-6886

Passcode: 48934805

 

A replay of the call will be available through March 25, 2016 at the following numbers:

U.S./Canada dial-in: (855) 859-2056

International dial-in: (404) 537-3406

Passcode: 48934805

 

DigitalGlobe will also sponsor a live and archived webcast of the conference call on the Investor Relations portion of its website. Click here to directly access the live webcast.

 

Supplemental earnings materials, including conference call slides and management scripts, are available on the Investor Relations section of the company’s website at www.digitalglobe.com.  

 

About DigitalGlobe

DigitalGlobe is a leading global provider of high-resolution Earth-imagery products and services sourced from our own advanced satellite constellation and third-party providers. Our imagery solutions support a wide variety of users in defense and intelligence, civil agencies, mapping and analysis, environmental monitoring, oil and gas exploration, infrastructure management, Internet portals, and navigation technology. Each day users depend on us to better understand our changing planet in order to save lives, resources and time.

 

DigitalGlobe is a registered trademark of DigitalGlobe.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements contained herein, including statements about our 2016 outlook and in the management quotation, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements relate to future events or future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or “looks forward to” or the negative of these terms or other similar words, although not all forward-looking statements contain these words.

 

Any forward-looking statements are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions. A number of important factors could cause our actual results or performance to differ materially from those indicated by such forward-looking statements, including: the loss, reduction or change in terms of any of our primary contracts or decisions by customers not to exercise renewal options; the availability of government funding for our products and services both domestically and internationally; changes in government and customer priorities and requirements (including cost-cutting initiatives, the potential deferral of awards, terminations or reduction of expenditures to respond to the priorities of Congress and the administration, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011); the risk that U.S. government sanctions against specified companies and individuals in Russia may limit our ability to conduct business with potential or existing customers; the outcome of pending or threatened litigation; the loss or impairment of any of our satellites; delays in the construction and launch of any of our satellites or our ability to achieve and maintain full operational capacity of all our satellites; delays in implementation of planned ground system and infrastructure enhancements; loss or damage to the content contained in our ImageLibrary; interruption or failure of our ground system and other infrastructure; decrease in demand for our imagery products and services; increased competition, including possibly from companies with substantial financial and other resources and services, that may reduce our market share or cause us to lower our prices; our inability to fully integrate acquisitions or to achieve planned synergies; changes in satellite imaging technology; our failure to obtain or maintain required regulatory approvals and licenses; changes in U.S. or foreign law or regulation that may limit our ability to distribute our imagery products and services; the costs associated with being a public company; and other important factors, all as described more fully in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2015.

 

We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

 

Non-U.S. GAAP Financial Measures

EBITDA and Adjusted EBITDA.  EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and may not be defined similarly by other companies. EBITDA and Adjusted EBITDA should not be considered alternatives to net income as indications of financial performance or as alternatives to cash flow from operations as measures of liquidity. There are limitations to using non-U.S. GAAP financial measures, including

the difficulty associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.

EBITDA and Adjusted EBITDA are key measures used in our internal operating reports by management and our Board of Directors to evaluate the performance of our operations and are also used by analysts, investment banks and lenders for the same purpose. Adjusted EBITDA is a measure being used as a key element of the company-wide bonus incentive plan. We believe that the presentation of EBITDA and Adjusted EBITDA enables a more consistent measurement of period to period performance of our operations, and EBITDA facilitates comparison of our operating performance to companies in our industry. We believe that EBITDA and Adjusted EBITDA measures are particularly important in a capital intensive industry such as ours, in which our current period depreciation is not a good indication of our current or future period capital expenditures. The cost to construct and launch a satellite and to build the related ground infrastructure may vary greatly from one satellite to another, depending on the satellite’s size, type and capabilities. Current depreciation expense is not indicative of the revenue generating potential of the satellites.

EBITDA excludes interest income, interest expense and income taxes because these items are associated with our capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of prior capital expenditure decisions which are not indicative of future capital expenditure requirements.

Adjusted EBITDA further adjusts EBITDA to exclude restructuring, other re-engineering and integration costs, as these are non-core items. Restructuring charges incurred in 2014 are costs incurred to realize efficiencies from the acquisition of GeoEye, such as reducing excess workforce, consolidating facilities and systems, and relocating ground terminals. Restructuring charges incurred in 2015 relate to our re-engineering and restructuring plans announced in 2015, pursuant to which the Company has and expects to continue to reduce global headcount and rationalize our real estate footprint. Other re-engineering charges are associated with the restructuring plans announced in 2015 and represent costs incurred to realize efficiencies from reducing internal and contractor headcount, such as re-engineering processes and enhancing system workflows, as well as costs related to the decision to proactively decommission IKONOS. Integration costs consist primarily of professional fees incurred to assist us with system and process improvements associated with integrating operations as part of the GeoEye acquisition. Additionally, it excludes joint venture gains and losses and the gain on subsidiary disposition because these are non-core items that are not related to our primary operations.

We use EBITDA and Adjusted EBITDA in conjunction with traditional U.S. GAAP operating performance measures as part of our overall assessment of our performance and we do not place undue reliance on these non-GAAP measures as our only measures of operating performance. EBITDA and Adjusted EBITDA should not be

considered as substitutes for other measures of financial performance reported in accordance with U.S. GAAP.

Free Cash Flow.  Free cash flow is defined as net cash flows provided by operating activities less net cash flows used in investing activities (excluding acquisition of businesses, net of cash acquired).  Free cash flow is not a recognized term under U.S. GAAP and may not be defined similarly by other companies.  Free cash flow should not be considered an alternative to “operating income (loss),” “net income (loss),” “net cash flows provided by (used in) operating activities” or any other measure determined in accordance with U.S. GAAP.  Since free cash flow includes investments in operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most comparable U.S. GAAP measure — “net cash flows provided by (used in) operating activities” because it provides information about the amount of cash generated before acquisitions of businesses that is then available to repay debt obligations, make investments, fund acquisitions, and for certain other activities.  There are limitations to using non-U.S. GAAP financial measures, including the difficulty associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.

Performance against key metrics:

 

 

 

DigitalGlobe, Inc.

Consolidated Statements of Operations

 

 

 

 

 

 

 

DigitalGlobe, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

 

 

 

 

EBITDA margin is calculated by dividing EBITDA by U.S. GAAP revenue. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by U.S. GAAP revenue. We have not provided a reconciliation of our Adjusted EBITDA outlook to the comparable forward-looking U.S. GAAP financial measure because we are unable to provide a forward-looking estimate of the reconciling items between such non-U.S. GAAP forward-looking measure and the comparable forward-looking U.S. GAAP measure. Certain factors that are materially significant to our ability to estimate these items are out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation to the comparable forward-looking U.S. GAAP measure is not available without unreasonable effort.

 

DigitalGlobe, Inc.

Reconciliation of Net Cash Flows Provided by Operating Activities to Free Cash Flow

 

Free Cash Flow margin is calculated by dividing Free Cash Flow by U.S. GAAP revenue.

DigitalGlobe, Inc.

Consolidated Balance Sheets

 

 

 

DigitalGlobe, Inc.

Consolidated Statements of Cash Flows

 

 

 

 

 

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Media Contact

Edelman for DigitalGlobe

Email: [email protected]

 

 

Investor Relations Contact

Fred Graffam

Senior Vice President, Investor Relations

Phone: (303) 684-1692

Email: [email protected]