- Quarterly Report (10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

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

For the transition period from to

Commission file number: 001-33015

GeoEye, Inc.

(Exact name of registrant as specified in its charter)

Delaware		20-2759725
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2325 Dulles Corner Boulevard		20171
Herndon, VA		(Zip Code)
(Address of principal executive offices)

(Registrant’s telephone number, including area code)

(703) 480-7500

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

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

The number of shares outstanding of GeoEye’s common stock, par value $0.01, or the Common Stock, as of November 2, 2012 was 22,557,695 shares.

TABLE OF CONTENTS

PART I —	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II —	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	48
Signatures		49

In this Quarterly Report on Form 10-Q, or Quarterly Report, “GeoEye,” the “Company,” “we,” “our,” and “us” refer to GeoEye, Inc. and its subsidiaries.

We own or have rights to various copyrights, trademarks, and trade names used in our business, including the following: GEOEYE®; IKONOS®; ORBIMAGE®; ORBVIEW®; ROADTRACKER®; GEOEYE FOUNDATIONtm; GEOPROFESSIONALtm; GEOSTEREOtm; GEOFUSEtm; EYEQtm; EYEONtm; SEASTARtm; SEASTAR FISHERIES INFORMATION SERVICEsm; MARINE INFORMATION SERVICEsm; MASTERCASTtm; OCEAN MONITORING SERVICEsm; ORBBUOYtm; ORBMAPtm; TRUSTED IMAGERY EXPERTStm; VESSEL TRACKINGtm; ELEVATING INSIGHTtm; GEOEYE ANALYTICStm; EARTHWHEREtm; SIGNATURE ANALYSTtm; GEOEYE 3D AIRPORTtm; GEOEYE 3D HARBORtm; GEOTRACKERtm; and HUMAN GEOGRAPHY INFORMATION SURVEYtm

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PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

GEOEYE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2012		December 31, 2011
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	220,860	$	188,738
Short-term investments		8,500		9,220
Accounts receivable - trade and unbilled receivables (net of allowances: 2012 - $632; 2011 - $718)		44,973		39,917
Income tax receivable		2,748		19,645
Restricted cash		3,952		4,207
Current deferred tax assets		2,148		2,148
Prepaid expenses and other current assets		11,360		14,805
Total current assets		294,541		278,680
Property, plant and equipment, net		56,857		48,065
Satellites and related ground systems, net		1,070,795		913,454
Goodwill		67,945		68,130
Intangible assets (net of accumulated amortization: 2012 - $20,030; 2011 - $17,634)		8,130		10,526
Non-current restricted cash		3,915		6,875
Other non-current assets		11,051		8,855
Total assets	$	1,513,234	$	1,334,585
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	63,240	$	58,510
Current portion of deferred revenue		67,322		53,433
Total current liabilities		130,562		111,943
Long-term debt		513,379		511,019
Long-term deferred revenue, net of current portion		220,869		131,968
Deferred tax liabilities		89,748		64,694
Other non-current liabilities		7,879		7,674
Total liabilities		962,437		827,298
Commitments and contingencies		-		-
Stockholders’ equity:
Series A convertible preferred stock		1		1
Series B junior participating preferred stock		-		-
Common stock		226		222
Additional paid-in capital		386,259		379,154
Retained earnings		164,311		127,910
Total stockholders’ equity		550,797		507,287
Total liabilities and stockholders’ equity	$	1,513,234	$	1,334,585

See Notes to Unaudited Condensed Consolidated Financial Statements.

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GEOEYE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands, except per share amounts)						(In thousands, except per share amounts)
Revenues	$	87,109		$	85,769		$	264,786		$	259,601

Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		31,227			28,508			91,937			91,246
Depreciation and amortization		17,860			17,986			53,355			52,204
Selling, general and administrative		22,822			15,516			56,469			44,606
Total operating expenses		71,909			62,010			201,761			188,056
Income from operations		15,200			23,759			63,025			71,545
Interest income (expense), net		22			(1,122	)		1,382			(8,249	)
Income before provision for income taxes		15,222			22,637			64,407			63,296
Provision for income taxes		(5,666	)		(8,549	)		(25,004	)		(23,552	)
Net income		9,556			14,088			39,403			39,744
Preferred stock dividends		(1,007	)		(1,008	)		(3,002	)		(2,992	)
Net income less preferred stock dividends		8,549			13,080			36,401			36,752
Income allocated to participating securities		(912	)		(1,416	)		(3,902	)		(3,984	)
Net income available to common stockholders	$	7,637		$	11,664		$	32,499		$	32,768

Earnings per share:
Basic	$	0.34		$	0.53		$	1.45		$	1.48
Diluted	$	0.33		$	0.51		$	1.43		$	1.44

Shares used to compute basic earnings per share		22,519			22,147			22,392			22,107
Shares used to compute diluted earnings per share		22,845			22,789			22,799			22,767

Other comprehensive income (loss):
Foreign currency translation adjustments	$	(141	)	$	105		$	(188	)	$	45
Income tax benefit/(provision) related to items of other comprehensive income		58			(40	)		75			(17	)
Other comprehensive income (loss), net of tax		(83	)		65			(113	)		28

Comprehensive income		9,473			14,153			39,290			39,772
Preferred stock dividends		(1,007	)		(1,008	)		(3,002	)		(2,992	)
Comprehensive income less preferred stock dividends		8,466			13,145			36,288			36,780
Comprehensive income allocated to participating securities		(903	)		(1,423	)		(3,890	)		(3,987	)
Comprehensive income available to common stockholders	$	7,563		$	11,722		$	32,398		$	32,793

See Notes to Unaudited Condensed Consolidated Financial Statements.

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GEOEYE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash flows from operating activities:
Net income	$	39,403		$	39,744
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		53,355			52,204
Non-cash recognition of deferred revenue		(25,602	)		(24,880	)
Non-cash amortization of deferred costs		2,797			2,667
Amortization of debt discount and issuance costs		-			2,845
Gains, impairments and other		174			1,250
Deferred income taxes		25,004			23,533
Stock-based compensation		7,219			7,665
Changes in deferred revenue		128,392			5,277
Changes in assets and other liabilities		7,368			23,397
Net cash provided by operating activities		238,110			133,702
Cash flows from investing activities:
Capital expenditures		(207,717	)		(246,864	)
Proceeds from sale of property, plant and equipment		3,145			-
Investment purchase		(500	)		-
Redemptions of short-term investments		720			40,780
Adjustment for SPADAC acquisition		-			319
Net cash used in investing activities		(204,352	)		(205,765	)
Cash flows from financing activities:
Prepaid financing costs		-			(118	)
Preferred stock dividend payments		(3,002	)		(2,992	)
Proceeds from exercise of stock options and other		1,366			1,268
Net cash used in financing activities		(1,636	)		(1,842	)
Net increase (decrease) in cash and cash equivalents		32,122			(73,905	)
Cash and cash equivalents, beginning of period		188,738			283,233
Cash and cash equivalents, end of period	$	220,860		$	209,328

Supplemental disclosures of cash flow information:
Income taxes paid	$	521		$	31
Non-cash surrender of common stock to cover employees' minimum tax liability		(2,240	)		(1,302	)
Non-cash preferred stock dividend accrual		1,007			1,008
Conversion of note receivable to cost-method investment		1,500			-
Non-cash consideration on customer transaction		-			1,920

See Notes to Unaudited Condensed Consolidated Financial Statements.

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GEOEYE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)	General Information

Business

GeoEye is a leading source of geospatial information and insight for decision makers and analysts who need a clear understanding of our changing world to protect lives, manage risk and optimize resources. Each day, organizations involved in defense and intelligence, public safety, critical infrastructure, energy and online media rely on GeoEye’s Earth imagery, geospatial expertise and enabling technology to support important missions around the globe. Widely recognized as a pioneer in high-resolution satellite imagery, GeoEye has evolved into a complete provider of geospatial intelligence solutions.

On July 22, 2012, GeoEye entered into an agreement and plan of merger, the Merger Agreement, with DigitalGlobe, Inc., pursuant to which GeoEye will be merged with and into DigitalGlobe, Inc. On August 30, 2012, GeoEye entered into an amendment to this Merger Agreement, which removes the reference to a requirement that the DigitalGlobe stockholders approve the assumption of GeoEye stock plans and the issuance of DigitalGlobe common stock thereunder, because there is no obligation to seek such approval pursuant to such plans, applicable law or stock exchange requirements. On October 30, 2012, we filed a Proxy Statement announcing a special meeting of GeoEye Stockholders to approve the adoption of such Merger Agreement.

Pursuant to the Merger Agreement and upon the terms and subject to the conditions described therein, at the time the merger becomes effective, (A) each issued and outstanding share of common stock, par value $0.01 per share, of GeoEye, or Company Common Stock will be converted into the right to receive either (i) with respect to which an election to receive a combination of stock and cash consideration has been effectively made, the combination, or Mixed Consideration of (x) $4.10 in cash and (y) 1.137 shares of common stock, par value $0.001 per share, of DigitalGlobe, or DigitalGlobe Common Stock, (ii) with respect to which an election to receive all cash consideration has been effectively made, $20.27 in cash without interest (subject to proration) or (iii) with respect to which an election to receive all stock consideration has been effectively made, 1.425 shares of DigitalGlobe Common Stock (subject to proration) and (B) each issued and outstanding share of Series A Convertible Preferred Stock of GeoEye, or Company Preferred Stock, will be converted into the right to receive (i) 1.000 shares of a newly-designated series of preferred stock of DigitalGlobe, or DigitalGlobe Preferred Stock, and (ii) $4.10 in cash for each share of Company Common Stock into which such share of Company Preferred Stock is convertible immediately prior to the Effective Time. If a holder of Company Common Stock does not make an election as set forth above, such stockholder will receive Mixed Consideration.

The Merger Agreement contemplates the repayment of all the Company’s outstanding debt (including the 8.625 percent Senior Secured Notes due 2016 and the 9.625 percent Senior Secured Notes due 2015).

The consummation of this merger is subject to obtaining the affirmative vote of a majority of the outstanding shares of GeoEye Common Stock approving the merger and a majority of the outstanding shares of DigitalGlobe Common Stock represented at the DigitalGlobe stockholders meeting in person or by proxy approving the issuance of DigitalGlobe Common Stock. The consummation of the merger is also subject to the satisfaction of certain regulatory conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval of the National Oceanic and Atmospheric Administration and the Federal Communications Commission. On September 21, 2012, GeoEye received a request for additional information from the U.S. Department of Justice. This additional request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. GeoEye is promptly responding to this additional request, and continues to work cooperatively with the U.S. Department of Justice as it conducts its review of the proposed combination.

In addition to our imagery collection capacities, we are a global leader in the creation of enhanced satellite imagery information products and services. We operate state-of-the-art high-resolution image processing and production facilities in St. Louis, Missouri and Thornton, Colorado. Our St. Louis, Missouri facility processes imagery from numerous commercial and government sensors, in addition to our own enhanced satellite imagery information products and services, to produce a variety of value-added products. We believe we are the only major commercial imagery satellite operator who can produce imagery from multiple Earth imagery sources in addition to our own enhanced satellite imagery information products and services.

GeoEye’s information services allow its customers to collect, process and analyze vast amounts of geospatial data to quickly see precise changes on the ground and anticipate where events may occur in the future. Our Web-based information services platform, EyeQ, can provide imagery services and other layers of geospatial information on demand. EyeQ combines imagery products with on-demand tools for managing geospatial information and project-based collaboration. GeoEye Analytics, which provides geospatial predictive analytic solutions, has expertise in analyzing multiple layers of intelligence, including human geography, to discover patterns in order to gain insights that protect lives, optimize deployment of resources and mitigate risk.

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We believe the combination of our highly accurate satellite imaging assets, our high-resolution image processing and production facilities—especially our multi-source production capability—our color digital imagery library and our information services differentiate us from our competitors. This combination enables us to provide “elevated insight” by delivering a comprehensive range of Earth imagery, geospatial expertise and enabling technology to our diverse customer base.

We serve both domestic and international customers with imagery, products and information services. Our principal customers are U.S. government agencies, primarily the National Geospatial-Intelligence Agency, or NGA. For the three and nine months ended September 30, 2012, U.S. government agencies represented approximately 68 percent and 67 percent of our total revenues, respectively. For the three and nine months ended September 30, 2012, the NGA represented approximately 56 percent and 55 percent of our total revenues, respectively. Most of our government contracts are funded incrementally on a year-to-year basis. Our largest government contract, the EnhancedView Service Level Agreement, or EnhancedView SLA (see Note 2), has up to seven additional one-year renewal options, and one nine-month renewal option remaining at September 30, 2012. The NGA has exercised a three month option renewal of the EnhancedView SLA that commenced September 1, 2012.

On October 31, 2012, the Company received notice from the NGA that, due to funding shortfalls, the NGA does not intend to exercise the nine-month EnhancedView SLA option with the Company for the current contract year performance period of December 1, 2012 through August 31, 2013. The NGA did indicate it might seek to renew the EnhancedView SLA by December 15, 2012, should funding become available. The nine-month option for the remainder of the contract year through August 31, 2013 would have provided for service revenue to the Company, based upon the availability of funding, of approximately $119.25 million. During the nine months ended September 30, 2012 and 2011, revenue under the EnhancedView SLA accounted for approximately 43 percent and 42 percent, respectively, of our total revenues. The notice from the NGA means that there will be no revenue generated by us under the EnhancedView SLA for GeoEye-1 imagery for the foreseeable future. The Company is materially dependent on the NGA for its business and anticipates such termination will result in a material reduction of our revenues, income and future cash flows. Such circumstances may require the review of related long-lived assets for possible impairment, including our GeoEye-1 satellite, and may result in an impairment of our goodwill. We will complete our required annual goodwill impairment test during the fourth quarter of 2012. We are making efforts to replace the EnhancedView SLA revenues with revenues from new and existing customers. Loss of revenue from the EnhancedView SLA will make us more dependent on revenue from commercial and international customers, which is difficult to forecast.

Basis of Presentation

The condensed consolidated financial statements of GeoEye have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. The financial information included herein, other than the condensed consolidated balance sheet as of December 31, 2011, has been prepared without audit. The condensed consolidated balance sheet as of December 31, 2011, has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2011. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments and accruals that are necessary for a fair presentation of the results of all interim periods presented herein and are of a normal recurring nature.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in GeoEye’s Annual Report on Form 10-K for the year ended December 31, 2011. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of GeoEye and all of its wholly owned subsidiaries. All balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make judgments, estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Restricted Cash

The Company is party to irrevocable standby letters of credit, in connection with contracts between GeoEye and third parties, in the ordinary course of business to serve as performance obligation guarantees. As of September 30, 2012, the Company had $7.9 million classified as restricted cash as a result of the irrevocable standby letters of credit. $4.0 million is available within one year and is classified as current, and the remaining $3.9 million is available through 2014.

Investments

We record our investments in debt securities at fair value, and classify these securities as short-term investments on the consolidated balance sheet when the original maturities at purchase are greater than ninety days but less than one year.

The Company’s short-term investments consist of variable rate demand notes.

As of September 30, 2012, and December 31, 2011, we categorized all of our investments as available-for-sale, and all of these outstanding short-term investments mature within one year. Although the variable-rate demand notes have long-term contractual maturity dates of 20 to 30 years, the interest rates reset weekly. Despite the long-term nature of the underlying securities, they are classified as short-term due to our ability to quickly liquidate or put back these securities.

Additionally, the Company holds a minor equity investment in a technology company serving the solar energy industry, which is accounted for as a cost method investment.

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Goodwill and Intangible Assets

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is tested for impairment annually on October 1 or whenever an event occurs or circumstances change that could reduce the fair value of a reporting unit below its carrying amount. As a result of the acquisition of SPADAC Inc. in December 2010, we determined that a new reporting unit was created. As of September 30, 2012, and December 31, 2011, GeoEye’s reporting units are GeoEye, Inc. and GeoEye Analytics.

In assessing the recoverability of goodwill, we calculate the fair market value at the reporting unit level, based upon discounted cash flows that utilize estimates in annual revenues, gross margins and other relevant factors for determining the fair value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company compares the implied value of goodwill with its carrying amount. If the carrying amount of the goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized for the difference between the carrying amount and the implied fair value of goodwill.

Intangible assets arising from business combinations are initially recorded at fair value. We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, which are generally two to ten years. We review for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment of Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Impairment losses are recognized in operating results when the sum of expected discounted net future cash flows is less than the carrying value of the assets. The amount of the impairment is measured as the difference between the asset’s estimated fair value and its carrying value. Fair value is determined primarily using projected future cash flows.

Preferred Stock

In September 2010, the Company issued Series A Convertible Preferred Stock, or the Series A Preferred Stock, par value of $.01 per share. Cumulative dividends on the Series A Preferred Stock are payable at a rate of 5 percent per annum of the $1,000 liquidation preference per share. At the Company’s option, dividends may be declared and paid in cash out of funds legally available therefore, when, as and if declared by the Board of Directors of the Company. If not paid in cash, an amount equal to the cash dividends due is added to the liquidation preference. Dividends payable in cash are recorded in current liabilities. All dividends payable, whether in cash or as an addition to the liquidation preference, are recorded as a reduction to our retained earnings.

Earnings per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is equal to net income less preferred stock dividends and income allocated to participating securities. The Company’s preferred shares are participating securities and require the two-class method of computing earnings per share. Diluted earnings per share is calculated by dividing net income available to common stockholders as adjusted for the effect of dilutive common equivalent shares by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the common shares issuable upon the conversion of the convertible preferred shares and those issuable related to stock options, deferred stock units, employee stock purchase plan shares and nonvested stock. For purposes of computing diluted earnings per share, the if-converted method will be used to the extent that the result is more dilutive than the application of the two-class method.

Revenue Recognition

Our principal sources of revenue are from imaging services, the sale of satellite imagery directly to end users or value-added resellers, the provision of direct access to our satellites, associated ground processing technology upgrades and operations and maintenance services. We also derive significant revenue from value-added production services where we combine our images with data and imagery from our own and other sources to create sophisticated information products. Additionally, new sources of revenue include the dissemination and hosting of imagery and the provision of consultation, integration, data analysis and other professional services related to geospatial information systems.

We record revenues from the sale of satellite imagery directly to end users or value-added resellers based on the delivery of the imagery. This revenue is recognized when the products are delivered to the customer, and, generally, these arrangements are contracted for separately on a stand-alone basis.

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Sales of direct access to our satellites ordinarily require us to provide access over the term of multi-year sales contracts under subscription-based arrangements. Accordingly, we recognize revenues on such imagery contracts on a straight-line basis over the delivery term of the contract. However, certain multi-year sales contracts are based on minimum levels of access time with adjustments based on usage. In addition to the sale of direct satellite access, we may separately sell ground processing technology upgrades and operations and maintenance services to a customer in a bundled arrangement. If the satellite access service is combined with the sale of ground processing technology upgrades and operations and maintenance services, and the requirements for separate revenue recognition are not met, we recognize revenues on a straight-line basis over the combined delivery term of the services. In other arrangements when the separation criteria are met, total arrangement consideration is allocated to each separate unit of accounting using relative fair value. Revenues are recognized over the appropriate service period: access and operations and maintenance are recognized over the contract term; and ground processing technology upgrades are recognized when delivery and acceptance is complete. We consider a deliverable to have standalone value if the product or service provides value to the customer independent from other elements in the arrangement or if the product or service is sold separately by us or if it could be resold by the customer. Our revenue arrangements generally do not include a general right of return relative to the delivered products.

Revenue is recognized on contracts to provide value-added production services using the percentage-of-completion method. Revenue is recognized under different acceptable alternatives of the percentage-of-completion method depending on the terms of the underlying contract, which include input measures based on costs and efforts expended or output measures based on units of delivery or completion of contractual milestones. Total unbilled accounts receivable were $6.2 million and $6.6 million at September 30, 2012, and December 31, 2011, respectively. Generally, these arrangements are sold on a standalone basis and are not bundled with other product offerings. To the extent that estimated costs of completion are adjusted, revenue and profit recognized from a particular contract will be affected in the period of the adjustment. Anticipated contract losses are recognized as they become known.

We record revenues generated from the information services base offerings, including dissemination and hosting of imagery, on a straight-line basis over the subscription period.

Revenues for consultation and professional services are recognized as the services are performed. Revenues from time and materials contracts are recognized based on man-hours utilized, plus other reimbursable contract costs incurred during the period. Revenues from firm-fixed price contracts are recognized on a percentage of completion basis, utilizing the relationship of contract costs incurred and management’s estimate of total contract costs. Revenues from cost-reimbursable contracts are recognized based on costs incurred, with applied estimated or contractually specified indirect cost rates and our contractually specified fee or profit margin.

Deferred revenue represents receipts in advance of the delivery of imagery or services. Revenue for other services is recognized as services are performed. In addition, cost-share amounts received from the U.S. government are recorded as deferred revenue when received and recognized on a straight-line basis over the useful life of the satellite.

Recent Accounting Pronouncements

In June 2011, the FASB issued guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2011. The Company adopted the guidance on a retrospective basis on January 1, 2012. The guidance does not have any impact on the Company’s financial position, results of operations or cash flows. However, it does result in a change to the Company’s presentation and disclosure of comprehensive income.

In May 2011, the FASB issued new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The guidance modifies the existing standard to include disclosure of all transfers between Level 1 and Level 2 asset and liability fair value categories. In addition, it provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The guidance requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The guidance is effective for interim and annual reporting periods beginning after December 15, 2011, with early adoption prohibited. We adopted the new guidance effective January 1, 2012, which did not have a material impact on the Company’s financial statement disclosures.

(2)	EnhancedView Program

On August 6, 2010, the NGA originally awarded us a contract under its EnhancedView program. This competitively awarded contract supports the EnhancedView program by providing products and services that will help meet the increasing geospatial intelligence needs of the intelligence community and the Department of Defense

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The EnhancedView program award provides for a new satellite imagery delivery SLA with the NGA. The EnhancedView SLA initially provided for continued monthly payments by the NGA for services provided primarily by GeoEye-1 of up to $12.5 million ($150.0 million per year), subject to a maximum reduction of 10 percent in the base year and 15 percent in the option years based on performance metrics. Under the EnhancedView SLA, to the extent that less than $12.5 million is paid by the NGA for any month, the shortfall can be applied to future products and services or used to fund an extension of the contract. The EnhancedView SLA originally provided for payments to increase by an additional $15.3 million per month ($183.6 million per year), also subject to a maximum reduction of 15 percent based on performance metrics when GeoEye-2 becomes operational and meets NGA certification requirements, which we currently expect will occur in 2013. The initial term of the EnhancedView SLA was one year, with nine one-year renewal options exercisable by the NGA. Imagery deliveries under the EnhancedView SLA began on September 1, 2010, and the imagery is collected by the Company’s existing satellite constellation.

On June 22, 2012, we were notified by the NGA that, due to funding shortfalls, it would not exercise the full year EnhancedView SLA option for the Contract Year September 1, 2012 through August 31, 2013. Instead, the NGA proposed a three-month option providing for service revenue to the Company from September 1, 2012, through November 30, 2012, of $37.5 million and $2.25 million for EnhancedView SLA and additional Web hosting services, respectively, or a total of $39.75 million, and a further nine-month option for the remainder of the Contract Year through August 31, 2013. On August 30, 2012, the NGA exercised the three-month renewal option for the EnhancedView SLA, entering into an amendment to the EnhancedView agreement. Pursuant to the amendment, the NGA extended the EnhancedView SLA for the period beginning September 1, 2012 and ending November 30, 2012. The amendment also created a new nine-month renewal option to extend the EnhancedView SLA for the period beginning December 1, 2012, and ending August 31, 2013. On September 14, 2012, the NGA elected to fund our new additional Web hosting services for the two-month period ending November 30, 2012 for a total of $1.5 million.

On October 31, 2012, the Company received notice from the NGA that, due to funding shortfalls, the NGA does not intend to exercise the nine-month EnhancedView SLA option with the Company for the current contract year performance period of December 1, 2012 through August 31, 2013. The NGA did indicate it might seek to renew the EnhancedView SLA by December 15, 2012, should funding become available. The nine-month option for the remainder of the contract year through August 31, 2013 would have provided for service revenue to the Company, based upon the availability of funding, of approximately $119.25 million. During the nine months ended September 30, 2012 and 2011, revenue under the EnhancedView SLA accounted for approximately 43 percent and 42 percent, respectively, of our total revenues. The notice from the NGA means that there will be no revenue generated by us under the EnhancedView SLA for GeoEye-1 imagery for the foreseeable future. The Company is materially dependent on the NGA for its business and anticipates such termination will result in a material reduction of our revenues, income and future cash flows. Such circumstances may require the review of related long lived assets for possible impairment, including our GeoEye-1 satellite, and may result in an impairment of our goodwill. We will complete our required annual goodwill impairment test during the fourth quarter of 2012. We are making efforts to replace the EnhancedView SLA revenues with revenues from new and existing customers. Loss of revenue from the EnhancedView SLA will make us more dependent on revenue from commercial and international customers, which is difficult to forecast.

As part of the EnhancedView contract, the NGA initially agreed to contribute 42.1 percent of the cost, up to a maximum of $337.0 million, of the overall construction and launch costs of the GeoEye-2 satellite and associated ground station equipment. The GeoEye-2 satellite is currently scheduled for launch in the first half of 2013. The contract provides that the contribution should be made in two cost-share payments: the first payment of $111.2 million when the GeoEye-2 satellite is ready for integration and testing; and the second payment, and balance of the cost-share, when the GeoEye-2 satellite becomes operational and meets NGA certification requirements. To date, the NGA has obligated funding of $181.0 million on this contract to cover these cost-share payments. In June 2012, the Company received the first cost-share payment of $111.2 million, as a result of the Company meeting the NGA’s integration and testing requirements. This $111.2 million cost share payment was initially recorded as deferred revenue and is being recognized as revenue over the expected operational life of the GeoEye-2 satellite.

Additionally on June 22, 2012, we were notified by the NGA that it is electing not to obligate additional funding under the GeoEye-2 cost share agreement. After deducting the $111.2 million payment, which was received by us in June 2012 upon completion of the first payment milestone, there is approximately $70.0 million left in obligated funding on the contract. We are currently negotiating with the NGA to restructure the agreement and modify the specific milestones and remaining funding obligations. There is no guarantee that our negotiations with the NGA in restructuring the agreement will be successful. Further, even if we are successful in our negotiations with the NGA, there is no guarantee that the restructured or modified agreement will be on terms favorable to us. Assuming no additional funds will be obligated by the U.S. government toward the overall cost of construction and launch of GeoEye-2, the NGA will have contributed approximately 23 percent of the total original estimated cost of the GeoEye-2 program, and we will have contributed the rest. We intend to complete the construction and development of GeoEye-2 as planned in 2013.

The EnhancedView program award also provides for value-added products and services and our EyeQ Web Mapping Services to be delivered over the life of the EnhancedView SLA, if requested by the NGA. A portion of this award includes funding for the design and procurement of additional infrastructure to support government operations, which will be initially recorded as deferred revenue and recognized as revenue over the contractual term of the EnhancedView contract.

The EnhancedView program replaced the NextView program, except that GeoEye will continue to fulfill existing NextView value-added product and services orders until such orders are complete. New value-added product and services orders are expected to be placed under the EnhancedView contract. The NextView SLA portion of the NextView program was replaced by the EnhancedView SLA as of September 1, 2010. We recognized $37.5 million and $112.8 million of imagery and other revenue under the EnhancedView SLA during the three and nine months ended September 30, 2012, respectively. We recognized $36.8 million and $109.8 million of imagery and other revenue under the EnhancedView SLA during the three and nine months ended September 30, 2011, respectively. Additionally, during each of the three and nine months ended September 30, 2012 and 2011, we recognized $6.0 million and $18.1 million, respectively, of deferred revenue related to the recognition of the cost-share amounts for the GeoEye-1 satellite from the NextView contract.

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(3)	Investments

At September 30, 2012, and December, 31, 2011, GeoEye held short-term investments, all of which are classified as available-for-sale. These investments consist of variable-rate demand notes with costs of $8.5 million and $9.2 million as of September 30, 2012, and December 31, 2011, respectively, which equal their estimated fair values. There were no gross unrecognized gains or losses as of September 30, 2012, or December, 31, 2011.

Additionally, as of September 30, 2012, the Company owns less than a 20 percent interest in a technology company serving the solar energy industry and does not exercise significant influence over the operating or financial decisions. This cost method investment of $1.5 million is included in other non-current assets on the condensed consolidated balance sheet.

(4)	Property, Plant and Equipment

Property, plant and equipment consisted of the following at September 30, 2012, and December 31, 2011 ( in thousands ):

	September 30, 2012			December 31, 2011
Land and buildings	$	6,715		$	7,419
Furniture, computers, equipment and software		58,087			55,294
Leasehold improvements		20,456			19,405
Accumulated depreciation		(42,261	)		(36,713	)
Subtotal		42,997			45,405
Property, plant and equipment in process		13,860			2,660
Property, plant and equipment, net	$	56,857		$	48,065

We record property, plant and equipment at cost. We also capitalize certain internal and external software development costs incurred to develop software for internal use. Costs of major enhancements to internal use software are capitalized while routine maintenance of existing software is charged to expense as incurred. Property, plant and equipment in process include costs incurred in connection with our Thornton, CO facilities expansion, as well as other additional computer hardware and software costs. During the nine months ended September 30, 2012, we disposed of our facility in Norman, Oklahoma, as well as the assets related to our aerial imagery business.

Depreciation expense related to property, plant and equipment was $3.4 million for each of the three months ended September 30, 2012 and 2011, and $10.2 million and $9.0 million for the nine months ended September 30, 2012 and 2011, respectively.

(5)	Satellites and Related Ground Systems

Satellites and related ground systems consisted of the following at September 30, 2012, and December 31, 2011 ( in thousands ):

	September 30, 2012			December 31, 2011
Satellites	$	412,476		$	411,105
Ground systems		89,984			89,984
Accumulated depreciation		(210,030	)		(169,281	)
Subtotal		292,430			331,808
Satellites and ground systems in process		778,365			581,646
Satellites and related ground systems, net	$	1,070,795		$	913,454

The capitalized costs of the Company’s satellites and related ground systems include internal direct labor and project management costs, internally developed software and material costs related to assets that support the satellites’ construction and development. The cost of the Company’s satellites and related ground systems also includes capitalized interest incurred during the construction, development and initial in-orbit testing period.

As of September 30, 2012, and December 31, 2011, we have incurred total capitalized costs of $773.6 million and $578.7 million, respectively, related to the Company’s development efforts for EnhancedView, primarily consisting of costs for the development of and construction of GeoEye-2. Included in these costs is capitalized interest of $103.1 million and $63.0 million, as of September 30, 2012, and December 31, 2011, respectively.

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We maintain in-orbit insurance policies covering our GeoEye-1 and IKONOS satellites. We capitalize the portion of the premiums associated with the insurance coverage of the launch and in-orbit commissioning period of our commercial satellites. Accordingly, prior to the start of GeoEye-1’s commercial operations, we capitalized a portion of insurance premiums in the cost of the satellite that are being amortized over the estimated life of GeoEye-1, which is nine years. Following launch and in-orbit commissioning, insurance premium amounts related to in-orbit operations are charged to expense ratably over the related policy periods.

The Company maintains insurance policies for GeoEye-1 with both full coverage and total-loss-only coverage in compliance with our indentures. As of September 30, 2012, we carried $260.3 million of in-orbit insurance for GeoEye-1, comprised in part by $195.8 million of full coverage to be paid if GeoEye-1’s capabilities become impaired as measured against a set of specifications, which expires on December 1, 2012. We also carry $64.5 million of insurance in the event of a total loss of the satellite, which expires December 1, 2012.

Our IKONOS satellite was fully depreciated in June 2008. The IKONOS satellite is insured for $4.3 million of in-orbit coverage, which expires on December 1, 2012.

Total satellite and related ground systems depreciation expense was $13.6 million and $13.7 million for the three months ended September 30, 2012 and 2011, respectively, and $40.7 million and $40.5 million for the nine months ended September 30, 2012 and 2011, respectively.

(6)	Income Taxes

The Company’s effective tax rate was 39.7 percent before discrete items for the nine months ended September 30, 2012, and 37.2 percent for the nine months ended September 30, 2011. Income tax expense was $5.7 million and $25.0 million, including discrete benefit of $0.6 million, for the three and nine months ended September 30, 2012, respectively. Income tax expense was $8.5 million and $23.6 million for the three and nine months ended September 30, 2011, respectively. The effective tax rate has increased over the prior year primarily due to the expiration of the research and development credit on December 31, 2011. The Company’s effective tax rate differs from the federal tax rate primarily due to state and local income taxes.

(7)	Long-Term Debt

On October 8, 2010, the Company issued $125.0 million aggregate principal of 8.625 percent Senior Secured Notes due 2016, or the 2016 Notes, in a publicly registered offering. Interest payments on the 2016 Notes are due semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, the Company may, on one or more occasions, redeem all or part of the 2016 Notes at 104.313 percent of principal for the subsequent 12-month period; at 102.156 percent of principal on October 1, 2014, for the subsequent 12-month period; and at 100 percent of principal on October 1, 2015, and thereafter.

The 2016 Notes are unconditionally guaranteed, jointly and severally, on a secured second-priority basis, by all existing and future domestic restricted subsidiaries of the Company. The 2016 Notes and the guarantees are secured by a lien on substantially all of the assets of the Company and the guarantors.

On October 9, 2009, the Company issued $400.0 million aggregate principal, net of original issue discount of $20.0 million, of 9.625 percent Senior Secured Notes due 2015, or the 2015 Notes. Interest is payable on the 2015 Notes semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, the Company may on one or more occasions redeem all or part of the 2015 Notes at 104.813 percent of principal for the subsequent 12-month period and at 100 percent of principal on October 1, 2014, and thereafter.

The 2015 Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis, by all existing and future domestic restricted subsidiaries of the Company. The 2015 Notes and the guarantees are secured by a lien on substantially all of the assets of the Company and the guarantors.

Except for a minor investment in foreign subsidiaries, the Company does not have any independent assets or operations other than its ownership in all of the capital stock of its subsidiaries. Since inception, all of the Company’s operations have been conducted through its wholly owned subsidiaries.

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Interest (Income) Expense, Net

The composition of interest (income) expense, net, was as follows (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Interest expense	$	13,403		$	13,295		$	40,124		$	39,817
Capitalized interest		(13,403	)		(12,116	)		(40,123	)		(31,322	)
Interest income		(22	)		(57	)		(1,383	)		(246	)
Total interest (income) expense, net	$	(22	)	$	1,122		$	(1,382	)	$	8,249

Interest expense for the three and nine months ended September 30, 2012 and 2011, includes interest expense on our 2016 Notes and 2015 Notes, amortized prepaid financing costs and amortization of debt discount. Interest is capitalized on our construction in progress, including our GeoEye-2 satellite and related ground systems. Interest income represents earnings on our cash balances and 2012 includes cash interest received related to federal income tax refunded to us during the year.

(8)	Convertible Preferred Stock

In September 2010, Cerberus Satellite LLC purchased 80,000 shares of Series A Preferred Stock having a liquidation preference of $1,000 per share. This resulted in net proceeds to the Company of $78.0 million, after discounts and before issuance costs. The Series A Preferred Stock is convertible on issuance, at the option of the holders, at a conversion rate of $29.76 per common share, which is equivalent to a conversion rate of 2.7 million shares of common stock of the Company.

The Series A Preferred Stock represents an ownership interest assuming conversion of such Series A Preferred Stock to the Company’s common stock, of approximately 10 percent as of September 30, 2012. Dividends on the Series A Preferred Stock are payable quarterly in arrears at a rate of 5 percent per annum of the liquidation preference of $1,000 per share, subject to declaration by the Board of Directors. The Company declared dividends on the Series A Preferred Stock of $1.0 million during the three months ended September 30, 2012 and 2011, and $3.0 million during the nine months ended September 30, 2012 and 2011. The dividend payable of $1.0 million was included in accounts payable and accrued expenses as of September 30, 2012, and December 31, 2011.

In connection with the February 9, 2012, second amendment to the Stockholder Rights Agreement, the Company entered into a standstill letter agreement with Cerberus Capital Management, L.P. Under the standstill agreement, Cerberus and its affiliates have agreed, subject to certain exceptions, not to take certain actions with respect to the Company during the standstill period of February 9, 2012, through the earliest of certain specified events or June 30, 2013, including, among other things, not to effect or seek to effect any acquisition by the Cerberus parties of beneficial ownership of any securities, assets or businesses of the Company, or any of its subsidiaries if, upon acquisition, the aggregate beneficial ownership of Cerberus parties of beneficial ownership would exceed 29.99 percent of the number of common shares of the Company that are then outstanding, including the shares of the Company’s Series A Convertible Preferred Stock, on an as-converted basis.

On June 5, 2012, the Company entered into an amendment to the standstill letter agreement with Cerberus Capital Management, L.P. dated as of February 9, 2012. Under the Amendment, Cerberus and its affiliates have agreed that, until the earlier of the expiration of the standstill period (June 30, 2013) and the adjournment of the 2013 annual meeting of stockholders of the Company, the Cerberus parties will cause all Series A Preferred Stock or common stock owned by the Cerberus parties to be present for quorum purposes and to vote in favor of any and all directors nominated by the Board of Directors of the Company for election, provided that such nominees include all directors that holders of Series A Preferred Stock are entitled to nominate.

(9)	Fair Value Measurements

GeoEye’s financial instruments include cash and cash equivalents, available-for-sale short-term investments, restricted cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying amounts of cash and cash equivalents, available-for-sale short-term investments, restricted cash, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of these instruments.

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The following table provides the fair value of our financial assets and liabilities as of September 30, 2012, and December 31, 2011 (in thousands) :

	September 30, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Available-for-sale securities	$	8,500	$	8,500	$	9,220	$	9,220
Senior Secured Notes (due 2016)		125,000		137,030		125,000		127,970
Senior Secured Notes (due 2015)		388,379		448,000		386,019		446,560

We classified the above instruments as Level 2 instruments due to the usage of market prices not quoted on active markets and other observable market data.

(10)	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2012, and December 31, 2011 (in thousands) :

	September 30, 2012		December 31, 2011
Accounts payable and accrued expenses	$	18,947	$	18,054
Accrued bonuses, payroll and related benefits		14,507		16,410
Accrued expenses - subcontractors		4,138		10,718
Accrued interest payable		24,641		12,320
Dividends payable		1,007		1,008
Total accounts payable and accrued expenses	$	63,240	$	58,510

(11)	Stockholders’ Equity

Earnings per Share

Basic earnings per share, or EPS, is computed based on the weighted-average number of shares of the Company’s Common Stock outstanding. Diluted EPS is computed based on the weighted-average number of shares of the Company’s Common Stock outstanding and other dilutive securities. Securities that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are required to be included in the computation of basic EPS and diluted EPS pursuant to the two-class method. The Company’s Series A preferred shares are participating securities.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations (in thousands) :

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	9,556		$	14,088		$	39,403		$	39,744
Preferred stock dividends		(1,007	)		(1,008	)		(3,002	)		(2,992	)
		8,549			13,080			36,401			36,752
Income allocated to participating securities		(912	)		(1,416	)		(3,902	)		(3,984	)
Net income available to common stockholders	$	7,637		$	11,664		$	32,499		$	32,768

Denominator:
Weighted average shares outstanding used to compute basic earnings per share		22,519			22,147			22,392			22,107
Dilutive effect of:
Stock options, deferred stock units, restricted stock units, employee stock purchase plan shares and nonvested stock		326			642			407			660
Weighted average shares outstanding and dilutive securities used to compute diluted earnings per share		22,845			22,789			22,799			22,767

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For the three months ended September 30, 2012, 2.7 million potential common shares from the conversion of preferred stock and 0.8 million stock options and nonvested stock awards were excluded from the calculation of diluted EPS, as their inclusion would have been anti-dilutive. For the nine months ended September 30, 2012, 2.7 million potential common shares from the conversion of preferred stock and 0.9 million stock options and nonvested stock awards were excluded from the calculation of diluted EPS, as their inclusion would have been anti-dilutive.

For each of the three and nine months ended September 30, 2011, 2.7 million potential common shares from the conversion of preferred stock and 0.2 million stock options and nonvested stock awards were excluded from the calculation of diluted EPS, as their inclusion would have been anti-dilutive.

Changes in Stockholders’ Equity

Changes in stockholders’ equity for the nine months ended September 30, 2012, consisted of the following (in thousands) :

Balance at January 1, 2012	$	507,287
Net income for the nine months ended September 30, 2012		39,403
Issuance of common stock		1,366
Surrender of common stock to cover employees' minimum tax liability		(2,240	)
Stock-based compensation		8,171
Foreign currency translation adjustment		(188	)
Preferred stock dividends		(3,002	)
Balance at September 30, 2012	$	550,797

(12)	Significant Customer and Geographic Information

The Company operates in a single industry segment, in which it provides imagery, imagery information products and image-processing services to customers around the world.

GeoEye recognized revenue related to contracts with the U.S. government, directly or as a subcontractor, of $58.9 million and $55.6 million for the three months ended September 30, 2012 and 2011, representing 68 percent and 65 percent of total revenues, respectively. For the nine months ended September 30, 2012 and 2011, the Company recognized $178.6 million and $174.3 million under its contracts with the U.S. government, respectively, representing 67 percent of total revenues for each respective period. We had no other customers for whom revenues exceeded 10 percent of total revenues during the three or nine months ended September 30, 2012 or 2011.

The Company has two product and service lines: (a) Imagery, including the NextView cost-share, and (b) Production and Other Services.

Total revenues by these lines were as follows ( in thousands ):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2012		2011		2012		2011
Imagery	$	59,746	$	63,503	$	181,964	$	184,060
NextView cost-share		6,038		6,038		18,114		18,114
Production and other services		21,325		16,228		64,708		57,427
Total revenues	$	87,109	$	85,769	$	264,786	$	259,601

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Total domestic and international revenues were as follows (in thousands) :

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2012		2011		2012		2011
Domestic	$	66,069	$	63,698	$	199,760	$	199,112
International		21,040		22,071		65,026		60,489
Total revenues	$	87,109	$	85,769	$	264,786	$	259,601

Our property, plant and equipment and ground systems are primarily held domestically.

(13)	Commitments and Contingencies

Contractual Obligations

The following table summarizes our contractual cash obligations as of September 30, 2012 (in thousands) :

	Payments due by year
	Less than 1 Year		1 to 2 years		2 to 3 years		3 to 4 years		4 to 5 years		Thereafter		Total
Long-term debt obligations	$	-	$	-	$	-	$	400,000	$	125,000	$	-	$	525,000
Interest payments on long-term debt (1)		49,281		49,281		49,281		49,281		10,781		-		207,905
Operating lease obligations		15,068		18,278		18,531		18,954		6,897		13,454		91,182
Purchase obligations (2)		71,419		840		770		-		-		-		73,029
Total contractual obligations (3)	$	135,768	$	68,399	$	68,582	$	468,235	$	142,678	$	13,454	$	897,116

(1)

Represents contractual interest payment obligations on the $400.0 million outstanding principal balance of our 2015 Notes, which bear interest at a rate per annum of 9.625 percent and contractual interest payment obligations on the $125.0 million outstanding principal balance of our 2016 Notes, which bear interest at a rate per annum of 8.625 percent.

(2)

Purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that are enforceable and legally binding. As of September 30, 2012, purchase obligations include EnhancedView-related commitments, ground systems and communication services.

(3)

Total contractual obligations presented exclude $4.9 million of unrecognized tax benefits, due to uncertainty with respect to the expected timing of associated cash payments.

Operating Leases

We have commitments for operating leases primarily relating to office and operating facilities and equipment. We lease various real properties under operating leases that generally require us to pay taxes, insurance, maintenance and minimum lease payments. These leases contain escalation provisions for increases as a result of increases in real estate taxes and operating expenses. We recognize rent expense under such leases on a straight-line basis over the term of the lease. Substantially all of these leases have lease terms ranging from three to twelve years. Some of our leases have options to renew.

Total rental expense under operating leases for the three months ended September 30, 2012 and 2011, was approximately $1.0 million and $0.9 million, respectively, and for the nine months ended September 30, 2012 and 2011, was approximately $3.4 million and $3.3 million, respectively.

Contingencies

In July 2012, GeoEye and the GeoEye board of directors, DigitalGlobe, 20/20 Acquisition Sub, Inc. and WorldView, LLC were named as defendants in three purported class action lawsuits filed in the United States District Court for the Eastern District of Virginia. The lawsuits were brought on behalf of proposed classes consisting of all public holders of GeoEye common stock, excluding the defendants and, among others, their affiliates. The actions were captioned: Behnke v. GeoEye, Inc., et al., No. 1:12-CV-826-CMH-TCB, filed on July 26, 2012; Braendli v. GeoEye, Inc., et al., No. 1:12-CV-841-CMH-TRJ, filed on July 30, 2012; and Crow v. Abrahamson, et al., No. 1:12-CV-842-CMH-TCB, filed on July 30, 2012. On September 7, 2012, the Court ordered the consolidation of the three actions. The consolidated action is captioned: In re GeoEye, Inc., Shareholder Litigation, Consol. No. 1:12-cv-00826-CMH-TCB. The Court’s consolidation order provided for, among other things, the appointment of the law firms of Robbins Geller Rudman & Dowd LLP, Levi & Korsinsky LLP and Finkelstein Thompson LLP as members of the Plaintiffs’ Executive Committee of Lead Counsel (“Lead Counsel”) and the setting of the defendants’ response date to the amended complaint as 30 days after its filing. A corrected amended complaint was filed in the consolidated action on September 24, 2012. The amended complaint contains allegations that the GeoEye board of directors breached their fiduciary duties by, among other things, failing to maximize stockholder value, agreeing to preclusive deal protection measures and failing to disclose certain information necessary to make an informed vote on whether to approve the proposed merger. DigitalGlobe is alleged to have aided and abetted these breaches of fiduciary duty. In addition, the amended complaint contains allegations that the GeoEye board of directors and DigitalGlobe violated Section 20(a) and Section 14(a) of the Securities Exchange Act of 1934, and Rule 14a-9 promulgated thereunder, by the filing of a Registration Statement allegedly omitting material facts and setting forth materially misleading information. The consolidated action seeks, among other things, a declaration that a class action is maintainable, an injunction preventing the consummation of the merger and an award of damages, costs and attorneys’ fees.

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On September 28, 2012, Lead Counsel filed a motion for expedited discovery. On September 30, 2012, Lead Counsel made a confidential settlement demand requesting additional disclosures to address the alleged omissions raised in the amended complaint. On October 9, 2012, following arm’s-length negotiations, the parties to the consolidated action entered into a memorandum of understanding (the “MOU”) to settle all claims asserted therein on a classwide basis. GeoEye and the GeoEye board of directors, DigitalGlobe, 20/20 Acquisition Sub, Inc. and WorldView, LLC entered into the MOU solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing. In connection with the MOU, DigitalGlobe agreed to make additional disclosures in Amendment No. 1 to the Registration Statement filed with the Securities and Exchange Commission on October 10, 2012. The settlement set forth in the MOU includes a release of all claims against defendants alleged in the corrected amended complaint, and is subject to, among other items, the execution of a stipulation of settlement and court approval, as well as the Merger becoming effective under applicable law. Payments made in connection with the settlement, which are subject to court approval, are not expected to be material to GeoEye.

In the normal course of business, we may be party to other various lawsuits, legal proceedings and claims arising out of our business. We believe that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on our business, financial condition, liquidity or results of operations.

(14)	Subsequent Event

On October 31, 2012, the Company received notice from the NGA that, due to funding shortfalls, the NGA does not intend to exercise the nine-month EnhancedView SLA option with the Company for the current contract year performance period of December 1, 2012 through August 31, 2013. The NGA did indicate it might seek to renew the EnhancedView SLA by December 15, 2012, should funding become available. The nine-month option for the remainder of the contract year through August 31, 2013 would have provided for service revenue to the Company, based upon the availability of funding, of approximately $119.25 million. During the nine months ended September 30, 2012 and 2011, revenue under the EnhancedView SLA accounted for approximately 43 percent and 42 percent, respectively, of our total revenues. The notice from the NGA means that there will be no revenue generated by us under the EnhancedView SLA for GeoEye-1 imagery for the foreseeable future. The Company is materially dependent on the NGA for its business and anticipates such termination will result in a material reduction of our revenues, income, and future cash flows. Such circumstances may require the review of related long-lived assets for possible impairment, including our GeoEye-1 satellite, and may also result in an impairment of our goodwill. We will complete our required annual goodwill impairment test during the fourth quarter of 2012. We are making efforts to replace the EnhancedView SLA revenues with revenues from new and existing customers. Loss of revenue from the EnhancedView SLA will make us more dependent on revenue from commercial and international customers, which is difficult to forecast.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements. Without limitation, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including statements relating to growth, expected levels of expenditures and statements about future operating results, are forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements and those presented elsewhere by our management from time to time are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. These risks and uncertainties include, but are not limited to, those described in “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 13, 2012, or 2011 Annual Report, and as updated in our quarterly reports on Form 10-Q. The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:

changes or delays in Congressional appropriations or uncertainty as to the completion of the federal budget process;

risks related to our U.S. government contracts, including risk of termination, with or without cause, suspensions, and other changes in purchase levels;

changes in our revenue backlog or expected revenue backlog for future services;

risks related to the Merger Agreement with DigitalGlobe, including failure to obtain necessary regulatory approvals, the receipt of a superior proposal or other intervening event beyond our control prior to stockholder approval;

risks associated with operating our in-orbit satellites;

satellite launch failures, satellite launch and construction delays and in-orbit failures or reduced performance;

the number of commercial satellite launch opportunities available in any given time period that could impact our ability to timely schedule future launches and the prices we have to pay for such launches;

possible future losses on satellites that are not adequately covered by insurance;

our ability to obtain new satellite insurance policies with financially viable insurance carriers on commercially reasonable terms or at all, as well as the ability of our insurance carriers to fulfill their obligations;

general U.S. and international economic, business and political conditions;

domestic and international government regulation;

market acceptance of our products and services;

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our ability to maintain and protect our Earth imagery content and our image archives against damage;

pricing pressure and overcapacity in the markets in which we compete;

the competitive environment in which we operate, as some of our competitors may have greater financial, personnel and operating resources;

inadequate access to capital markets or other financing;

customer defaults on their obligations owed to us;

our international operations and other uncertainties associated with doing business internationally; and

other factors disclosed in our subsequent filings under the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, and other factors beyond our control. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Quarterly Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 2.

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

The information included in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2011 Annual Report. In preparing the discussion and analysis contained in this Item 2, we assume that readers have read or have access to the discussion and analysis contained in the 2011 Annual Report and in our other Exchange Act filings. In addition, the following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes, and “Part I — Item 1A — Risk Factors,” which describes key risks associated with our operations and industry, and “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2011 Annual Report.

The management discussion and analysis, or MD&A, is intended to assist in understanding and assessing the trends and significant changes in our results and financial condition. We organized our MD&A into the following sections:

Overview – a brief description of our business and highlights of the current period

Results of Operations – an analysis of our results of operations in our condensed consolidated financial statements

Liquidity and Capital Resources – an analysis of cash flows, sources and uses of cash, and commitments and contingencies

Critical Accounting Policies – a discussion of key accounting policies requiring critical judgments and estimates

Overview

GeoEye is a leading source of geospatial information and insight for decision makers and analysts who need a clear understanding of our changing world to protect lives, manage risk and optimize resources. Each day, organizations in defense and intelligence, public safety, critical infrastructure, energy and online media rely on GeoEye’s Earth imagery, geospatial expertise and enabling technology to support important missions around the globe. Widely recognized as a pioneer in high-resolution satellite imagery, GeoEye has evolved into a complete provider of geospatial intelligence solutions.

In the three months ended September 30, 2012, total revenue increased to $87.1 million from $85.8 million in 2011, a growth rate of 1.6 percent. Over the same period, net income decreased to $9.6 million from $14.1 million, a decline of 32.2 percent. In addition, Adjusted EBITDA, a non-GAAP measure (see reconciliation on page 26), decreased to $43.4 million from $43.7 million, a decline of 0.5 percent. Adjusted EBITDA for the three months ended September 30, 2012, reflects adjustments for transaction related costs of $8.3 million, all of which relate to our pending merger with DigitalGlobe.

On July 22, 2012, we entered into the Merger Agreement with DigitalGlobe. On August 30, 2012, GeoEye entered into an amendment to this Merger Agreement, which removes the reference to a requirement that the DigitalGlobe stockholders approve the assumption of GeoEye stock plans and the issuance of DigitalGlobe common stock thereunder, because there is no obligation to seek such approval pursuant to such plans, applicable law or stock exchange requirements. On October 30, 2012, we filed a Proxy Statement announcing a special meeting of GeoEye Stockholders to approve the adoption of such Merger Agreement. Our results for the three months ended September 30, 2012, include $8.3 million of transaction costs, primarily professional services, related to the Merger Agreement.

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The consummation of this merger is subject to obtaining the affirmative vote of a majority of the outstanding shares of GeoEye Common Stock approving the merger and a majority of the outstanding shares of DigitalGlobe Common Stock represented at the DigitalGlobe stockholders meeting in person or by proxy approving the issuance of DigitalGlobe Common Stock and assumption of certain Company equity plans in the merger. The consummation of the merger is also subject to the satisfaction of certain regulatory conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval of the National Oceanic and Atmospheric Administration and the Federal Communications Commission. On September 21, 2012, GeoEye received a request for additional information from the U.S. Department of Justice. This additional request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. GeoEye is promptly responding to this additional request, and continues to work cooperatively with the U.S. Department of Justice as it conducts its review of the proposed combination.

We own and operate two Earth-imaging satellites, GeoEye-1 and IKONOS, with advanced high-resolution imagery collection capabilities. GeoEye-1 is the world’s highest resolution and most accurate commercial Earth-imaging satellite. Our next satellite, GeoEye-2, will have even higher resolution and is on track to launch and is scheduled to go into operations in the fall of 2013. We own one of the world’s largest libraries of commercial panchromatic and color digital satellite imagery; it contains more than 650 million square kilometers of color Earth imagery.

In addition to our high-resolution Earth imagery collection capacities, we are a global leader in the creation of enhanced satellite imagery information products and services. We operate state-of-the-art high-resolution image processing and production facilities in St. Louis, Missouri and Thornton, Colorado. Our St. Louis, Missouri facility processes imagery from numerous commercial and government sensors, including our own enhanced satellite imagery, to produce an expanded variety of value-added products. We believe we are the only major commercial imagery satellite operator who can produce imagery from multiple Earth imagery sources in addition to our own enhanced satellite imagery information products and services.

GeoEye’s Earth imagery, geospatial expertise and enabling technology allow its customers to collect, process and analyze vast amounts of geospatial data to quickly see, understand and respond to changes on the ground and anticipate where events may occur in the future. Our Web-based information services platform, EyeQ, provides on-demand access to GeoEye imagery, making this valuable information accessible to new audiences.

Our GeoEye Analytics operations build on our heritage of providing multi-source value-added geospatial services by bringing advanced geospatial analytics expertise. Our analysts leverage proprietary tools and tradecraft to process and exploit multiple layers of geospatial data to better understand the characteristics of a location and anticipate where events may occur. Our teams support many important national security, law enforcement, and risk management missions.

We believe the combination of our Earth imagery, geospatial expertise, and enabling technology differentiates us from our competitors. This combination enables us to provide “elevated insight” in the geospatial industry by delivering solutions that help our customers protect lives, manage risk and optimize resources.

Our Web site is www.geoeye.com. We make available free of charge on or through our Web site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission, or the SEC. This reference to our Web site is for the convenience of shareholders as required by the SEC and shall not be deemed to incorporate any information on the Web site into this Form 10-K or our other filings with the SEC.

Our Web site is also a key source of important information about us. We routinely post to the About Us/Investor Relations section of our Web site important information about our business, our operating results and our financial condition and prospects, including our earnings releases and supplemental financial information. We also have a Corporate Governance page in the Investor Relations section of our Web site that includes, among other things, copies of our Code of Business Conduct & Ethics and the charters for each standing committee of our Board of Directors, which currently are: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Strategy Committee and the Risk Committee. Copies of our Bylaws and these charters and policies are also available in print to stockholders upon request to our Corporate Secretary at GeoEye, Inc., 2325 Dulles Corner Boulevard, Herndon, Virginia 20171.

Products and Services

Our principal sources of revenue are from the sale of Earth imagery directly to end users or value-added resellers, the provision of direct access to our satellites, associated ground processing technology upgrades and operations and maintenance services. We also derive significant revenue from value-added production and analytic services where we combine imagery GeoEye collects with other sources of data from our customers to create sophisticated value-added geospatial products. Additionally, we earn revenue from the dissemination and hosting of imagery.

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Earth Imagery

We offer a wide range of high-resolution satellite imagery that provides our customers archive data and new collection services in four key formats:

Geo. Our Geo product, which is the foundation of the imagery product line, is a map-oriented image suitable for a broad range of customer uses. Geo images are suitable for customer visualization and monitoring applications and are delivered to our customers in a data and information format capable of being processed into other advanced imagery products using standard commercially available software.

GeoProfessional. Our GeoProfessional products consist of imagery that has been aligned and geographically corrected by our experienced production personnel to provide the most accurate and precise imagery currently available from a commercial satellite provider. Our production personnel can also combine various satellite and aerial images into a single, highly detailed and comprehensive image. Available in various levels of accuracy, these GeoProfessional products are suitable for feature extraction, change detection, base mapping and other similar geo-location applications.

GeoStereo. Our GeoStereo product uses at least two images of the same location at different angles to provide our customers with a three-dimensional image of a given location. GeoStereo provides the base images that are used for three-dimensional feature recognition and extraction. These GeoStereo products support a wide range of imagery applications such as digital elevation model creation, building height extraction, spatial layers and three-dimensional feature extraction.

GeoEye View. Our GeoEye View product is imagery specifically designed for viewing in Google Earth and Maps. Images are captured by the GeoEye-1 and IKONOS satellites and then orthorectified (terrain-corrected) and mosaicked (blended together) by the experts at GeoEye’s production facility. GeoEye View takes the technical difficulty out of working with imagery datasets and makes loading it into Google Earth and Maps as simple as loading a spreadsheet into Google Documents with the Google Maps Engine and Google Earth Enterprise applications.

Production Services

Value-added products and services generated by our production service operations are purchased by U.S. government agencies and domestic and international commercial customers, including international governments and state and local governments. Production services typically involve the processing and production of specific data and imagery information products that are built to stringent customer specifications. We have developed advanced processing systems that enable us to process raw data from a wide range of both government and commercial sensors (imaging satellites) and then merge the source images into very precise information and imagery products to meet the needs of a broad range of customers. Our production services range from the generation of precision imagery products (for example, digital elevation maps) to the extraction of site-specific features (for example, airports, highways and buildings) for our customers’ database development.

Our production services, which are designed to increase the accuracy and precision of satellite and aerial imagery, include the following production processes:

Georectification. This is a computer-processing operation that corrects the pixel locations of a digital image to remove image distortions caused by the non-vertical pointing and movement of the sensor during the imaging event.

Tonal Correction. This is the scientific correction of the color variations between various component images of an image mosaic so that the image or picture reflects a coherent color structure.

Image Mosaicking. This is the process of merging or stitching multiple images together. Since images are taken at different look angles, elevations, weather, times and seasons, etc., they do not match each other tonally or in exact location to the ground. Prior to mosaicking, images are tonally corrected as much as possible. They are also block adjusted — the images are shifted in relation to each other and to ground truth to improve accuracy. The result is a group of images that match each other in location and color, so they can be stitched together to create a mosaic that is as seamless as possible.

Orthorectification. This is the process of accurately registering imagery to ground coordinates and geometrically correcting it for Earth elevation differences at the image location. For example, orthorectification is used to make buildings and objects in an image appear to be standing straight instead of leaning. After processing, the image can be used for a variety of mapping applications, including land use and land-cover classification, terrain analysis, natural resource mapping, backdrops for maps, temporal-change analysis, multi-image fusion and more.

Our production services include elevation data, maps, topographic maps, digital orthophoto imagery, remote sensing services, survey and inventory services and Geospatial Information System, or GIS, consulting and implementation. We also offer geospatial products and services to help develop and manage geospatial data to support customer documentation needs, inventory of resources and engineering and development applications.

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Information Services

We provide imagery information services, which combine our imagery with third-party data to create sophisticated and customized information for our customers.

GeoEye Analytics provides geospatial predictive analytic solutions to over 40 customers in key markets of defense, intelligence and homeland security. Our highly trained geospatial and multi-source analysts utilize proprietary software and algorithms to combine location-based information, geographic data, human geography, historic events and a wide range of other information sources to generate unique location-based analysis that enables customers to gain the insight they need to support mission critical operations around the world. Our teams and technology are used daily in mission areas such as counter terrorism, law enforcement, oil and gas exploration, fraud detection and risk management. Predictive geospatial analysis enables our customers to analyze where events are likely to occur and provides the insight they need so they can best manage risk, optimize deployment of resources and ensure efficient utilization of key assets.

Our information services business provides our customers global on-demand access to imagery and related information over the Internet. This Web-based services platform, which we call EyeQ , provides the infrastructure for this service and our geospatial information services business. EyeQ delivers imagery and other location-based information through annual subscriptions and user licenses. EyeQ offers a Web interface with tools that function as our customers’ data center. EyeQ serves up imagery and other standards-based content throughout the customers’ data network and out to their customers and partners. With EyeQ, our customers have access to secure, timely and accurate location information delivered into their business environment. EyeQ is user friendly and available twenty-four hours a day and seven days a week. EyeQ serves our goal of simplifying access to and delivery of imagery and location information.

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Results of Operations

Comparison of the Results of Operations for the Three and Nine Months Ended September 30, 2012 and 2011

	For the Three Months Ended September 30,												For the Nine Months Ended September 30,
	2012						2011						2012						2011
	Amount			% of Revenue			Amount			% of Revenue			Amount			% of Revenue			Amount			% of Revenue
	(in thousands, except percentages)												(in thousands, except percentages)
Revenues	$	87,109			100.0	%	$	85,769			100.0	%	$	264,786			100.0	%	$	259,601			100.0	%

Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		31,227			35.8			28,508			33.2			91,937			34.7			91,246			35.1
Depreciation and amortization		17,860			20.5			17,986			21.0			53,355			20.2			52,204			20.1
Selling, general and administrative		22,822			26.2			15,516			18.1			56,469			21.3			44,606			17.2
Total operating expenses		71,909			82.5			62,010			72.3			201,761			76.2			188,056			72.4
Income from operations		15,200			17.5			23,759			27.7			63,025			23.8			71,545			27.6
Interest income (expense), net		22			0.0			(1,122	)		(1.3	)		1,382			0.5			(8,249	)		(3.2	)
Income before provision for income taxes		15,222			17.5			22,637			26.4			64,407			24.3			63,296			24.4
Provision for income taxes		(5,666	)		(6.5	)		(8,549	)		(10.0	)		(25,004	)		(9.4	)		(23,552	)		(9.1	)
Net income		9,556			11.0			14,088			16.4			39,403			14.9			39,744			15.3
Preferred stock dividends		(1,007	)		(1.2	)		(1,008	)		(1.1	)		(3,002	)		(1.2	)		(2,992	)		(1.2	)
Net income less preferred stock dividends		8,549			9.8			13,080			15.3			36,401			13.7			36,752			14.1
Income allocated to participating securities		(912	)		(1.0	)		(1,416	)		(1.7	)		(3,902	)		(1.4	)		(3,984	)		(1.5	)
Net income available to common stockholders	$	7,637			8.8		$	11,664			13.6		$	32,499			12.3		$	32,768			12.6

Revenues

	For the Three Months Ended September 30,										Change Between						For the Nine Months Ended September 30,										Change Between
	2012					2011					2012 and 2011						2012					2011					2012 and 2011
	Amount		% of Revenue			Amount		% of Revenue			Amount			%			Amount		% of Revenue			Amount		% of Revenue			Amount			%
	(in thousands, except percentages)																(in thousands, except percentages)
Imagery	$	59,746		68.6	%	$	63,503		74.0	%	$	(3,757	)		(5.9	)%	$	181,964		68.7	%	$	184,060		70.9	%	$	(2,096	)		(1.1	)%
NextView cost-share		6,038		6.9			6,038		7.0			-			-			18,114		6.9			18,114		7.0			-			-
Production and other services		21,325		24.5			16,228		19.0			5,097			31.4			64,708		24.4			57,427		22.1			7,281			12.7
Total revenues	$	87,109		100.0		$	85,769		100.0		$	1,340			1.6		$	264,786		100.0		$	259,601		100.0		$	5,185			2.0

Imagery revenues primarily include imagery sales, affiliate access fees, equipment sales and operations and maintenance fees. NextView cost-share revenues are based on the recognition of deferred revenue related to the cost-share amounts from the NGA. Production and other services revenues primarily include revenue from production orders for the NGA and commercial customers, GeoEye Analytics and EyeQ, our Web-based dissemination service.

Imagery revenues decreased for the three and nine months ended September 30, 2012, compared to the same periods in 2011, primarily due to lower levels of orders and deliveries to commercial customers, partially offset by greater international affiliate access fees due to higher contract renewals.

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Production and other services revenues increased for the three and nine months ended September 30, 2012, compared to the same periods in 2011, primarily due to the increase in level of production services provided under U.S. government contracts.

Total domestic and international revenues were as follows:

	For the Three Months Ended September 30,										Change Between						For the Nine Months Ended September 30,										Change Between
	2012					2011					2012 and 2011						2012					2011					2012 and 2011
	Amount		% of Revenue			Amount		% of Revenue			Amount			%			Amount		% of Revenue			Amount		% of Revenue			Amount		%
	(in thousands, except percentages)																(in thousands, except percentages)
Domestic	$	66,069		75.8	%	$	63,698		74.3	%	$	2,371			3.7	%	$	199,760		75.4	%	$	199,112		76.7	%	$	648		0.3	%
International		21,040		24.2			22,071		25.7			(1,031	)		(4.7	)		65,026		24.6			60,489		23.3			4,537		7.5
Total revenues	$	87,109		100.0		$	85,769		100.0		$	1,340			1.6		$	264,786		100.0		$	259,601		100.0		$	5,185		2.0

Domestic revenues include those from the EnhancedView SLA, recognition of deferred revenue related to the NextView cost-share payments from the NGA, commercial imagery sales, sales of value-added products and services and EyeQ, our Web-based dissemination service. International revenues are derived from access fee agreements and ground station operation and maintenance contracts with our international regional affiliate customers, commercial imagery sales and sales of ground stations.

Domestic revenues increased during the three and nine months ended September 30, 2012, compared to the same periods in 2011, primarily due to an increase in our value-added production services.

International revenues decreased during the three months ended September 30, 2012, compared to the same period in 2011, primarily due to decreased deliveries made to international resellers. International revenues increased during the nine months ended September 30, 2012, compared to the same period in 2011, primarily due to an increase in imagery deliveries to international resellers and access fees for international affiliates.

Operating Expenses

Direct Costs of Revenue

	For the Three Months Ended September 30,										Change Between						For the Nine Months Ended September 30,										Change Between
	2012					2011					2012 and 2011						2012					2011					2012 and 2011
	Amount		% of Revenue			Amount		% of Revenue			Amount			%			Amount		% of Revenue			Amount		% of Revenue			Amount			%
	(in thousands, except percentages)																(in thousands, except percentages)
Labor and overhead	$	18,044		20.7	%	$	18,029		21.0	%	$	15			0.1	%	$	55,411		20.9	%	$	58,202		22.4	%	$	(2,791	)		(4.8	)%
Subcontractor		6,784		7.8			5,111		6.0			1,673			32.7			18,028		6.8			18,243		7.0			(215	)		(1.2	)
Satellite insurance		1,389		1.6			1,567		1.8			(178	)		(11.4	)		4,228		1.6			4,690		1.8			(462	)		(9.9	)
Other direct costs		5,010		5.7			3,801		4.4			1,209			31.8			14,270		5.4			10,111		3.9			4,159			41.1
Total direct costs of revenue	$	31,227		35.8		$	28,508		33.2		$	2,719			9.5		$	91,937		34.7		$	91,246		35.1		$	691			0.8

Direct costs of revenue include the costs of operating our satellites and related ground systems, labor and ongoing costs related to our operations, maintenance and production contracts and provision of services by GeoEye Analytics. Subcontractor expenses primarily include payments to third parties for support to operate the IKONOS and GeoEye-1 satellites and their related ground systems, and production and GeoEye Analytics contracts. Other direct costs include material costs and fees to support and maintain our satellite program, related ground station equipment, and production contracts.

Labor and overhead costs remained consistent during the three months ended September 30, 2012, compared to the same period in 2011. Labor and overhead costs decreased during the nine months ended September 30, 2012, compared to the same period in 2011, primarily due to a greater portion of engineering and IT labor and associated project management overhead incurred and capitalized related to the EnhancedView program than in the prior year.

Subcontractor expenses increased during the three months ended September 30, 2012, compared to the same period in 2011, primarily due to increased services related to supporting new ground systems, as well as supporting production and GeoEye Analytic contracts. Subcontractor expenses decreased during the nine months ended September 30, 2012, compared to the same period in 2011, primarily due to lower overall costs required to support GeoEye-1 in 2012.

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Other direct costs of revenue increased during the three and nine months ended September 30, 2012, compared to the same periods in 2011, primarily due to an increase in maintenance services and materials for equipment related to GE-2 and production contracts, as well as increased costs related to fulfilling GeoEye Analytics contracts.

Depreciation and Amortization

	For the Three Months Ended September 30,										Change Between						For the Nine Months Ended September 30,										Change Between
	2012					2011					2012 and 2011						2012					2011					2012 and 2011
	Amount		% of Revenue			Amount		% of Revenue			Amount			%			Amount		% of Revenue			Amount		% of Revenue			Amount			%
	(in thousands, except percentages)																(in thousands, except percentages)
Depreciation	$	17,061		19.6	%	$	17,119		20.0	%	$	(58	)		(0.3	)%	$	50,959		19.3	%	$	49,539		19.1	%	$	1,420			2.9	%
Amortization		799		0.9			867		1.0			(68	)		(7.8	)		2,396		0.9			2,665		1.0			(269	)		(10.1	)
Total depreciation and amortization	$	17,860		20.5		$	17,986		21.0		$	(126	)		(0.7	)	$	53,355		20.2		$	52,204		20.1		$	1,151			2.2

Depreciation increased during the nine months ended September 30, 2012, compared to the same period in 2011, primarily due to the deployment of several EyeQ system releases and related hardware, as well as depreciation on leasehold improvements and infrastructure related to our Herndon headquarters.

Selling, General and Administrative Expenses

	For the Three Months Ended September 30,										Change Between						For the Nine Months Ended September 30,										Change Between
	2012					2011					2012 and 2011						2012					2011					2012 and 2011
	Amount		% of Revenue			Amount		% of Revenue			Amount			%			Amount		% of Revenue			Amount		% of Revenue			Amount			%
	(in thousands, except percentages)																(in thousands, except percentages)
Payroll, commissions, and related costs	$	5,329		6.1	%	$	6,636		7.7	%	$	(1,307	)		(19.7	)%	$	19,357		7.3	%	$	18,515		7.1	%	$	842			4.5	%
Stock-based compensation		1,332		1.5			1,412		1.7			(80	)		(5.7	)		4,919		1.9			5,152		2.0			(233	)		(4.5	)
Transaction related costs		8,339		9.6			-		-			8,339			100.0			10,715		4.0			-		-			10,715			100.0
Professional fees		3,000		3.5			2,752		3.2			248			9.0			7,649		2.9			7,988		3.1			(339	)		(4.2	)
Research and development		790		0.9			765		0.9			25			3.3			2,378		0.9			1,992		0.8			386			19.4
Other		4,032		4.6			3,951		4.6			81			2.1			11,451		4.3			10,959		4.2			492			4.5
Total selling, general and administrative expenses	$	22,822		26.2		$	15,516		18.1		$	7,306			47.1		$	56,469		21.3		$	44,606		17.2		$	11,863			26.6

Selling, general and administrative expenses include the costs of the finance, administrative and general management functions and the costs of marketing, advertising, promotion and other selling expenses, including commissions. Other selling, general and administrative expenses include facilities, computer and telecommunication services, travel and related costs for our sales, marketing and back office support activities.

Total selling, general and administrative expenses increased for the three and nine months ended September 30, 2012, compared to the same periods in 2011, primarily due to transaction costs associated with the pending merger with DigitalGlobe. For the three months ended September 30, 2012, this increase was partially offset by a decrease in payroll, commissions, and related costs due to a reduction in estimated bonuses and related costs.

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Interest (Income) Expense, Net

The composition of interest (income) expense, net, was as follows:

	For the Three Months Ended September 30,												Change Between						For the Nine Months Ended September 30,												Change Between
	2012						2011						2012 and 2011						2012						2011						2012 and 2011
	Amount			% of Revenue			Amount			% of Revenue			Amount			%			Amount			% of Revenue			Amount			% of Revenue			Amount			%
	(in thousands, except percentages)																		(in thousands, except percentages)
Interest expense	$	13,403			15.4	%	$	13,295			15.5	%	$	108			0.8	%	$	40,124			15.2	%	$	39,817			15.3	%	$	307			0.8	%
Capitalized interest		(13,403	)		(15.4	)		(12,116	)		(14.1	)		(1,287	)		(10.6	)		(40,123	)		(15.2	)		(31,322	)		(12.0	)		(8,801	)		(28.1	)
Interest income		(22	)		(0.0	)		(57	)		(0.1	)		35			61.4			(1,383	)		(0.5	)		(246	)		(0.1	)		(1,137	)		(462.2	)
Total interest (income) expense, net	$	(22	)		(0.0	)	$	1,122			1.3		$	(1,144	)		(102.0	)	$	(1,382	)		(0.5	)	$	8,249			3.2		$	(9,631	)		(116.8	)

Interest (income) expense, net, includes interest expense on our 2015 and 2016 Notes, amortization of prepaid financing costs and amortization of debt discount, offset by capitalized interest and interest income.

We had interest income during the three and nine months ended September 30, 2012, compared to interest expense for the three and nine months ended September 30, 2011, primarily due to increased capitalized interest associated with the additional construction costs incurred for the GeoEye-2 satellite during 2012, as well as cash interest received during 2012 related to federal income tax refunded.

Provision for Income Taxes

Our effective tax rate was 39.7 percent before discrete items for the nine months ended September 30, 2012, and 37.2 percent for the nine months ended September 30, 2011. Income tax expense was $5.7 million and $25.0 million, including discrete benefit of $0.6 million, for the three and nine months ended September 30, 2012, respectively. Income tax expense was $8.5 million and $23.6 million for the three and nine months ended September 30, 2011, respectively. The effective tax rate has increased over the prior year due to the expiration of the research and development credit on December 31, 2011. Our effective tax rate differs from the federal tax rate primarily due to state and local income taxes.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that represents net income before interest (income) expense, net, provision for income taxes, depreciation and amortization expenses, non-cash stock-based compensation expense and other unusual items. We present Adjusted EBITDA to enhance understanding of our operating performance. We use Adjusted EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that Adjusted EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, Adjusted EBITDA is not a recognized term of financial performance under GAAP, and our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures of other companies.

The use of Adjusted EBITDA as an analytical tool has limitations, and it should not be considered in isolation, or as a substitute for analysis of our results of operations as reported in accordance with GAAP. Some of these limitations are:

It does not reflect our cash expenditures, or future requirements, for all contractual commitments;

It does not reflect our significant interest expense, or the cash requirements necessary to service our indebtedness;

It does not reflect cash requirements for the payment of income taxes when due;

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and,

It does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, but may nonetheless have a material impact on our results of operations.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as an alternative to net income or cash flow from operations determined in accordance with GAAP. Management compensates for these limitations by not viewing Adjusted EBITDA in isolation, and specifically by using other GAAP measures, such as cash flow provided by operating activities and capital expenditures, to measure our liquidity. Our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.

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A reconciliation of net income to Adjusted EBITDA is as follows:

		For the Three Months Ended September 30,					Change Between			For the Nine Months Ended September 30,					Change Between
		2012			2011		2012 and 2011			2012			2011		2012 and 2011
		(in thousands)								(in thousands)
Net income	$	9,556		$	14,088	$	(4,532	)	$	39,403		$	39,744	$	(341	)
Adjustments:
Interest (income) expense, net		(22	)		1,122		(1,144	)		(1,382	)		8,249		(9,631	)
Provision for income taxes		5,666			8,549		(2,883	)		25,004			23,552		1,452
Depreciation and amortization		17,860			17,986		(126	)		53,355			52,204		1,151
Transaction related costs		8,339			-		8,339			10,715			-		10,715
Non-cash stock-based compensation expense		2,043			1,928		115			7,219			7,665		(446	)
Adjusted EBITDA	$	43,442		$	43,673	$	(231	)	$	134,314		$	131,414	$	2,900

Liquidity and Capital Resources

The Company’s principal sources of liquidity are its cash from operating activities, unrestricted cash, cash equivalents and short-term investments. Our primary cash needs are for capital expenditures, working capital and debt service.

We believe that the combination of our current cash position along with expected cash flow from operations should provide sufficient resources to meet our operating requirements through the next twelve months and to fund the construction and launch of GeoEye-2. However, our ability to continue to be profitable and generate positive cash flow from our operations beyond that period is dependent upon adequate U.S. government and other customer demand for our products and services. Most of our government contracts are funded incrementally on a year-to-year basis. Our largest government contract, the EnhancedView SLA, was originally awarded in August 2010 and may have up to seven additional one-year renewal options, and one nine-month renewal option remaining at September 30, 2012.

All of our contracts with the U.S. government agencies are subject to risks of termination or reduction in scope due to changes in U.S. government policies and priorities, or reduced Congressional funding level commitments. Pursuant to the contract terms, U.S. government agencies can terminate, modify or suspend our contracts at any time with or without cause. For the three and nine months ended September 30, 2012, U.S. government agencies represented approximately 68 percent and 67 percent of our total revenues, respectively. Although the U.S. government does not intend to renew or extend our contracts at similar levels or similar terms, we believe we would most likely be able to maintain operations and continue to fund GeoEye-2 with existing cash and cash equivalents for the next twelve months.

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Further, notwithstanding the NGA's intent not to renew our EnhancedView SLA for GeoEye-1 imagery we believe that the U.S. government will require Earth imagery and possibly other services in the current U.S. government fiscal year starting October 1, 2012. Additionally, to the extent capacity becomes available on our satellites due to lower U.S. government demand; we intend to make that capacity available to commercial and international customers.

Cash Flow Items

As of September 30, 2012, we had $220.9 million of cash and cash equivalents and $8.5 million of short-term investments.

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $238.1 million and $133.7 million for the nine months ended September 30, 2012 and 2011, respectively. The increase of $104.4 million in the nine months ended September 30, 2012, compared to the same period in 2011, was primarily related to the $111.2 million cost-share payment received from the NGA for our achievement of certain milestones in the construction of GeoEye-2, partially offset by changes in working capital.

Net Cash Used in Investing Activities

Net cash used in investing activities was $204.4 million and $205.8 million for the nine months ended September 30, 2012 and 2011, respectively. The consistent level of activity from 2011 to 2012 for cash used in investing activities is primarily driven by the greater redemptions of short-term investments in 2011, almost entirely offset by lower capital expenditures in 2012. As of September 30, 2012, we have incurred total capitalized costs of $773.6 million for the EnhancedView program, primarily consisting of costs for the construction of GeoEye-2.

Net Cash Used in Financing Activities

Net cash used in financing activities was $1.6 million and $1.8 million for the nine months ended September 30, 2012 and 2011, respectively. The decrease of $0.2 million in the nine months ended September 30, 2012, compared to the same period in 2011 was primarily related to an increase in the proceeds from the exercise of stock options in 2012.

Long-Term Debt

In October 2010, we closed on a publicly registered debt offering of $125.0 million of our 2016 Notes due October 1, 2016. The 2016 Notes bear interest at 8.625 percent per annum. Interest payments on the 2016 Notes will be made semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, the Company may, on one or more occasions, redeem all or part of the 2016 Notes at 104.313 percent of principal for the subsequent 12-month period, at 102.156 percent of principal on October 1, 2014, for the subsequent 12-month period and at 100 percent of principal on October 1, 2015, and thereafter. The net proceeds of the 2016 Notes offering are being used for general corporate purposes, which may include working capital, future production and services expansion, capital expenditures and other strategic opportunities. The 2016 Notes are unconditionally guaranteed, jointly and severally, on a secured second-priority basis.

In October 2009, we closed on a private placement offering of $400.0 million of our 2015 Notes due October 1, 2015. The net proceeds of the 2015 Notes offering were used to fund the repurchase of the Company’s outstanding $250.0 million 2012 Notes due July 1, 2012. The 2015 Notes bear interest at the rate of 9.625 percent per annum. Interest is payable semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, GeoEye, Inc. may on one or more occasions redeem all or part of the 2015 Notes at 104.813 percent of principal for the subsequent 12-month period and at 100 percent of principal on October 1, 2014, and thereafter. The 2015 Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis.

As of September 30, 2012, our total long-term debt consisted of $125.0 million of 2016 Notes and $400.0 million of 2015 Notes, net of outstanding issue discount of $11.6 million. Under the indentures governing the 2016 and 2015 Notes, we are prohibited from paying dividends on our common stock until the principal amount of all such notes has been repaid.

The indentures governing our 2016 Notes and 2015 Notes contain covenants that restrict our ability to incur additional indebtedness unless, among other things, we can comply with fixed charge coverage ratios. We may incur additional indebtedness only if, after giving pro forma effect to that incurrence, our ratio of Adjusted cash EBITDA to total consolidated debt for the four fiscal quarters ending as of the most recent date for which internal financial statements are available meet certain levels, or we have availability to incur such indebtedness under certain baskets in the indentures. Adjusted cash EBITDA is defined as Adjusted EBITDA less amortization of deferred revenue related to the NextView agreement with the NGA in the indenture governing the 2015 Notes, and as Adjusted EBITDA less amortization of deferred revenue related to the NextView, EnhancedView or any successor agreement with the NGA in the indenture governing the 2016 Notes. As of September 30, 2012, we were in compliance with all covenants associated with each of our borrowings.

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Equity Sources and Uses

In September 2010, Cerberus Satellite, LLC purchased 80,000 shares of Series A Preferred Stock having a liquidation preference of $1,000 per share. This resulted in net proceeds to the Company of $78.0 million, after discounts and before issuance costs. The Series A Preferred Stock is convertible on issuance, at the option of the holders, at a conversion rate of $29.76 per common share, which is equivalent to a conversion rate of 2.7 million shares of common stock of the Company.

Contracted Backlog

We have historically had, and currently have, a substantial contracted backlog. Backlog increases the visibility of our revenues and net cash provided by operating activities. The following table represents our estimated backlog as of September 30, 2012.

Backlog Available to be Recognized as Revenue:	Next Twelve Months						Beyond Twelve Months
	Funded		Unfunded		Total		Funded		Unfunded		Total
	(in millions)
EnhancedView SLA	$	25.0	$	-	$	25.0	$	-	$	1,285.2	$	1,285.2
EnhancedView cost-share amortization		-		-		-		181.0		-		181.0
NextView cost-share amortization		24.2		-		24.2		105.7		-		105.7
EnhancedView - production and other services		11.6		-		11.6		48.3		553.5		601.8
Other U.S. government		20.5		6.4		26.9		0.1		3.4		3.5
Total U.S. government		81.3		6.4		87.7		335.1		1,842.1		2,177.2
International		38.3		-		38.3		9.2		-		9.2
North American commercial		25.2		-		25.2		64.9		-		64.9
Total Backlog	$	144.8	$	6.4	$	151.2	$	409.2	$	1,842.1	$	2,251.3

Total contract backlog includes all contractual commitments, the amounts that could be awarded and funded under these contracts and the amount of future option periods under these contract awards that could be exercised and funded, in whole or in part. Of our contract backlog as of September 30, 2012, $554.0 million is currently funded; the remaining balance of $1.85 billion represents the value of our current contracts, including their unexercised option years, which could be exercised or funded, in whole or in part, in future periods. Subject to funding and contract performance, of our contract backlog as of September 30, 2012, we could realize as revenue $151.2 million within one year, of which $144.8 million is funded and $6.4 million is not currently funded, and the balance of $2.25 billion in future periods, of which $409.2 million is currently funded and $1.84 billion is not currently funded. The amounts currently unfunded primarily relate to our EnhancedView contract and option periods that are not funded or not exercised.

Total contract backlog includes the following items: the remaining portion of the ten-year term of the EnhancedView SLA with the NGA, infrastructure design and procurement services under the EnhancedView contract with the NGA, the value of unfunded value-added products and services awarded under the EnhancedView program on a specific delivery order, access fee agreements, regional affiliate ground station operations and maintenance contracts with our international regional affiliate customers, commercial imagery contracts, other value-added products and services, the EnhancedView cost share payment, and remaining unamortized revenue from the NGA NextView cost-share payments made prior to the GeoEye-1 satellite becoming fully operational.

In addition, under the EnhancedView cost share agreement, the NGA has agreed to contribute to the overall construction and launch costs of the GeoEye-2 satellite and associated ground station equipment. The GeoEye-2 cost share payments are included in the backlog table and will be paid to the Company upon completion of the performance milestones. The cost share payments will be recorded as deferred revenue until full acceptance by the NGA, and upon acceptance, the revenues will be recognized over the expected operational life of the satellite. In June 2012, the Company was notified by the NGA that its funding of the cost share will be limited to $181.0 million, the amount already obligated under the cost share agreement. After deducting the $111.2 million payment which was received by us in June 2012 upon completion of the first payment milestone, there is approximately $70.0 million left in obligated funding on the contract. We are currently negotiating with the NGA to restructure the agreement and modify the specific milestones and remaining funding obligations. There is no guarantee that our negotiations with the NGA in restructuring the agreement will be successful. Further, even if we are successful in our negotiations with the NGA, there is no guarantee that the restructured or modified agreement will be on terms favorable to us.

The EnhancedView SLA contract is structured as a one-year contract, with nine one-year renewal options exercisable by the NGA. On October 4, 2011, the Company entered into an amendment to the EnhancedView SLA with the NGA exercising the first renewal option year which extended the EnhancedView SLA performance period through August 31, 2012. On June 22, 2012, we were notified by the NGA that, due to funding shortfalls, it would not exercise the full year EnhancedView SLA option for the Contract Year September 1, 2012 through August 31, 2013. Instead, the NGA proposed a three-month option providing for service revenue to the Company from September 1, 2012 through November 30, 2012 of $39.75 million, and a further nine-month option for the remainder of the Contract Year through August 31, 2013. On August 30, 2012, the NGA exercised the three-month renewal option, entering into an amendment to the EnhancedView agreement, pursuant to which the NGA extended the EnhancedView SLA for GeoEye-1 imagery for the performance period through November 30, 2012. The amendment also created a new nine-month renewal option to extend the EnhancedView SLA for GeoEye-1 imagery for the period beginning December 1, 2012, and ending August 31, 2013. On September 13, 2012, the NGA elected to fund two of the three months of additional web hosting services for the period ending November 30, 2012.

However, with regards to the EnhancedView SLA for GeoEye-2 imagery, it is our expectation that funding will be available to us, but is subject to the uncertainty of budget funding available once GeoEye-2 is operational and has been accepted by the NGA. Though we believe the U.S. government will continue to need to purchase imagery from us to meet defense intelligence needs, it is uncertain funding will be available for the EnhancedView SLA for GeoEye-1 imagery after November 30, 2012, or the EnhancedView SLA for GeoEye-2 imagery at any level.

Backlog Risks

Most of our government contracts, including the EnhancedView program, are funded incrementally on a month-to-month or year-to-year basis; however, certain foreign government and commercial customers have signed multi-year contracts. Due to the federal budgetary problems, the U.S. government has continued to deliberate broad reductions in expenditures including possible reductions to expenditures on commercial satellite imagery. This has currently impacted the contract year September 1, 2012 through August 31, 2013 under the EnhancedView program, as noted above, and may have an impact on future contract years under this program. The U.S. government drives a substantial portion of commercial imaging demand and our revenues, including EnhancedView. Changes in U.S. government policies, priorities or funding levels could materially and adversely affect our financial condition, liquidity and results of operations. Furthermore, contracts with the U.S. government may be terminated or suspended by the U.S. government at any time, with or without cause, which would result in a reduction in our backlog.

At this time, the U.S. government’s ongoing budget process is underway and the amounts of any funding reductions to EnhancedView beyond August 31, 2013 are still unknown. As a result, these backlog amounts may and will fluctuate and may not be a reliable indicator of future revenues.

Risks associated with our business and government contracts include, but are not limited to, those described in “Risk Factors” under Part II, Item 1A of this report on Form 10-Q.

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Capital Expenditures

For the three and nine months ended September 30, 2012, our capital expenditures included $41.8 million and $188.3 million for satellites and ground systems and $6.1 million and $19.4 million for property, plant and equipment, respectively.

We currently expect that total capital expenditures for 2012 will be approximately $310.0 million, of which $275.0 million would be related to our continued construction of GeoEye-2 and related infrastructure under the EnhancedView program, including $53.0 million of capitalized interest. We expect to incur the remaining $35.0 million of capital expenditures for other operating equipment infrastructure. We intend to fund our capital expenditure requirements through cash on hand and cash provided by operating activities, which includes the $111.2 million EnhancedView cost-share payment that we received during the second quarter of 2012.

Off-Balance-Sheet Arrangements

We lease various real properties under operating leases that generally require us to pay taxes, insurance, maintenance and minimum lease payments. Some of our leases have options to renew.

We do not have any other significant off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Commitments and Contingencies

Operating Leases

Total rental expense under operating leases for the three months ended September 30, 2012 and 2011, was $1.0 million and $0.9 million, respectively, and for the nine months ended September 30, 2012 and 2011, was approximately $3.4 million and $3.3 million, respectively.

Contingencies

Critical Accounting Policies

The foregoing discussion of our financial condition and results of operations is based on the condensed consolidated financial statements included in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses and the related disclosures of contingencies. We base these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

During the nine months ended September 30, 2012, there were no significant changes to the critical accounting policies we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2011. Refer to Note 1 – “General Information” in the Notes to Unaudited Condensed Consolidated Financial Statements for a summary of the new guidance we adopted during the first quarter for the presentation of comprehensive income.

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Recent Accounting Pronouncements

See Note 1 of our Notes To Unaudited Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements and our expectation of their impact on our condensed consolidated Financial Statements.

Item 3.

Quantitative and Qualitative Disclosure about Market Risk.

We are not currently exposed to the market risk associated with unfavorable movements in interest rates. All of our debt as of September 30, 2012, is fixed-rate. At September 30, 2012, the estimated fair value of our long-term debt instruments was approximately $585.0 million, compared with a carrying value of $513.4 million, net of an $11.6 million unamortized discount on our $400.0 million 2015 Notes. While changes in interest rates impact the fair value of our debt, the interest rates are fixed, and changes in the market rate will not impact our earnings and cash flows. Additionally, the Merger Agreement contemplates the repayment of all of our debt. Our available-for-sale investments generally renew every seven days and, therefore, are classified as short-term investments due to our ability to quickly liquidate or put back these securities. These financial instruments may be subject to interest rate risk through lost income, should interest rates increase during their limited term to maturity or resetting of interest rates and thus may limit our ability to invest in higher income investments.

We do not currently have any material foreign currency exposure related to our foreign subsidiaries in Asia, Netherlands, or the Middle East.

Item 4.

Controls and Procedures.

a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a - 15(e) and 15d - 15(e)) as of September 30, 2012. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective.

b) Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.

Legal Proceedings.

Item 1A.

Risk Factors.

The risks described below, among others, could cause our actual operating results to differ materially from those indicated or suggested by our past performance and current financial condition as reported in this Form 10-Q, as well as by forward-looking statements made in our Annual Report on Form 10-K for the year ended December 31, 2011 or in our quarterly reports on Form 10-Q, or presented elsewhere by management from time to time.

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Risks Related To Our Contracts

Our business is substantially dependent on U.S. government contracts. The failure of the NGA to exercise the EnhancedView SLA option and any future modifications to the renewal options for the EnhancedView SLA will have an immediate and material adverse effect on our business, financial condition and results of operations.

Revenues from U.S. government contracts accounted for 64 percent of our total revenues for the year ended December 31, 2011, and 68 percent and 67 percent of our total revenues for the three and nine months ended September 30, 2012 respectively. Our contracts with U.S. government agencies are subject to risks of termination, with or without cause, or reduction in scope due to changes in U.S. government policies, priorities or funding level commitments to various government agencies. Our primary contract with the U.S. government, through the NGA, is the EnhancedView SLA, which was awarded and authorized on August 6, 2010. During the calendar year 2011 we recognized $147.0 million of revenue under the EnhancedView SLA, which accounted for approximately 41 percent of our revenue that year. During the three and nine months ended September 30, 2012, we recognized $37.5 million and $112.8 million of revenue, respectively, under the EnhancedView SLA, each representing 43 percent of our revenue for the respective periods. The EnhancedView SLA originally was structured as a one-year agreement, with nine one-year renewal options, exercisable at the NGA’s option. In October 2011, the NGA exercised its first renewal option under the contract. This contract amendment extended the EnhancedView SLA for an 11-month period beginning October 5, 2011 and ending August 31, 2012.

On June 22, 2012 we were notified by letter that, due to funding shortfalls, the NGA would not exercise the full year EnhancedView SLA option for the contract year commencing September 1, 2012. The NGA has exercised a three month option renewal of the EnhancedView SLA that commenced September 1, 2012. On October 31, 2012, we received notice from the NGA that, due to funding shortfalls, the NGA does not intend to exercise the nine-month EnhancedView SLA option with the Company for the current contract year performance period of December 1, 2012 through August 31, 2013. The NGA did indicate it might seek to renew the EnhancedView SLA by December 15, 2012, should funding become available. The nine-month option for the remainder of the contract year through August 31, 2013 would have provided for service revenue to the Company, based upon the availability of funding, of approximately $119.25 million.

The Company is materially dependent on its business with the U.S. government and anticipates such termination will have a material adverse effect on revenues and income. Loss of revenue from this customer will make us more dependent on revenue from commercial and international customers, which is difficult to forecast and subject to substantial uncertainty.

We have been notified that the NGA is reducing our cost share agreement for the development and launch of GeoEye-2.

As part of the EnhancedView award, we entered into a cost-share agreement with the NGA that contemplated approximately $337.0 million of funding for the development and launch of GeoEye-2; this amount represented approximately 42 percent of our expected GeoEye-2 development and launch expense. To date we have received $111.2 million toward such funding. The timing of any additional funding is uncertain and may depend on modifications to our cost-share agreement, further development of GeoEye-2, and any decision on our part not to accept additional cost share funding under the current agreement.

On June 22, 2012 we were notified by the NGA by letter that due to funding shortfalls for the EnhancedView program, it will not make further cost-share payments to us for the development of GeoEye-2 beyond the approximately $70.0 million remaining under the current agreement. This means that the NGA’s total cost-share contribution, should we accept the remaining $70.0 million and related modifications to our cost-share agreement, will not exceed $181.0 million, or approximately 23 percent of the total original estimated costs for GeoEye-2 development and launch expense, substantially less than we had forecasted. If we do not accept the remaining $70.0 million, the NGA’s total cost share contribution will have been $110.0 million or approximately 14 percent of the total original estimated costs for GeoEye-2. Although we intend to complete GeoEye-2 on schedule, the loss of forecasted cost-share revenue for GeoEye-2 will adversely affect our ability to fund and finance future satellite development after GeoEye-2 and additions to or replacements of our current satellites.

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A substantial portion of our revenues are generated from contracts with U.S. government agencies, particularly the NGA, that are subject to annual renewal and Congressional appropriations. A failure or delay by Congress to make appropriations to the NGA or other U.S. government agencies could materially reduce our revenue and have a material adverse effect on our business.

Although our NGA contracts generally involve fixed annual minimum commitments, such commitments are subject to annual Congressional appropriations and, as a result, the NGA may not continue to fund these contracts at current or anticipated levels.

Funding of U.S. government contracts are subject to congressional budget authorization and appropriation processes. We cannot predict the extent to which total funding and/or funding for our contracts will be included, increased or reduced as part of the 2013 budget and subsequent budgets ultimately approved by Congress or will be included in separate supplemental appropriations. The impact, severity and duration of the current U.S. economic situation, economic policies adopted or to be adopted by the U.S. government, and pressures on the federal budget could also adversely affect the total funding and/or funding for our contracts. In the event that appropriations for any of our contracts become unavailable, or are reduced or delayed, one or more of our contracts may be terminated or adjusted by the U.S. government, which could have a material adverse effect on our business, financial condition and results of operations.

When the U.S. government does not complete its budget process before the end of its fiscal year, government operations are typically funded pursuant to a continuing resolution that authorizes agencies of the U.S. government to continue to operate, but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, government agencies may delay or cancel funding we expect to receive on work we are already performing. Additionally, when operating under a continuing resolution, U.S. government agencies may delay or cancel new initiatives and programs, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, when the U.S. government approaches its existing statutory limit on the amount of permissible federal debt that may be incurred, this limit must be raised in order for the U.S. government to continue to pay its obligations on a timely basis. If the debt ceiling is not raised, it is unclear how the U.S. government would prioritize its payments and where our payments would fall in that priority list. A significant portion of our work is performed under U.S. government contracts that provide generally that we will continue to perform on the contract even if the U.S. government is unable to make timely payments. Failure to continue performance under the contract may place us at risk of termination for default. Such conditions are unprecedented in the history of U.S. government fiscal policy administration, and there is no assurance that should the U.S. government fail to pass legislation in time to avoid reaching the debt ceiling, such legislation would be forthcoming in the near term. Should conditions occur such that the U.S. government or others are unable to pay us timely for work performed, we would need to finance that work from our available cash resources, credit facilities and access to the capital markets, if available. It is unclear how long the U.S. government’s payment capacity might be constrained, and therefore, how long we may be required to finance; however, it is likely that there are practical limitations on how long we could finance our operations under these circumstances. An extended delay in the timely payments by the U.S. government, if any, would likely result in a material adverse effect on our business, financial condition and results of operations.

Changes in U.S. government policy regarding the use of commercial imagery products and service providers, or material reduction or cancellation of the U.S. government EnhancedView program may have a material adverse effect on our revenue and our ability to fund operations and achieve our growth objectives.

We understand that current U.S. government policy encourages the use of commercial imagery products and services to support U.S. national security objectives. We are considered by the U.S. government to be a commercial imagery products and services provider. U.S. government policy is subject to change, and any change in policy away from supporting the use of commercial imagery products and service providers to meet U.S. government imagery needs could materially adversely affect our business, financial condition and results of operations.

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Our substantial dependence on U.S. government contracts requires us to meet critical performance requirements in our operations. Any failure on our part to meet those requirements could result in termination of one or more of our contracts.

Our contracts with the U.S. government set forth detailed performance requirements and specifications for the imagery and services that we provided under those contracts. Failure to meet those requirements and specifications may result in a delay in recognition of revenue from the U.S. government, and could result in the termination of one or more contract for material breach. Though we believe we maintain quality systems and controls to meet all contractual requirements, any breach on our part that results in termination of or delay in revenue under a significant contract, including our EnhancedView SLA, could have a material adverse effect on our business, financial condition or results of operations.

Government audits of our contracts could result in a decrease in our earnings and/or have a negative effect on our cash position following an audit adjustment.

Our government contracts are subject to cost audits, which may occur several years after the period to which the audit relates. If an audit identifies significant unallowable costs, we could incur a material charge to our earnings or reduction in our cash position, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to our Operations

Our information systems and security systems and networks may be subject to intrusion, resulting in possible interruption, delay or suspension of our ability to provide our products and services, which could result in loss of current and future business.

A breach or breaches of our information, security or network systems could materially adversely affect our business. Our business involves the transmission and storage of large quantities of electronic data, including the imagery comprising our global imagery library. In addition, our business is becoming increasingly Web-based, allowing our customers to access and take delivery of imagery from our digital imagery library over the Internet. From time to time, we have experienced computer viruses and other forms of third-party attacks on our systems that, to date, have not had a material adverse effect on our business.

Despite our dedicated team of security professionals as well as the implementation and continued upgrading of security measures, our network infrastructure may be vulnerable to computer viruses, unauthorized third-party access or other problems caused by third parties, which could lead to interruptions, delays or suspension of our operations, loss of imagery from our global imagery library and the loss or compromise of technical information or customer information. Inappropriate use of the Internet by third parties, including attempts to gain unauthorized access to information or systems—commonly known as “cracking” or “hacking”—could also potentially jeopardize the overall security of our systems and could deter certain customers from doing business with us. If a breach involves information subject to breach disclosure laws (such as certain personally identifiable information), we may be required to publicly disclose the breach, which may deter customers from dealing with us and/or expose us to material notification expenses. In addition, a security breach that involved classified or other sensitive government information, or certain controlled technical information, could subject us to civil or criminal penalties, and could result in loss of our government contracts, loss of access to classified information, loss of export privileges or debarment as a government contractor.

Because the techniques used to obtain unauthorized access, or to otherwise infect or sabotage information, security and network systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these new techniques or to implement adequate preventive measures. We may also need to expend significant people and financial resources to protect against security breaches or remedy any breaches that might occur. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of Web-based products and services we offer and increase the number of countries within which we do business.

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Interruption or failure of our infrastructure and image downloading systems could impair our ability to effectively perform our daily operations, protect and maintain the Earth imagery content stored in our image archives and provide our products and services, which could damage our reputation and harm our results of operations.

The availability of our products and services depends on the continuing operation of our infrastructure, information technology and communications systems, including our satellite and ground network systems. Any system downtime, damage to, or failure of our systems could result in interruptions in our service, which could reduce our revenue and profits. Our systems are vulnerable to damage or interruption from floods, fires, power loss, telecommunications failures, computer viruses, computer denial-of-service attacks or other attempts to harm our systems. Our data centers and ground stations can be powered by backup generators. However, if our primary source of power and the backup generators also fail, our daily operations and results of operations would be materially and adversely affected.

In addition, our ground stations and collection systems are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Our satellite imagery is encrypted, downloaded directly to our ground stations and then stored in our image archives for sale to our customers. As a result, our operations are dependent upon our ability to maintain and protect our Earth imagery content and our image archives and to provide our images to our customers, including our foreign distribution network, value-added resellers and EyeQ customers. The impairment of our ability to perform any of these functions could result in lengthy interruptions in our services and/or damage our reputation, which could have a material adverse effect on our financial condition, liquidity and results of operations.

Satellites have limited useful lives and are expensive to replace.

Satellites have limited useful lives. We determine a satellite’s useful life, or its expected operational life, using a complex calculation involving the probabilities of failure of the satellite’s components from design or manufacturing defects, environmental stresses, estimated remaining fuel or other causes.

A number of factors can affect the expected operational lives of our satellites, including the quality of construction, the supply of fuel, the expected gradual environmental degradation of solar panels, the durability of various satellite components and the orbits in which the satellites are placed. Certain advanced components, such as its cameras, are integral to a satellite’s design functionality and expected operational life. The failure of satellite components can cause damage to, or loss of, the use of a satellite before the end of its expected operational life. Electromagnetic storms or collisions with other objects could damage our satellites, which could in turn impair their design functionality and expected operational life. Such objects could include debris from exploded satellites and spent rocket stages, dead satellites and meteoroids. We cannot assure you that each satellite will remain in operation for its expected operational life. We expect the performance of any satellite to decline gradually near the end of its expected operational life.

Our GeoEye-1 satellite was launched in September 2008 and has an expected operational life of nine years. IKONOS, another of our satellites, launched in September 1999, was fully depreciated in June 2008. An updated study on IKONOS was completed in 2011, and the results indicate that there are no impending sources of loss of mission through the end of 2012. However, there can be no assurance that IKONOS will continue to operate adequately to remain commercially viable.

Replacing a satellite is expensive. We are currently building GeoEye-2, which we expect to be operational in 2013. We expect to use $111.2 million, the first installment of the federal government cost-share funds, as well as other current cash balances and funds generated from operations, to develop and launch GeoEye-2. If our cost-share agreement with the NGA is terminated by the NGA, or if Congress fails to make appropriations to fund payments by the NGA under this cost-share agreement, we will have to seek additional financing from outside sources, which we may be unable to obtain on terms we find acceptable. If we do not generate sufficient funds from operations and we cannot obtain financing from outside sources on favorable terms, we will not be able to deploy a new satellite to replace GeoEye-1 at the end of its expected operational life. We cannot assure investors that we will be able to generate sufficient funds from operations or be able to raise additional capital on acceptable terms or on a timely basis, if at all, to develop or deploy follow-on high-resolution satellites.

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We cannot assure you that our satellites will operate as designed. We may experience in-orbit satellite failures or degradations in performance that could impair the commercial performance of our satellites, which could lead to lost revenue, an increase in our operating expenses, lower operating income or lost backlog.

Our satellites employ advanced technologies and sensors that are subject to severe environmental stresses in space that could affect the satellite’s performance. Hardware component problems in space could lead to degradation in performance or loss of functionality of the satellite, with attendant costs and revenue losses. In addition, human operators may execute improper implementation commands that can negatively impact a satellite’s performance. Unanticipated catastrophic events, such as meteor showers or collisions with space debris, could reduce the performance of or destroy any of our satellites. Even if a satellite is operated properly, minor technical flaws in the satellite’s sensors could significantly degrade their performance, which could materially affect our ability to collect imagery and market our products successfully.

If we suffer a partial or total loss of a deployed satellite, we would need a significant amount of time and would incur substantial expense to repair or replace that satellite. We may experience other problems with our satellites that may reduce their performance. During any period in which a satellite is not fully operational, we may lose most or all of the revenue that otherwise would have been derived from that satellite. In addition, we may not have on hand, or be able to obtain in a timely manner, the necessary funds to cover the cost of any necessary satellite repair or replacement. Our inability to repair or replace a defective satellite, or correct any other technical problem in a timely manner, could result in a significant loss of revenue. Our business model depends on our ability to sell imagery from our high-resolution satellites. We do not presently have plans to construct and launch a replacement satellite for our high-resolution IKONOS satellite if it fails.

In 2009, we experienced an irregularity with GeoEye-1 that affected the transmission of imagery to certain ground stations and subsequently thereto, we experienced an unrelated aberration that affected the collection of some color imagery by GeoEye-1. We have successfully implemented modifications that we believe significantly reduce or eliminate the business impacts of these issues. Nonetheless, any failure of our cameras on any of our satellites or other loss of satellite capacity or functionality could require different satellite operational modifications that may have a material adverse effect on our imagery collection operations, and could materially affect our financial condition, liquidity and results from operations.

New or proposed satellites are subject to construction and launch delays, the occurrence of which can materially and adversely affect our operations.

We have in the past experienced delays in satellite construction and launch, which have adversely affected our operations. Such interruptions can result from delays in the construction of satellites and the procurement of requisite components and launch vehicles; limited availability of appropriate launch windows; possible delays in obtaining regulatory approvals and launch failures. Failure to meet a satellite’s construction schedule, resulting in a significant delay in the future delivery of a satellite, could also adversely affect our marketing strategy for the satellite. Even after a satellite has been manufactured and is ready for launch, an appropriate launch date may not be available for several months. Further, any significant delay in the commencement of service of any of our satellites would allow customers who pre-purchased or agreed to utilize capacity on the satellite to terminate their contracts, which could affect our plans to replace an in-orbit satellite prior to the end of its service life.

Our success depends upon our ability to recruit and motivate key personnel.

Our success depends on attracting, retaining and motivating highly skilled engineering and information technology professionals. A number of our employees are highly skilled engineers and other information technology professionals. In addition, our success depends to a significant extent upon the abilities and efforts of the members of our senior executive management team. Competition for highly skilled individuals is intense, and if we fail to continue to attract, retain and motivate such professionals, our ability to compete in our industry could be adversely affected.

Failure to obtain, or the revocation of, regulatory approvals could result in service interruptions and materially adversely affect our business, financial position and results of operations.

U.S. Government Approvals. Operation of our satellites requires licenses from, and is subject to regulation by, the DoC. The failure to obtain these licenses, or the revocation of one or more licenses (for example, as the result of our failure to comply with our licenses or applicable regulations), could adversely affect our ability to conduct our business. DoC regulations and license conditions provide that we must obtain prior DoC consent to certain changes in control over, or the holding of certain interests in, the Company. DoC regulations and license conditions also provide that the U.S. government may interrupt service or otherwise limit our ability to distribute satellite images to certain parties, including certain of our customers, to address national security or foreign policy concerns or because of the international obligations of the U.S. government. Actual or threatened interruptions or limitations on our service could adversely affect our ability to market our products. In addition, the DoC has the right to review and approve our agreements with foreign entities, including contracts with international customers for high-resolution imagery. We have received such approvals for the agreements in place with our existing international customers. However, such reviews could delay or prohibit us from executing new international agreements or renewals or extensions of our existing agreements, which could materially adversely affect our financial condition and results of operations. See “Government Regulation – United States – Department of Commerce Regulation.”

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We have in the past and may in the future supply certain of our international customers with access to ground stations that enable these customers to downlink data directly from our satellites. Exporting these ground stations and technical information relating to these stations may require us to obtain export licenses from the DoC or the U.S. Department of State. If the DoC or the U.S. Department of State does not issue these export licenses in connection with future exports, or if these licenses are significantly delayed or contain restrictions, or if the DoC or the U.S. Department of State revokes, suspends or denies a request for renewal of existing licenses, then our business, financial condition and results of operations could be materially adversely affected. See “Government Regulation – United States – Export Controls and Security Clearance Regulation.”

We require certain facility and personnel security clearances to perform our classified U.S. government related business. Security clearances are subject to regulations and requirements including the National Industrial Security Program Operating Manual, or NISPOM, which provides baseline standards for the protection of classified information released or disclosed to industry in connection with classified U.S. government contracts. Among other things, the NISPOM restricts the ability of non-U.S. (“foreign”) entities or individuals to hold foreign ownership, control, or influence, or FOCI, over a U.S. person performing classified work for the U.S. government, such that investments in the Company by a non-U.S. entity or individual could require prior review by the U.S. Department of Defense. The suspension or cancellation of our facility security clearances, or the inability to maintain personnel security clearances for our personnel to perform classified U.S. government contracts, could have a material adverse effect on our business and results of operations. See “Government Regulation – United States – Export Controls and Security Clearance Regulation.”

Our operation of satellites and ground stations also requires licenses from, and is subject to regulation by, the FCC. The FCC regulates the launch and operation of our satellites, the use of satellite spectrum and the licensing of our ground station terminals located within the United States. The FCC also regulates the ownership and control of its licensees, and must consent to certain changes in such ownership or control. We currently have all required FCC licenses necessary to operate our business as it is currently conducted and recently filed an application to modify the GeoEye-1 satellite FCC license to add the GeoEye-2 satellite and associated ground stations. However, these licenses have expiration dates, which are expected to occur while the satellites and ground systems are still in use. The FCC generally renews licenses in the ordinary course, but there can be no assurance that our licenses will be renewed at their expiration dates for full terms or without adverse conditions, or that our application to modify our GeoEye-1 satellite FCC license will be granted. Failure to renew or modify these licenses, obtain FCC authorization to launch and operate any new satellites or otherwise maintain our existing licenses (for example, as the result of our failure to comply with our licenses or applicable regulations) could have a material adverse effect on our ability to generate revenue and conduct our business as currently planned. See “Government Regulation – United States – Federal Communications Commission Regulation.”

International Registration and Approvals. The use of satellite spectrum is subject to the requirements of the International Telecommunication Union, or ITU. Additionally, satellite operators must abide by the specific laws of the countries in which downlink services are provided from the satellite to ground station terminals within such countries. Our customers or distributors are responsible for obtaining local regulatory approval from the governments in the countries in which they receive imagery downlinked directly from our satellites to ground stations within such countries. If the necessary approvals are not obtained, we will not be able to distribute real-time imagery in those regions, and this inability to offer real-time service in a foreign country could negatively affect our business. In addition, regulatory provisions in countries where we wish to operate may impose unduly burdensome restrictions on our operations. Our business may also be adversely affected if the national authorities where we plan to operate adopt treaties, regulations or legislation unfavorable to foreign companies or limiting the provision of our products and services.

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Risks Related to Competition and Markets

We operate in a highly competitive and specialized industry. The size and resources of some of our competitors may allow them to compete more effectively than we can, which could result in loss of our market share.

Our products and services compete with other satellite and aircraft-based imagery sources and related imagery products and services offered by a wide range and scale of commercial and government providers. Some competitors may have greater financial, personnel and other operating resources than us.

Our major U.S. competitor for high-resolution satellite imagery is DigitalGlobe. DigitalGlobe currently operates three high-resolution satellites able to collect sub meter resolution imagery: Quickbird, launched in 2001; WorldView-1, launched in September 2007; and WorldView-2, launched in October 2009. DigitalGlobe’s three satellite constellation offers more collection capacity than GeoEye’s two satellite constellation of GeoEye-1 and IKONOS. While we believe GeoEye-1 offers the highest-resolution and positional accuracy of any commercial imagery satellite in the world, some customers may value collection capacity over image quality. In 2011, Astrium successfully launched their Pleiades satellite which collects sub meter imagery. DigitalGlobe also announced intentions to expand their distribution option for international customers, known as the Direct Access Program. The emergence of Astrium as a commercial imagery vendor that offers radar, medium-resolution, and high-resolution imaging capabilities and DigitalGlobe’s increased investment in international growth could lead to increased pricing competition and put our market share at risk.

If competitors develop and launch satellites with comparable or more advanced technologies than ours, or offer services at lower prices than ours, then our business, financial position and results of operations could be adversely affected.

U.S. and foreign government agencies may build and operate their own systems, which could affect the current and potential market share of our products and services and could lead to pricing pressure.

The U.S. government currently relies, and is likely to continue to rely, on government-owned and operated systems for classified satellite-based high-resolution imagery. The U.S. government could reduce its purchases from commercial satellite imagery providers or decrease the number of companies to which it contracts with no corresponding increase in the total amount spent.

The U.S. government and foreign governments also develop, construct, launch and operate their own imagery satellites, with comparable or higher resolution and accuracy, which could reduce their need to rely on commercial suppliers. In addition, such governments could sell Earth imagery from their satellites in the commercial market and thereby compete on price and technological capabilities with the sales of our imagery products and services. These governments could also subsidize the development, launch and operation of imagery satellites by our current or future competitors and subsidize the pricing of imagery from their satellites, which could lead to additional pricing pressure. Pricing pressure could lead to potential market share losses if we choose not to lower our prices to retain our existing customer base. Any reduction in purchases of our products and services by the U.S. government could have a material adverse effect on our business, operations and financial condition.

The success of our products and services will depend on market acceptance, and you should not rely on historic growth rates as an indicator of future growth.

Our success depends on existing markets accepting our imagery products and information services and our ability to develop new business markets and new services. Our business plan is based on the assumption that we will generate significant future revenues from sales of high-resolution imagery produced by our satellite constellation and from sales of our information services to current and new customers in our existing and new markets. The commercial availability of high-resolution satellite imagery is still a fairly new market. Consequently, it is difficult to predict accurately the ultimate size of the market and the market acceptance of our products and services. Our strategy is to target certain existing and new markets for our satellite imagery and relies on a number of assumptions. The actual market for our products and services could vary from the potential end markets that we have identified causing us to develop smaller end markets and potentially miss other market opportunities.

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We cannot accurately predict whether our products and services will achieve significant market acceptance or whether there will be a market for our products and services on terms we find acceptable. Market acceptance of our commercial high-resolution Earth imagery products and new information services depends on a number of factors, including the quality, scope, timeliness, sophistication and price of services and the availability of substitute products and services. Lack of significant market acceptance of our offerings, or other products and services that utilize our products and services, delays in acceptance, failure of certain markets to develop or our need to make significant investments to achieve acceptance by the market would negatively affect our business operations, financial condition and financial results.

We may not continue to grow in line with our historical growth rates. If we are unable to achieve sustainable growth, we may be unable to execute our business strategy, expand our business or fund our liquidity needs. As a result, our prospects, financial condition and business operations could be materially and adversely affected.

We rely on resellers and a foreign distribution network to market and sell our products and services in certain markets and to certain customers. If these distributors and resellers fail to market our products and services successfully, our business, financial condition and results of operations will be materially adversely affected.

We rely principally on foreign regional resellers to market and sell our imagery from the GeoEye-1 and IKONOS satellites in various international markets. We are currently expanding our efforts to further develop our current and future operations in international markets. Our foreign regional resellers may not have the skill or experience to further develop international regional commercial markets for our products and services. If we fail to enter into additional foreign regional distribution agreements, or if our foreign regional resellers fail to market and sell our imagery products and services successfully abroad, these marketing failures could negatively affect our business operations and financial condition.

We rely on domestic and foreign value-added resellers to develop, market and sell our products and services to address certain target domestic and foreign markets, including certain industries and geographical markets. If our value-added resellers fail to develop, market and sell our products and services successfully, this failure could negatively affect our business, financial condition and results of operations.

Our international business exposes us to risks relating to increased regulation and political or economic instability in foreign markets.

For the year ended December 31, 2011, approximately 26 percent of our total revenues were derived from international sales. We intend to continue to pursue international contracts, and we expect to continue to derive substantial revenues from international sales of our products and services. International operations are subject to certain risks, such as:

Changes in domestic and foreign governmental regulations and licensing requirements;

Deterioration of relations between the United States and a particular foreign country;

Increases in tariffs and taxes and other trade barriers;

Changes in political and economic stability, including fluctuations in the value of foreign currencies, which may make payment in U.S. dollars, as provided for under our existing contracts, more expensive for foreign customers; and

Difficulties in obtaining or enforcing judgments in foreign jurisdictions.

These risks are beyond our control and could have a material adverse effect on our business, financial position and results of operations.

Risks Related to the Merger

Our Merger Agreement with DigitalGlobe, Inc. is subject to certain conditions beyond our control.

On July 22, 2012 we entered into an Agreement and Plan of Merger, or Agreement, with DigitalGlobe, Inc. under which our stockholders are to receive newly issued shares of DigitalGlobe common stock and cash (and, for our preferred holders, DigitalGlobe preferred stock and cash) in exchange for their shares in GeoEye. Consummation of the merger is subject to certain conditions beyond our control, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act, consent of the Federal Communications Commission, or FCC, no pending temporary restraining order or preliminary or final injunction, receipt of certain tax opinions and the approval of the stockholders of both GeoEye and DigitalGlobe. DigitalGlobe also has a right to terminate the Agreement based upon receipt by it of a superior proposal (as defined in the Agreement) or other intervening event beyond our control prior to approval of the merger by its stockholders. If the merger is not consummated there could be an adverse effect on the market price for our common stock.

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GeoEye stockholders cannot be sure of the value of the DigitalGlobe common stock to be issued in the merger as the aggregate number of shares of DigitalGlobe common stock to be issued in the merger is fixed and the market price of shares of DigitalGlobe common stock will fluctuate.

To the extent any GeoEye stockholder elects to receive the mixed cash/stock consideration or fails to make any election with respect to any GeoEye common stock, such GeoEye stockholder will receive for each share of GeoEye common stock subject to the mixed cash/stock election the combination of (x) $4.10 in cash and (y) 1.137 shares of DigitalGlobe common stock; furthermore, to the extent any GeoEye stockholder elects to receive the all stock consideration, such GeoEye stockholder will receive for each share of GeoEye common stock subject to the all stock consideration, 1.425 shares of DigitalGlobe common stock (which may be prorated depending on the extent other GeoEye stockholders elect to receive mixed cash/stock consideration, cash consideration and/or stock consideration.).

In all cases, the aggregate number of shares of DigitalGlobe common stock to be issued pursuant to the Agreement is fixed and will not change to reflect changes in the market price of GeoEye or DigitalGlobe common stock. The market price of DigitalGlobe common stock at the time of completion of the merger may vary significantly from the market prices of DigitalGlobe common stock on the last trading date before the Agreement was executed, on the date of this joint proxy statement/prospectus, on the date a GeoEye stockholder makes an election with respect to the merger consideration, on the date of the respective special meetings of DigitalGlobe stockholders or GeoEye stockholders or on the date of the effective time of the merger.

In addition, the merger might not be completed until a significant period of time has passed after the special meetings of GeoEye stockholders and DigitalGlobe stockholders. Because the exchange ratio will not be adjusted to reflect any changes in the market value of GeoEye common stock or DigitalGlobe common stock, the market value of the DigitalGlobe common stock issued in connection with the merger and the GeoEye common stock surrendered in connection with the merger may be higher or lower than the values of those shares on earlier dates. Stock price changes may result from, among other things, changes in the business, operations or prospects of GeoEye or DigitalGlobe prior to or following the merger, litigation or regulatory considerations, general business, market, industry or economic conditions and other factors both within and beyond the control of GeoEye and DigitalGlobe. Neither GeoEye nor DigitalGlobe is permitted to terminate the Agreement solely because of changes in the market price of either company’s common stock.

GeoEye stockholders may receive a form or combination of consideration different from what they elect.

Only GeoEye stockholders who elect to receive the mixed cash/stock election amount and those that make no election can be assured of the exact amount of shares of DigitalGlobe common stock and cash they will receive in the merger. While each holder of GeoEye common stock may elect to receive all cash, all DigitalGlobe common stock or a combination of cash and DigitalGlobe common stock pursuant to the Agreement, the pools of cash and DigitalGlobe common stock available for all GeoEye stockholders is fixed. Depending on the elections made by other GeoEye stockholders, if a holder of GeoEye common stock elects to receive all cash pursuant to the merger, such holder may receive a portion of the merger consideration in DigitalGlobe common stock and if a holder of GeoEye common stock elects to receive all DigitalGlobe common stock pursuant to the merger, such holder may receive a portion of the merger consideration in cash. Accordingly, GeoEye stockholders who vote in favor of the merger proposal and elect to receive only cash cannot be assured that they will not receive a portion of their consideration in DigitalGlobe common stock, and GeoEye stockholders who vote in favor of the merger proposal and elect to receive only DigitalGlobe common stock cannot be assured that they will not receive a portion of their merger consideration in cash. If a holder of GeoEye common stock does not submit a properly completed and signed election form to the exchange agent by the election deadline, then such stockholder will have no control over the type of merger consideration such stockholder may receive, and, consequently, will receive the mixed cash/stock consideration amount.

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If a GeoEye stockholder delivers shares of GeoEye common stock to make an election, such GeoEye stockholder will not be able to sell those shares unless the GeoEye stockholder revokes his or her election prior to the election deadline.

If you are a holder of GeoEye common stock and want to make an election, you must deliver to the exchange agent by the election deadline a properly completed and signed election form along with stock certificates (or a properly completed notice of guaranteed delivery) or, in the case of book-entry shares, any additional documents specified in the procedures set forth in the election form. You will not be able to sell any shares of GeoEye common stock that you have delivered to the exchange agent unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in GeoEye common stock for any reason until you receive cash and/or DigitalGlobe common stock pursuant to the merger. In the time between delivery of your shares to the exchange agent and the closing of the merger, the market price of GeoEye common stock or DigitalGlobe common stock may change, and you might otherwise want to sell your shares of GeoEye common stock to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment.

Current GeoEye and DigitalGlobe stockholders will have a reduced ownership and voting interest after the merger.

DigitalGlobe will issue or reserve for issuance approximately 26.0 million shares of DigitalGlobe common stock to GeoEye common stockholders in the merger (including shares of DigitalGlobe common stock to be issued in connection with outstanding GeoEye equity awards). As a result of these issuances, current GeoEye and DigitalGlobe stockholders are expected to hold approximately 36 percent and 64 percent, respectively, of the combined company’s outstanding common stock immediately following completion of the merger.

GeoEye and DigitalGlobe stockholders currently have the right to vote for their respective directors and on other matters affecting their respective company. When the merger occurs, each GeoEye stockholder that receives shares of DigitalGlobe stock will become a stockholder of DigitalGlobe with a percentage ownership of the combined company that will be smaller than the stockholder’s percentage ownership of GeoEye. Correspondingly, each DigitalGlobe stockholder will remain a stockholder of DigitalGlobe with a percentage ownership of the combined company that will be smaller than the stockholder’s percentage of DigitalGlobe prior to the merger. As a result of these reduced ownership percentages, former GeoEye stockholders will have less voting power in the combined company than they now have with respect to GeoEye, and DigitalGlobe stockholders will have less voting power in the combined company than they now have with respect to DigitalGlobe. Accordingly, former GeoEye stockholders will have less influence over management of a combined company than they now have with respect to GeoEye, and DigitalGlobe stockholders will have less influence over management of a combined company than they now have with respect to DigitalGlobe.

Provisions of the Agreement may deter alternative business combinations.

Restrictions in the Agreement on solicitation generally prohibit GeoEye and DigitalGlobe from soliciting any acquisition proposal or offer for a merger or business combination with any other party, including a proposal that might be advantageous to the stockholders of GeoEye or DigitalGlobe when compared to the terms and conditions of the merger described in this joint proxy statement/prospectus. In addition, if the Agreement is terminated, under certain specified circumstances, GeoEye or DigitalGlobe could be required to pay the other a termination fee of $20.0 million. These provisions may deter third parties from proposing or pursuing alternative business combinations that might result in greater value to holders of GeoEye common stock or holders of DigitalGlobe stock than the transaction described in the joint proxy statement/prospectus filed by GeoEye and DigitalGlobe.

GeoEye and DigitalGlobe will be subject to various uncertainties and contractual restrictions while the merger is pending that could adversely affect their financial results.

Uncertainty about the effect of the merger on employees, suppliers, vendors and customers may have an adverse effect on GeoEye and/or DigitalGlobe. These uncertainties may impair GeoEye’s and/or DigitalGlobe’s ability to attract, retain and motivate key personnel until the merger is completed and for a period of time thereafter, and could cause customers, suppliers, vendors and others who deal with GeoEye or DigitalGlobe to seek to change existing business relationships with GeoEye or DigitalGlobe. Employee retention and recruitment may be particularly challenging prior to completion of the merger, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

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The pursuit of the merger and the preparation for the integration may place a significant burden on management and internal resources of either or both companies. Any significant diversion of management’s attention away from ongoing business and any difficulties encountered in the transition and integration process could affect GeoEye’s and/or DigitalGlobe’s financial results prior to the merger and the combined company’s financial results post-merger.

In addition, the Agreement restricts each of GeoEye and DigitalGlobe, without the other party’s consent, from making certain acquisitions and dispositions and taking other specified actions while the merger is pending. These restrictions may prevent GeoEye and/or DigitalGlobe from pursuing attractive business opportunities and making other changes to their respective businesses prior to completion of the merger or termination of the Agreement.

If completed, the merger may not achieve its intended results, and GeoEye and DigitalGlobe may be unable to successfully integrate their operations.

GeoEye and DigitalGlobe entered into the Agreement with the expectation that the merger will result in various benefits for the combined company, including, among others, synergies resulting from cost savings and operating efficiencies. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether the respective businesses and assets of GeoEye and DigitalGlobe can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger. The combined company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the combined company’s future business, financial condition, operating results and prospects.

The merger could unfavorably impact negotiations or existing agreements with the NGA or other customers.

Both GeoEye and DigitalGlobe have historically derived a substantial portion of their revenues from contracts with the NGA. These contracts may be terminated in the future, or may not be renewed or extended, and the loss of any contract would materially reduce the revenue and could have a material adverse effect on the financial condition and results of operations of GeoEye, DigitalGlobe or the combined company. Whether or not the merger is consummated, the announcement and pendency of the merger could disrupt the respective companies’ business relationships with the NGA or other current customers, who may alter, delay or defer decisions regarding current and future arrangements with GeoEye or DigitalGlobe because of the pending merger. These disruptions could be exacerbated by a delay in the consummation of the merger or termination of the Agreement and could have an adverse effect on the respective businesses and financial results of GeoEye, DigitalGlobe or the combined company.

GeoEye may elect to launch or ship for launch its GeoEye-2 satellite, which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger.

Both companies believe that the merger could create significant benefits for the combined company, including by operating more effectively and integrating the GeoEye and DigitalGlobe satellites into one satellite operations infrastructure and optimizing the size of the satellite constellation. If GeoEye ships or launches GeoEye-2 prior to the closing of the merger, DigitalGlobe will have the right to terminate the Agreement. Even if DigitalGlobe elects to proceed with the merger, the shipment or launch of GeoEye-2 may impair the ability of the combined company to integrate the infrastructure of the combined company and the ability to achieve the anticipated benefits of the merger may be adversely affected. Although DigitalGlobe has the right to terminate the Agreement in the event GeoEye launches or ships for launch any satellite, DigitalGlobe may elect not to terminate and to instead proceed with the transaction despite the potential loss of certain anticipated synergies.

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If the combined company elects to place a satellite in ground storage, the satellite will be subject to degradation, damage or obsolescence of certain capabilities, which could adversely affect the combined company’s ability to fully achieve the anticipated benefits of the merger.

GeoEye and DigitalGlobe each have a satellite under construction, GeoEye-2 and WorldView-3, respectively. To obtain the anticipated benefits of the merger, the combined company plans to optimize the size of the satellite constellation and anticipates placing in storage one of the two satellites currently being built until such time as incremental capacity or a replacement for an existing satellite is required. Each of the satellites includes advanced technologies and sensors, and extended periods of storage could result in degradation which may not be fully covered by applicable insurance or obsolescence of certain capabilities of the satellite. In addition, the satellite will be subject to damage or destruction while in storage which may not be fully covered by applicable insurance. If the satellite requires upgrades or is damaged while on the ground, DigitalGlobe may need additional time and may incur substantial expense. Any inability to upgrade, repair or replace the stored satellite in a timely manner could adversely affect the combined company’s ability to fully achieve the anticipated benefits of the merger.

GeoEye and DigitalGlobe may be unable to obtain in the anticipated timeframe, or at all, the regulatory approvals required to complete the merger or, in order to do so, GeoEye and DigitalGlobe may be required to comply with material restrictions or conditions that may negatively affect the combined company after the merger is completed or cause them to abandon the merger. Failure to complete the merger could negatively affect the future business and financial results of GeoEye and DigitalGlobe.

Completion of the merger is contingent upon, among other things, the expiration or termination of the applicable HSR Act waiting period and required regulatory approvals or consents from the FCC and NOAA or the Department of Commerce. Both we and DigitalGlobe have received a second request for information and documents from the Antitrust Division of the U.S. Department of Justice, and while we are cooperating in responding to the request, it may take several months to comply fully with the request. GeoEye and DigitalGlobe can provide no assurance that all required regulatory authorizations, approvals or consents will be obtained or that the authorizations, approvals or consents will not contain terms, conditions or restrictions that would be detrimental to the combined company after completion of the merger.

The respective special meetings of GeoEye and DigitalGlobe stockholders at which the merger-related proposals will be considered may take place before all of the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known.

Satisfying the conditions to, and completion of, the merger may take longer than, and could cost more than, GeoEye and DigitalGlobe expect. Any delay in completing, or any additional conditions imposed in order to complete, the merger may materially adversely affect the synergies and other benefits that GeoEye and DigitalGlobe expect to achieve from the merger and the integration of their respective businesses.

Neither GeoEye nor DigitalGlobe can make any assurances that it will be able to satisfy all the conditions to the merger or succeed in any litigation brought in connection with the merger. If the merger is not completed, the financial results of GeoEye and/or DigitalGlobe may be adversely affected and GeoEye and/or DigitalGlobe may be subject to several risks, including, but not limited to:

payment to the other of a termination fee of approximately $20.0 million, as specified in the Agreement, depending on the nature of the termination;

payment of costs relating to the merger, whether or not the merger is completed;

loss of investor confidence as a result of failure to complete the merger; and/or

being subject to litigation related to any failure to complete the merger.

The pro forma financial statements and financial forecasts included in the joint proxy statement/prospectus filed by GeoEye and DigitalGlobe are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the merger.

The pro forma financial statements and financial forecasts contained in the joint proxy statement/prospectus filed by GeoEye and DigitalGlobe are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of the combined company’s financial condition or results of operations following the merger for several reasons. The prospective financial information was prepared during the period prior to the execution of the Agreement on July 22, 2012 and has not been updated. The actual financial condition and results of operations of the combined company following the merger may not be consistent with, or evident from, these pro forma financial statements or financial forecasts. In addition, the assumptions used in preparing the pro forma financial information and financial forecasts may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the merger. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the stock price of the combined company.

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GeoEye and DigitalGlobe will incur substantial transaction fees and costs in connection with the merger.

GeoEye and DigitalGlobe expect to incur non-recurring expenses totaling approximately $60.1 million, which are primarily transaction costs. In addition to these expenses, we expect issuance costs of $28.9 million to be incurred and capitalized in connection with the refinancing of the indebtedness of both companies. Additional unanticipated costs may be incurred in the course of the integration of the respective businesses of GeoEye and DigitalGlobe. The companies cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all.

Certain directors, executive officers and specific stockholders of GeoEye and DigitalGlobe have interests in the merger that are different from, or in addition to, those of other GeoEye and DigitalGlobe stockholders, which could have influenced their decisions to support or approve the merger.

Certain directors and executive officers of GeoEye and DigitalGlobe have interests in the merger that differ from, or that are in addition to, their interests as stockholders of GeoEye and DigitalGlobe. These interests include, among others, continued service as a director or an executive officer of the combined company, and the accelerated vesting of certain equity awards and/or certain severance benefits in connection with the merger.

In addition, GeoEye and DigitalGlobe have entered into voting agreements with certain directors, executive officers and specific stockholders of GeoEye and DigitalGlobe, in each case solely in the party’s capacity as a stockholder. These voting agreements require the stockholders to vote in favor of the proposals to be voted on at the GeoEye or DigitalGlobe special meeting of stockholders, as applicable, and to vote against certain actions. The voting agreements specifically do not limit or restrict the rights and obligations of a stockholder in their capacity as a director or officer of GeoEye or DigitalGlobe, as applicable, and in no way restricts any director or officer of GeoEye or DigitalGlobe, as applicable, in the exercise of their fiduciary duties as a director or officer of GeoEye or DigitalGlobe, as applicable. However, these voting agreements do limit the rights of these stockholders, solely in their capacity as stockholders, to vote against the proposals to be voted on at each company’s special meeting of stockholders, and for certain other actions.

These interests, among others, may influence the directors and executive officers of DigitalGlobe to support or approve the share issuance proposal and/or the directors and executive officers of GeoEye to support or approve the merger.

Risks Related to Our Capital Structure and Strategy

Our business is capital intensive, and we may not be able to raise adequate capital to finance our business strategies, including funding any future satellite, or we may be able to do so only on terms that significantly restrict our ability to operate our business.

The implementation of our business strategies, such as expanding our satellite constellation and our value-added products and services offerings, requires a substantial outlay of capital. As we pursue our business strategies and seek to respond to opportunities and trends in our industry, our actual capital expenditures may differ from our expected capital expenditures, and there can be no assurance that we will be able to satisfy our capital requirements in the future. We currently expect that our ongoing liquidity requirements for sustaining our operations will be satisfied by cash on hand, cash generated from our existing and future operations and proceeds from the U.S. government cost-share. However, we cannot provide assurances that our businesses will generate sufficient cash flow from operations in the future or that future borrowings will be available in amounts sufficient to enable us to execute our business strategies.

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Lending institutions have suffered and may continue to suffer losses due to their lending policies and their other financial relationships, especially because of the continued challenges and uncertainties in the U.S. and global economies. As a result, changes in the capital markets may impact our ability to obtain new financing or refinance our existing debt on reasonable terms and in adequate amounts, if at all. If we determine we need to obtain additional funds through external financing and are unable to do so, we may be prevented from fully implementing our business strategies. We can provide no assurance that we will be able to raise sufficient capital to continue funding our satellite constellation and expand our other products and services.

The continuing economic challenges and uncertainty may affect our business operations, financial condition and financial results in ways that we currently cannot predict.

The continuing economic challenges in the financial markets, national debt concerns and uncertainty regarding the global economy may have an impact on our business, our business operations, financial condition and financial results. As the cost of capital has increased substantially and the availability of funds from the capital markets has diminished significantly, our ability to access the capital markets may be restricted or be available only on terms we do not consider favorable. Limited access to the capital markets could adversely affect our ability to take advantage of business opportunities or react to changing economic and business conditions and could adversely affect our strategy.

The current economic situation could affect our customers, causing them to fail to meet obligations to us, which could have a material adverse effect on our revenue, results of operations and cash flows. A continued economic downturn coupled with the uncertainty and volatility of the global financial crisis may have a further adverse effect on our business and our consolidated financial condition, results of operations and cash flows that we currently cannot predict or anticipate. The uncertainty about future economic conditions also makes it more challenging for us to forecast our operation results, make business decisions, and identify and prioritize the risks that may affect our business, our business operations, financial condition and financial results.

Our effective income tax rate may vary.

Various internal and external factors may have favorable or unfavorable effects on our future effective income tax rate. These factors include, but are not limited to, changes in tax laws, regulations and or rates; the results of any tax examinations; changing interpretations of existing tax laws or regulations; changes in estimates of prior years’ items; acquisitions; changes in our corporate structure; and changes in overall levels of income before taxes. All of these factors may result in periodic revisions to our effective income tax rate.

Although we carry insurance on our satellites, there can be no assurance that insurance proceeds would be available to us in the event of operational degradation of any our satellites, or that proceeds that might be available will adequately cover our losses.

We procure insurance covering risks associated with our satellite operations through the commercial insurance markets. The cost and amount of coverage available to us, and the types of loss coverage we are able to obtain at reasonable costs, are affected by factors beyond our control. These include recent loss experience in insurance markets, risk assessments by insurance carriers and their advisors, the carriers’ cost of capital, general economic conditions, and failures of other satellites using components similar to ours or using similar launch vehicles. Insurance premiums for satellite risk of loss coverage have historically been quite volatile, as have the terms of coverage and exclusions for coverage, and there can be no assurance that future premiums we may be required to pay to obtain or maintain our insurance will not exceed our ability to pay those premiums. Higher premiums on insurance policies will increase our costs. Should the future terms of launch and in-orbit insurance policies become less favorable than those currently available, this may result in limits on amounts of coverage that we can obtain or may prevent us from obtaining insurance at all.

Our insurance policies contain various exclusions from coverage based upon commercial realities and the types of coverage available in the market. For example, the anomalies we have experienced in the operation of GeoEye-1 are excluded from our present policies, and any costs we have experienced to mitigate such anomalies are not covered by insurance. If we experience other operational anomalies associated with our satellites that could degrade their performance or our ability to collect the amount and/or quality of imagery that we anticipate, we may not have access to proceeds to cover our added costs or loss of revenue.

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Our 2015 Notes and 2016 Notes require us to obtain launch and in-orbit insurance for our satellites, which is costly and may be difficult or impossible to obtain. A loss of a high-resolution satellite such as GeoEye-1 will require us to offer to repurchase our 2015 Notes and 2016 Notes, and we may lack sufficient insurance to cover that cost.

The terms of the 2015 Notes and 2016 Notes, or Indentures, require us to obtain launch and in-orbit insurance for any future satellites we construct and launch and require us to maintain specified levels of in-orbit operation insurance for GeoEye-1, to the extent that such coverage can be obtained at a premium that is not disproportionately high. With respect to GeoEye-1, we currently carry $260.3 million of in-orbit insurance, consisting of $195.8 million of in-orbit insurance, expiring December 1, 2012, and $64.5 million of in-orbit insurance in the event of the total loss of the satellite, expiring December 1, 2012. We believe, that under current market conditions, the premiums for additional coverage would be disproportionately high. This insurance is not sufficient to cover the cost of a replacement high-resolution imagery satellite such as GeoEye-1 or to provide us with sufficient funds to repurchase all of the 2015 Notes and the 2016 Notes then outstanding in the event that, as a result of such a loss, we are required to make a mandatory offer to repurchase the 2015 Notes and the 2016 Notes. We will seek to obtain insurance coverage for GeoEye-2 and all future satellites as required under the 2015 Notes and the 2016 Notes. However, any failure to obtain required insurance could cause a default under the 2015 Notes and the 2016 Notes, which could have a material adverse effect on our business, financial condition and results of operations.

We have a substantial amount of indebtedness.

Our substantial indebtedness has important consequences. For example, it:

limits our ability to borrow additional funds;

limits our ability to pay dividends;

limits our flexibility in planning for, or reacting to, changes in our business and our industry;

increases our vulnerability to general adverse economic and industry conditions;

limits our ability to make strategic acquisitions;

requires us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate activities; and

places us at a competitive disadvantage compared to competitors that have less debt.

Interest costs related to our debt are substantial and, as a result, the demands on our cash resources are significant. Our ability to make payments on our debt and to fund operations and planned capital expenditures will depend on our future results of operations and ability to generate cash. Our future results of operations are, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

The terms of the Indentures will permit us and our subsidiaries to incur substantial additional indebtedness in the future, including secured indebtedness with first-priority liens or pari passu liens, which could further exacerbate the risks described above.

Servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.

Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, political, financial, competitive, legislative, regulatory and other factors that are beyond our control.

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For the year ended December 31, 2011, our interest expense totaled $53.1 million, before considering the impact of capitalized interest. We cannot assure you that our business will generate sufficient cash flow from operations to enable us to pay our indebtedness or to fund our other liquidity needs. If our cash flows are insufficient to allow us to make scheduled payments on our indebtedness, we may need to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, or that we will be able to refinance on commercially reasonable terms or that these measures would satisfy our scheduled debt service obligations. If we are unable to generate sufficient cash flow or refinance our debt on favorable terms, it could have a material adverse effect on our financial condition, the value of our outstanding debt and our ability to make any required cash payments under our indebtedness.

A lowering or withdrawal of the credit ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade credit rating, and any credit rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2015 Notes and 2016 Notes. Credit ratings are not recommendations to purchase, hold or sell the 2015 Notes and 2016 Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the 2015 Notes and 2016 Notes. Any downgrade by a rating agency could decrease earnings and may result in higher borrowing costs in the future.

Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the 2015 Notes and 2016 Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell the 2015 Notes and 2016 Notes without a substantial discount.

We may pursue acquisitions, investments, strategic alliances and joint ventures, which could affect our results of operations.

We may engage in various transactions, including purchases or sales of assets, acquisitions of businesses, or enter into investments or contractual arrangements, such as strategic alliances or joint ventures. These transactions may be intended to result in the realization of cost savings, the generation of cash, the generation of income or the reduction of risk. We cannot assure you that we will be able to identify suitable acquisition, investment, alliance or joint venture opportunities or that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be successful.

In addition, upon consummation of an acquisition, investment, strategic alliance or joint venture, we may face challenges with integration efforts, including the combination and development of product and service offerings, sales and marketing approaches and establishment of combined operations. There can be no assurance that an acquired business will perform as expected; that we will not incur unforeseen obligations or liabilities; that the business will generate sufficient cash flow to support the indebtedness, if incurred, to acquire them or the expenditures needed to develop them; or that the rate of return from such businesses will justify the decision to invest the capital.

Any future acquisitions, investments, strategic alliances or joint ventures may require additional debt or equity financing, which, in the case of debt financing, would increase our leverage and potentially affect our creditworthiness. Any deterioration in our creditworthiness or our future credit ratings associated with an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing terms.

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Item 6.

Exhibits.

(a)

Exhibits:

Incorporated by Reference

Exhibit No

Exhibit Description

Form

SEC File No.

Exhibit

Filing Date

Filed

Herewith

2.1

Amendment No. 1, dated August 30, 2012, to Agreement and Plan of Merger, dated as of July 22, 2012, by and among GeoEye, Inc., 20/20 Acquisition Sub, Inc., WorldView, LLC, and DigitalGlobe, Inc.#

8-K

001-33015

2.1

8/30/2012

10.1#

Modification P00025 to Contract No. HM0210-10-C-003 with U.S. National Geospatial-Intelligence Agency.

31.1

Certification of the Company’s Chief Executive Officer, Matthew M. O’Connell, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Company’s Chief Financial Officer, Joseph F. Greeves, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Company’s Chief Executive Officer, Matthew M. O’Connell, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Company’s Chief Financial Officer, Joseph F. Greeves, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.

The following financial information from GeoEye, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

Portions of this exhibit have been omitted pursuant to a request for confidential treatment, and this exhibit has been filed separately with the SEC.

#	Portions of the exhibit have been omitted pursuant to a request for confidential treatment, and this exhibit has been filed separately with the SEC.

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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.

	GeoEye, Inc.

Date: November 6, 2012	/s/ Matthew M. O’Connell
	Matthew M. O’Connell
	Chief Executive Officer

Date: November 6, 2012	/s/ Joseph F. Greeves
	Joseph F. Greeves
	Executive Vice President and Chief Financial Officer

Date: November 6, 2012	/s/ Jeanine J. Montgomery
	Jeanine J. Montgomery
	Vice President, Accounting and Corporate Controller

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