SPACEHAB Reports Financial Results for Third Quarter Fiscal Year 2004
SPACEHAB, Incorporated, a leading provider of
commercial space services, today announced financial results for its
fiscal year 2004 third quarter and nine months ended March 31, 2004.
Third Quarter Results
SPACEHAB reported third quarter 2004 net income of $0.3 million,
or $0.02 per share ($0.02 per share diluted), on revenue of $14.8
million compared with prior year quarter net loss of $62.7 million, or
$5.06 per basic and diluted share, on revenue of $26.4 million. The
disparity in earnings is mainly attributed to SPACEHAB’s recognition
of a non-recurring charge of $50.3 million for the prior year’s loss
of the Company’s Research Double Module (RDM) that was destroyed in
the STS-107 space shuttle tragedy and goodwill impairment of $11.9
million recognized upon termination of the Company’s Flight Crew
System Development contract with NASA.
Revenue for the third fiscal quarter of 2004 decreased by
approximately 44% from the prior year’s quarterly revenue of $26.4
million primarily due to the previously announced completion of
SPACEHAB Government Services (SGS) contracts as well as the continuing
postponement of space shuttle missions. NASA has announced that it
currently anticipates a return to flight in March of 2005.
Interest expense was approximately $2.2 million for the three
months ended March 31, 2004 compared to approximately $1.8 million for
the three months ended March 31, 2003. The increase in interest
expense is primarily due to the termination of the interest rate swap
and write-off of debt placement costs from the refinancing of the
Company’s Florida Spacecraft Processing Facility (SPF) mortgage loan
on January 29, 2004.
Nine Month Results
SPACEHAB’s nine months earnings were $4.4 million, or $0.35 per
share ($0.31 per share diluted), on revenue of $66.5 million compared
to a net loss of $61.6 million, or $5.03 per basic and diluted share,
on revenue of $81.3 million for first nine months of the prior fiscal
year. The prior fiscal year net loss includes a non-recurring charge
of $50.3 million for the loss of the RDM and goodwill impairment of
$11.9 million. The current fiscal year earnings include goodwill
impairment of $8.3 million and investment impairment of $1.8 million
which were recorded in the second quarter. Also included in revenue
and earnings for the current fiscal year are proceeds of $17.5 million
paid by The Boeing Company in termination of certain minimum
guarantees under its satellite processing contract with Astrotech.
Under the Company’s previous contract with NASA, and now under
contract with Lockheed Martin Corporation, SPACEHAB received
additional payments relative to costs incurred in maintaining the
capability and staff for space shuttle operations during the
suspension of space shuttle flights and for logistics planning and
preparation for future space shuttle missions. As stated, revenue and
operating earnings for the current fiscal year also reflect the
previously announced conclusion of certain NASA contracts in the
Company’s SGS business unit during the first nine months of the
current fiscal year.
Interest expense was approximately $6.8 million for the nine
months ended March 31, 2004 compared to approximately $5.5 million for
the nine months ended March 31, 2003. The increase in interest expense
is due to write-offs of deferred loan costs upon refinancing the
Florida SPF and termination of the interest rate swap.
Liquidity
Combined cash, cash equivalents, and short-term investments at
March 31, 2004 were $8.7 million. As previously reported, SPACEHAB
completed restructuring its financing of the Florida SPF in January
2004, reducing the facility mortgage obligation by approximately $11.0
million. The facility mortgage was restructured with a principal
balance of $6.1 million, a reduced effective interest rate from 7.87%
to a fixed rate of 5.5%, and a shortened maturity date of January
2007. The restructured loan is collateralized by certain contract
revenues for operations at the facility. Upon restructuring the
facility mortgage, the Company paid approximately $1.3 million to
retire an interest rate swap agreement.
Deferred revenue as of March 31, 2004 was $7.5 million compared to
$16.1 million at June 30, 2003. The decrease is primarily due to the
closeout of the Research And Logistics Mission Support (ReALMS)
contract and to a previously billed commercial experiment services
contract that was to be flown on an upcoming space shuttle mission.
Due to ongoing delays in space shuttle missions, the commercial
contract was modified and the services will be provided on multiple
Russian Progress missions, the first scheduled for launch in July
2004.
Current liabilities decreased to $19.4 million at March 31, 2004
compared to $27.2 million at June 30, 2003 mainly due to a substantial
reduction in accounts payable to strategic partner EADS Space
Transportation GmbH, the final payment of a shareholder note, and the
recognition of the deferred revenue stated above.
SPACEHAB continues to pursue its claim with NASA for
indemnification of its losses in the amount of $87.7 million from its
RDM that was destroyed during the STS-107 space shuttle tragedy. In a
notification received from NASA, the Agency stated that after a review
and internal audit of the amounts specified, it intends to advise
SPACEHAB of its findings on June 24, 2004. Lloyd’s of London
(“Lloyd’s”), the Company’s insurer for the RDM has refiled its
complaint, previously filed in U.S. District Court, in the Superior
Court of the State of Washington. Lloyd’s alleges that SPACEHAB
breached the contracts of insurance by demanding and receiving the
insurance proceeds before NASA had paid, or agreed to pay, the
contractually obligated $8.0 million indemnification; that SPACEHAB,
through its insurance agent, submitted misleading information in
obtaining the insurance; and other allegations. SPACEHAB believes that
the complaint is without merit and is responding accordingly.
SPACEHAB believes it has sufficient cash to fund ongoing
operations and support new business initiatives through the end of the
fiscal year. However, in certain scenarios, the Company could face
liquidity concerns following the fiscal year end.
Update of Ongoing Operations
Although the grounding of the space shuttle continues to pose
challenges for the Company and the industry, SPACEHAB continues to
play a key role in NASA’s Space Shuttle and International Space
Station (ISS) Programs and is exploring new possibilities for
supporting the National Space Vision announced in January 2004. “The
new U.S. space exploration policy sets a bold course for NASA,”
observed Michael E. Kearney, President and Chief Executive Officer. “A
course that will clearly benefit from new commercial services such as
those provided by SPACEHAB.”
As the impacts of this vision materialize over time, SPACEHAB
management will continue to align its business direction to remain a
constructive force in the human spaceflight program. In the long term,
management believes that the Company’s core competencies offer
opportunities to continue to provide high-value services as well as
design, build, and operate assets that could support initiatives
beyond low earth orbit. In the near term, SPACEHAB’s primary objective
is to continue providing unique services to NASA and the international
space community in support of the space shuttle and ISS programs. With
this renewed vision, the space shuttle and ISS remain an integral part
of the human spaceflight program, at least, through 2010.
The SPACEHAB Flight Services (SFS) business unit continues to
support four of the next six ISS missions through its contract with
the ISS prime contractor, Boeing, and through its subcontract with the
ISS Cargo Mission Contractor, Lockheed Martin Corporation. SPACEHAB
will be providing an Integrated Cargo Carrier (ICC) on STS-114, NASA’s
return-to-flight mission, and is scheduled to provide NASA with an ICC
on space shuttle mission STS-121, a Logistics Single Module (LSM) and
an ICC on STS-116, and an LSM and an ICC on STS-118.
On April 15, 2004, the SFS business unit completed a successful
transition of its systems integration and operations capabilities from
its subcontract with Boeing to an in-house capability. As a result,
SPACEHAB personnel will now perform the end-to-end mission
integration, hardware development, and sustaining engineering
functions required to support the flight of its existing modules on
the space shuttle. This move reduces operating costs, increases
flexibility in responding quickly to changing customer requirements,
and builds upon existing core SPACEHAB capabilities needed to support
future logistics and research missions to the ISS.
Additionally, the SFS Space Commerce Development team is
formulating its May 20, 2004 response to the recently released NASA
Exploration Systems Enterprise Request for Information. In SPACEHAB’s
response, SFS will provide insight to the NASA Office of Exploration
regarding SPACEHAB’s innovative payload/crew integration and
transportation concepts as well as its proven capabilities and
processes that could effectively and efficiently support the evolving
phases of the nation’s vision for completion of the ISS and the
exploration of the moon, Mars and the solar system.
Although the commercial satellite market is relatively slow,
SPACEHAB’s Astrotech business unit experienced heavier traffic through
both its owned and managed payload processing facilities. During the
third quarter, Astrotech supported the successful launches of three
communications satellites. The Telstar 14/Estrela do Sul 1 satellite
lifted off from the Odyssey Launch Platform positioned on the equator
in the Pacific Ocean on January 10, 2004 after processing at the Sea
Launch Home Port in Long Beach, California. February 5 saw the launch
of the AMC-10 telecommunications satellite from Cape Canaveral Air
Force Station (CCAFS). The satellite will provide cable television
services to all 50 states, Mexico and the Caribbean. An Atlas III
rocket lifted off from CCAFS on March 13, 2004 to place into orbit the
Astrotech-processed MBSAT satellite which will deliver digital
multimedia information services to mobile users throughout Japan and
Korea.
Astrotech also provided payload processing services in support of
several missions to be launched after SPACEHAB’s third quarter. The
Boeing Satellite Systems Superbird-6, the DirecTV-7S, the
environmental monitoring ROCSAT-2, the Space Systems/Loral-built
Telstar 18, and the Northrop Grumman-built NASA AURA spacecrafts, as
well as the NASA APL MESSENGER spacecraft, the first direct NASA
contract for Astrotech services in Florida, are all benefiting from
Astrotech’s facilities and capabilities.
In support of the United States Air Force (USAF) and Boeing,
Astrotech is providing processing services for two Global Positioning
System (GPS) spacecraft upper stage solid rocket motor assemblies.
While the USAF upgrades their existing GPS facility, Astrotech is
providing this capability normally managed in government facilities.
Additionally, the payload fairings and spacecraft simulator for the
Delta IV/USAF Heavy Demonstration mission are in process at
Astrotech’s Florida facility. Launch is scheduled for no earlier than
the first week of July and will represent the first launch of a heavy
configuration for the Evolved Expendable Launch Vehicle (EELV).
The Company’s SPACEHAB Government Services (SGS) business unit
continues its configuration management and product development
services in support of NASA’s ISS Program at the Johnson Space Center.
Through NASA’s Program Integration and Control contract, SGS is
supporting NASA with the development and implementation of the
Agency’s fiscal year 2005 ISS Program Operating Plan which becomes
part of NASA’s overall budget.
Conference Call
SPACEHAB will host a conference call at 10:00 a.m. Central time
following the earnings release. During the call, management will
discuss the Company’s third quarter financial results as well as other
recent and potential future developments relating to SPACEHAB. To
participate on the call, please dial 888.532.2976 (domestic calls) or
904.779.4727 (international calls) and ask for the SPACEHAB Earnings
Conference. A taped replay will be available following the conference
call and accessible via access code 23687926 until 11:59 p.m. Eastern
time on May 12, 2004 at 800.252.6030 (domestic calls) or 402.220.2491
(international calls). To hear a replay of the call via the Internet,
visit the Investor Relations section of the SPACEHAB website at
www.spacehab.com. This audio archived webcast of the conference call
will be available on the Company website for 90 days.
About SPACEHAB, Incorporated
SPACEHAB, Incorporated (www.spacehab.com) is a leading provider of
commercial and government space services with three primary business
units. The Flight Services business unit develops, owns, and operates
habitat and laboratory modules and cargo carriers aboard NASA’s Space
Shuttles for Space Station resupply and research purposes. SPACEHAB’s
Astrotech subsidiary provides payload processing support services for
both commercial and government customers at company-owned facilities
in Florida and California. The Company’s Government Services business
unit supports NASA’s Johnson Space Center providing configuration
management, product engineering, and support services for both the
Space Station and Space Shuttle programs. Additionally, through The
Space Store, Space Media provides space merchandise to the public and
space enthusiasts worldwide (www.thespacestore.com).
The statements in this document may contain “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. Such
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those projected in the
statements. In addition to those risks and uncertainties discussed
herein, such risks and uncertainties include, but are not limited to,
whether the Company will fully realize the economic benefits under its
U.S. National Aeronautics and Space Administration (“NASA”) and other
customer contracts, whether NASA and other customers will continue to
utilize the Company’s habitat modules and related commercial space
assets, whether plans to complete the International Space Station
(“ISS”) are fulfilled, continued availability and use of the U.S.
Space Shuttle system, technological difficulties, product demand and
market acceptance risks, the effect of economic conditions,
uncertainty in government funding, the impact of competition, delays
and uncertainties in future space shuttle and ISS programs, resolution
of the Company’s indemnification claim with NASA arising from the loss
of the Columbia orbiter and its crew during the STS-107 mission, and
other risks described in reports filed by the Company with the
Securities and Exchange Commission. The Company assumes no obligation
to update these forward-looking statements.
Tables follow
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share data)
Three Months Nine Months
Ended March 31, Ended March 31,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue $14,800 $26,413 $66,466 $81,275
Costs of revenue 9,815 22,123 36,172 66,516
----------- ----------- ----------- -----------
Gross profit 4,985 4,290 30,294 14,759
----------- ----------- ----------- -----------
Operating expenses
Selling, general and
administrative 2,545 3,146 8,880 9,229
Research and
development 7 20 9 105
Nonrecurring charge,
loss of Research
Double Module - 50,268 - 50,268
Goodwill impairment - 11,925 8,274 11,925
Impairment of
investment in Guigne - - 1,800 -
----------- ----------- ----------- -----------
Total operating
expenses 2,552 65,359 18,963 71,527
----------- ----------- ----------- -----------
Income (loss) from
operations 2,433 (61,069) 11,331 (56,768)
Interest expense (2,177) (1,842) (6,776) (5,541)
Interest and other
income (expense), net 22 (26) 97 (56)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 278 (62,937) 4,652 (62,365)
Income tax (expense)
benefit (11) 218 (251) 727
----------- ----------- ----------- -----------
Net income (loss) $267 $(62,719) $4,401 $(61,638)
=========== =========== =========== ===========
Income (loss) per share
Net income (loss) per
share - basic $0.02 $(5.06) $0.35 $(5.03)
=========== =========== =========== ===========
Shares used in
computing net income
(loss) per share -
basic 12,476,342 12,398,775 12,415,977 12,263,426
=========== =========== =========== ===========
Net income (loss) per
share - diluted $0.02 $(5.06) $0.31 $(5.03)
=========== =========== =========== ===========
Shares used in
computing net income
(loss) per share -
diluted 14,264,818 12,398,775 14,039,798 12,263,426
=========== =========== =========== ===========
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
March 31, June 30,
2004 2003
ASSETS
--------- ----------
Cash and cash equivalents $2,044 $1,301
Short-term investments 6,628 14,047
Accounts receivable, net 5,827 6,780
Prepaid expenses and other current assets 672 343
--------- ----------
Total current assets 15,171 22,471
Property, plant, and equipment, net of accumulated
depreciation and amortization of $51,732 and
$48,700, respectively 80,482 83,689
Other assets, net 4,314 15,196
--------- ----------
Total assets $99,967 $121,356
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 19,448 27,221
Long-term liabilities 68,815 89,045
Stockholders' equity 11,704 5,090
--------- ----------
Total liabilities and stockholders' equity $99,967 $121,356
========= ==========
Contact:
- SPACEHAB, Inc., Houston
- Kimberly Campbell, 713-558-5049
- campbell@spacehab.com
