SPACEHAB, Incorporated
, a leading provider of commercial space services, today
announced that it has issued its fiscal year 2003 Letter to Shareholders in an
effort to update existing SPACEHAB investors on the current status of the
Company, and more importantly, management’s perspective on the Company’s
future growth outlook. The text from the letter follows:
“Dear Fellow Shareholders,
It is my pleasure to update you regarding the accomplishments and
challenges we faced during 2003 at SPACEHAB, as well as comment on our
expectations for the future of the Company. While fiscal year 2003 was one of
our more challenging years, I’m very pleased with how the entire team
responded to events that were largely beyond our control and how we continued
to strive towards improving our business base and increasing shareholder
value.
Without a doubt, the most significant challenge we faced was the loss of
the space shuttle Columbia, the STS-107 crew, and the SPACEHAB Research Double
Module (RDM). This tragic event left the nation and the aerospace community
greatly saddened and in a temporary state of uncertainty. We offer our heart
felt condolences to those who lost loved ones in this tragedy. We supported
NASA in the accident investigation and have since completed the difficult
recovery activities. Since the accident, the space shuttle fleet remains
grounded. However, the nation’s commitment to the Human Space Flight program
remains strong. A Gallup poll published in USA Today shows that Americans
continue to support the space program, even in light of tragedy, recognizing
that our quest for knowledge through exploration must continue. On the heels
of this disaster, we were informed that we were not awarded the competition
for the Flight Crew Systems Development (FCSD) contract, work that we had held
for over a decade.
Our proactive management team responded effectively to both of these
challenges, demonstrating our ability to overcome, persevere, and continue
efficient operations. We believe this resilience will make us successful on
new contract opportunities, particularly in support of the International Space
Station (ISS) program. Our customers continue to see value in our services,
and we have several encouraging opportunities that I will share with you in
more detail in this letter.
Financial Overview
From a financial perspective, the challenges and opportunities we faced
during the year impacted our Company; however, our management team has
continued its focus on delivering a steady revenue stream and improving
operating cash flow while reducing expenses and debt. The loss of the RDM
resulted in a one-time charge of $50.3 million during the third quarter. While
commercial insurance proceeds offset a portion of our total loss by $17.7
million, in July 2003 we submitted a detailed claim in draft to NASA for
recovery of the RDM investment in the amount of $87.0 million. We expect to
revise this claim in the second quarter of fiscal year 2004 to incorporate the
findings of the Columbia Accident Investigation Board, and upon revision we
will re-file with NASA. We believe we have a basis for recovery of the loss
from NASA but there can be no assurances as to the timing or the amount to be
received from the claim.
Fiscal year 2003 revenues decreased to $95.0 million compared to $102.8
million for the year ended June 30, 2002. We reported a net loss for the year
of $81.8 million, or ($6.66) per basic and diluted share, compared to a net
loss of $2.4 million, or ($0.20) per basic and diluted share, for the prior
year. The size of this year’s loss was due to three primary outcomes: 1) the
write-off of the RDM, 2) the previously recorded and announced reduction in
goodwill classified as Other Assets in the amount of $11.9 million, and 3) a
write-down of $16.1 million for certain assets under development that are no
longer being funded due to uncertainties in human space flight programs.
Excluding these three key items, totaling $78.3 million, the Company’s
adjusted net loss was $3.4 million.
Business Segment Summary
Our business units continue to focus on the utilization of our existing
asset base and the delivery of improved operating results. Through the fourth
quarter of fiscal 2003, our SPACEHAB Flight Services (SFS) personnel completed
all STS-107 accident investigation support activities with NASA. This business
unit is continuing operations, supporting three of the next five planned space
shuttle missions. STS-114, currently scheduled as NASA’s return-to-flight
mission to be launched no earlier than March 2004, utilizes the Integrated
Cargo Carrier (ICC) through a contract with The Boeing Company. This
unpressurized flatbed pallet will serve as a storage platform for critical ISS
spares. Our support to the STS-116 and STS-118 ISS missions, both under
contract to NASA, utilizes our logistics module and ICC. Our SFS team is
currently supporting NASA discussions that may lead to additional module and
carrier flights. Although we cannot predict the outcome of these discussions,
the Company has excess capacity and the capability to support additional
research and logistics missions to low Earth orbit.
SPACEHAB Government Services (SGS) continued to provide space shuttle and
ISS services to NASA, including support of stowage integration and ISS
configuration management. Looking forward, we are competing on ISS-related
opportunities through the submission of proposals for three new five-year
contracts. I am pleased to report that NASA has notified us that we made the
competitive range as a finalist on all three of these procurements. Under the
first solicitation, we are bidding as a prime contractor on the Mission
Integration Contract that is estimated by NASA to be valued at more than $100
million over the five-year period. This contract would further leverage our
core capabilities, utilizing critical skills that include mission integration,
ISS stowage integration, and Russian language and logistics services. On the
second solicitation, we are bidding as a subcontractor on the ISS Program
Integration and Control contract where our configuration management competency
is a core element in this procurement. We are vying to capture this effort on
the ARES Corporation Team that includes Booz Allen Hamilton. Under the third
solicitation, for the Cargo Mission contract, we are bidding as a
subcontractor to The Boeing Company where we plan to provide our unique
stowage integration, International Partner integration, sustaining engineering
of stowage hardware, and program integration capabilities. We anticipate NASA
will announce contract awards in October 2003 with contract start dates in
January 2004. In the event that SGS is not successful in its effort to secure
these bids, we would further adjust our cost structure and evaluate remaining
long-lived and intangible assets to maintain a competitive and profitable
posture.
Our subsidiary, Astrotech Space Operations, was awarded two new contracts
in our fourth quarter ended June 30, 2003. The first was an award by
NASA/Kennedy Space Center to provide payload processing support services at
its Titusville, Florida facility for two NASA-scientific payloads, NASA
MESSENGER and Deep Impact, scheduled for launch in 2004 and 2005,
respectively. Most recently Astrotech was awarded a new contract by NASA in
support of the AURA mission at Vandenberg Air Force Base, California. These
contracts further solidify the Company’s growing business base in the
government sector. Astrotech recently celebrated the successful April 2003
launch of the Asiasat-4 spacecraft, the May 2003 liftoff of HellasSat, and the
July 2003 launch of the Rainbow 1 Direct Broadcast Satellite, all processed at
our Astrotech Florida facilities. Astrotech also supported the processing of
the Thuraya D-2 spacecraft that had a successful June 2003 liftoff by Sea
Launch. This business unit remains the leading supplier of payload processing
services to the commercial business sector, and we are actively discussing
opportunities with potential customers for additional government missions at
both the Astrotech Florida and Vandenberg Air Force Base facilities to
continue the expansion of Astrotech’s customer base.
Outlook
Looking forward, we are enthusiastic regarding several current
undertakings. First, we are actively supporting the ISS program in preparation
for the Space Shuttle return-to-flight. While new roles may be assigned to our
modules and carriers, we are currently manifested on three of the first five
missions to the station. As a result of the temporary delays that are
necessary to plan for a safe return-to-flight, we are in contract negotiations
with NASA and The Boeing Company on the value of equitable adjustments for the
STS-114, STS-116, and STS-118 space shuttle missions that will result in
additional revenue.
Second, as I previously mentioned, we were recently notified that we have
been named finalist in three out of three ISS contract competitions. This
outcome is exciting for us. It is a testament to our capability for
simultaneously managing several large competitions and to the dedication of
our team for expanding our business opportunities. Third, we have been
successful in expanding our payload processing business, especially in the
government sector, at our Astrotech subsidiary.
Due to the temporary grounding of the space shuttle and uncertainties in
human space flight programs, we anticipate that in the next fiscal year we
will have to work through and overcome challenges similar to those in 2003. In
the meantime, we have considerable intellectual property and high-value assets
protected by significant barriers to entry, and we have good prospects for new
business opportunities. As we carefully execute our plan to capture these, and
future, opportunities, we will continue to ensure that we leverage our core
competencies, maintain appropriate margins, and limit cash commitments on
capital investments and new asset development. At fiscal year end, cash
equivalents, and short-term investments totaled $15.3 million. We expect to
utilize existing cash and any potential payment from NASA to support
strategies to improve profitability, support new business initiatives, and
reduce debt.
We worked hard during fiscal 2003 to streamline operations resulting in a
continuous improvement of our selling, general, and administrative (SG&A) and
operating expenses. We’ve strengthened our relationship with our primary
customer, NASA, who has provided us with numerous accolades regarding our
performance on the transition activities during the wrap-up of the FCSD
contract, for our recovery efforts on the STS-107 mission, and for our recent
international shipping support of equipment and supplies to Russia for launch
on Progress vehicles bound for the ISS. And, we’ve continued to pursue new
business opportunities that include the previously mentioned ISS contracts,
new Alternate Access to Station work, Orbital Space Plane activities, new
Astrotech payload processing missions, and more. These new business pursuits
are aligned with our core competencies, support our positive brand image and
strategic partnerships, and augment our corporate vision.
Our management team is engaged and working diligently to stabilize and
grow our business base while finding ways to enhance shareholder value. We are
a high-value, low-price supplier to the U.S. Government and commercial
markets. We are building on our value-based strategy as a growth platform — a
starting point for a multi-faceted service enterprise serving both government
and private customers in space and on the ground. Our long-term objective is
to become a leading provider of commercial space access and ground processing
services. With continued support from our stockholders, I am confident we can
achieve this goal.”
- [signature]
- Michael E. Kearney
- President and Chief Executive Officer
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.
About SPACEHAB, Incorporated
With approximately $100 million in annual revenue, SPACEHAB, Incorporated
(www.spacehab.com) is a leading provider of commercial space services. The
Company develops, owns, and operates habitat and laboratory modules and cargo
carriers aboard NASA’s Space Shuttles for space station resupply and research
purposes. Its Government Services business unit provides Space Station and
Space Shuttle support services including orbiter crew compartment integration,
stowage, and configuration management to NASA’s Johnson Space Center in
Houston. SPACEHAB’s Astrotech subsidiary provides commercial satellite
processing services at facilities in California and Florida. Additionally,
through The Space Store, Space Media provides space merchandise to the public
and space enthusiasts worldwide (www.thespacestore.com).
For more information, contact:
Haris Tajyar Julia A. Pulzone
Managing Partner Chief Financial Officer
Investor Relations International SPACEHAB, Inc. -- Washington Office
Phone 818.981.5300 Phone 202.488.3500
Fax 818.981.5303 Toll free 888.647.9543
htajyar@irintl.com pulzone@hqspacehab.com
