SPACEHAB, Incorporated
(Nasdaq: SPAB), a leading provider of commercial space services, today
announced financial results for its fiscal year 2004 second quarter and six
months ended December 31, 2003.
Second Quarter Results
SPACEHAB reported second quarter 2004 net income of $3.5 million, or $0.28
per share ($0.25 per share diluted), on revenue of $32.8 million compared with
prior year quarter net income of $1.2 million, or $0.10 per share ($0.09 per
share diluted), on revenue of $28.1 million. As previously announced, the
Company’s second quarter results benefited from receipt of a $17.5 million
prepayment in termination of a long-term payload processing contract between
SPACEHAB’s Astrotech Space Operations subsidiary and The Boeing Company
(“Boeing”). The long-term contract was terminated due to Boeing’s assessment
of the lack of predictability of future satellite launches. The Company
anticipates providing future payload processing services to Boeing on a
mission-by-mission basis.
Revenue for the second fiscal quarter of 2004, excluding the $17.5 million
long-term contract prepayment, decreased by approximately 46% from the prior
year’s quarterly revenue of $28.1 million primarily due to the continuing
postponement of space shuttle missions pending resolution of all issues
addressed in the Columbia Accident Investigation Board report on the space
shuttle tragedy, and the previously announced completion of certain contracts
in the Company’s SPACEHAB Government Services (SGS) business unit. NASA has
announced that it currently anticipates the return of space shuttle flights in
September 2004.
Upon recognition of the long-term contract prepayment by Boeing, the
Company wrote off goodwill of $2.5 million for its Astrotech subsidiary.
Additionally, the Company wrote off goodwill of $5.7 million in the second
quarter for its SGS subsidiary after NASA notified the Company that it was not
awarded the International Space Station (ISS) Mission Integration contract or
the Cargo Mission contract of which SGS was a subcontractor to Boeing. During
the second quarter, the Company recorded an impairment charge of $1.8 million
relative to its investment in Guigne, Inc., a Canadian corporation with
proprietary acoustic technology used in spaceflight, due to an adverse change
in Guigne’s financial condition that, in the opinion of management, impairs
the investment. Additionally, SPACEHAB recognized charges of $0.4 million
related to the closing of the Company’s Washington D.C. office and severance
for terminated employees.
Interest expense was approximately $2.9 million for the three months ended
December 31, 2003 compared to approximately $1.8 million for the three months
ended December 31, 2002. The increase in interest expense is due to
recognition of an unrealized loss of $0.8 million upon the loss of hedge
accounting from the repayment of debt as well as the acceleration of $0.4
million of debt placement fees associated with the repayment.
Six Month Results
SPACEHAB’s six months earnings were $4.1 million, or $0.33 per share
($0.30 per share diluted), on revenue of $51.7 million compared to $1.1
million, or $0.09 per share ($0.08 per share diluted), on revenue of $54.9
million for first six months of the prior fiscal year. The six months revenue
for the current fiscal year included the long-term contract termination
payment of $17.5 million offset by the absence of space shuttle flights in the
current fiscal year.
Under the Company’s contract with NASA, SPACEHAB received an equitable
adjustment payment relative to costs incurred in maintaining the capability
and staff for space shuttle operations during the postponement period and for
logistics planning and preparation for future space shuttle missions. 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 six months of the current fiscal year.
Operating expenses for the first six months of fiscal year 2004 include
the estimated cost of closing the Company’s D.C. office, the write-off of
goodwill in the Company’s Astrotech and SGS subsidiaries, impairment of the
investment in Guigne, Inc., and costs incurred in contract proposal
preparation for SGS bids in the first and second quarters of fiscal year 2004,
offset by cost reductions implemented in the second quarter of fiscal year
2004.
Interest expense was approximately $4.6 million for the six months ended
December 31, 2003 compared to approximately $3.7 million for the six months
ended December 31, 2002. The increase in interest expense is due to
recognition of an unrealized loss of $0.8 million upon the loss of hedge
accounting from the repayment of debt as well as the acceleration of $0.4
million of debt placement fees associated with the repayment.
Liquidity
Combined cash, cash equivalents, and short-term investments at December
31, 2003 were $16.6 million, of which approximately $6.2 million is restricted
pursuant to the Company’s revolving and mortgage loans payable. During the
second quarter of the current fiscal year, the Company received $17.5 million
as a contract termination payment from Boeing and repaid $11.9 million of debt
obligations, including $9.5 million paid upon the restructuring of the
Company’s financing of its Florida Spacecraft Processing Facility. The
Florida facility mortgage was restructured in January 2004 with a principal
balance of $6.5 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 loan in January
2004, the Company paid $1.3 million to retire the interest rate swap
agreement.
Deferred revenue as of December 31, 2003 was $12.5 million compared to
$16.1 million at June 30, 2003 as the Company recognized revenue on contracts
where milestone payments had been received in prior periods. Current
liabilities increased to $29.8 million at December 31, 2003 compared to $27.2
million at June 30, 2003 due mainly to the reclassification of $6.8 million of
long-term deferred revenue into short-term deferred revenue. This was largely
offset by an overall reduction of deferred revenue, a reduction of the current
portion of the mortgage loan payable, and a reduction in accounts payable.
The Company’s backlog at December 31, 2003 was $69.1 million compared to
$169.6 million at June 30, 2003, primarily resulting from the reduction in
deferred revenue, termination of the long-term payload processing contract
with Boeing, and NASA’s cancellation of the STS-112 space shuttle mission.
Update of Ongoing Operations
“Our enthusiasm as a valuable member of the human spaceflight program was
bolstered this quarter with the announcement of President Bush’s new vision
for U.S. space leadership which includes planned missions to the moon and
Mars,” said Michael E. Kearney, President and Chief Executive Officer. “Our
core competencies afford us the capability to design, build, and operate
assets that could support initiatives beyond low earth orbit, and we will
pursue opportunities aggressively as the Administration’s vision becomes
clear.”
In the near term, SPACEHAB’s primary objective is to continue providing
unique services to NASA and the 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 for the next ten
years.
The SPACEHAB Flight Services (SFS) business unit continues to support
people working and living in space and is actively supporting four of the next
six ISS missions. Through a contract being finalized with Cargo Mission
Contractor Lockheed Martin Corporation, SPACEHAB will continue to provide NASA
with an Integrated Cargo Carrier (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. Additionally, through Boeing, SPACEHAB will be providing an ICC on
STS-114, NASA’s return-to-flight mission.
Subsequent to quarter end, SPACEHAB activities on the STS-116, STS-118,
and STS-121 missions through the Research and Logistics Module Support
(ReALMS) contract with NASA were completed. The Company received its final
evaluation from NASA which consisted of all “Excellent” ratings, the highest
scores available.
The SFS business unit is strengthening its systems integration and
operations capabilities by bringing these functions in-house in support of its
logistics and research module activities. Previously performed by Boeing, as
a subcontractor to SPACEHAB, SFS will now perform the end-to-end mission
integration functions, develop new flight hardware, and conduct the sustaining
engineering on its existing modules and carriers. This move reduces costs for
NASA, 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.
Astrotech supported the successful launch of the Navy’s
Ultra-High-Frequency Follow-On, communications satellites, the eleventh and
final in a series, which lifted off from Cape Canaveral Air Force Station on
December 17, 2003 onboard an Atlas 3B booster. Astrotech also supported the
processing of the Sea Launch Telstar 14/Estrela do Sul 1 spacecraft which was
lifted into orbit, subsequent to quarter end, by a Sea Launch Zenit-3SL rocket
from the Odyssey Launch Platform positioned on the equator in the Pacific
Ocean.
The Company’s SGS business unit continues to provide critical
configuration management and product development services in support of the
ISS program. During the second quarter, this business unit received word that
its bid on the ISS Program Integration and Control contract, as a
subcontractor to the ARES Corporation team, was successful. This five-year
initiative is currently valued at approximately $22.0 million for the Company,
and if exercised, two additional one-year contract options would increase the
award by an additional $10.0 million. In January 2004, SGS was awarded a
contract to design and fabricate ISS handrails used by astronauts conducting
space walks. Valued at approximately $0.6 million with the potential for
another $0.1 million in additional work, SGS is scheduled to deliver the
hardware in nine months.
Conference Call
SPACEHAB will host a conference call on February 9, 2004 at 10:00 a.m.
Central time to discuss the second quarter earnings release. To participate
on the call, please register with Haris Tajyar, Investor Relations
International, at 818-382-9702. To participate via the Internet, visit the
Investor Relations section of the SPACEHAB website at www.spacehab.com. A
taped replay will be available following the conference call and accessible
via access code 21649855 until 11:59 p.m. Eastern time on February 10, 2003 at
800.252.6030 (domestic calls) or 402.220.2491 (international calls). An audio
archived webcast of the conference call will be available on the Company
website for approximately 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.
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share data)
Three Months Six Months
Ended December 31, Ended December 31,
2003 2002 2003 2002
Revenue $32,816 $28,050 $51,666 $54,862
Costs of revenue 12,830 22,758 26,357 44,393
Gross profit 19,986 5,292 25,309 10,469
Operating expenses:
Selling, general and
administrative 3,403 2,667 6,335 6,083
Research and development 2 73 2 85
Goodwill impairment 8,274 -- 8,274 --
Impairment of
investment in Guigne 1,800 -- 1,800 --
Total operating
expenses 13,479 2,740 16,411 6,168
Income from
operations 6,507 2,552 8,898 4,301
Interest expense (2,859) (1,839) (4,599) (3,699)
Interest and other
income, net 42 (41) 75 (30)
Income before income
taxes 3,690 672 4,374 572
Income tax (expense)
benefit (222) 503 (240) 509
Net income $3,468 $1,175 $4,134 $1,081
Basic and diluted
income per share:
Net income per share
- basic $0.28 $0.10 $ 0.33 $0.09
Shares used in
computing net
income per share
- basic 12,401,291 12,234,266 12,386,123 12,194,775
Net income per
share - diluted $0.25 $0.09 $0.30 $0.08
Shares used in
computing net
income per share
- diluted 13,897,126 13,606,199 13,810,998 13,558,802
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
December 31, June 30,
2003 2003
(unaudited)
ASSETS
Cash and cash equivalents,
including restricted amounts
of $1,734 and $0 $7,607 $1,301
Investments, including restricted
amounts of $4,579 and $0 9,007 14,047
Accounts receivable, net 6,873 6,780
Prepaid expenses and other current assets 787 343
Total current assets 24,274 22,471
Property, plant, and equipment, net of
accumulated depreciation and amortization 81,311 83,689
Other assets, net 4,353 15,196
Total assets $109,938 $121,356
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $29,753 $27,221
Long-term liabilities 69,519 89,045
Stockholders' equity 10,666 5,090
Total liabilities and stockholders'
equity $109,938 $121,356
FOR MORE INFORMATION:
Kimberly Campbell
Director of Marketing and Communications
SPACEHAB, Inc.
713.558.5049
campbell@spacehab.com
