Lean Organization and Improved Operations Lead to Profitable Year End
Highlights
- Annual revenue of $77.6 million despite grounding of space
shuttle - Net income of $2.1 million for fiscal year 2004
- Total debt reduced by $13.9 million to $70.3 million
- Cash plus short-term investments at year end of $7.6 million
- Contract backlog of $100.9 million
SPACEHAB, Incorporated (NASDAQ/NMS: SPAB), a leading provider of
commercial space services, today announced financial results for its
2004 fiscal year and fourth quarter ended June 30, 2004.
Earnings and Revenue
The fourth quarter of SPACEHAB’s fiscal year ended June 30, 2004
resulted in a net loss of $2.3 million or $0.19 per basic share,
compared with a fiscal year 2003 fourth quarter net loss of $20.1
million or $1.63 per basic share. Net earnings for fiscal year 2004
were $2.1 million or $0.17 per basic share compared to a net loss in
fiscal year 2003 of $81.8 million or $6.66 per basic share. Revenue
for the fourth quarter of 2004 was $11.1 million, a decrease of 19%
from the prior year’s quarterly revenue of $13.7 million. SPACEHAB’s
revenue for fiscal year 2004 totaled $77.6 million compared to revenue
of $95.0 million in the prior fiscal year.
“Although we experienced a decline in revenue for 2004 due to the
completion of a large SPACEHAB Government Services contract and
ongoing delays in the space shuttle launch schedule, our intense
efforts to improve operations and streamline our organization resulted
in a net profit for the year,” said Brian K. Harrington, SPACEHAB
Senior Vice President, Finance and Chief Financial Officer. NASA has
announced that it currently anticipates a return to flight for the
shuttle no earlier than March 2005.
Fourth quarter results reflect costs of $1.3 million which
includes expenses associated with the Company’s decision to end its
contract with The Boeing Company for integration and operations
services in support of SPACEHAB’s modules. The impact includes costs
for closing the Huntsville, Alabama offices occupied by Boeing in
fulfillment of this contract along with an incentive fee made payable
upon termination of the contract. As described in more detail later in
this release, SPACEHAB has significantly enhanced its internal
engineering and technical staff and is now providing these services
with internal personnel for future space shuttle missions.
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 flights and for logistics planning and preparation for
future space shuttle missions.
During fiscal year 2004, SPACEHAB was faced with numerous
challenges and transitions. Significant events and activities that
made an impact on business operations included the extended downtime
in space shuttle operations, major contractual changes in all of the
Company’s main business units, the changeover of work previously
outsourced to an in-house capability, and the announcement and
associated outcome of the Nation’s New Vision for Space Exploration.
SPACEHAB capably responded by streamlining operations, turning
opportunities into reality, strengthening relationships with valued
customers, and positioning the Company to be a member of the new
exploration program.
Specifically, the current fiscal year earnings include goodwill
impairments of $8.3 million for Astrotech and SPACEHAB Government
Services and investment impairment in Guigne Inc. 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 Boeing in termination of certain minimum financial guarantees
under its satellite processing contract with SPACEHAB’s Astrotech
subsidiary.
Interest expense was approximately $8.2 million for the year ended
June 30, 2004 compared to approximately $7.2 million for the year
ended June 30, 2003. The current fiscal year included $1.3 million to
retire an interest rate swap agreement upon restructuring of certain
debt. Consolidated selling, general, and administrative expenses were
$10.9 million in fiscal year 2004, compared to $13.1 for fiscal 2003,
reflecting costs associated with closing and relocating the corporate
offices from Washington D.C. to Houston, Texas.
“Fiscal 2004 was one of progress and transformation for SPACEHAB
as the Company demonstrated growing maturity and continued to
stabilize operations and build underlying profitability,” said Mr.
Harrington. “We made the hard decisions to leave programs offering
marginal returns or requiring high-risk investments, and we turned our
financial attention to cash flow, earnings, and liquidity yet we
maintained our vector as a pioneering company, leading the way toward
the development of a commercial space market.”
Liquidity
Total debt was reduced by $13.9 million during fiscal 2004 to
$70.3 million through scheduled debt amortization, repayment of
certain loans, and the restructuring and reduction of the Astrotech
facility mortgage. As previously reported, SPACEHAB completed
restructuring its financing of its Florida Spacecraft Processing
Facility (SPF) in January 2004, reducing the facility mortgage
obligation by approximately $11.0 million. The facility mortgage was
restructured with a principal balance of $5.6 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 and the SPF itself.
Combined cash, cash equivalents, and short-term investments at
June 30, 2004 were $7.6 million. SPACEHAB’s $5.0 million revolving
credit facility, which includes a restriction on $5.6 million of
short-term investments, had a balance drawn of $1.4 million as of June
30, 2004.
Deferred revenue as of June 30, 2004 was $7.2 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 with Mitsubishi Corporation that was to be flown for the
Japan Aerospace Exploration Agency on an upcoming space shuttle
research mission. Due to ongoing delays in shuttle missions and the
resourceful efforts of SPACEHAB and their international alliance with
RSC Energia, the commercial contract was modified and the services
provided on multiple Russian Progress missions, the first of which
successfully launched subsequent to fiscal year end.
Current liabilities decreased to $22.3 million at June 30, 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.
The Company has submitted a formal claim for indemnification of
losses totaling $87.7 million dollars resulting from the Space Shuttle
Columbia accident in February 2003. The claim has been submitted to
NASA, and SPACEHAB is currently in negotiations with NASA with the
goal of expedient resolution. The contract with NASA for use of the
Company’s space assets on Columbia provided for indemnification of
$8.0 million by NASA. The negotiations underway relate to
indemnification beyond this amount based upon the Company’s total loss
of $87.7 million and NASA’s reconciliation of the losses allowable
under the Federal Acquisition Regulations of approximately $47.4
million. SPACEHAB believes that it has a basis for recovery of some or
all of the loss from NASA, but there can be no assurance as to the
timing or the amount, if any, to be recovered from the claim. In the
event that an acceptable resolution cannot be reached, SPACEHAB has
the right to file for administrative and/or judicial review of its
claim for indemnification.
The Company’s ability to maintain sufficient liquidity in the
future will depend on a number of factors including the return to
flight of the space shuttle, the continued activity in the commercial
and governmental satellite launch industry, and the amount and timing
of the ultimate settlement of the claim for indemnification for losses
suffered on the Space Shuttle Columbia accident.
Update of Ongoing Operations
In January 2004, the White House issued a new vision for U.S.
space leadership. This action was followed by the release of the
President’s Commission report on the Implementation of the U.S. Space
Exploration Policy in June 2004. This report established clear
guidelines for realistic implementation of the Nation’s new space
vision, including recommendations to ‘recognize and implement a far
larger presence of private industry in space operations with the
specific goal of allowing private industry to assume the primary role
of providing services to NASA, and most immediately in accessing
low-Earth orbit.’
“I am encouraged by the many parallels between the Commission’s
report and our Company’s business model,” observed Michael E. Kearney,
President and Chief Executive Officer. “Our innovative solutions,
commercial offerings, and strong international partnerships that were
also advocated as part of the report, position SPACEHAB to be a
crucial player in the many initiatives that will evolve from this
developing endeavor.”
For the first half of fiscal 2004, the ReALMS contract was the
vehicle used by NASA to obtain the use of the Company’s module and
pallet carriers. Upon the restructuring of NASA’s various
International Space Station (ISS) contracts, Lockheed Martin became
the prime contractor for ISS cargo services, and SPACEHAB Flight
Services (SFS) now provides logistics capabilities and assets as a
subcontractor to Lockheed. The new contract provides for the use of
SPACEHAB’s single module as well as its Integrated Cargo Carriers
(ICCs) to support three logistics missions to the ISS: STS-121,
STS-116, and STS-118, in order of their scheduled launch dates. The
contract also provides for sustaining SPACEHAB’s single and double
module and ICC flight readiness capabilities throughout the contract
period of performance.
Additionally, SPACEHAB has a $19.9 million contract with Boeing
for ICC services on the STS-114 mission. Currently, STS-114 is the
return-to-flight mission scheduled for launch no earlier than March
2005. SPACEHAB will be further compensated for any additional delays
in launching this mission, or other missions under contract that are
in the late stages of mission preparation, at the time of an announced
delay. This compensation is negotiated on a cost basis as contract
price adjustments to cover the period until the shuttle returns to
flight.
During the fiscal year, 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 as
well as NASA’s emerging exploration initiative.
Subsequent to year end, the SFS Space Commerce Development group
was awarded a six-month NASA study contract valued at approximately
$1.0 million to support the space agency’s new exploration
initiatives. As one of a just a handful of the proposals selected from
the multitude submitted, SPACEHAB will define concepts for
accomplishing human lunar exploration with a focus on innovative
solutions and commercial approaches that could be extensible to Mars
and beyond. In addition to this six-month contract effort, the Company
may be awarded a contract option that includes an additional six-month
effort also valued at nearly $1.0 million.
SPACEHAB’s Astrotech subsidiary supported the processing of twelve
spacecraft for launch during fiscal year 2004, compared to eight
spacecraft in fiscal 2003. During the fourth quarter 2004, this
included four commercial satellites launched into orbit, one of which
was the heaviest commercial satellite ever launched successfully
through the Sea Launch Company. Astrotech’s Vandenberg Air Force Base
facility saw the processing of the ROCSAT-2 spacecraft and the
Company’s Titusville, Florida team supported the successful launch of
the AMC-11 telecommunications satellite.
During fiscal 2004, Astrotech began direct contract support to
NASA for satellite support services in Florida. Astrotech has two NASA
missions under contract, MESSENGER which successfully launched after
the fiscal year, and Deep Impact scheduled for launch in fiscal 2005.
Astrotech is also working with NASA on an Indefinite
Delivery/Indefinite Quantity (IDIQ) contract format for future mission
support.
SPACEHAB Government Services is currently under contract to
provide configuration management services within the Program
Integration and Control (PI&C) contract of which ARES Corporation is
the prime contractor. The SGS Project Engineering and Fabrication team
received several contracts during the fiscal year to design and
fabricate various flight and crew training hardware in support of NASA
and various ISS international partners. Included were training
equipment for NASA and the European Space Agency, large stowage bags,
and 175 new flight handrails to support on-orbit astronaut mobility.
Kearney stated, “I am excited about where SPACEHAB and the
aerospace industry are going.” A recent Gallup poll showed that more
than two-thirds of Americans surveyed support the new space vision and
that funding for NASA should remain constant or increase. “There is a
renewed spirit of discovery and purpose — not only at NASA but across
the Nation — and SPACEHAB will continue to be a pioneering leader of
this growing market.”
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 year end and fourth quarter financial results as
well as other recent and potential future developments relating to
SPACEHAB. To participate on the call, please dial 888-532-3106
(domestic calls) or 904-779-4753 (international calls) and ask for the
SPACEHAB Earnings Conference. A taped replay will be available
following the conference call and accessible via access code 26054979
until 11:59 p.m. Eastern time on September 9, 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 Information
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 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.
Tables follow
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share data)
Three Months Twelve Months
Ended June 30, Ended June 30,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue $11,140 $13,688 $77,606 $94,963
Costs of revenue 9,506 12,275 45,678 78,791
----------- ----------- ----------- -----------
Gross profit 1,634 1,413 31,928 16,172
----------- ----------- ----------- -----------
Operating expenses
Selling, general and
administrative 2,028 3,869 10,908 13,098
Research and
development 214 13 223 118
Nonrecurring charge,
loss of Research
Double Module - - - 50,268
Goodwill impairment - - 8,274 11,925
Asset impairment 16,143 16,143
Impairment of
investment in Guigne - - 1,800 -
----------- ----------- ----------- -----------
Total operating
expenses 2,242 20,025 21,205 91,552
----------- ----------- ----------- -----------
Income (loss) from
operations (608) (18,612) 10,723 (75,380)
Interest expense (1,461) (1,702) (8,237) (7,243)
Interest and other
income (expense), net (2) 47 95 (9)
----------- ----------- ----------- -----------
Income (loss) before
income taxes (2,071) (20,267) 2,581 (82,632)
Income tax (expense)
benefit (255) 130 (506) 857
----------- ----------- ----------- -----------
Net income (loss) $(2,326) $(20,137) $2,075 $(81,775)
=========== =========== =========== ===========
Income (loss) per share
Net income (loss) per
share - basic $(0.19) $(1.63) $0.17 $(6.66)
=========== =========== =========== ===========
Shares used in
computing net income
(loss) per share -
basic 12,563,072 12,353,587 12,450,320 12,285,467
=========== =========== =========== ===========
Net income (loss) per
share - diluted $(0.19) $(1.63) $0.15 $(6.66)
=========== =========== =========== ===========
Shares used in
computing net income
(loss) per share -
diluted 12,563,072 12,353,587 14,141,949 12,285,467
=========== =========== =========== ===========
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
June 30, June 30,
2004 2003
ASSETS ------------ ------------
Cash, restricted cash and investments $7,577 $15,348
Accounts receivable, net 7,878 6,780
Property, plant, and equipment, net 79,600 83,689
Other assets, net 4,870 15,539
------------ ------------
Total assets $99,925 $121,356
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 22,301 27,221
Long-term liabilities 68,214 89,045
Stockholders' equity 9,410 5,090
------------ ------------
Total liabilities and stockholders' equity $99,925 $121,356
============ ============
Contact:
SPACEHAB, Inc., Houston
Kimberly Campbell, 713-558-5049
campbell@spacehab.com
