Spacehab Lands Back in the Red in 2006 with $12 Million Loss

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  Space News Business

Spacehab Lands Back in the Red in 2006 with $12 Million Loss

By BRIAN BERGER
Space News Staff Writer
posted: 11 September 2006
12:17 pm ET


WASHINGTON — Boosted to profitability by one-time gains in 2004 and 2005, Spacehab landed back in the red for 2006, posting a $12 million net loss for its corporate fiscal year that ended June 30.

The Houston-based space services company attributed about half of its loss for the year to a $6.3 million write-off for a pressurized module that was destroyed in February 2003 when the Space Shuttle Columbia broke up during re-entry.

NASA paid Spacehab $8.2 million in 2005 to compensate for the loss of the leased module, a payout that helped the company post a $5.2 million profit last year on revenues of $59.4 million. Spacehab values the lost hardware at $88 million and is suing NASA for the balance.

Spacehab’s tort claim, filed in the U.S. District Court in Houston in February, is on hold pending a ruling by the Armed Services Contract Board of Appeals on the matter .

Spacehab Chief Financial Officer Brian Harrington told analysts during a Sept. 5 conference call that the appeal is still in the discovery phase and probably a year away from resolution.

Harrington also said Spacehab has accelerated the depreciation of its space shuttle hardware to square with NASA’s planned 2010 retirement of the shuttle fleet. Previously the company assumed a 2015 shuttle retirement date for the purpose of pinning a value on the hardware, which includes both pressurized and unpressurized cargo and experiment modules designed to fit in the space shuttle cargo bay.

Harrington told analysts that NASA’s dearth of space shuttle launches remained a problem for Spacehab in 2006.

NASA has flown just two space shuttle missions since the Columbia disaster, and only one of those — Discovery’s July 2005 return-to-flight mission — occurred within Spacehab’s most recently completed fiscal year.

The majority of Spacehab’s revenues come from leasing its shuttle-borne modules to NASA to host experiments and carry supplies bound for the international space station. Spacehab was disappointed when NASA decided in late 2005 to spend $120 million building its own unpressurized cargo carrier rather than use a similar, if slightly smaller, Spacehab module that is available today to haul hardware to the space station.

Spacehab also provides engineering support to the space station program, primarily under subcontract to Lockheed Martin Corp. of Bethesda, Md. Although Spacehab’s earnings statement did not break out revenues by business unit, Spacehab Chief Operating Officer Mike Bain said in a late August interview that the space station support work brings in between $5 million and $10 million a year.

Bain said Spacehab continues to pull in an additional $10 million to $15 million a year through Astrotech Space Operations, a Titusville, Fla.-based subsidiary that provides payload processing services for satellites launching from nearby Cape Canaveral Air Force Station. But that business also has experienced setbacks in recent years, among them the cancellation of a long-term contract with Boeing Co. of Chicago to process payloads slated for launch on Boeing’s Delta 2 rockets. Boeing paid Astrotech $17.5 million in termination fees for the cancellation, helping Spacehab return a $2.2 million profit in 2004 on revenues of $77.6 million.

Spacehab’s new fiscal year is off to a shaky start with continued delays getting the first space station assembly mission in over three years off the ground, and a disappointing loss in a competition to demonstrate new space station re-supply services for NASA.

Spacehab was one of six finalists for part of the $500 million NASA intends to spend through the end of the decade on the Commercial Orbital Transportation Services demonstration program. NASA announced Aug. 18 that it was splitting the money between El Segundo, Calif.-based Space Exploration Technologies and Oklahoma City-based Rocketplane Kistler. Although Spacehab is lending its payload processing and logistics expertise to both teams, the company has not pinned a dollar value to the work to be done.