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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the Fiscal Year Ended
June 30, 2001.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required] For the
transition period from _____________ to ____________
Commission File No. 0-27206
SPACEHAB, Incorporated
300 D Street, SW
Suite 814
Washington, D.C. 20024
(202) 488-3500
Incorporated in the IRS Employer Identification
State of Washington Number 91-1273737
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange
Common Stock on which Registered
(no par value) NASDAQ National Market
Number of shares of Common Stock (no par value) outstanding as of
August 23, 2001:11,528,145. Aggregate market value of Common Stock (no par
value) held by non-affiliates of the registrant on August 19, 2001, based upon
the closing price of the Common Stock on the Nasdaq National Market of $1.91 was
approximately $22,018,757.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES_X_ NO ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
Documents Incorporated by Reference:
Proxy Statement for the Annual Meeting of Parts I, II, and III of Form 10-K
Stockholders to be held November 20, 2001.
PART I
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, including (without limitation) under "Products
and Services," "Company Strategy," "Dependence on a Single Customer," "Research
and Development," "Competition" and "Backlog" of Item 1 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General" and "--Liquidity and Capital Resources" of Item 7. 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, the successful development and commercialization of the
Research Double Module and related new commercial space assets, deployment of
the International Space Station ("ISS"), technological difficulties, product
demand and market acceptance risks, the effect of economic conditions,
uncertainty in government funding and the impact of competition.
Item 1. Business
Company Background and History
------------------------------
SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated
in 1984 and is the first company to commercially develop, own and operate both
pressurized habitable modules that provide space-based laboratory research
facilities and cargo services aboard the U.S. Space Shuttle system (the "Space
Shuttle" or "STS") and an unpressurized cargo carrier system. A SPACEHAB Single
Module, when installed in the payload bay of a Space Shuttle, more than doubles
the working and living space available to astronauts for research,
experimentation, habitation and storage. The Company presently offers its
SPACEHAB Modules in a single modular version (the "Single Module") and a double
modular version (the "Double Module"). The Company also offers an unpressurized
cargo carrier system, the ("ICC") or "Integrated Cargo Carrier", and has
completed the construction of a research double module (the "Research Double
Module" or "RDM"). During the second half of the year ended June 30, 1998, the
Company initiated development for a new asset, the Adaptable Docking Module
("ADM") which will provide the following services to the Company's customers:
serve as a docking module, serve as a crew return vehicle vestibule, serve as a
large hatch air lock and be deployable to attach to the International Space
Station ("ISS"). All versions of the SPACEHAB Modules can accommodate a
combination of lockers, racks and soft stowage arrangements, which are provided
as a service primarily to NASA. SPACEHAB Modules, which have been outfitted with
systems to facilitate laboratory research experiments in the near-weightless
("microgravity") environment of space, are also capable of transporting food,
clothing, equipment and other vital supplies (collectively, "logistics") to the
ISS. SPACEHAB also provides a full range of pre- and post-flight experiment and
payload processing services, and in-flight operations support to assist
astronauts and researchers, in space and on the ground, in connection with the
performance of experiments aboard SPACEHAB Modules. From June 1993 through June
2001, SPACEHAB Modules and ICC's have flown sixteen successful missions on the
Space Shuttle.
The Company is committed to expanding its business with NASA while also
diversifying its revenue and customer base by targeting new and related space
services markets. On February 12, 1997, the operating assets and business of
Astrotech Space Operations, L.P. ("Astrotech") were acquired from Northrop
Grumman Corporation. Astrotech is one of the premier commercial providers of
satellite payload processing services in the United States providing launch site
preparation of flight-ready satellites to major U.S. space launch companies and
satellite manufacturers, including Lockheed Martin Corporation ("Lockheed
Martin"), The Boeing Company ("Boeing") and Orbital Sciences Corporation
("Orbital Sciences"). The Astrotech acquisition diversified SPACEHAB's customer
base to include commercial customers of space satellite payload processing
services and broadened the Company's business base to include services in
support of manned as well as unmanned space activities.
SPACEHAB expanded its capability to respond to the needs of its Human
Space Flight Customers by acquiring Johnson Engineering Corporation ("JE") on
July 1, 1998. With over 546 employees, JE performs several critical services for
NASA including flight crew support services, operations, training and
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fabrication of mockups at NASA's Neutral Buoyancy Laboratory ("NBL") and at
NASA's Space Vehicle Mockup Facility ("SVMF"), where astronauts train for both
Space Shuttle and ISS missions. JE also designs and fabricates flight hardware
as well as providing stowage integration services and, is responsible for
configuration management support to the ISS program office.
On April 11, 2000, the Company announced the formation of Space Media,
Inc. ("SMI"), a majority-owned subsidiary that intends to create proprietary
space-themed content for education and commerce. During the year ended June 30,
2001, SMI's activities were refocused primarily to develop content for the STARS
Academy(TM), corporate promotion and advertising opportunities and offering a
library of content that can be redistributed through various media channels. The
STARS Academy is a global education program offering students a scientific,
cultural and social adventure across the earth, into the oceans and aboard the
International Space Station. SMI offers retail products associated with the
STARS Academy. The STARS Academy program currently is planning to launch
student-designed experiments on a Space Shuttle mission next year for schools in
Australia, Canada, China, Israel, Japan, Singapore, Thailand, and the United
States. During the year ended June 30, 2000, SMI acquired The Space Store, an
online retail operation, anticipating that e-commerce is expected to be an
integral part of its Internet business. The Space Store currently offers an
assortment of space-related products through its Space Store website,
www.spacestore.com.
In the year ended June 30, 2000, the Company also began development
and completed the preliminary design phase, in partnership with RSC Energia
("Energia") of Korolev, Russia, of a commercial space station habitat module.
Named Enterprise(TM), this multipurpose module will be attached to the ISS. The
Company anticipates that Enterprise will be the world's first commercial real
estate in space and the first commercial module attached to the ISS. Enterprise
is currently designed to offer space station users habitation, stowage space,
communications, power and other utilities, and laboratory facilities for
long-duration research.
The Company and Energia completed the organization of Space Station
Enterprise, LLC ("SSE LLC"), a Delaware limited liability corporation, to
complete development and future operation of Enterprise. The Company and Energia
have an equal ownership interest in SSE LLC. SSE LLC is actively pursuing
additional investors to provide investment funds and participate as owners of
SSE LLC in completing Enterprise. Enterprise is anticipated to be launched in
early 2004.
Company Strategy
----------------
SPACEHAB's goal is to become a global market leader providing products
and services supporting human space flight, space station logistics and
satellite launch industries. The Company seeks to achieve this goal through
implementation of the following strategy:
1. Expanding The Scope of Business. SPACEHAB continues to focus on its
core business through evaluating opportunities to offer new products and
services to its customer base using its existing assets and company expertise.
The Company has also focused on divesting non-core business operations. The
Company has completed construction of the Research Double Module, continued
development of the ADM opportunity and has developed and flown the Integrated
Cargo Carrier. Based on SPACEHAB's continuing involvement in microgravity
research and logistics Space Shuttle missions, and its close interaction with
NASA and other users of its SPACEHAB Module services, the Company is well
positioned to anticipate emerging requirements for new services in the human
space flight industry. The acquisition of JE on July 1, 1998 complements
SPACEHAB's traditional strengths in conceptual design and program management
while adding skills in engineering, design and training critical to NASA as
well as to the successful completion of the ISS. With the acquisition of
Astrotech on February 12, 1997, the Company diversified its revenue and
customer base targeting new and related space services markets. Astrotech is
one of the premier commercial providers of satellite payload processing
facilities in the United States providing launch site preparation of
flight-ready satellites to major U.S. space launch companies and satellite
manufacturers.
2. Focusing on Quality of Service. SPACEHAB has completed sixteen
Shuttle Missions to date, all of which have been completed successfully. The
Company intends to maintain and enhance its reputation for product reliability,
process innovation and performance excellence.
3. Maintaining Its Position as Low-Price Provider. The Company
continues to offer its payload accommodation and station logistics resupply
services to NASA and other customers using
2
SPACEHAB-owned and leased assets, on a fixed-price basis that the Company
believes is significantly lower than the cost-plus basis used by traditional
aerospace contractors. Through the focus and rigorous application of commercial
best practices in the development and operation of its hardware and facilities,
SPACEHAB substantially reduces the cost, time and complexity that burden
conventional government contractors providing services under cost-plus
contracts.
JE performs services under a cost-plus award and incentive fee contract
for government services that is requested and directed by NASA. This contract
form provides for the lowest cost to the government by requiring a separate
negotiation of the price for each task order, thereby allowing JE to implement
commercial best practices to reduce cost. JE's capabilities also provide a base
with which to pursue commercial opportunities.
4. Continuing Entrepreneurial Initiatives. The Company continues to
develop and offer innovative business arrangements to meet NASA and other
customer requirements. The Company has repeatedly taken the initiative to
improve its modules and payload processing services and to deploy new assets in
anticipation of customer needs. By focusing on the quality, cost and
responsiveness of its services, and by attracting and recruiting highly talented
and experienced personnel into its distinctly entrepreneurial organization,
SPACEHAB seeks to distinguish itself as an innovative and effective provider of
commercial space services while achieving higher contract profit margins for
module contracts than are customary in traditional government aerospace
contracts.
5. Leveraging International Strategic Alliances. The Company seeks to
create and maintain strategic alliances with key international players in the
space industry. Such relationships include Mitsubishi Corporation in Japan;
Astrium, GmbH (formerly known as DaimlerChrysler Aerospace AG ("Astrium"), a
related party, Alenia Spazio S.p.A. ("Alenia"), and Intospace GmbH in Europe;
and RSC Energia in Russia. On August 2, 1999, Astrium, a related party,
strengthened its strategic relationship with the Company by purchasing a $12.0
million equity stake in SPACEHAB. This transaction was completed in two stages,
on August 5, 1999 and on October 14, 1999. The Company believes these alliances
have produced and will continue to produce business opportunities with these
partners, the governments of their respective countries and other industries
within those countries.
Through the Company's contracts, it continues to implement its business
strategy by identifying customer requirements, creating innovative technical
solutions, raising private capital to develop assets and providing services
pursuant to those contracts.
Products and Services
---------------------
SPACEHAB Single Modules are aluminum cylinders, measuring 10 feet in
length by 13.5 feet in diameter, that incorporate a patented design including a
truncated top and flat-end caps. These fully instrumented modules provide
experiment resources such as power, data management, thermal control and vacuum
venting. SPACEHAB Single Modules are employed primarily for research missions
such as the STS-95 flight that carried Senator John Glenn back into space in
October 1998. In the nine months ended June 30 1996, the Company completed a
development program and introduced the Logistics Double Module. This module was
optimized to carry logistics and was used by NASA to carry vital supplies to the
astronauts and cosmonauts who resided on the Russian space station Mir. SPACEHAB
invested $12.5 million in the design, development, and production of the
Logistics Double Module. During the year ended June 30, 1997, in an effort to
anticipate the need of customers, the Company began the full-scale development
and construction of its Research Module with double module hardware, which when
combined with a Single Module becomes the RDM. The RDM is fully dedicated to
microgravity research and is under contract for the STS-107 mission, which is
scheduled to fly in May 2002. Expenditures for the RDM through the year ended
June 30, 2001 were $59.9 million. The RDM was completed in the year ended June
30, 2001.
The Company expects that the RDM will meet or exceed all of NASA's
projected requirements for dedicated microgravity and life sciences research
that had been performed by Spacelab, the U.S. government-owned habitable module,
which was retired after its final mission in April 1998. As a result of the
retirement of NASA's Spacelab, the Company believes that its flight-proven
modules position SPACEHAB to become the sole provider of crew-tended
microgravity research capabilities for the Space Shuttles. In the year ended
June 30, 1998, the Company initiated preliminary development of the ADM. The ADM
will provide the following services to the Company's customers: serve as a
docking module with the ISS, a crew return vehicle vestibule and a large hatch
air lock.
3
SPACEHAB has addressed the need to carry unpressurized cargo to the ISS
by designing and developing the ICC System of unpressurized or "space-exposed"
payload carriers. Unpressurized cargo, including ISS assembly components,
astronaut tools and support equipment, as well as spare parts and experiments,
is critical to the assembly and operation of the ISS. One or more ICCs can be
used singularly or in combination with SPACEHAB Single or Double Modules to
provide the optimum mix of pressurized and unpressurized cargo on a single
mission to the ISS. The ICC was first flown on the first supply mission to the
ISS, STS-96, in May 1999. Three additional successful missions have been flown
to date. Two more are under contract. Five more appear in NASA manifest planning
documents. In order to more fully meet NASA's requirements for external,
unpressurized cargo, the Company, in partnership with Astrium GmbH, a related
party, has completed development of a vertical cargo carrier, designed and built
for SPACEHAB by RSC Energia, and other derivatives and components which make the
ICC System the most capable, flexible and adaptable unpressurized payload
carrier system anywhere. ICC derivatives include deployable pallets that will
transfer from the Space Shuttle Orbiter and be attached to the ISS during
increment operations.
JE performs several critical services for NASA, including flight crew
support services, operations, training and fabrication of mockups at NASA's
Neutral Buoyancy Laboratory and at NASA's Space Vehicle Mockup Facility, where
astronauts train for both Space Shuttle and ISS missions. JE also designs and
fabricates flight hardware, such as flight crew equipment and crew quarters
habitability outfitting, as well as providing stowage integration services. JE
is also responsible for configuration management support to the ISS program
management office. JE's ability to perform detailed design, fabrication, and
operations complements the Company's traditional strengths in conceptual design
and program management. The acquisition of JE provides many of the critical
skills and capabilities used to perform SPACEHAB services that currently are
acquired through subcontracting relationships.
JE primarily operates under the Flight Crew Systems Development
contract ("FCSD" Contract") which is currently a $366.6 million multitask
cost-plus-award and incentive-fee contract. The contract commenced in May 1993
and was originally scheduled to conclude in April 2001. NASA has exercised its
option to extend certain tasks for an additional year through April 2002.
SPACEHAB's Astrotech payload processing business serves the commercial
satellite manufacturing and launch services industries in Florida and at the
Vandenberg Air Force Base in California. Although payload processing is
generally associated with the final preparation of a satellite or other space
payload for launch, it is also the first step in the launch process and requires
specialized facilities and support located at the launch site. Astrotech's
payload processing activities provide the necessary resources for mechanical
assembly or reassembly, electrical systems testing, calibration, liquid
propellant loading and numerous other related activities. Additionally,
Astrotech's specialized facilities include, but are not limited to,
environmentally controlled rooms, airlock systems, overhead crane systems, and
hazard-proof work areas. In the year ended June 30, 1999, Astrotech acquired an
additional 23.5 acres of land adjoining its existing Florida site for the
construction of additional payload processing facilities required to support the
increased projected launch rate and larger sized payloads associated with the
new Evolved Expendable Launch Vehicles ("EELV") being developed by Boeing and
Lockheed Martin under Air Force contracts. In support of the new Boeing and
Lockheed Martin contracts, Astrotech completed the design and began construction
of a major facility expansion at its Florida site estimated to cost
approximately $30.5 million. When completed in the fall, this new facility will
support all planned configurations of the new Boeing Delta IV and Lockheed
Martin Atlas V launch vehicles. Expenditures for this expansion were
approximately $9.9 million and $5.7 million in the year ended June 30, 2001 and
2000, respectively. Subsequent to the year ended June 30, 2001, Astrotech
completed a $20 million financing of its satellite processing facility expansion
in Titusville, Florida.
Astrotech operates its payload processing services under multi-year
agreements with Lockheed Martin to support the processing of commercial Atlas
payloads and with Boeing to support the processing of all Delta payloads, and
with Orbital Sciences to support the processing of Taurus and Pegasus payloads.
Astrotech also has a similar arrangement with Boeing to support the processing
of all Sea Launch payloads at Sea Launch's facility in Long Beach, California.
Astrotech continued its pursuit of a second major business area,
providing sounding rocket flight hardware and launch services. In December 1998,
Astrotech entered into a relationship with ATK (formerly Alliant Tech Services,
Inc) to develop a new sounding rocket system called the "Oriole". The successful
test launch of the Oriole was completed on July 7, 2000 from NASA Wallops Flight
Facility in
4
Virginia. Subsequent to the year ended June 30, 2001, Astrotech sold the assets
of its Oriole sounding rocket program and related property to DTI Associates,
Inc. of Arlington, Virginia. The sale, effective July 26, 2001 turns over all
physical and intellectual property assets of Astrotech's sounding rocket
program, including the design of the Oriole rocket, except for those required
for Astrotech to fulfill the terms of an agreement with an existing customer.
Astrotech also plans to pursue additional opportunities, including (i)
providing payload processing facilities and services to new U.S. Government
customers in the defense and intelligence communities and (ii) supporting new
space launch facilities and related payload processing functions
internationally.
On April 11, 2000, the Company announced the formation of Space Media,
Inc. ("SMI"), a majority-owned subsidiary that intends to create proprietary
space-themed content for education and commerce. During the year ended June 30,
2001, SMI's activities were refocused primarily to develop content for the STARS
Academy(TM), corporate promotion and advertising opportunities and offering a
library of content that can be redistributed through various media channels. The
STARS Academy is a global education program offering students a scientific,
cultural and social adventure across the earth, into the oceans and aboard the
International Space Station. SMI offers retail products associated with the
STARS Academy. The STARS Academy program currently is planning to launch
student-designed experiments on a Space Shuttle mission next year for schools in
Australia, Canada, China, Israel, Japan, Singapore, Thailand, and the United
States. During the year ended June 30, 2000, SMI acquired The Space Store, an
online retail operation, anticipating that e-commerce is expected to be an
integral part of its Internet business. The Space Store currently offers an
assortment of space-related products though its Space Store website,
www.spacestore.com.
------------------
Also in the year ended June 30, 2000, the Company began development, in
partnership with RSC Energia, of the Enterprise(TM) space station habitat module
- the world's first commercial real estate in space. With Enterprise, the
Company can offer stowage space, power and other utilities, and research
facilities for long-duration experiments.
In 1998 the Company entered into a joint venture agreement with Guigne
Technologies Ltd. to build the SpaceDRUMSTM , a facility that uses acoustic
energy to position samples inside an experiment device for "containerless
processing", which is scheduled to be the first commercial research facility on
the ISS. The company's interest in the joint venture was converted to an equity
interest in Guigne', Inc., the parent company of Guigne Technologies, Ltd.
effective January 1, 2000. Guigne, Inc is a developer of technologies using
acoustic energy processing which include various commercial sonar products.
The Company continues to pursue new business opportunities by
identifying customer requirements and creating and implementing innovative
technical solutions. The Company believes that the demand for microgravity and
life sciences research conducted on SPACEHAB modules and demand for the use of
its modules for logistics support and other infrastructure services including
communications, power supply and refueling and reboosting services will increase
both during the assembly phase of the ISS and after the ISS becomes fully
operational. The ISS is the largest engineering and scientific project ever
undertaken. More than a dozen nations, led by the United States, Russia, Japan
and the European Community, will develop, build, launch and operate the ISS. In
addition, the Company also believes that the increasing demand for satellites
and the improvements in satellite technology will continue to provide
opportunities in the satellite launch services field.
Industry Overview
-----------------
The U.S. space program encompasses four broad objectives: to advance
scientific research, to establish a permanent human presence in space, to
develop new technologies that contribute to U.S. economic growth and security
and to foster improved international relations through peaceful cooperation in
space with Europe, Japan, Russia and other nations. SPACEHAB is focused on two
markets: (i) microgravity and life sciences space research and (ii) space
support services such as space station logistics and resupply, ground operations
and payload processing and training.
Microgravity and Life Sciences Space Research
In orbit, the forces of inertia and gravity counterbalance each other,
thereby creating a condition of near weightlessness known as "microgravity." In
a microgravity environment, materials and living matter behave in fundamentally
different ways than they do on Earth. This phenomenon has stimulated worldwide
5
interest from scientists and commercial researchers who are seeking improved
ways to manipulate and process materials and to study biological processes that
cannot otherwise be achieved in ground-based laboratories.
The demand for access to a microgravity environment can be divided into
two broad categories: scientific research and commercial applications. NASA and
other U.S. and international government research organizations provide support
for both basic scientific research and its commercial applications to determine
the fundamental effects that gravity has on physical processes.
Space Support Services and Training
Space support services include providing logistics and payload
processing support to NASA, other governments and commercial customers of the
Space Shuttle and the ISS. Permanently orbiting facilities such as the ISS
require reliable sources of logistics: food, clothing, equipment and supplies
that sustain the astronauts and enable them to conduct research. NASA's current
plans call for the Space Shuttle to be launched at least six times per year for
the foreseeable future. It is currently estimated that the ISS, when completed,
will require approximately five Space Shuttle logistics missions per year.
To support the Space Shuttle and ISS operations, NASA requires ground
operations and payload support services before and after each mission. Payload
processing operations entail payload scheduling, mission planning,
safety/certification analysis, physical integration of the payload into its
carrier (such as SPACEHAB modules), the integration of the carriers into the
Space Shuttle's cargo bay, flight operations, technical data gathering and
synthesis, and launch and landing site activities. Space support services also
involve the provision of specialized services and support near launch sites for
commercial satellite manufacturers and launch services. These activities include
mechanical assembly or re-assembly, electrical check, calibration, liquid
propellant loading and related activities.
A significant component of space support services include managing all
training operations and facility engineering at the NBL. NASA also requires
design and fabrication of full-scale mockups of the ISS elements used in NBL and
SVMF training.
Competition
-----------
Currently, there are no other companies that compete directly with
SPACEHAB in providing pressurized module services that are carried aboard the
Space Shuttles. NASA had a government-owned and operated system, Spacelab, which
provided services similar to those provided by SPACEHAB modules. However, NASA
terminated the Spacelab program with its final mission flown in April 1998. The
Company completed the design and construction of the Research Double Module
under a contract with Boeing (formerly McDonnell Douglas Aerospace). The
Research Double Module represents a commercial replacement for NASA's Spacelab.
The Company believes that this module will significantly outperform Spacelab in
terms of technology, capacity, functionality and cost-effectiveness.
The Company's long-term strategy for growth is to provide research,
logistics, infrastructure and payload processing services to NASA and others
during the ISS era. This strategy could require the Company to compete with
commercial companies such as Lockheed Martin, Boeing and others who have
existing NASA support contracts, greater financial resources and manufacturing
capabilities, and larger marketing, sales and technical organizations than the
Company. In response to this, the Company has maintained strong strategic
relationships with United Space Alliance and Boeing. In addition, in the
international market SPACEHAB formed a strategic alliance with DaimlerChrysler
Aerospace AG, now part of the largest European aerospace corporation, Astrium, a
related party. As part of the agreement with Astrium, a related party, they have
taken a position as the largest single shareholder in the Company and are
actively pursuing joint programs with the Company. SPACEHAB's existing strategic
relationships with Mitsubishi Corporation and Alenia may provide additional
opportunities for teaming and partnerships that management believes will enable
the Company to compete for market share.
The Italian Space Agency has contracted with the International Space
Station to build three Multi-Purpose Logistics Modules ("MPLM") intended for use
in connection with the ISS. Although the MPLM provides similar services similar
as SPACEHAB's modules for ISS logistics missions, SPACEHAB believes that its
modules are complementary to the MPLM. Each module is for use in special
situations, e.g.- the MPLM is expected to be used when a requirement exists for
large construction elements such as rack-based systems and payloads. When the
requirement exists for crew rotation, resupply of food, supplies
6
and equipment, the Company believes that SPACEHAB modules would be more
appropriate due in part to the flexibility and late access capabilities of the
SPACEHAB's modules. Of the five planned or possible logistics missions per year
to the ISS, the Company expects that two or three will be SPACEHAB missions.
Astrotech's payload processing facilities are located in Florida and
California. At present, management believes that Astrotech's U.S. competition is
limited to the California Vandenberg Air Force Base ("VAFB") launch site where a
competitor, Spaceport Systems International ("SSI") is located. SSI was
established by obtaining surplus U.S. Air Force facilities at the VAFB launch
complex before Astrotech established its facilities there when no commercial
alternative was available. To the Company's knowledge, SSI has won several
contracts to process NASA spacecraft for launch from VAFB. SSI does not have
payload processing facilities in Florida, where the majority of U.S. commercial
satellite launches occur.
JE's competitors are those aerospace companies that provide engineering
and fabrication services. JE's competitors include Boeing, Lockheed Martin,
United Space Alliance, Barrios Technologies, Inc., Hernandez Engineering, Inc.,
Cimarron and Oceaneering International, Inc.
SMI has no known competitors.
Dependence on a Single Customer
-------------------------------
Approximately $87 million (or 83 percent) of the Company's revenue in
the year ended June 30, 2001 was generated from two NASA contracts - the
Research and Logistics Mission Support Contract ("REALMS") and the Flight Crew
System Development ("FCSD") Contract. While Astrotech, and the commercial
customer contracts allowed under the REALMS contract provides additional revenue
sources, the Company anticipates that revenue from NASA will continue to account
for a significant amount of the Company's revenue over the next several years.
There are no assurances, however, that NASA will require the Company's services
in the future. Therefore, the Company's failure to execute new contracts with
NASA would have a material adverse effect on the Company's financial condition
and results of operations. Additionally, a significant portion of the revenue
from JE is derived under contracts with NASA. Accordingly, the Company continues
to focus its efforts on diversifying its customer base to include commercial
companies, as evidenced by the Astrotech acquisition in 1997 and the formation
of SMI in 2000.
Backlog
-------
A significant portion of the Company's revenue is currently generated
from its contracts with NASA that, similar to contracts with other agencies of
the U.S. government, contain provisions pursuant to which NASA may terminate the
contract "for convenience." The Company's contracts with NASA are conditioned by
its terms upon NASA receiving an adequate annual appropriation of funds from the
U.S. Congress. Failure to receive funds from Congress or a withdrawal by
Congress of prior appropriations would permit NASA to terminate its contracts
with SPACEHAB "for convenience." For the government's fiscal year ended
September 30, 2001, both the U.S. Senate and House of Representatives have
authorized and approved an annual appropriation of $14.5 billion for NASA,
including $2.087 billion for the ISS, indicating a commitment by the government
to the space industry. However, there can be no assurance that the future level
of approved funding will be adequate for NASA to complete all of its initiatives
including those relating to the contracts with the Company. In addition, in
light of the recent terrorist activity, the amount of future NASA's
appropriations is uncertain.
SPACEHAB anticipates that a portion of future revenue will be derived
from contracts with entities other than agencies of the U.S. government that
will not be subject to federal contract regulations such as termination "for
convenience of the government" or federal government funding restrictions.
However, to the extent that such contracts require the use of the Space Shuttle
for transportation, these systems must be available and will have to be obtained
at a reasonable cost to SPACEHAB.
As of June 30, 2001 and 2000, the Company's contract backlog was
approximately $205 million and $218 million, respectively, of which $97 million
and $129 million, respectively, represented U.S. government backlog and $108
million and $89 million, respectively, represented non-U.S. government
contracts.
7
Contract History
----------------
SPACEHAB's fundamental business strategy is based on carefully
anticipating customer requirements and, investing capital to develop
space-flight assets, contracting with established aerospace companies for
engineering and asset production while retaining ownership of these assets and
providing innovative, cost-effective solutions that meet customer requirements
using fixed-price service contracts. This strategy has been successful for the
Company in obtaining three significant contracts with NASA: a $184.2 million
Commercial Middeck Augmentation Module contract (the "CMAM Contract") for five
missions, a $91.5 million contract for four missions and three option missions
(all of which were exercised) to the Mir Space Station (the "Mir Contract") and
a $160.3 million REALMS contract for four missions and defining the pricing for
six mission configurations. The REALMS Contract provides an opportunity for the
Company to provide similar services to commercial customers. Contracts with
commercial customers on STS-95, STS-101, STS-105, STS-107 and STS-123 are
approximately $38.0 million.
The CMAM Contract, signed in November 1990, required SPACEHAB to
furnish NASA with SPACEHAB module accommodations for experiments developed by
the Centers for the Commercial Development of Space ("CCDS") on five Space
Shuttle missions. The fifth and final CMAM mission was completed successfully
during September 1996.
The basic Mir Contract, signed in July 1995, required the Company to
provide Single and Double Module accommodations for the provision of logistics
re-supply to the Mir Space Station on four Space Shuttle missions. The fourth
mission, STS-84, was completed successfully in May 1997. In addition, in
September 1996, the Company entered into agreements with the Japanese Space
Agency ("NASDA") and the European Space Agency ("ESA") (collectively, the
"NASDA/ESA Contract"). Pursuant to the NASDA/ESA Contract, SPACEHAB provided
hardware and integration and operations for scientific microgravity experiments
to NASDA and ESA aboard the Logistics Double Module on STS-84.
In June 1997, NASA exercised all three options for additional missions
for $39.0 million under the Mir Contract. The Mir Contract options called for
two Logistics Double Module missions and one Single Module mission that were
successfully completed in September 1997, January 1998 and June 1998,
respectively.
The REALMS Contract, signed in December 1997 and amended in October
1999, requires that the Company provide a single and a double module and
unpressurized ICC to support microgravity research payloads and outfitting of
the ISS. STS-95, a research mission, flew in October 1998; STS-96, a logistics
mission, flew in May 1999; STS-101, a logistics mission, flew in May 2000;
STS-106, a logistics mission, flew in September 2000; and STS-105, a logistics
mission, flew in August 2001; and STS-107 and STS-123, research missions, are
scheduled to fly in May 2002 and May 2004, respectively. The REALMS Contract
provides an opportunity for the Company to provide similar services to
commercial customers on STS-95 and STS-101, STS-107 and STS-123. During the year
ended June 30 1998, the Company entered into agreements with NASDA, ESA, the
Canadian Space Agency ("CSA") and the Japanese Broadcasting Agency ("NHK")
(collectively, the "STS-95 Commercial Customers"). Pursuant to the agreements,
SPACEHAB provided hardware and integration and operations for scientific
microgravity experiments to the STS-95 Commercial Customers aboard the Single
Research Module on STS-95. The Company completed integration and operations
efforts for the STS-95 and STS-96 missions and began integration and operations
efforts for STS-101 and STS-107 during the year ended June 30, 1999 reporting
$39.1 million in revenue for these missions under the percentage-of-completion
revenue recognition policy. In the year ended June 30, 2000, the Company
completed integration and operations efforts for STS-101, began integration and
operation efforts for STS-102, STS-105 and STS-106 and continued integration and
operation efforts for STS-107. In the year ended June 30, 2000, the Company
recognized $39.6 million in revenue for these missions. In the year ended June
30, 2001, the Company completed integration and operations efforts for STS-102
and STS-106 continued integration and operations effects for STS-105, STS-107,
STS-114 and STS-123. In the year ended June 30, 2001, the Company recognized
$45.0 million in revenue for these missions.
JE primarily operates under the Flight Crew Systems Development
contract ("FCSD" Contract") which is currently a $366.6 million multitask
cost-plus-award and incentive-fee contract. The contract commenced in May 1993
and was scheduled to conclude in April 2001. NASA has exercised its option to
extend certain tasks for an additional year through April 2002. JE performs
several critical services for NASA including flight crew support services,
operations, training and fabrication of mockups at NASA's NBL and at NASA's
SVMF, where astronauts train for both Space Shuttle and ISS missions. JE also
8
designs and fabricates flight hardware, such as flight crew equipment and crew
quarters' habitability outfitting as well as providing stowage integration
services. JE is also responsible for configuration management support to the ISS
program management office. For the years ended June 30, 2001, 2000 and 1999, JE
recognized revenue of $53.5 million, $58.2 million and $58.4 million,
respectively.
During the year ended June 30, 2000, Astrotech completed negotiations
of long-term extensions to payload processing contracts with its two largest
customers, Boeing and Lockheed Martin. The revenue under these contracts is
approximately $85 million. Astrotech has successfully supported the processing
of over 150 satellites since the beginning of operations in 1985 and continues
to be recognized as the industry leader in commercial satellite processing. For
the years ended June 30, 2001, 2000 and 1999, Astrotech recognized revenue of
$6.2 million, $7.6 million and $9.8 million, respectively.
Research and Development
------------------------
The Company incurred $0.4 million, $2.4 million and $3.6 million in
research and development expenditures during the years ended June 30, 2001, 2000
and 1999, respectively.
Approximately $0.1 million of the Company's research and development
expenditures for the year ended June 30, 2001 were spent on the Astrotech
sounding rocket program. $0.2 million was spent on the development of a
lightweight tunnel at JE. The remainder of $0.1 million was spent on
miscellaneous research and development projects at SPACEHAB.
Approximately $1.1 million of the Company's research and development
expenditures for the year ended June 30, 2000 were spent completing the
development of the Astrotech sounding rocket program. In addition, $0.5 million
was spent on the development of the Enterprise module and $0.8 million was spent
on various studies conducted by third parties. Approximately $1.0 million of the
Company's research and development expenditures for the year ended June 30, 1999
were spent on the development of the sounding rockets. In addition, $2.6 million
was spent on various studies conducted by third parties.
SPACEHAB completed the construction of the ICC in the year ended June
30, 2000. Completion of this asset expands the Company's product and service
lines to meet market requirements for low-cost unpressurized carriers for
research experiments and cargo. SPACEHAB developed the ICC to carry
unpressurized cargo to the ISS, based on a patented pallet technology (the
"Unpressurized Cargo Pallet" or ("UCP"), which can be used independently or in
tandem with the SPACEHAB Single or Double Modules. The ICC's design is such that
it is located in what is ordinarily unused volume in the front of the Space
Shuttle's cargo bay. By expanding the capabilities of the Space Shuttle and by
offering flexibility in the mix of pressurized and unpressurized cargo carried
on each mission, the Company believes that the ICC could become the preferred
method for providing logistics and utilization resupply to the ISS. During the
year ended June 30, 2001, the Company sold the ICC assets to Astruim. SPACEHAB
has entered into an agreement with Astrium, a related party, to lease these
assets for a period of four years with two additional four-year options.
Certain Regulatory Matters
--------------------------
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. The Company believes that its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and consequential financial liability to the Company. Compliance with
environmental laws and regulations and technology export requirements has not
had in the past, and, the Company believes, will not have in the future,
material effects on the capital expenditures, earnings or competitive position
of the Company.
Employees
---------
As of June 30, 2001, the Company and its wholly and majority-owned
subsidiaries employed 647 regular fulltime employees, 546 are employed by JE, 66
are employed by SPACEHAB, 25 are employed by the Astrotech subsidiary, and 10
are employed by the SMI subsidiary. Of these employees, approximately 11 percent
hold advanced degrees, including 8 individuals who hold doctorate degrees.
Additionally, a significant number of the Company's employees have experience in
both the space industry and/or governmental space agencies, with a special
expertise in commercial space and human space flight. None of the Company's
employees are covered by collective bargaining agreements. Underlying all of
9
SPACEHAB's efforts has been the dedication and skill of its personnel. The
Company believes that the dedication of its employees is critical to its success
and that its relations with its employees are excellent.
Item 2. Properties
The Company and its wholly and majority-owned subsidiaries, Astrotech
and JE, currently occupy 14 locations. The corporate headquarters which had been
located at 300 D Street SW, Suite 814, Washington, DC 20024 was re-designated at
13130 State Highway 3, Houston, TX 77598. The office at 300 D Street SW, Suite
814, Washington, DC consists of 15,499 square-feet of office space and houses 13
employees including portion of SPACEHAB's executive management, finance and
marketing team, and a portion of Astrotech's management and administrative team.
The term of the present lease expires on December 16, 2007.
SPACEHAB has 120 employees encompassing executive management, sales and
marketing, flight services and JE employees located at 13130 State Highway 3,
Houston, TX 77598. The facility consists of 126,000 square feet of
non-contiguous office and manufacturing space located near the Johnson Space
Center. The term of the lease is for two and a half years and expires on March
15, 2003.
SPACEHAB also leases offices at 1331 Gemini Avenue, Suites 300 and 310,
Houston, Texas 77058. The Houston offices consist of approximately 23,000 square
feet of non-contiguous office space located near the Johnson Space Center. The
lease has a five-year term commencing March 1, 1998, and expiring February 28,
2003. The company is actively seeking a subtenant for this space.
The Company's payload processing facility, housing a 4-person
operations team, is located near the Kennedy Space Center in Cape Canaveral,
Florida. The facility is contained in an approximately 58,000 square-foot plant.
The Company owns the building that houses the payload processing facility but
leases the land upon which it is constructed. The payload processing facility
has a clean room work area of approximately 24,000 square-feet. This work area
is designed to accommodate the SPACEHAB Single and Double Modules, as well as
the ICC. This area includes 11 secure experiment/payload integration and work
areas ranging in size from 300 square-feet to 1,000 square-feet each. In
addition, the facility provides office space, stock rooms, storage areas, a
machine shop, an electrical shop, conference rooms, and other miscellaneous
accommodations. In July 1997, the Company negotiated a new agreement with the
Canaveral Port Authority for the lease of the land. The term of the new lease is
for a forty-three year period commencing August 28, 1997. Upon expiration of the
land lease, all improvements on the property revert at no cost to the lessor.
SPACEHAB occupies 6,300 square-feet of office space located at 615
Discovery Drive, Huntsville, Alabama housing 5 employees. The lease will expire
on October 30, 2001.
SMI occupies 1,400 square-feet on office space located on the campus of
Brevard Community College in Titusville, Florida housing 7 employees. The lease
term expired on June 30, 2001 and is being leased on a month-to-month basis.
Astrotech occupies three additional locations. The 2-person technical
sounding rocket team is located at 7513 Connelley Drive, Suite M, Hanover,
Maryland. This facility is approximately 2,000 square-feet of leased office
space. The term of the present lease is for a thirteen and one half months
period expiring on December 31, 2001. This facility was assigned to the acquiror
with the sale of the sounding rocket business subsequent to the year ended June
30, 2001.
Astrotech's 13-person engineering and support team is located in an
eight-building, owned facility at 1515 Chaffee Drive, Titusville, Florida 32780.
This 88,000 square-foot facility supports non-hazardous and hazardous material
processing, payload storage and customer offices. The construction of a new
50,000 square foot processing facility was started in the year ended June 30,
2000 and is scheduled for completion in October 2001. These buildings presently
occupy one-third of the 62-acre property owned by Astrotech, with the remaining
two-thirds available for expansion.
Astrotech has a 3-person technical staff located on Vandenberg Air
Force Base in Santa Barbara County, California. Astrotech presently rents a
60-acre site on the Air Force Base and owns five buildings comprising 18,800
square-feet, which are dedicated to the same functions provided at the Florida
facility. The term of the present land lease expires on July 13, 2013. Upon
expiration of the land lease, all improvements on the property revert at no cost
to the lessor.
10
JE occupies five locations. Its headquarters are located at 555 Forge
River Road, Suite 150, Webster, Texas 77058. The headquarters house JE's
87-person engineering team within a 31,114 square-foot facility. This office
lease will expire on June 30, 2003.
JE has a 26-person fabrication shop located at 920 Gemini Avenue,
Houston, Texas, 77058. This facility is approximately 18,000 square-feet and is
being leased for a three-year term that will expire on April 30, 2002.
JE also occupies one facility used for storage, shipping and receiving
at 926 Gemini Ave, Houston, Texas 77058. This facility consists of approximately
4,000 square feet. The lease will expire on April 30, 2002.
JE also occupies approximately 12,800 square feet of space at 18100
Upper Bay Road, Houston, Texas 77058 that houses a 11-person engineering and
laboratory team. The lease will expire on April 30, 2002.
JE also occupies approximately 13,000 square feet of space at 16850
Titan, Houston, Texas 77058 that houses a sewing lab, offices and storage place.
The lease expired on July 31, 2001 and the facility is being leased on a
month-to-month basis.
Additionally, JE has more than 366 additional employees who are housed
at various government facilities within the Houston area.
The Company believes that its current facilities and equipment are
generally well maintained and in good condition and are adequate for it's
present and foreseeable needs.
Item 3. Legal Proceedings
The Company is not currently involved in any material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the fourth
quarter of the year ended June 30, 2001.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock (the "Common Stock") trades on the NASDAQ
National Market System under the symbol "SPAB." The Common Stock has been
publicly traded since December 22, 1995, the date of the closing of the
Company's initial public offering. The quarterly high and low closing stock
prices for fiscal years 2001 and 2000 are as follows:
Fiscal 2001 High Low
----------- ---- ---
First Quarter $ 6 13/32 $ 4 3/8
Second Quarter $ 5 3/4 $ 2 1/16
Third Quarter $ 3 1/2 $ 2
Fourth Quarter $ 2 57/64 $ 2 1/16
Fiscal 2000 High Low
----------- ---- ---
First Quarter $ 6 1/8 $ 4 5/8
Second Quarter $ 6 3/4 $ 3 15/16
Third Quarter $ 6 1/16 $ 4 1/2
Fourth Quarter $ 5 1/2 $ 4 1/4
The Company has never paid cash dividends. It is the present policy of
the Company to retain earnings to finance the growth and development of its
business and, therefore, the Company does not anticipate paying cash dividends
on its Common Stock in the foreseeable future.
11
The Company has authorized 30,000,000 shares of Common Stock. At August
18, 2001, 11,528,145 shares of Common Stock were outstanding. The Company had
approximately 3,270 shareholders of record and beneficial holders of its Common
Stock on June 30, 2001.
On August 2, 1999, Astrium, a related party and a shareholder,
purchased an additional $12.0 million equity stake in SPACEHAB representing
1,333,334 shares of Series B Senior Convertible Preferred Stock. Under the
agreement, Astrium, a related party, purchased all of SPACEHAB's 975,000
authorized and unissued shares of preferred stock. At the annual stockholders
meeting held on October 14, 1999, the shareholders approved the proposal to
increase the number of authorized shares of preferred stock to 2,500,000, in
order to complete the transaction with Astrium, a related party, allowing them
to purchase the additional 358,334 preferred shares. The preferred stock
purchase increased Astrium's, a related party, and investment interest in
SPACEHAB to approximately 11.5 percent. The Series B Senior Convertible
Preferred Stock is: convertible at the holders' option on the basis of one share
of preferred stock for one share of common stock, entitled to vote on an "as
converted" basis the equivalent number of shares of common stock and has
preference in liquidation, dissolution or winding up of $9.00 per preferred
share. No dividends are payable on the convertible preferred shares.
Sales of Unregistered Securities
--------------------------------
On August 5, 1999 the Company issued 975,000 shares of a new Series B
Senior Convertible Preferred Stock (the "Series B Preferred Stock") and issued
an additional 358,334 shares of the Series B Preferred stock following an
amendment to the Company's Articles of Incorporation to permit an increase in
the number of authorized shares of preferred stock. This amendment was approved
by stockholders at their Annual Meeting on October 14, 1999.
The purchaser of the Series B Preferred Stock was DaimlerChrysler
Aerospace AG (now Astrium), a related party, and the total consideration paid
was $12 million. The Preferred Stock is convertible into shares of the Company's
Common Stock on a one for one basis, subject to anti-dilution provisions.
The Preferred Stock was issued in reliance on an exemption from
registration provided by Section 4(2) of the Securities Act of 1933 as amended
for transactions by an issuer not involving any public offering. Appropriate
legends regarding restrictions on the resale of the securities were affixed to
the certificates representing these securities.
For additional information about this transaction, please see the
Company's report on Form 8K (File No. 0-27206) filed with the SEC on August 19,
1999.
Item 6. Selected Financial Data
The selected financial data presented below are derived from the
audited consolidated financial statements of SPACEHAB. This selected financial
information should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
report.
Year Ended Year Ended Year Ended Year Ended Year Ended
June 30 June 30 June 30 June 30 June 30
----------------------------------------------------------------
1997 1998 1999 2000 2001
----------------------------------------------------------------
(in thousands, except per share data)
Statement of Operations Data:
Revenue /1/ $56,6012/3/ $64,087 $107,7207/3/ $105,708 $105,254
Costs of revenue 35,046 36,321 89,283 87,931 92,243
----------------------------------------------------------------
Gross 21,555 27,766 18,437 17,777 13,011
profit
Selling, general and 8,567 13,712 14,599 17,8328 21,796
administrative expenses
Research and development 1,252 2,620 3,636 2,440/9/ 393
expenses
----------------------------------------------------------------
Operating income (loss) 12,662 12,697 202 (2,495) (9,178)
Interest expense, net of 955 4,480 4,905 3,773 4,804
capitalized amounts
Net income (loss) 13,832/3/ 9,604 (2,589) (3,844) (12,785)/10/
Net income (loss) per common $1.24 $0.84 ($0.23) ($0.34) ($1.12)
share - Diluted5
Shares used in computing net 11,160 14,571 11,185 11,273 11,400
income (loss) Per common share -
diluted4
Other Data:
Cash provided by (used for) ($5,995) $31,604 ($6,331) $1,424 $17,124
operations
Total investing activities 29,308/5/ 23,113 58,619/6/ $29,794 $23,076
Balance Sheet Data (at period end):
Working capital (deficiency) $3,159 $62,660 $12,374 ($1,601) ($41,424)
Total assets 114,450 220,604 204,346 225,109 222,477
Long-term debt, excluding 12,725 85,322 78,810 75,901 64,589
current portion
Stockholders' equity 86,622 96,408 94,165 102,702 90,356
12
----------------------
/1/ The Company recognized revenue upon the completion of each flight under the
Mir and CMAM Contracts. For new contract awards for which the capability to
successfully complete the contract can be demonstrated at contract
inception, revenue recognition under the percentage-of-completion method is
being reported based on costs incurred over the period of the contract.
/2/ Includes revenues of $2,860 generated by Astrotech subsequent to its
acquisition on February 12, 1997.
/3/ Includes an extraordinary gain of $3,274, net of taxes and legal fees,
relating to the amendment and restatement of a credit agreement.
/4/ In December 1997, the Company adopted the provisions of Statement of
Financial Accounting No. 128, Earnings Per Share, which establishes new
guidelines for the calculations of earnings per share. Earnings per share
for FY 1994 through FY 1997 have been restated to reflect the provisions of
this new standard.
/5/ Includes $20,134 of consideration for the purchase of Astrotech.
/6/ Includes $24,745 of consideration for the purchase of JE and a $1,400
investment in a joint venture.
/7/ Includes revenues of $58.4 million generated by JE subsequent to its
acquisition on July 1, 1998.
/8/ Includes approximately $1.8 million of expenses associated with the startup
of SMI.
/9/ Includes approximately $0.5 million of expenses associated the Enterprise
module.
/10/ Includes approximately $3.3 million of non-cash expense to record a full
valuation allowance on the Company's deferred tax asset.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles. SPACEHAB, along with
Johnson Engineering Corporation ("JE"), Astrotech Space Operations, L.P.
("Astrotech"), and Space Media, Inc. ("SMI") subsidiaries define the Company.
The Company's revenues for the year ended June 30, 2001 were primarily
generated from the REALMS contract and contracts with related commercial
customers, with two missions flown, September 2000 and March 2001, and the FCSD
contract with JE. The Company's revenues for the year ended June 30, 2000 were
primarily generated from the REALMS contract and contracts with related
commercial customers, with one mission flown in May 2000 and the FCSD with JE.
The Company's revenues for the year ended June 30, 1999 were generated primarily
from the REALMS Contract and contracts with related commercial customers, with
two missions flown during the year and the FCSD contract.
SPACEHAB generates revenue by providing a turnkey service that includes
access to the modules and unpressurized cargo carriers and integration and
operations support to scientists and researchers responsible for the experiments
and/or logistics supplies for module missions aboard the Space Shuttle System
and under the FCSD Contract. Revenue generated under the REALMS Contract and for
new contract awards for which the capability to successfully complete the
contract can be demonstrated at contract inception, revenue is recognized under
the percentage-of-completion method and is being reported based on costs
incurred over the period of the contract. With respect to the FCSD cost-plus
award and incentive fee contract, revenue is recognized based on costs incurred
plus a proportionate amount of
13
estimated fee earned. Revenue provided by Astrotech's payload processing
services is recognized ratably over the occupancy period of the satellite while
in the Astrotech facilities.
The expenses associated with the operations of the Company are recorded
differently based on the type of expense. Costs of revenue include integration
and operations expenses associated with the performance of two types of efforts:
(i) sustaining engineering in support of all missions under a contract and (ii)
mission specific support. Costs associated with the performance of the contracts
using the percentage-of-completion method of revenue recognition are expensed as
incurred. Costs associated with the cost-plus-award and incentive fee contracts
are expensed as incurred by JE. Other costs of revenue include depreciation
expense and costs associated with the Astrotech payload processing facilities.
Flight related insurance covering transportation of the SPACEHAB Modules from
SPACEHAB's payload processing facility to the Space Shuttle, in-flight insurance
and third-party liability insurance are also included in costs of revenue and
are recorded as incurred. Selling, general and administrative and interest and
other expenses are recognized when incurred.
JE primarily operates under the Flight Crew Systems Development
contract ("FCSD" Contract") which is currently a $366.6 million multitask
cost-plus-award and incentive-fee contract. The contract commenced in May 1993
and was originally scheduled to conclude in April 2001. NASA has exercised its
option to extend certain tasks for an additional year through April 2002. JE
performs services under a cost-plus award and incentive fee contract for
government services that is requested and directed by NASA.
Astrotech revenue is derived from various multi-year fixed-price
contracts with satellite and launch vehicle manufacturers. The services and
facilities Astrotech provides to its customers support the final assembly,
checkout and countdown functions associated with preparing a satellite for
launch. This preparation includes: the final assembly and checkout of the
satellite, installation of the solid rocket motors, loading of the liquid
propellant, encapsulation of the satellite in the launch vehicle, transportation
to the launch pad and command and control of the satellite during pre-launch
countdown. Revenue provided by the Astrotech payload processing facilities is
recognized ratably over the occupancy period of the satellites in the Astrotech
facilities. Costs incurred by Astrotech are recognized as incurred.
On April 11, 2000, the Company announced the formation of Space Media,
Inc. ("SMI"), a majority-owned subsidiary that intends to create proprietary
space-themed content. During the year ended June 30, 2001, SMI's activities were
refocused primarily to develop content for the STARS Academy(TM), corporate
promotion and advertising opportunities and offering a library of content that
can be redistributed through various media channels. The STARS Academy is a
global education program offering students a scientific, cultural and social
adventure across the earth, into the oceans and aboard the International Space
Station. SMI offers retail products associated with the STARS Academy. The STARS
Academy program currently is planning to launch student-designed experiments on
a Space Shuttle mission next year for schools in Australia, Canada, China,
Israel, Japan, Singapore, Thailand, and the United States.
During the year ended June 30, 2000, SMI acquired The Space Store, an
online retail operation, anticipating that e-commerce may be an integral part of
its Internet business. The Space Store currently offers an assortment of
space-related products. SMI generated a nominal amount of revenue for the year
ended June 30, 2001.
Results of Operations
Fiscal Year Ended June 30, 2001 as Compared to the Fiscal Year Ended June 30,
2000
Revenue. The Company's revenue essentially remained unchanged from last
-------
year at approximately $105.3 million for the year ended June 30, 2001, as
compared to $105.7 million for the year ended June 30, 2000. For the year ended
June 30, 2001, $45.0 million was recognized from the REALMS contract and related
commercial customers, $53.5 million from JE, $6.2 million from Astrotech and
$0.5 million from SMI, $0.1 million of miscellaneous revenue. For the year ended
June 30, 2000, $39.6 million was recognized from the REALMS contract and related
commercial customers, $58.2 million from JE, $7.6 million from Astrotech and
$0.3 million of miscellaneous revenue. The increase in revenue under the REALMS
contract and related commercial customers is due primarily to an increase in
contract value due to a two-year slip in the launch date of STS-107. Revenue at
JE declined primarily due to the deletion of certain tasks under the FCSD
contract partially offset by an increase in commercial contract revenue.
Astrotech's revenue decline is primarily the result of the impact of a reduced
number of launches, of
14
customer launch vehicle failures, which have been subsequently corrected, and
the bankruptcies of Iridium and ICO Satellite Systems. SMI had no revenue for
the year ended June 30, 2000.
Costs of Revenue. Costs of revenue for the year ended June 30, 2001,
----------------
increased 5% to approximately $92.2 million, as compared to $87.9 million for
the year ended June 30, 2000. For the year ended June 30, 2001, $31.1 million of
costs were for integration and operation costs under the REALMS Contract and
related commercial customers, $49.8 million for cost of revenue at JE, $4.3
million for integration and operations at Astrotech, $0.4 million for SMI and
depreciation of $6.6 million. In contrast, the primary costs of revenue for the
year ended June 30, 2000, $24.7 million of costs were for integration and
operation costs under the REALMS Contract and related commercial customers,
$53.1 million for cost of revenue at JE, $4.7 million for integration and
operations at Astrotech, and depreciation of $5.4 million. Cost of revenue
increased under the REALMS Contract and related commercial customers contracts
primarily as the result of the increased costs of the launch date slippage of
STS-107. Cost of revenue at JE decreased primarily due to the deletion of
certain tasks under the FCSD contract partially offset by increased costs under
its commercial contracts. In addition, approximately $1.2 million of
non-reimbursable cost overruns related to the delivery of the robotic training
arm for NASA under a fixed-price contract were included in cost of revenue for
JE in the year ended June 30, 2000. JE completed this delivery during the year
ended June 30, 2000. Cost of revenue decreased at Astrotech due to the reduced
number of missions processed. SMI incurred no costs of revenue for the year
ended June 30, 2000.
Operating Expenses. Operating expenses increased by 9% to approximately
------------------
$22.2 million for the year ended June 30, 2001, as compared to $20.3 million for
the year ended June 30, 2000. Selling, general and administrative ("SG&A")
expenses increased $4.0 million from the year ended June 30, 2000 due primarily
to the start up costs associated with Space Media of $3.2 million, and expenses
associated with JE's efforts to expand its customer base into commercial markets
of $0.4 million. This increase was offset by a decrease in research and
development costs of $2.0 million.
Research and development costs for the year ended June 30, 2001 were
approximately $0.4 million, as compared to $2.4 million for the year ended June
30, 2000. This decrease is due primarily to a shift in emphasis to the
completion of the current assets under construction as opposed to the
development of new assets. Approximately $0.1 million was spent by Astrotech for
the completion of the development of the sounding rocket program this year as
compared to $1.1 million in the year ended June 30, 2000 and $0.3 million was
spent on the development of a lightweight tunnel and miscellaneous items in the
year ended June 30, 2001 as compared to $0.5 million spent on research and
development on the EnterpriseTM module during the year ended June 30, 2000.
There were no R&D expenditures for Enterprise during the year ended June 30,
2001.
Interest Expense, Net of Capitalized Interest. Interest expense was
---------------------------------------------
approximately $7.5 million and $7.4 million for the years ended June 30, 2001
and June 30, 2000 respectively. $2.7 million of interest expense was capitalized
in 2001 as compared to $3.7 million in 2000. Interest is capitalized on the
in-progress construction of the Company's modules and payload processing
facilities.
Interest and Other Income, Net. Interest and other income was
------------------------------
approximately $0.3 million and $0.7 million for the years ended June 30, 2001
and 2000, respectively. Interest income is earned by the Company through the
short-term investment of available funds.
Net Loss. The net loss for the year ended June 30, 2001 was
--------
approximately $12.8 million, or $1.12 per share (basic and fully diluted EPS),
on 11,400,482 shares as compared to a loss of $3.8 million, or $0.34 per share
(basic and fully diluted EPS), for the year ended June 30, 2000 on 11,272,767
shares. The net loss for the year ended June 30, 2001 includes a $3.3 million
non-cash charge to record a full valuation allowance on the Company's deferred
tax asset. Income tax benefit for these periods was ($0.9) million and ($1.8)
million for the years ended June 30, 2001 and 2000, respectively. As of June 30,
2001, the Company had approximately $41.7 million of available net operating
loss carry-forwards expiring between 2007 and 2021 to offset future regular
taxable income.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during the
years ended June 30, 2001 and 2000.
15
Fiscal Year Ended June 30, 2000 as Compared to the Fiscal Year Ended June 30,
1999
Revenue. The Company's revenue decreased approximately 2% to $105.7
million for the year ended June 30, 2000, as compared to $107.7 million for the
year ended June 30, 1999. For the year ended June 30, 2000, $39.6 million was
recognized from the REALMS contract and related commercial customers, $58.2
million from JE, $7.6 million from Astrotech, and $0.3 million of miscellaneous
revenue. Conversely, for the year ended June 30, 1999 revenue of $39.1 million
was recognized from the REALMS Contract and related commercial customers, $58.4
million from JE, $9.8 million from Astrotech and $0.4 million of miscellaneous
revenue. Astrotech's revenue declined from the year ended June 30, 1999 due to a
reduced number of launches, a result of customer launch vehicle failures, which
have been subsequently corrected, and the bankruptcies of Iridium and ICO
Satellite Systems. The revenues recognized under REALMS contract and related
commercial customers and for JE remained essentially the same.
Costs of Revenue. Costs of revenue for the year ended June 30, 2000,
----------------
declined 2% to $87.9 million, as compared to $89.3 million for the year ended
June 30, 1999. For the year ended June 30, 2000, $24.7 million of costs were for
integration and operation costs under the REALMS Contract and related commercial
customers, $53.1 million for cost of revenue at JE, $4.7 million were for
integration and operations at Astrotech and depreciation of $5.4 million. In
contrast, the primary costs of revenue for the year ended June 30, 1999, were
$25.9 million for integration and operation costs under the REALMS Contract and
related commercial customers, $53.8 million for cost of revenue at JE, $4.6
million for integration and operations at Astrotech, and depreciation of $5.0
million. Cost of revenue for JE include approximately $1.2 million of
non-reimbursable cost overruns related to the delivery of the robotic training
arm for NASA under a fixed-price contract. JE completed this delivery during the
year ended June 30, 2000 and there are no expected future costs.
Operating Expenses. Operating expenses increased by 11% to
------------------
approximately $20.3 million for the year ended June 30, 2000, as compared to
approximately $18.2 million for the year ended June 30, 1999. Selling, general
and administrative costs increased due primarily to the start up costs
associated with Space Media of $1.8 million and expenses associated with JE's
efforts to expand its customer base into commercial markets. This increase was
offset by a decrease in research and development costs of $1.2 million. Research
and development costs for the year ended June 30, 2000 were $2.4 million, as
compared to $3.6 million for the year ended June 30, 1999. This decrease is due
primarily to a shift in emphasis to the completion of the current assets under
construction as opposed to the development of new assets. In addition,
approximately $1.1 million was spent by Astrotech for the completion of the
development of the sounding rocket program this year as compared to $1.0 million
in the year ended June 30, 1999 and $0.5 million was spent on research and
development on the Enterprise/TM/ module during the year ended June 30, 2000.
There were no expenditures for Enterprise in the year ended June 30, 1999.
Interest Expense, Net of Capitalized Interest. Interest expense was
---------------------------------------------
approximately $7.4 million for the years ended June 30, 2000 and June 30, 1999.
$3.7 million of interest expense was capitalized in 2000 as compared to $2.5
million in 1999. Interest is capitalized on the in progress construction of the
Company's modules and payload processing facilities.
Interest and Other Income, Net. Interest and other income was
------------------------------
approximately $0.7 million and $1.6 million for the years ended June 30, 2000
and 1999, respectively. Interest income is earned by the Company through the
short-term investment of available funds.
Net Loss. The net loss for the year ended June 30, 2000 was
--------
approximately $3.8 million, or $0.34 per share (basic and fully diluted EPS), on
11,272,767 shares as compared to a loss of $2.6 million, or $0.23 per share
(basic and fully diluted EPS), for the year ended June 30, 1999 on 11,184,742
shares. Income tax benefit for these periods was ($1.8) million and ($0.5)
million for the years ended June 30, 2000 and 1999, respectively. As of June 30,
2000, the Company had approximately $26.2 million of available net operating
loss carry-forwards expiring between 2007 and 2020 to offset future regular
taxable income.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during the
years ended June 30, 2000 and 1999.
Liquidity and Capital Resources
-------------------------------
The Company has incurred net losses in the years ended June 30, 2001,
2000 and 1999. The Company has historically financed its capital expenditures,
research and development and working capital
16
requirements with progress payments under its various contracts, as well as with
proceeds received from private debt and equity offerings and borrowings under
credit facilities. During December 1995, SPACEHAB completed an initial public
offering of Common Stock (the "Offering"), which provided the Company with net
proceeds of approximately $43.5 million.
In June 1997, the Company signed an agreement with a financial
institution securing a $10.0 million revolving line of credit (the "Revolving
Line of Credit") that the Company may use for working capital purposes. As of
June 30, 2000, $4.5 million was drawn on the line of credit, which expired on
August 31, 2000. On August 9, 2000, the Company entered into a $15 million
revolving credit facility with a different financial institution, which provides
a working capital line of credit with a letter of credit sub-limit of $10.0
million (the "New Credit Facility"). This New Credit Facility replaced the $10
million Revolving Line of Credit. Certain assets of the Company collateralize
the new credit facility. The term of the new agreement is through August 2003.
As of June 30, 2001, $6.75 million was drawn on the New Credit Facility. In
conjunction with the Astrotech Financing of its satellite processing facility in
Titusville, Florida in August 2001, the terms of the New Credit Facility have
been amended. Astrotech is no longer a party to the New Credit Facility and the
maximum amount allowable to be drawn under the Credit Facility has been reduced
to $6.5 million. The Company is in the process of negotiating new covenants and
revisions to certain terms of the New Credit Facility.
In July 1997, Astrotech obtained a five-year term loan (the "Term
Loan Agreement"), which is guaranteed by SPACEHAB, and provides for loans of up
to $15.0 million for general corporate purposes and equipment financing. As of
June 30, 2001, the Company had loans payable of $4.3 million. In conjunction
with the Astrotech financing of its satellite processing facility in Titusville,
Florida in August 2001, $3.1 million of the term Loan Agreement was repaid.
On October 21, 1997, the Company completed a private placement offering
of convertible subordinated notes payable (the "Notes Offering"), which provided
the Company with net proceeds of approximately $59.9 million which has been
used, in part, for capital expenditures associated with the development and
construction of space related assets, the purchase of JE on July 1, 1998, and
for general corporate purposes. In December 1998, the Company amended its
agreement with Alenia Spazio S.p.A ("Alenia") relative to the subordinated
convertible notes payable to Alenia with an outstanding balance of $11.9
million. In consideration for a payment of $4.0 million, Alenia agreed to reduce
the annual interest rate from 12 percent to 10 percent on the outstanding
balance as of January 1, 1999, and the interest payment due for the quarter
ended December 31, 1998, was waived resulting in an effective interest rate of
8.75 percent. As of June 30, 2001, the Company had an outstanding balance due of
$7.9 million. The maturity date of this debt was extended from August 1, 2001 to
October 31, 2001. The Company is in ongoing discussions with Alenia to
restructure the terms of this debt to provide for repayment over an extended
period.
The agreement with the senior debt holders was amended and requires
that an interest rate of 8.25 percent be applied to the senior debt with an
outstanding balance of $0.3 million as of June 30, 2001, which was subsequently
repaid in August 2001.
On August 2, 1999, Astrium GmbH ("Astrium"), a related party, a
shareholder, purchased an additional $12.0 million equity stake in SPACEHAB
representing 1,333,334 shares of Series B Senior Convertible Preferred Stock.
Under the agreement, Astrium, a related party, purchased all of SPACEHAB's
975,000 authorized and unissued shares of preferred stock. At the annual
stockholders meeting held on October 14, 1999, the shareholders approved the
proposal to increase the number of authorized shares of preferred stock to
2,500,000, in order to complete the transaction with Astrium, a related party,
allowing them to purchase the additional 358,334 preferred shares. The preferred
stock purchase increased Astrium's, a related party, investment voting interest
in SPACEHAB to approximately 11.5 percent. The Series B Senior Convertible
Preferred Stock is: convertible at the holders' option on the basis of one share
of preferred stock for one share of common stock, entitled to vote on an "as
converted" basis the equivalent number of shares of common stock and has
preference in liquidation, dissolution or winding up of $9.00 per preferred
share. No dividends are payable on the convertible preferred shares.
For the year ended June 30, 2001 the Company was in breach of certain
loan covenants of the Term Loan and New Credit Facility. The Company received a
waiver of the covenant violation on the New Credit Facility as of June 30, 2001
and also received a waiver and covenant reset for the Term Loan. For the year
ended June 30, 2000, the Company was in breach of certain covenants of the Term
Loan and
17
Revolving Line of Credit facility. The covenant for the Revolving Line of Credit
was waived through its term and the covenant on the Term Loan agreement was
waived and amended on a going forward basis. The Company is in the process of
negotiating new covenants on the New Credit Facility for future periods.
Although there can be no assurances, the Company believes it will be in
compliance with the amended covenants of the Term Loan and existing covenants of
the New Credit Facility during the year ended June 30, 2002.
Cash Flows From Operating Activities. Cash provided by (used for)
operations for the years ended June 30, 2001, 2000, and 1999 was $17.1 million,
$1.4 million and $(6.3) million, respectively. For the year ended June 30, 2001,
the significant items affecting cash provided by operating activities were
primarily the result of deprecation and amortization of $10.6 million, a
non-cash charge of approximately $3.3 million to record a full valuation
allowance against the Company's deferred tax asset, an increase in deferred
revenue of $11.0 million, primarily related to equitable adjustment payments for
STS-107, and a decrease in accounts receivable of $8.4 million. For the year
ended June 30, 2000, the significant items affecting cash provided by operating
activities primarily the result of depreciation and amortization of $8.8
million, $11.1 million provided by deferred revenue, primarily from a payment
received for STS-123, offset primarily by the increase in accounts receivable of
$8.3 million and payments for subcontracting services of $4.8 million. For the
year ended June 30, 1999, the significant items affecting cash used for
operating activities was the decrease in deferred revenue and advanced billings
of $9.3 million, the increase in accounts receivable of $3.1million, offset
primarily by the cash provided by depreciation and amortization of $7.6 million.
Cash Flows Used in Investing Activities. For the years ended June 30,
2001, 2000, and 1999, cash flows used in investing activities were $23.1
million, $29.8 million and $58.6 million, respectively. During the year ended
June 30, 2001, the company's expenditures for flight assets under construction
relate primarily to the completion for the Research Double Module ("RDM"), which
was placed in service in April 2001 and expenditures for the Enterprise Module.
Approximately, $8.9 million was spent for buildings under construction,
primarily for the expansion of Astrotech's Payload processing facilities in
Titusville, Florida. The company received $7.6 million in cash for the sale of
its ICC assets to Astrium, a related party. Expenditures for the year ended June
30, 2000 were primarily for the continued construction of the Company's flight
assets including, among others, the RDM, Adaptable Double Module, Enterprise
module and completion of the ICC. A significant portion of the cash used for
buildings under construction relate to the expansion of Astrotech's payload
processing facilities. Expenditures for this expansion in the year ended June
30, 2000 were approximately $4.0 million and $1.1 million in the year ended June
30, 1999. In addition, $1.2 million was returned to the Company as certain
escrow funds relative to the purchase of JE were received. An additional $0.6
million was invested in Guigne, completing the Company's contractual obligation
for the financing of the SpaceDRUMS/TM/ joint venture. Expenditures during the
year ended June 30, 1999 were $24.7 million for the purchase of JE, $27.3
million of expenditures for the various flight assets including the RDM and ICC
system, $4.2 million for the expansion of both SPACEHAB's payload processing
facilities and Astrotech's payload processing facilities and a $1.4 million
investment in Guigne and the SpaceDRUMS joint venture
Cash Flows From Financing Activities. For the years ended June 30,
2001, 2000, and 1999, cash flows (used for) provided by financing activities
were $(1.0) million, $14.0 million and ($6.0) million, respectively. During the
year ended June 30, 2001 the company borrowed $2.25 million under the New Credit
Facility and made payments of $3.3 million on the notes payable and $0.3 million
on the note payable to the senior debt holders. During the year ended June 30,
2000 the Company received $11.9 million from the issuance of convertible
preferred shares to Astrium, a related party and borrowed $4.5 million on the
Revolving Line of Credit. In addition, the Company paid approximately $2.9
million on other notes payable. During the year ended June 30, 1999, the Company
made a principal payment of $4.0 million to Alenia, paid $2.8 million and
borrowed an additional $1.0 million under the Term Loan Agreement.
The Company has incurred net losses in the years ended June 30, 2001,
2000 and 1999. Historically, the Company has financed its capital expenditures,
research and development and working capital requirements with progress payments
under its various contracts, as well as with proceeds received from both public
and private debt and equity offerings and borrowings under credit facilities.
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability of
assets and
18
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
The Company's liquidity has been constrained over the past fiscal year.
A significant portion of this constraint arose from funding of new operations
and assets to support future Company growth and construction of the new
Astrotech Florida facility prior to obtaining external financing. In addition,
the Company was committed to capital investments to complete certain flight
assets.
Due to changes in the external markets, the Company reevaluated its
strategy. Beginning in the third quarter of the fiscal year, management began an
aggressive multi-faceted plan to improve the Company's financial position and
liquidity. This plan included the following components: i) completing the
external financing for the new facility required to support operations at
Astrotech's Florida location; ii) reducing operating costs and establishing an
operating plan for fiscal year 2002 which provides for sufficient cash flow to
support efficient operations; iii) renegotiating the terms and conditions of
the revolving line of credit; iv) limiting cash commitments for future capital
investments and new asset development; v) restructuring the repayment of
certain debts maturing in fiscal year 2002; vi) divesting non-core assets;
vii) obtaining external investor funding for its Space Media subsidiary; viii)
completing negotiations for certain contract equitable adjustments due to the
Company under it long-term services contract with NASA; and ix) improving the
overall liquidity of the Company. Management anticipates that this strategy will
generate sufficient additional liquidity to support its operations and satisfy
its debt obligations.
Under this Plan, the Company undertook extensive efforts to reduce cash
required for both operations and capital investments. Specifically, the Company
took steps to reduce overhead beginning in the third quarter of the fiscal year
and reduced its workforce by approximately 10%. The Company's fiscal year 2002
operating plan will continue to realize efficiencies from these actions.
Subsequent to June 30, 2001, Astrotech obtained $20 million of financing for the
expansion of its payload processing facilities. The financing provides funds for
completion of the facility construction as well as a return of approximately
$6.5 million of previously invested working capital of the Company. The Company
used approximately $3.1 million of these working capital funds to repay an
existing obligation under Astrotech's credit facility. Additionally, the Company
completed planned divesting of non-core assets. Development and construction of
new assets is currently limited to those assets required to fulfill existing
commitments under contracts. The Company has no further on-going commitments to
fund development or construction of any asset.
Under this Plan, the Company refocused the scope of SMI's operations on
near term initiatives in order to maximize the potential return of capital
invested to date in SMI. Subsequent to year end, the Company obtained $750,000
from an investor to fund future operations of SMI in exchange for equity in SMI.
As a result, the Company's ownership interest in SMI was reduced to
approximately 51% in September 2001.
The Company's ability to continue as a going concern is dependent on
its ability to complete the restructure of certain debt obligations, secure the
remaining portion of contract funding on the equitable adjustment due under its
contract with NASA, achieve its fiscal year 2002 operating and cash flow
objectives, and comply with the terms of its credit facility. The Company is in
ongoing negotiations with its senior lender to renegotiate the terms and
conditions of the New Credit Facility and with Alenia Spazio S.p.A. to
restructure its debt. The Company continues to receive negotiated interim
funding for work performed under the NASA contract equitable adjustment.
Management believes it will be successful in negotiating the repayment terms of
its debt due to Alenia Spazio S.p.A.; however, there can be no assurances that
the Company will be able to reach agreement with Alenia Spazio S.p.A. on the
terms and conditions of a restructure. Additionally, management of the Company
strongly believes such funding under its equitable adjustment with NASA will
continue, although there can be no assurances that the contract will be fully
funded in a timely manner to provide sufficient operating cash flow to support
operations.
The Company's plans indicate that all cash generated from operations
during the next fiscal year will be used to fund operations and reduce existing
debt. The Company believes that the cash flows from operations, borrowings under
the New Credit Facility and spending reductions related to discretionary capital
expenditures and other expenses will be sufficient to enable the Company to meet
its cash requirements for the next twelve months.
As discussed above, management has implemented and completed a
significant portion of the plan begun in the third quarter of the fiscal year
and expects that it will be successful in accomplishing the remaining portion of
the plan; however, no assurance can be given that the Company will be successful
in
19
achieving the remaining goals. If the Company is unable to complete its
strategy, cash flow may be insufficient to cover the Company's operating and
debt service requirements in fiscal year 2002.
Recent Accounting Pronouncements
--------------------------------
In June 2001, the Financial Accounting Standards Board issued SFAS No.
142, "Accounting for Goodwill and Other Intangible Assets." The Statement
eliminates the requirement to amortize costs in excess of net assets acquired
(goodwill) under the purchase method of accounting, and sets forth a new
methodology for periodically assessing and, if warranted, recording impairment
of goodwill. Early adoption of this standard is permitted July 1, 2001, however,
the Company does not plan to adopt early. The Company will be required to adopt
the new rules effective July 1, 2002. The elimination of amortization of
goodwill is expected to increase earnings by approximately $1.0 million. The
Company will analyze and assess the impairment provisions of the new Statement,
but has not yet determined the impact, if any, of the adoption of those
provisions.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
SPACEHAB's primary exposure to market risk relates to interest rates. SPACEHAB's
financial instruments which are subject to interest rate risk principally
include the New Credit Facility, the Term Loan Agreement and fixed rate
long-term debt. SPACEHAB's long-term debt obligations are generally not callable
until maturity. On September 30, 2001 SPACEHAB's Astrotech Space Operations,
Inc. subsidiary completed a financing for a building under construction. In
conjunction with this financing, a swap agreement was entered into to provide
for a fixed rate of interest under the loan commitment beginning January 2002.
SPACEHAB does not use any other interest rate swaps or derivative financial
instruments to manage its exposure to fluctuations in interest rates.
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 NASA and
other customer contracts, the successful development and commercialization of
the Research Double Module and related new commercial space assets, deployment
of the International Space Station, technological difficulties, product demand
and market acceptance risks, the effect of economic conditions, uncertainty in
government funding and the impact of competition.
Item 8. Financial Statements and Supplementary Data.
20
Report of Independent Auditors
The Board of Directors
SPACEHAB, Incorporated and Subsidiaries
We have audited the accompanying consolidated balance sheet of SPACEHAB,
Incorporated and subsidiaries (the Company) as of June 30, 2001, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SPACEHAB,
Incorporated and subsidiaries at June 30, 2001, and the consolidated results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company has incurred significant losses from operations, negative cash flows and
has a working capital deficiency. In addition, the Company has not complied with
certain covenants of loan agreements with banks. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
McLean, Virginia
October 12, 2001
21
Report of Independent Auditors
The Board of Directors
SPACEHAB, Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheet of
SPACEHAB, Incorporated and subsidiaries (the Company) as of June 30, 2000, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the two-year period ended June 30, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SPACEHAB,
Incorporated and subsidiaries as of June 30, 2000, and the results of their
operations and their cash flows for each of the years in the two-year period
ended June 30, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
McLean, Virginia
August 31, 2000
22
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
June 30,
------------------------
Assets 2001 2000
------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 34 $ 6,949
Accounts receivable, net (note 4) 17,358 25,798
Prepaid expenses and other current assets 1,381 2,328
------------------------------------------------------------------------------------------------------------------------
Total current assets 18,773 35,075
------------------------------------------------------------------------------------------------------------------------
Property and equipment:
Flight assets 159,400 106,950
Module improvements in progress 24,188 66,066
Payload processing facilities 40,192 29,398
Furniture, fixtures equipment and leasehold improvements 13,854 12,650
------------------------------------------------------------------------------------------------------------------------
237,634 215,064
Less accumulated depreciation and amortization (63,580) (56,380)
-----------------------------------------------------------------------------------------------------------------------
Property and equipment, net 174,054 158,684
Goodwill, net of accumulated amortization of $3,500 and 2,428, respectively 21,347 23,301
Investment in Guigne, net (note 19) 1,800 1,800
Other assets, net 6,503 6,249
------------------------------------------------------------------------------------------------------------------------
Total assets $ 222,477 $ 225,109
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Loans payable under credit agreement, current portion (note 6) $ 333 $ 333
Loans payable, current portion (note 8) 3,126 3,126
Revolving loan payable (note 8) 6,750 4,500
Accounts payable 10,533 10,540
Accounts payable-Astrium 2,751 807
Accrued expenses 7,739 6,986
Accrued subcontracting services 2,112 1,999
Convertible notes payable to shareholder (note 7) 7,860 -
Deferred revenue 18,993 8,385
------------------------------------------------------------------------------------------------------------------------
Total current liabilities 60,197 36,676
------------------------------------------------------------------------------------------------------------------------
Loans payable under credit agreement, net of current portion (note 6) - 333
Loans payable, net of current portion (note 8) 1,139 4,458
Convertible notes payable to shareholder (note 7) - 7,860
Accrued contract costs 100 880
Miscellaneous note payable 200 -
Deferred revenue 7,235 6,870
Deferred income taxes (note 13) - 2,080
Convertible subordinated notes payable (note 8) 63,250 63,250
------------------------------------------------------------------------------------------------------------------------
Total liabilities 132,121 122,407
------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 1, 11 and 16) Stockholders' equity (notes
7, 8, 11 and 12):
Preferred stock, no par value, convertible, authorized 2,500,000 shares, issued and
outstanding 1,333,334 shares, (liquidation preference of $12,000) 11,892 11,892
Common stock, no par value, authorized 30,000,000 shares, issued
and outstanding 11,528,145 and 11,345,032 shares, respectively 82,513 82,074
Additional paid-in capital 16 16
Retained earnings (accumulated deficit) (4,065) 8,720
------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 90,356 102,702
------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 222,477 $ 225,109
------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
23
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
-----------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
June 30, June 30, June 30,
2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Revenue $ 105,254 $ 105,708 $ 107,720
-----------------------------------------------------------------------------------------------------------------------
Costs of revenue 92,243 87,931 89,283
-----------------------------------------------------------------------------------------------------------------------
Gross profit 13,011 17,777 18,437
-----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and administrative 21,796 17,832 14,599
Research and development 393 2,440 3,636
-----------------------------------------------------------------------------------------------------------------------
Total operating expenses 22,189 20,272 18,235
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (9,178) (2,495) 202
Interest expense, net of capitalized interest (note 3) (4,804) (3,773) (4,905)
Interest and other income, net 311 662 1,615
-----------------------------------------------------------------------------------------------------------------------
Loss before income taxes (13,671) (5,606) (3,088)
Income tax benefit (note 13) (886) (1,762) (499)
-----------------------------------------------------------------------------------------------------------------------
Net Loss $ (12,785) $ (3,844) $ (2,589)
-----------------------------------------------------------------------------------------------------------------------
Basic Loss per share:
Net Loss per share - basic $ (1.12) $ (0.34) $ (0.23)
-----------------------------------------------------------------------------------------------------------------------
Shares used in computing net loss per share - basic 11,400,482 11,272,767 11,184,742
-----------------------------------------------------------------------------------------------------------------------
Diluted Loss per share:
Net loss per share - diluted $ (1.12) $ (0.34) $ (0.23)
-----------------------------------------------------------------------------------------------------------------------
Shares used in computing net loss per share - diluted 11,400,482 11,272,767 11,184,742
-----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
24
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
---------------------------------------------------------------------------------------------------------------------
Convertible
Preferred Stock Common Stock Additional
--------------------- ---------------------- Paid-In
Shares Amount Shares Amount Capital
---------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 - $ - 11,168,161 $ 81,239 $ 16
Common stock issued upon stock option exercises - - 1,070 8 -
Common stock issued under employee stock purchase plan - - 60,415 338 -
Net income - - - - -
--------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 - $ - 11,229,646 $ 81,585 $ 16
--------------------------------------------------------------------------------------------------------------------
Preferred stock issued 1,333,334 11,892 - - -
Common stock issued under employee stock purchase plan - - 115,386 489 -
Net loss - - - - -
--------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 1,333,334 $11,892 11,345,032 $ 82,074 $ 16
--------------------------------------------------------------------------------------------------------------------
Common stock issued under employee stock purchase plan - - 183,113 439 -
Net loss - - - - -
--------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 1,333,334 $11,892 11,528,145 $ 82,513 $ 16
---------------------------------------------------------------------------------------------------------------------
-----------------------------
Retained
Earnings Total
(Accumulated Stockholders'
Deficit) Equity
-----------------------------
Balance at June 30, 1998 $ 15,153 $ 96,408
Common stock issued upon stock option exercises - 8
Common stock issued under employee stock purchase plan - 338
Net income (2,589) (2,589)
------------------------------------------------------- ---------------------------
Balance at June 30, 1999 $ 12,564 $ 94,165
------------------------------------------------------- ---------------------------
Preferred stock issued - 11,892
Common stock issued under employee stock purchase plan - 489
Net loss (3,844) (3,844)
------------------------------------------------------- ---------------------------
Balance at June 30, 2000 $ 8,720 $ 102,702
------------------------------------------------------- ---------------------------
Common stock issued under employee stock purchase plan - 439
Net loss (12,785) (12,785)
------------------------------------------------------- ---------------------------
Balance at June 30, 2001 $ (4,065) $ 90,356
------------------------------------------------------- ---------------------------
See accompanying notes to consolidated financial statements
25
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Year ended Year ended Year ended
June 30, 2001 June 30, 2000 June 30, 1999
----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (12,785) $ (3,844) $ (2,589)
Adjustments to reconcile net loss to net cash provided
by (used for) operating activities:
Depreciation 8,691 7,133 5,909
Amortization 1,259 1,089 1,108
Amortization of debt placement costs 623 528 538
Valuation allowance of deferred tax asset 3,292 - -
Valuation allowance of investment in Guigne - (200) -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 8,440 (8,327) (3,126)
(Increase) decrease in prepaid expenses and other
current assets 947 (1,182) (290)
Decrease (increase) in deferred mission costs - (1,031) -
Increase in other assets (1,064) (240) (14)
Increase (decrease) in deferred flight revenue 10,973 11,093 (7,762)
Increase in accounts payable and accrued expenses 2,007 1,955 345
Increase (decrease) in advance billings - - (1,567)
Increase (decrease) in accrued subcontracting
services 113 (4,788) 97
Increase (decrease) in deferred taxes (5,372) (762) 1,020
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 17,124 1,424 (6,331)
----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for flight assets under construction (20,150) (23,009) (27,381)
Payments for building under construction (8,934) (4,868) (871)
Purchases of property, equipment and leasehold improvements (1,558) (2,361) (4,222)
Cash received from sale of Flight assets 7,566
Purchase of Johnson Engineering, net of cash acquired - 1,200 (24,745)
Purchase of The Space Store - (156) -
Investment in Guigne - (600) (1,400)
----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (23,076) (29,794) (58,619)
----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of note payable to insurers (333) (333) (500)
Proceeds from issuance of convertible preferred stock - 11,892 -
Proceeds from note payable - - 1,000
Proceeds from revolving line of credit 2,250 4,500 -
Payments of note payable (3,319) (2,575) (2,842)
Payments of note payable to shareholder - - (4,035)
Proceeds from exercise of stock options - - 8
Proceeds from issuance of common stock, net of expenses 439 489 338
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (963) 13,973 (6,031)
----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (6,915) (14,397) (70,981)
Cash and cash equivalents at beginning of year 6,949 21,346 92,327
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 34 $ 6,949 $ 21,346
----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Company, Operating Environment and Liquidity
Description of the Company and Operating Environment
SPACEHAB, Incorporated (the "Company") is the first company to
commercially develop, own and operate habitable modules that provide
space-based laboratory research facilities and cargo services aboard
the U.S. Space Shuttle system. The Company currently owns and operates
four pressurized laboratory and logistics supply modules, which
significantly enhance the capabilities of the Space Shuttle fleet. The
Company is currently constructing a module that will attach to the
International Space Station ("ISS") and be primarily used for storage,
power and utility service and laboratory facilities for long-duration
research. The Company's modules are unique to the Space Shuttle fleet
and ISS.
To date, the Company has successfully completed sixteen missions
aboard the Space Shuttle and substantially all of the Company's revenue
has been generated under contracts with National Aeronautics and Space
Administration ("NASA"). The Company's contracts are subject to
periodic funding allocations by NASA. NASA's funding is dependent on
receiving annual appropriations from the United States government.
During the years ended June 30, 2001, 2000, and 1999 approximately 83%,
86% and 80% of the Company's revenues were generated under U.S.
Government contracts.
On February 12, 1997, the Company acquired the assets and
certain of the liabilities of Astrotech Space Operations, L.P.
("Astrotech"), a subsidiary of Northrop Grumman, a provider of
commercial satellite launch processing services and payload processing
facilities in the United States. These services are provided at the
Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air
Force Base in California, and are provided to launch service providers
on a fixed-price basis. Additionally, Astrotech provides management and
consulting services to the Boeing Company for its Sea Launch program at
the Sea Launch facility in Long Beach, California.
On July 1, 1998, the Company acquired all of the outstanding
shares of capital stock of Johnson Engineering Corporation ("JE"). JE
performs several critical services for NASA including flight crew
support services, operations, training and fabrication of mockups at
NASA's Neutral Buoyancy Laboratory and at NASA's Space Vehicle Mockup
Facility, where astronauts train for both Space Shuttle and ISS
missions. JE also designs and fabricates flight hardware, such as
flight crew equipment and crew quarters' habitability outfitting as
well as providing stowage integration services. JE is also responsible
for configuration management of the ISS.
On April 11, 2000, the Company announced the formation of Space
Media, Inc. ("SMI"), a majority-owned subsidiary that intends to create
proprietary space-themed content for education and commerce. During the
year ended June 30, 2001, SMI's activities were refocused primarily to
develop content for the STARS Academy(TM), corporate promotion and
advertising opportunities and offering a library of content that can be
redistributed through various media channels. The STARS Academy is a
global education program offering students a scientific, cultural and
social adventure across the earth, into the oceans and aboard the
International Space Station. SMI offers retail products associated with
the STARS Academy. The STARS Academy program currently is planning to
launch student-designed experiments on a Space Shuttle mission next
year for schools in Australia, Canada, China, Israel, Japan, Singapore,
Thailand, and the United States. During the year ended June 30, 2000,
SMI acquired The Space Store, an online retail operation, anticipating
that e-commerce is expected to be an integral part of its Internet
business. The Space Store currently offers an assortment of
space-related products through its Space Store website,
www.spacestore.com.
------------------
In the year ended June 30, 2000, the Company also began
development and completed the preliminary design phase, in partnership
with RSC Energia ("Energia") of Korolev, Russia, of a commercial space
station habitation module. Named Enterprise(TM), this multipurpose
module will be attached to the ISS. The Company anticipates that
Enterprise will be the world's first commercial real estate in space
and the first commercial module attached to the ISS. Enterprise is
27
currently designed to offer space station users habitation, stowage
space, communications, power and other utilities, and laboratory
facilities for long-duration research.
The Company and Energia completed the organization of Space
Station Enterprise, LLC ("SSE LLC"), a Delaware limited liability
corporation, to complete development and future operation of
Enterprise. The Company and Energia have an equal ownership interest in
SSE LLC. SSE LLC is actively pursuing additional investors to provide
investment funds and participate as owners of SSE LLC in completing
Enterprise. Enterprise is anticipated to be launched in early 2004.
Liquidity
The Company has incurred net losses in the years ended June
30, 2001, 2000 and 1999. Historically, the Company has financed its
capital expenditures, research and development and working capital
requirements with progress payments under its various contracts, as
well as with proceeds received from both public and private debt and
equity offerings and borrowings under credit facilities.
The accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of
business. The financial statements do not include any adjustments
relating to the recoverability of assets and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
The Company's liquidity has been constrained over the past
fiscal year. A significant portion of this constraint arose from
funding of new operations and assets to support future Company growth
and construction of the new Astrotech Florida facility prior to
obtaining external financing. In addition, the Company was committed to
capital investments to complete certain flight assets.
Due to changes in the external markets, the Company reevaluated
its strategy. Beginning in the third quarter of the fiscal year,
management began an aggressive multi-faceted plan to improve the
Company's financial position and liquidity. This plan included the
following components: i) completing the external financing for the new
facility required to support operations at Astrotech's Florida
location; ii) reducing operating costs and establishing an operating
plan for fiscal year 2002 which provides for sufficient cash flow to
support efficient operations; iii) renegotiating the terms and
conditions of the Revolving Line of Credit (note B); iv) limiting cash
commitments for future capital investments and new asset development;
v) restructuring the repayment of certain debts maturing in fiscal year
2002; vi) divesting non-core assets; vii) obtaining external investor
funding for its Space Media subsidiary; viii) completing negotiations
for certain contract equitable adjustments due to the Company under it
long-term services contract with NASA (note 10); and ix) improving the
overall liquidity of the Company. Management anticipates that this
strategy will generate sufficient additional liquidity to support its
operations and satisfy its debt obligations.
Under this Plan, the Company undertook extensive efforts to
reduce cash required for both operations and capital investments.
Specifically, the Company took steps to reduce overhead beginning in
the third quarter of the fiscal year and reduced its workforce by
approximately 10%. The Company's fiscal year 2002 operating plan will
continue to realize efficiencies from these actions. Subsequent to June
30, 2001, Astrotech obtained $20 million of financing for the expansion
of its payload processing facilities. The financing provides funds for
completion of the facility construction as well as a return of
approximately $6.5 million of previously invested working capital of
the Company. The Company used approximately $3.1 million of these
working capital funds to repay an existing obligation under Astrotech's
credit facility (note 8). Additionally, the Company completed planned
divesting of non-core assets (note 21). Development and construction of
new assets is currently limited to those assets required to fulfill
existing commitments under contracts. The Company has no further
on-going commitments to fund development or construction of any asset.
Under this Plan, the Company refocused the scope of SMI's
operations on near term initiatives in order to maximize the potential
return of capital invested to date in SMI. Subsequent to year end, the
Company obtained $750,000 from an investor to fund future operations of
SMI in
28
exchange for equity in SMI. As a result, the Company's ownership
interest in SMI was reduced to approximately 51% in September 2001.
The Company's ability to continue as a going concern is
dependent on its ability to complete the restructure of certain debt
obligations, secure the remaining portion of contract funding on the
equitable adjustment due under its contract with NASA, achieve its
fiscal year 2002 operating and cash flow objectives, and comply with
the terms of its credit facility. The Company is in ongoing
negotiations with its senior lender to renegotiate the terms and
conditions of its credit facility and with Alenia Spazio S.p.A. to
restructure its debt. The Company continues to receive negotiated
interim funding for work performed under the NASA contract equitable
adjustment (note 10). Management believes it will be successful in
negotiating the repayment terms of its debt due to Alenia Spazio
S.p.A.; however, there can be no assurances that the Company will be
able to reach agreement with Alenia Spazio S.p.A. on the terms and
conditions of a restructure. Additionally, management of the Company
strongly believes such funding under its equitable adjustment with
NASA will continue, although there can be no assurances that the
contract will be fully funded in a timely manner to provide sufficient
operating cash flow to support operations.
The Company's plans indicate that all cash generated from
operations during the next fiscal year will be used to fund operations
and reduce existing debt. The Company believes that the cash flows from
operations, borrowings under the New Credit Facility and spending
reductions related to discretionary capital expenditures and other
expenses will be sufficient to enable the Company to meet its cash
requirements for the next twelve months.
As discussed above, management has implemented and completed a
significant portion of the plan begun in the third quarter of the
fiscal year and expects that it will be successful in accomplishing the
remaining portion of the plan; however, no assurance can be given that
the Company will be successful in achieving the remaining goals. If the
Company is unable to complete its strategy, cash flow may be
insufficient to cover the Company's operating and debt service
requirements in fiscal year 2002.
(2) Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of
SPACEHAB, Incorporated and its wholly owned and majority-owned
subsidiaries Astrotech, JE and SMI. All significant intercompany
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of its consolidated statements of cash flows, the
Company considers short-term investments with original maturities of
three months or less to be cash equivalents. Cash equivalents are
primarily made up of money market investments and overnight repurchase
agreements recorded at cost, which approximates market value.
Property and Equipment
Property and equipment are stated at cost. All furniture,
fixtures and equipment are depreciated using the straight-line method
over the estimated useful lives of the respective assets, which is
generally five years. The Company's payload processing facilities are
depreciated using the straight-line method over their estimated useful
lives ranging from sixteen to forty-three years.
Goodwill
The excess of the cost over the fair value of net tangible and
identifiable intangible assets acquired in business combinations
accounted for as a purchase has been assigned to goodwill. Goodwill is
being amortized on a straight-line basis over five to twenty-five
years.
29
The Company periodically evaluates whether changes have
occurred that would require revision of the remaining estimated useful
life of the assigned goodwill or render the goodwill not recoverable.
If such circumstances arise, the Company would use an estimate of the
undiscounted value of expected future operating cash flows to determine
whether the goodwill is recoverable.
Investments in Affiliates
The Company generally uses the equity method of accounting for
its investments in, and earnings of, investees. In accordance with the
equity method of accounting, the carrying amount of such an investment
is initially recorded at cost and is increased to reflect the Company's
share of the investor's income and is reduced to reflect the Company's
share of the investor's losses. Investments in which the Company has
less than 20% ownership and no significant influence are accounted for
under the cost method and are carried at cost.
Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with
the provisions of Statements of Financial Accounting Standards ("SFAS")
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
Stock-Based Compensation
The Company accounts for stock-based employee compensation
arrangements using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees ("APB Opinion 25"), and related interpretations.
Accordingly, compensation cost for options to purchase common stock
granted to employees is measured as the excess, if any, of the fair
value of common stock at the date of the grant over the exercise price
an employee must pay to acquire the common stock. The Company has
adopted the disclosure requirements of SFAS No. 123, Accounting for
Stock-based Compensation ("SFAS 123").
Warrants to purchase common stock granted to other than
employees as consideration for goods or services rendered are
recognized at fair value.
Revenue Recognition
Revenue generated under the REALMS Contract and for all other
contract awards for which the capability to successfully complete the
contract can be reasonably assured and costs at completion can be
reliably estimated at contract inception, revenue recognition under the
percentage-of-completion method is being used based on costs incurred
over the period of the contract. Revenue provided by JE is primarily
derived from cost-plus award fee contracts, whereby revenue is
recognized to the extent of costs incurred plus estimates of award fee
revenues using the percentage-of-completion method. Award fees, which
provide earnings based on the Company's contract performance as
determined by NASA evaluations, are recorded when the amounts can be
reasonably estimated, or are awarded. Changes in estimated costs to
complete, provisions for contract losses and estimated amounts
recognized as award fees are recognized in the period they become
known. Revenue provided by Astrotech's payload processing services is
recognized ratably over the occupancy period of the satellite while in
the Astrotech facilities.
Research and Development
Research and development costs are expensed as incurred.
30
Income Taxes
The Company recognizes income taxes under the asset and
liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry
forward. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
Net Income (Loss) Per Share
Net income (loss) per share is presented on both a basic and
diluted basis in accordance with the provisions of SFAS No. 128,
Earnings per Share.
Basic earnings (loss) per share are calculated by dividing net
income (loss) by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share
includes all common stock options and warrants and other common stock,
to the extent dilutive, that potentially may be issued as a result of
conversion privileges, including the convertible subordinated notes
payable (note 8).
Accounting Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from these estimates.
Reclassifications
Certain 2000 and 1999 amounts have been reclassified to conform
with the 2001 consolidated financial statement presentation.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued
SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets."
The Statement eliminates the requirement to amortize costs in excess of
net assets acquired (goodwill) under the purchase method of accounting,
and sets forth a new methodology for periodically assessing and, if
warranted, recording impairment of goodwill. Early adoption of this
standard is permitted July 1, 2001, however, the Company does not plan
to early adopt. The Company will be required to adopt the new rules
effective July 1, 2002. The elimination of amortization of goodwill is
expected to increase earnings by approximately $1.0 million. The
Company will analyze and assess the impairment provisions of the new
Statement, but has not yet determined the impact, if any, of the
adoption of those provisions.
(3) Statements of Cash Flows - Supplemental Information
Cash paid for interest costs was approximately $7.0 million;
$6.9 million and $5.4 million for the years ended June 30, 2001, 2000
and 1999, respectively. The Company capitalized interest of
approximately $2.7 million, $3.7 million and $2.5 million during the
years ended June 30, 2001, 2000 and 1999, respectively, related to the
module improvements and a building in progress.
The Company paid no income taxes for the years ended June 30,
2001 and 2000, and paid income taxes of approximately $400,000 for the
year ended June 30, 1999.
31
(4) Accounts Receivable
At June 30, 2001 and 2000, accounts receivable consisted of (in
thousands):
2001 2000
--------------------------------------------------- ---------------- --------------
U.S. government contracts:
Billed $ 9,181 $ 18,506
Unbilled 3,085 3,400
--------------------------------------------------- ---------------- --------------
Total U.S. government contracts 12,266 21,906
--------------------------------------------------- ---------------- --------------
Commercial contracts:
Billed 4,378 1,612
Unbilled 714 2,280
--------------------------------------------------- ---------------- --------------
Total commercial contracts 5,092 3,892
--------------------------------------------------- ---------------- --------------
Total accounts receivable $ 17,358 $ 25,798
--------------------------------------------------- ---------------- --------------
The Company anticipates collecting substantially all receivables
within one year.
The accuracy and appropriateness of the Company's direct and
indirect costs and expenses under its government contracts, and
therefore its accounts receivable recorded pursuant to such contracts,
are subject to extensive regulation and audit, including by the U.S.
Defense Contract Audit Agency or by other appropriate agencies of the
U.S. government. Such agencies have the right to challenge the
Company's cost estimates or allocations with respect to any government
contract. Additionally, a substantial portion of the payments to the
Company under government contracts are provisional payments that are
subject to potential adjustment upon audit by such agencies. In the
opinion of management, any adjustments likely to result from inquiries
or audits of its contracts would not have a material adverse impact on
the Company's financial condition or results of operations.
(5) Acquisition
The Space Store
On June 28, 2000, the Company paid approximately $200,000
including transaction costs, to acquire all of the capital stock of The
Space Store. The business combination has been accounted for using the
purchase method under APB Opinion 16. The purchase price has been
allocated to the assets and liabilities acquired based on estimates of
fair value as of the date of acquisition. Based on the allocation of
the net assets acquired, goodwill of approximately $200,000 was
recorded. Such goodwill is being amortized on a straight-line basis
over 5 years. Historical results of operations of The Space Store are
insignificant. The Space Store is a wholly owned subsidiary of SMI. The
Space Store is involved in e-commerce and sells space related items.
(6) Loans Payable Under Credit Agreement
Prior to an August 1996 amendment, the Company's credit
agreement consisted of a $6.5 million term loan bearing interest at 1
percent per month and a $5.5 million non-interest-bearing term loan
with several insurance companies. In addition, a revolving credit
commitment with a subcontractor and former shareholder provided a
maximum outstanding balance of $6.0 million and bore interest at a rate
of 1 percent per month.
In August 1996, the Company's credit agreement was amended. In
exchange for the full satisfaction of the Company's term loans with the
various insurance companies, the Company paid the insurance companies
$2.5 million and agreed to pay an additional $2.0 million under a new
non-interest-bearing term loan. As of June 30, 2001, the remaining
balance due under the term
32
loan is $0.33 million due on August 1, 2001, which was repaid
subsequent to the year ended June 30, 2001.
In conjunction with a payment in December 1998 of certain
principal of notes payable due to Alenia Spazio S.p.A., (note 7), the
annual interest rate on the outstanding balances under the credit
agreement was amended to be 8.25 percent per year. Aggregate interest
cost incurred on the debts due under the credit agreement was
approximately $30,000, $57,000 and $40,000 for the years ended June 30,
2001, 2000 and 1999, respectively.
(7) Convertible Notes Payable to Shareholder
The Company issued subordinated notes for a portion of the
amount due to Alenia Spazio S.p.A. ("Alenia"), a shareholder, under a
previously completed construction contract for the Company's flight
modules. In December 1998, the Company amended its agreement with
Alenia Spazio S.p.A. relative to the subordinated notes payable with a
then outstanding principal balance of $11.9 million due in August 2001.
In exchange for payment of $4.0 million, Alenia agreed to waive the
interest payment due for the quarter ended December 31, 1998 and to
reduce the annual interest rate on the subordinated notes from 12 to 10
percent on the outstanding balance as of January 1, 1999. In addition,
Alenia may elect to convert, in whole or part, the remaining principal
amount into equity, on terms and conditions to be agreed with the
Company.
The subordinated notes had aggregate outstanding balances of
$7.9 million at June 30, 2001. The notes bear interest at an annual
rate of 10 percent. No amount of principal or accrued interest on the
notes is due until all amounts under the amended and restated credit
agreement due to the various insurance companies (note 6) are repaid.
All principal payments were due under these notes on August 1, 2001.
The maturity date of this debt was extended from August 1, 2001 to
October 31, 2001. The Company is in ongoing discussions with Alenia to
restructure the terms of this debt to provide for repayment over an
extended period.
During the year ended June 30, 1998, the Company began paying
interest on these notes quarterly. The Company paid approximately
$800,000 interest during each of the years ended June 30, 2001 and 2000
and $400,000 in 1999.
(8) Other Debt
Revolving Loan Payable
On June 16, 1997, the Company entered into a $10.0 million
revolving loan payable line of credit agreement with a financial
institution. Outstanding balances on the line of credit accrue interest
at either the lender's prime rate or a LIBOR-based rate. Certain assets
of the Company collateralize this loan. The agreement expired on August
31, 2000. Through June 30, 2000, the Company had drawn $4.5 million
against the line of credit.
On August 9, 2000, the Company entered into a $15 million
revolving credit facility with a financial institution that provides a
working capital line of credit with a letter of credit sub-limit of
$10.0 million. This new credit facility replaced the current $10
million revolving line of credit. Certain assets of the Company
collateralize the new credit facility. The term of the agreement is
through August 2003. Through June 30, 2001, the Company had drawn $6.75
million against the line of credit.
In conjunction with the Astrotech financing of its satellite
processing facility in Titusville, Florida, in August 2001, the terms
of the credit facility have been amended. Astrotech is no longer a
party to the credit facility and the maximum amount allowable to be
drawn under the Credit Facility has been reduced to $6.5 million. The
Company is in the process of negotiating new covenants and revisions
to certain terms of the New Credit Facility.
Loans Payable
On July 14, 1997, the Company's subsidiary, Astrotech, entered
into a credit facility for loans of up to $15.0 million with a
financial institution. The term of the agreement is through
33
July 13, 2002. This loan is collateralized by the assets of Astrotech
and certain other assets of the Company, and is guaranteed by the
Company. Interest accrues at LIBOR plus three percent. Principal and
interest are payable on a quarterly basis. In April 1999, the Company
borrowed an additional $1.0 million under this credit facility with
the same terms, conditions and expiration date of the original loan.
Principal payments of approximately $3.1 million are due fiscal year
ended 2002, $1.1 million are due in the fiscal year early 2003, and
$40,000 in the fiscal year ending 2004. At June 30, 2001, the Company
had an outstanding balance of $4.3 million under this credit facility
and accrued interest of $87,000. In conjunction with the Astrotech
financing, $3.1 million of the balance outstanding at the year ended
June 30, 2001 was subsequently repaid.
Convertible Subordinated Notes
In October 1997, the Company completed a private placement
offering for $63.25 million of aggregate principal of unsecured 8
percent Convertible Subordinated Notes due 2007. Interest is payable
semi-annually. The notes are convertible into the common stock of the
Company at a rate of $13.625 per share. This offering provided the
Company with net proceeds of approximately $59.9 million to be used for
capital expenditures associated with the development and construction
of space related assets and for other general corporate purposes.
Loan Covenants
For the year ended June 30, 2001 the Company was in breach of
certain loan covenants of the Term Loan and New Credit Facility. The
Company received a waiver of the covenant violation on the New Credit
Facility as of June 30, 2001 and also received a waiver and covenant
reset for the Term Loan. For the year ended June 30, 2000, the Company
was in breach of certain covenants of the Term Loan and Revolving Line
of Credit facility. The covenant for the Revolving Line of Credit was
waived through its term and the covenant on the Term Loan agreement
was waived and amended on a going forward basis. The Company is in the
process of negotiating new covenants on the New Credit Facility for
future periods. Although there can be no assurances, the Company
believes it will be in compliance with the amended covenants of the
Term Loan and existing covenants of the New Credit Facility during the
year ended June 30, 2002.
(9) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated
fair values of the Company's financial instruments as of June 30, 2001
and 2000 in accordance with SFAS No. 107, Disclosures about Fair Value
of Financial Instruments (in thousands):
June 30, 2001 June 30, 2000
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------------------------- ------------- ------------- ------------ -------------
Financial liabilities:
Loans payable under
credit agreement $ 333 $ 333 $ 667 $ 579
Notes payable to shareholder 7,860 7,860 7,860 7,860
Loans payable under credit facility 4,264 4,264 7,583 7,583
Convertible notes payable 63,250 38,029 63,250 44,908
-------------------------------------------- ------------- ------------- ------------ -------------
The fair value of the Company's long-term debt is based on
quoted market price or is estimated based on the current rates offered
to the Company for debt of similar remaining maturities and other
terms. The carrying amounts of cash and cash equivalents, accounts
receivable, and accounts payable and accrued expenses approximate their
fair market value because of the relatively short duration of these
instruments.
34
(10) NASA Contracts
Research and Logistics Module Services Contract
On December 21, 1997, the Company entered into the REALMS
Contract to provide to NASA its flight modules and related integration
services over three missions at an aggregate fixed price of $44.9
million. This contract provides for NASA to use the flight modules for
both science and logistics missions. During the period from December
21, 1997 to June 30, 2001, this contract was amended whereby the REALMS
contract value was increased to $160.3 million and the number of
missions was increased to seven.
During the years ended June 30, 2001, 2000 and 1999, the Company
recognized $36.6 million, $33.3 million and $28.2 million of revenue,
respectively, under this contract. SPACEHAB has a claim in excess of
the REALMS contract value of approximately $7.9 million relative to an
equitable adjustment due to a two-year slip in the launch date of the
Space Shuttle flight STS-107.
Flight Crew Systems Development Contract ("FCSD")
JE primarily operates under the Flight Crew Systems
Development contract ("FCSD" Contract") which is currently a $366.6
million multitask cost-plus-award and incentive-fee contract. The
contract commenced in May 1993 and was scheduled to conclude in April
2001. NASA has exercised its option to extend certain tasks for an
additional year through April 2002. JE performs several critical
services for NASA including flight crew support services, operations,
training and fabrication of mockups at NASA's Neutral Buoyancy
Laboratory and at NASA's Space Vehicle Mockup Facility, where
astronauts train for both Space Shuttle and ISS missions. JE also
provides stowage integration services and is also responsible for
configuration management of the ISS.
During the years ended June 30, 2001, 2000 and 1999, the
Company recognized $50.7 million, $57.9 million, $57.7 million of
revenue, respectively, under this contract.
(11) Stockholder Rights Plan
On March 26, 1999, the Board of Directors adopted a Stockholder
Rights Plan designed to deter coercive takeover tactics and to prevent
a potential acquirer from gaining control of the Company without
offering a fair price to all of the Company's stockholders. A dividend
of one preferred share purchase right (a "Right") was declared on every
share of Common Stock outstanding on April 9, 1999. Each Right under
the Plan entitles the holder to buy one one-thousandth of a share of a
new series of junior participating preferred stock for $35. If any
person or group becomes the beneficial owner of 15 percent or more of
common stock (with certain limited exceptions), then each Right (not
owned by the 15 percent stockholder) will then entitle its holder to
purchase, at the Right's then current exercise price, common shares
having a market value of twice the exercise price. In addition, if
after any person has become a 15 percent stockholder, and is involved
in a merger or other business combination transaction with another
person, each Right will entitle its holder (other than the 15 percent
stockholder) to purchase, at the Right's then current exercise price,
common shares of the acquiring company having a value of twice the
Right's then current exercise price. The rights were granted to each
shareholder of record on April 9, 1999. At any time before a person or
group acquires a 15% position, the Company generally will be entitled
to redeem the Rights at a redemption price of $0.01 per Right. The
Rights will expire on April 9, 2009.
(12) Common Stock Option and Stock Purchase Plans
As of June 30, 2001, approximately 1,538,798 shares of common
stock were reserved for future grants of stock options under the
Company's three stock option plans.
35
Non-qualified Options
Non-qualified options are granted at the sole discretion of the
Board of Directors. Prior to the adoption of the 1994 Stock Incentive
Plan (the "1994 Plan"), stock options granted to the Company's officers
and employees were part of their employment contract or offer. The
number and price of the options granted was defined in the employment
agreements and such options vest incrementally over a period of four
years and generally expire within ten years of the date of grant.
The 1994 Plan
Under the terms of the 1994 Plan, the number and price of the
options granted to employees is determined by the Board of Directors
and such options vest, in most cases, incrementally over a period of
four years and expire no more than ten years after the date of grant.
The Directors' Stock Option Plan
Prior to an amendment on October 21, 1997, each non-employee
member of the Board of Directors was annually granted options to
purchase 5,000 shares of common stock at exercise prices equal to the
fair market value on the date of grant. Subsequent to the amendment,
each non-employee member of the Board of Directors received a one-time
grant of an option to purchase 10,000 shares of common stock. Further,
each new non-employee director after the amendment date receives a
one-time grant of an option to purchase 10,000 at an exercise price
equal to fair market value on the date of grant. In addition, effective
as of the date of each annual meeting of the Company's stockholders on
or after the effective date, each non-employee director who is elected
or continues as a member of the Board of Directors of the Company shall
be awarded an option to purchase 5,000 shares of common stock. Options
under the Director's Plan vest after one year and expire seven years
from the date of grant.
1997 Employee Stock Purchase Plan
During the year ended June 30, 1998, the Company adopted an
employee stock purchase plan that permits eligible employees to
purchase shares of common stock of the Company at prices no less than
85 percent of the current market price. Eligible employees may elect to
participate in the plan by authorizing payroll deductions from one
percent to ten percent of gross compensation for each payroll period.
On the last day of each quarter, each participant's contribution
account is used to purchase the maximum number of whole and fractional
shares of common stock determined by dividing the contribution
account's balance by the lesser of 85 percent of the price of a share
of common stock on the first day of the quarter or the last day of a
quarter. The number of shares of common stock that may be purchased
under the plan is 1,500,000. Through June 30, 2001, employees have
purchased approximately 372,000 shares under the plan.
Space Media, Inc. Stock Option Plan
During the year ended June 30, 2000, Space Media, Inc., a
majority owned subsidiary of the Company, adopted an option plan ("SMI
Plan") for employees, officers, directors and consultants of Space
Media, Inc. Under the terms of the SMI Plan, 1,500,000 shares have been
reserved for future grants for which the number and price of the
options granted is determined by the Board of Directors and such
options vest, in most cases, incrementally over a period of four years
and expire no more than ten years after the date of grant. At June 30,
2001, there were 611,250 options issued and outstanding under the SMI
Plan at a weighted average exercise price of $1.23. The options vest
equally over a four-year period and have a life of 10 years. There were
148,734 options exercisable as of June 30, 2001.
36
Stock Option Activity Summary
The following table summarizes the Company's stock option plans,
excluding the SMI plan:
Non-qualified Options 1994 Plan Directors' Plan
--------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
outstanding Price Outstanding Price Outstanding price
-------------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 1998 300,045 $ 12.33 1,478,253 $ 8.62 190,000 $ 9.99
Granted 300,000 14.00 572,713 11.69 50,000 7.00
Exercised - - 1,070 9.69 - -
Forfeited 106,241 12.00 140,670 9.16 - -
-----------------------------------------------------------------------------------------------------------------
493,804 $ 13.42 1,909,226 $ 9.50 240,000 $ 9.37
Outstanding at June 30, 1999
Granted - - 1,034,674 5.10 35,000 4.13
Exercised - - - - - -
Forfeited 95,831 12.39 360,287 7.06 - -
-----------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 2000 397,973 $ 13.66 2,583,613 $ 8.05 275,000 $ 8.70
Granted - - 1,036,040 4.44 40,000 4.00
Exercised - - - - - -
Forfeited 67,707 12.55 967,539 8.11 - -
-----------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 2001 330,266 $ 13.89 2,652,114 $ 6.62 315,000 $ 8.11
-----------------------------------------------------------------------------------------------------------------
Options exercisable at:
June 30, 1999 191,770 $ 12.39 1,072,121 $ 8.56 190,000 $ 9.99
June 30, 2000 397,973 13.66 1,423,660 8.58 240,000 9.37
June 30, 2001 330,266 13.89 1,272,238 7.89 275,000 8.70
Weighted-average fair value at
date of grant during the fiscal
period ended
June 30, 1999 300,000 $ 3.12 572,713 $ 4.50 50,000 $ 2.21
June 30, 2000 - - 1,034,674 3.02 35,000 1.87
June 30, 2001 - - 1,036,040 2.06 40,000 1.85
-------------------------------------------------------------------------------------------------------------------
The following table summarizes information about the Company's
stock options outstanding at June 30, 2001:
Options outstanding Options exercisable
----------------------------------------- ------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of exercise prices Outstanding life (years) price exercisable Price
----------------------------- -------------- ------------- ------------ -------------- ---------------
$ 2.81 - 4.75 552,000 9.16 $ 3.69 53,750 $ 4.34
4.88 - 5.75 1,036,310 7.64 5.06 305,586 5.21
6.63 - 10.13 693,889 2.10 7.02 691,889 7.01
10.63 - 14.50 1,009,081 4.63 12.28 820,179 12.42
24.00 6,100 1.25 24.00 6,100 24.00
----------------------------- -------------- -------- ------------ -------------- ---------------
$ 2.81 - $24.00 3,297,380 5.79 $ 7.49 $ 1,877,504 9.06
----------------------------- -------------- -------- ------------ -------------- ---------------
The Company applies APB Opinion 25 and related interpretations
in accounting for its plans. Accordingly, as all options have been
granted at exercise prices equal to the fair market value as of the
date of grant, no compensation cost has been recognized under these
plans in the accompanying consolidated financial statements. Had
compensation cost been determined
37
consistent with SFAS 123, the Company's net income (loss) and earnings
(loss) per common share would have been reduced (increased) to the pro
forma amounts indicated below (in thousands, except per share data):
Year Ended Year Ended Year Ended
June 30, 2001 June 30, 2000 June 30, 1999
-------------------------------------------------------------------------------------------------
Net income (loss):
As reported $ (12,785) $ (3,844) $ (2,589)
Pro forma $ (13,982) (4,996) (4,424)
-------------------------------------------------------------------------------------------------
Net income (loss) per share - basic:
As reported $ (1.12) $ (0.34) $ (0.23)
Pro forma $ (1.23) (0.44) (0.40)
-------------------------------------------------------------------------------------------------
The fair value of each option granted and each employee stock
purchase right is estimated using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants
in fiscal years 2001, 2000 and 1999, respectively: 0.0 percent dividend
growth; expected volatility ranging from 35 percent to 50 percent;
risk-free interest rates ranging from 5.68 percent to 7.875 percent;
and expected lives ranging from three months to seven years.
The effects of compensation cost as determined under SFAS 123 on
pro forma net income (loss) in years ended June 30, 2001, 2000 and 1999
may not be representative of the effects on pro forma net income (loss)
in future periods.
Warrants
The Company also has 53,000 currently exercisable warrants
outstanding to purchase the Company's common stock at $9.00 per share,
with an expiration date of June 2002. The fair market value of these
warrants was recognized at issuance. All such warrants were issued at
exercise prices equivalent to, or in excess of, the determined fair
market value of the Company's common stock at the date of issuance.
(13) Income Taxes
The Company accounts for taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
Under SFAS 109, deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax basis
of assets and liabilities using enacted rates expected to be in effect
during the year in which the differences reverse.
The components of income tax expense (benefit) from continuing
operations are as follows (in thousands):
Years Ended June 30,
------------------------------------------------
2001 2000 1999
---------------------------------------------------------------------------------------------------
Current:
Federal $ - $ - $ (1,447)
State 127 - 15
Foreign 70
---------------------------------------------------------------------------------------------------
197 - (1,432)
---------------------------------------------------------------------------------------------------
Deferred:
Federal (685) (1,477) 847
State and Local (398) (285) 86
Foreign
---------------------------------------------------------------------------------------------------
(1,083) (1,762) 933
--------------------------------------------------------------------------------------------------
Income Tax Expense (Benefit) $ (886) $(1,762) $ (499)
---------------------------------------------------------------------------------------------------
38
A reconciliation of the reported income tax expense to the amount that
would result by applying the U.S. federal statutory rate of 34 percent
to the income (loss) before income taxes to the actual amount of income
tax expense (benefit) recognized follows (in thousands):
Years Ended June 30,
------------------------------------------------
2001 2000 1999
---------------------------------------------------------------------------------------------------
Expected expense (benefit) $ (4,648) $ (1,906) $ (1,050)
Change in valuation allowance 3,948 43 169
State income taxes (491) (188) (15)
Other, primarily goodwill amortization 305 289 397
Total $ (886) $ (1,762) $ (499)
---------------------------------------------------------------------------------------------------
The Company's deferred tax asset as of June 30, 2001 and 2000 consists
of the following (in thousands):
2001 2000
--------------------------------------------------------------------------------------------------
Deferred Tax Assets:
Net Operating Loss Carryforwards $ 15,818 $ 10,472
General business Credit Carryforwards 2,170 2,170
Alternative Minimum Tax Credit Carryforwards 3,292 3,292
Accrued Expenses 1,636 999
Capitalized Start-up and Organization Costs 1,602 751
Other 190 110
--------------------------------------------------------------------------------------------------
Total Gross Deferred Tax Assets 24,708 17,794
Less - Valuation Allowance (4,160) (212)
--------------------------------------------------------------------------------------------------
Net Deferred Tax Assets 20,548 17,582
--------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Property and Equipment, principally due to
differences in depreciation 20,493 18,550
Other 55 115
--------------------------------------------------------------------------------------------------
Total Gross Deferred Tax Liabilities 20,548 18,665
--------------------------------------------------------------------------------------------------
Net Deferred Tax Assets/(Liabilities) 0 $ (1,083)
--------------------------------------------------------------------------------------------------
As of June 30, 2000, current deferred tax assets of $997,000 are
included in prepaid expenses and other current assets in the
accompanying balance sheet.
The net changes in the total valuation allowance for the years
ended June 30, 2001, 2000, and 1999 were increases of approximately
$3.9 million, $43,000 and $169,000, respectively.
At June 30, 2001, the Company had accumulated net operating
losses of approximately $41.7 million for Federal income tax purposes,
which are available to offset future regular taxable income. These
operating loss carryforwards expire between the years 2007 and 2021.
Utilization of these net operating losses may be subject to limitations
in the event of significant changes in stock ownership of the Company.
Additionally, the Company has approximately $2.2 million and
$3.3 million of research and experimentation and alternative minimum
tax credit carryforwards, respectively, available to offset future
regular tax liabilities. The research and experimentation credits
expire between the years 2002 and 2008; the alternative minimum tax
credits carry-forward indefinitely.
In assessing the realizability of its net deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the net deferred tax assets are realizable.
Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning
strategies in making this assessment. As of June 30, 2001, the Company
provided a full valuation allowance of approximately $4.2 million
against its net deferred tax assets.
39
(14) Net Income (Loss) Per Share
The following are reconciliation's of the numerators and
denominators of the basic and diluted earnings (loss) per share
computations for the years ended June 30, 2001, 2000 and 1999 (in
thousands, except share data):
Per common Assuming
share Dilution
-------------------------------------------------------------------------------------------------
Year Ended June 30, 2001
Net loss $ (12,785) $ (12,785)
Net loss, as adjusted $ (12,785) $ (12,785)
----------------------------------------------------------------------------------------------------
Weighted average outstanding common shares 11,400,482 11,400,482
Adjusted shares 11,400,482 11,400,482
----------------------------------------------------------------------------------------------------
Year Ended June 30, 2000
Net loss $ (3,844) $ (3,844)
Net loss, as adjusted $ (3,844) $ (3,844)
----------------------------------------------------------------------------------------------------
Weighted average outstanding common shares 11,272,767 11,272,767
Adjusted shares 11,272,767 11,272,767
----------------------------------------------------------------------------------------------------
Year Ended June 30, 1999
Net loss $ (2,589) $ (2,589)
Net loss, as adjusted $ (2,589) $ (2,589)
----------------------------------------------------------------------------------------------------
Weighted average outstanding common shares 11,184,742 11,184,742
----------------------------------------------------------------------------------------------------
Adjusted shares 11,184,742 11,184,742
All options and warrants to purchase shares of common stock were
excluded from the computations of diluted earnings (loss) per share for
the years ended June 30, 2001, 2000 and 1999, because the impact of
such options and warrants is anti-dilutive.
(15) Employee Benefit Plan
The Company has a defined contribution retirement plan, which
covers all employees and officers. For the years ended June 30, 2001,
2000 and 1999, the Company contributed $1.8 million, $1.5 million and
$0.8 million, respectively, to the plan. The Company has the right, but
not the obligation, to make contributions to the plan in future years
at the discretion of the Company's Board of Directors.
(16) Commitments
Integration and Operations Contracts
On August 13, 1997, the Company initiated a letter agreement
with The Boeing Company ("Boeing"), a major subcontractor and
shareholder, for standard integration and operation services to the
Company for future missions that were not already provided for under
its contract for missions to the Mir Space Station. In August 1998,
this letter agreement became a cost plus incentive fee contract whereby
Boeing will provide integration and operations services required to
successfully complete four research missions (one single module mission
and three double module missions) and seven logistics double module
missions. Additionally, there are several tasks that are separately
priced to yield a contract value of up to $139.5 million. As of June
30, 2001, $75.1 million has been incurred under this commitment.
Module Construction Contracts
During the year ended June 30, 1997, the Company entered into a
$43.1 million cost-plus-fee contract with Boeing to construct a new
research module with associated double module hardware. The Company has
taken initial delivery of the module and has completed its
construction. The Company has incurred approximately $43.0 million in
construction costs through June 30, 2001.
40
During the year ended June 30, 1999, the Company entered into a
$4.6 million letter agreement with Boeing to initiate activities to
support the fabrication of an adaptable double module. The letter
contract period of performance is through November 2000. The Company
has incurred $3.9 million in costs through June 30, 2001.
Leases
The Company is obligated under capital leases for equipment and
noncancelable operating leases for equipment, office space, storage
space, and the land for a payload processing facility. Future minimum
payments under these capital leases and noncancelable operating leases
are as follows (in thousands):
Capital Operating
Year ending June 30, Leases Leases
--------------------------------------------------------------------------------------------------
2002 $ 40 $ 2,265
2003 28 1,824
2004 22 864
2005 1 668
2006 and thereafter - 4,904
--------------------------------------------------------------------------------------------------
91 $ 10,525
---------
Less: amount representing interest between 9% and 12% (8)
---------------------------------------------------------------------------------
Present value of net minimum capital lease payments $ 83
---------------------------------------------------------------------------------
Rent expense for the years ended June 30, 2001, 2000 and 1999 was
approximately $2.9 million, $2.1 million and $2.2 million respectively.
For the year ended June 30, 2001, the capitalized lease assets are
recorded at $365,424 and the annual amortization is $44,000.
(17) Segment information
Based on its organization, the Company operates in four business
segments: SPACEHAB, now designated Flight Services for Company
management reporting, JE, Astrotech and SMI. SPACEHAB was founded to
commercially develop space habitat modules to operate in the cargo bay
of the Space Shuttles. Flight Services provides access to the modules
and integration and operations support services for both NASA and
commercial customers. JE is primarily engaged in providing engineering
services and products to the Federal Government and NASA, primarily
under the FCSD Contract. Astrotech provides payload-processing
facilities to serve the satellite manufacturing and launch services
industry. Astrotech currently provides launch site preparation of
flight ready satellites to major U.S. space launch companies and
satellite manufacturers. SMI was established in April 2000, to develop
space themed commercial business activities.
The Company's chief operating decision maker utilizes both
revenue and income before taxes, including allocated interest based on
the investment in the segment, in assessing performance and making
overall operating decisions and resource allocations. As such, other
income/expense items including taxes and corporate overhead have not
been allocated from Flight Services to the various segments.
41
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, see note
2. Information about the Company's segments is as follows:
(in thousands)
Year Ended June 30, 2001: Net Depreciation
Pre-Tax Fixed And
Revenue Income (loss) Assets Amortization
------------------------------------------------------------------------
Flight Services $44,997 $(7,868) $135,055 $7,107
Johnson Engineering 53,526 (887) 2,806 1,647
Astrotech 6,230 18 36,135 966
SMI 501 (4,934) 58 230
------------------------------------------------------------------------
$105,254 $(13,671) $174,054 $9,950
------------------------------------------------------------------------
Year Ended June 30, 2000: Net Depreciation
Pre-Tax Fixed And
Revenue Income (loss) Assets Amortization
------------------------------------------------------------------------
Flight Services $39,871 $(928) $129,709 $5,702
Johnson Engineering 58,254 108 3,000 1,537
Astrotech 7,583 (2,944) 25,975 983
SMI - (1,842) - -
------------------------------------------------------------------------
$105,708 $(5,606) $158,684 $8,222
------------------------------------------------------------------------
Year ended June 30, 1999: Net Depreciation
Pre-Tax Fixed And
Revenue Income Assets Amortization
------------------------------------------------------------------------
Flight Services $39,477 $(2,925) $109,912 $4,689
Johnson Engineering 58,398 342 1,647 1,164
Astrotech 9,845 (505) 20,625 1,164
SMI - - - -
------------------------------------------------------------------------
$107,720 $(3,088) $132,184 $7,017
------------------------------------------------------------------------
Foreign revenue for the years ended June 30, 2001, 2000 and
1999 was approximately $6.6 million, $1.7 million and $10.9 million
respectively. Domestic revenue for the years ended June 30, 2001, 2000
and 1999 was approximately $98.7 million, $104.0 million and $96.8
million respectively.
(18) Convertible Preferred Stock
On August 2, 1999, Astrium, a related party, a shareholder,
purchased an additional $12.0 million equity stake in SPACEHAB
representing 1,333,334 shares of Series B Senior Convertible Preferred
Stock. Under the agreement, Astrium, a related party, purchased all of
SPACEHAB's 975,000 authorized and uninsured shares of preferred stock.
At the annual stockholders meeting held on October 14, 1999, the
shareholders approved the proposal to increase the number of authorized
shares of preferred stock to 2,500,000, in order to complete the
transaction with Astrium, a related party, allowing them to purchase
the additional 358,334 preferred shares. The preferred stock purchase
increased Astrium's, a related party, voting interest in SPACEHAB to
approximately 11.5 percent. The Series B Senior Convertible Preferred
Stock is: convertible at the holders' option on the basis of one share
of preferred stock for one share of common stock, entitled to vote on
an "as converted" basis the equivalent number of shares of common stock
and has preference in liquidation, dissolution or winding up of $9.00
per preferred share. No dividends are payable on the convertible
preferred shares.
Astrium, a related party, provides unpressurized payload and
integration efforts to SPACEHAB on a fixed price basis in addition to
providing engineering services as required. For the years ended June
30, 2001, 2000 and 1999, Astrium's, a related party, payload and
integration services included in cost of revenue was approximately $4.3
million, $3.6 million and $2.1 million respectively.
42
(19) Investment in Guigne
During June 1998, the Company entered into a joint venture
agreement with Guigne Technologies Limited ("GTL"), a Canadian company,
for the purpose of developing, fabricating, marketing and selling of
SpaceDRUMS services, a containerless processing facility intended to be
deployed on the ISS. In accordance with the joint venture agreement,
the Company had contributed, in exchange for a 50 percent interest in
the joint venture, an aggregate of $2.0 million of working capital to
the joint venture through December 1999. The Company's contributions
were made in the form of an unsecured non-interest bearing note. The
joint venture has entered into contracts with an aggregate value of
$6.9 million for the lease of the SpaceDRUMS facility with an unrelated
party.
The joint venture agreement contained an option whereby the
Company could exchange its interest in the joint venture and the $2.0
million note for a common equity interest in Guigne Inc. ("GI"), the
ultimate parent of GTL. In accordance with the terms of the joint
venture agreement, in December 1999 the Company notified GI of its
intention to exercise its option. Under the option, the equity interest
obtained in GI was determined by dividing the $2.0 million contributed
by the Company by the fair market value of GI, as determined by
independent appraisal, at the date of exchange. However, such equity
interest could not exceed 19% of the outstanding equity of GI. The
independent appraisal and conversion were finalized subsequent to June
30, 2000, with an effective date of January 1, 2000, and resulted in
the Company obtaining a 15% common equity interest in GI. The Company
accounts for its investment in GI on the cost method. Upon the
exchange, the joint venture was dissolved and all property, rights,
assets and liabilities of the joint venture became the property,
rights, assets and liabilities of GI.
The Company did not have the ability to exclusively control the
operational and financial policies of the joint venture, although the
Company did exert significant influence and as such recognized its
investment in the joint venture prior to the exchange using the
modified equity method of accounting. During the year ended December
31, 1999, no revenues and no expenses were recognized by the joint
venture. During the quarter ended December 31, 1999, at the time of the
Company's exercise of its option, the Company recognized a $0.2 million
valuation allowance against its investment in GI based on the Company's
estimate of the fair value of GI.
(20) Asset Sale
On November 30, 2000, Astrium, a related party, entered into
an agreement with the Company to purchase the Company's Integrated
Cargo Carrier ("ICC") and Vertical Cargo Carrier ("VCC") flight assets.
The total purchase price of $15.4 million is comprised of both cash and
services payments. The transaction will occur in two phases. The first
phase is for the purchase of the ICC assets and the second phase is for
the purchase of the VCC assets. Phase one of the transactions was
completed in the three months ended March 31, 2001. The sale was
approximately at book value and the Company recognized a minimal loss.
SPACEHAB has entered into an agreement with Astrium, a related party,
to lease these assets for a period of four years with two additional
four-year options.
(21) Subsequent Events
On August 2, 2001, SPACEHAB'S Astrotech subsidiary sold the
assets of its Oriole sounding rocket program and related property for
approximately $1.2 million to DTI Associates, of Arlington, Virginia.
The sale, effective July 26, 2001, turns over all physical and
intellectual property assets of Astrotech's sounding rocket program,
including the design of the Oriole Rocket, except for those assets
required for Astrotech to fulfill the terms of an agreement with an
existing customer. The terms of the sale are as follows; an initial
cash payment at closing, five equal monthly payments beginning
September 2001 and a promissory interest bearing note, secured by the
Astrotech Sounding Rocket Program intellectual property, due July 26,
2002. Astrotech is expected to record a gain on the sale.
On August 9, 2001, SPACEHAB's Johnson Engineering (JE)
Subsidiary sold its Filter Housing Machining operations assets and
technology for approximately $850,000 to Clear Lake Industries Holdings
LLC (CLI), a company recently formed by W.T (Tom) Short, Retired
SPACEHAB Senior Vice President for JE. The sale was effective July 1,
2001. The termS of the
43
sale are as follows: an initial cash payment at closing and an
interest bearing note due June 29, 2006. The sale was recorded at book
value.
On September 10, 2001, SPACEHAB's Astrotech subsidiary
completed a $20 million financing of its satellite processing facility
expansion project in Titusville, Florida with a financial institution.
The proceeds of this financing are to be used to complete the
construction of the payload process facility and supporting
infra-structure. The loan is collaterized primarily by the multi year
payload processing contracts with Boeing and Lockheed Martin. Interest
accrues on the outstanding principal balance at a LIBOR-based rate,
adjustable quarterly. The loan is payable on January 15, 2011. In
conjunction with this financing, a swap agreement was entered into to
provide for a fixed rate of interest under the loan commitment
beginning January 2002.
On October 1, 2001, SPACEHAB received a $750,000 equity
investment in Space Media, Inc. from EscottVentures II, LLC, of
Melbourne, Florida. EscottVentures II has assumed a seat on SMI's board
of directors along with its equity stake. SPACEHAB's ownership in Space
Media, Inc. has been reduced to approximately 51% as a result of
EscottVentures II equity investment.
(22) Summary of Selected Quarterly Financial Data (Unaudited)
The following is a summary of selected quarterly financial
data for the previous three fiscal years (in thousands, except per
share data):
Three months ended
-----------------------------------------------------------------
September 30 December 31 March 31 June 30
-------------------------------------------------------------------------------------------- ------------
Year ended June 30, 2001
Revenue $26,966 $23,975 $24,453 $29,860
Income (loss) from operations (1,602) (3,066) (3,089) (1,421)
Net income (loss) (1,480) (2,738) (2,973) (5,594)
Net income (loss) per share - basic (0.13) (0.24) (0.26) (0.49)
Net income (loss) per share - diluted (0.13) (0.24) (0.26) (0.49)
-----------------------------------------------------------------------------------------------------------
Year ended June 30, 2000
Revenue $25,978 $26,011 $25,057 $28,662
Income (loss) from operations (2,087) (1,239) 111 720
Net income (loss) (1,959) (1,272) (635) 22
Net income (loss) per share - basic (0.17) (0.11) (0.06) 0.00
Net income (loss) per share - diluted (0.17) (0.11) (0.06) 0.00
------------------------------------------------------------------------------------------------------------
Year ended June 30, 1999
Revenue $28,273 $23,634 $26,693 $29,120
Income (loss) from operations 2,151 (2,007) 338 (280)
Net income (loss) 413 (1,851) (541) (610)
Net income (loss) per share - basic 0.04 (0.17) (0.05) (0.05)
Net income (loss) per share - diluted 0.04 (0.17) (0.05) (0.05)
------------------------------------------------------------------------------------------------------------
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
44
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.
Item 11. Executive Compensation.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.
Item 13. Certain Relationships and Related Transactions.
The information required by this item will be contained in the
Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders
and is hereby incorporated by reference thereto.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of the report:
1. Financial Statements.
The following consolidated financial statements of SPACEHAB,
Incorporated and its wholly owned and majority-owned subsidiaries and
related notes, are set forth herein as indicated below.
Page
----
Report of Ernst & Young LLP, Independent Auditors ........ 21
Report of KPMG LLP, Independent Auditors.................. 22
Consolidated Balance Sheets .............................. 23
Consolidated Statements of Operations .................... 24
Consolidated Statements of Stockholders' Equity .......... 25
Consolidated Statements of Cash Flows .................... 26
Notes to Consolidated Financial Statements ............... 27
2. Financial Statement Schedules.
All financial statement schedules required to be filed in Part IV, Item
14 (a) have been omitted because they are not applicable, not required,
or because the required information is included in the financial
statements or notes thereto.
3. Exhibits.
45
Exhibit No. Description of Exhibit
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2 Designation of Rights, Terms and Preferences of Series A Junior
Preferred Stock (see Exhibit 4.4 of this Report on Form 10-K).
3.3++ Designation of Rights, Terms and Preferences of Series B Senior
Convertible Preferred Stock of SPACEHAB, Incorporated.
3.4* Articles of Amendment of SPACEHAB, Incorporated, including the
Designation of Rights, Terms and Preferences of Additional
Shares of Series B Senior Convertible Preferred Stock of
SPACEHAB, Incorporated.
3.5* Amended and Restated By-Laws of the Company.
4.1++ Designation of Rights, Terms and Preferences of Series B Senior
Convertible Preferred Stock of the Registrant.
4.2++ Preferred Stock Purchase Agreement between the Registrant and
DaimlerChrysler Aerospace AG dated as of August 2, 1999.
4.3++ Registration Rights Agreement between the Registrant and
DaimlerChrysler Aerospace AG dated as of August 5, 1999.
4.4+ Rights Agreement, dated as of March 26, 1999, between the
Registrant and American Stock Transfer & Trust Company. The
Rights Agreement includes the Designation of Rights, Terms and
Preferences of Series A Junior Preferred Stock as Exhibit A, the
form of Rights Certificate as Exhibit B and the Summary of
Rights as Exhibit C.
10.3* Cost Plus Incentive Fee Contract (Number SHB 1009), dated
November 23, 1994, between the Registrant and McDonnell Douglas
(including the amendments thereto) (the "Mir Contract").
10.6* Amended and Restated Representation Agreement, dated August 15,
1995, by and between the Registrant and Mitsubishi Corporation.
10.7* Letter Agreement dated August 15, 1995, by and between the
Registrant and Mitsubishi Corporation.
10.12*** Amended and Restated Credit Agreement, dated August 20, 1996
among the Registrant, the Insurers listed therein and the Chase
Manhattan Bank (National Association), as agent.
10.13*////// SPACEHAB, Incorporated 1995 Directors' Stock Option Plan (as
amended and restated effective October 21, 1997).
10.27** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shelley A. Harrison.
10.28** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Edward E. David, Jr.
10.32** Indemnification Agreement, dated December 27, 1995, between the
Company and James R. Thompson.
10.36** Indemnification Agreement, dated December 27, 1995, between the
Company and David A. Rossi.
10.37** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shi H. Huang.
10.38** Indemnification Agreement, dated December 27, 1995, between the
Company and Nelda J. Wilbanks.
10.39** Indemnification Agreement, dated December 27, 1995, between the
Company and M. Dale Steffey.
10.43** Indemnification Agreement, dated December 27, 1995, between the
Company and Hironori Aihara.
46
10.49*// Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997,
between the Registrant and McDonnell Douglas Corporation,
McDonnell Douglas Aerospace Huntsville Division (the "Research
Double Module Contract").
10.52*// Office Building Lease Agreement, dated October 6, 1993, between
Astrotech and the Secretary of the Air Force (Lease number
SPCVAN - 2-94-001).
10.54*// Loan and Security Agreement, dated June 16, 1997, between the
Registrant, Astrotech and First Union National Bank (formerly
known as Signet Bank) (the "Revolving Credit Agreement").
10.55*// Loan and Security Agreement, dated July 14, 1997, between
Astrotech and the CIT Group/Equipment Financing, Inc. (the "Term
Loan Agreement").
10.57*// Employment and Non-Interference Agreement, dated April 10, 1997,
between the Company and John M. Lounge.
10.58*// Indemnification Agreement, dated October 22, 1996, between the
Company and John M. Lounge.
10.69*/// ESA Contract, Dated October 10, 1997, between the Registrant and
Intospace GmbH (the "ESA Contract").
10.70*//// NAS 9-97199, dated December 21, 1997, between the Registrant and
NASA (the "REALMS Contract").
10.73*//// Employment Agreement and Non-Interference Agreement dated
January 15, 1998, between the Company and David A. Rossi.
10.74*//// Amendment number 1 to Loan and Security Agreement dated December
31, 1997, between the Company and First Union National Bank.
10.80*///// CSA Contract, dated May 21, 1998, between the Registrant and the
Canadian Space Agency.
10.81*///// Gemini Office Building Lease Agreement, dated January 14, 1998,
between the Registrant and Puget of Texas
10.82*///// SHB98006, dated July 8, 1998, between the Registrant and Benz
Aerospace AG, Raumfahrt-Infrastuktur
10.84*///// Capital Office Park Lease as amended, dated April 23, 1998,
between Astrotech and Eleventh Springhill Lake Associates L.L.P.
10.85+++ Letter Agreement between the Company and Alenia Aerospazio.
10.86+++ Employment and Non-Interference Agreement dated July 1, 1998
between the Company and William A. Jackson
10.87+++ Employment and Non-Interference Agreement dated July 1, 1998
between the Company and Eugene A. Cernan
10.88+++ Employment and Non-Interference Agreement dated July 1, 1998
between the Company and W.T. Short
10.89+++ Modification S/A 14 to NAS9-97199 dated November 25, 1998,
between the Company and NASA.
10.90++++ SPACEHAB, Incorporated 1994 Stock Incentive Plan (as amended and
restated effective October 14, 1999).
47
10.92++++ Employment and Non-Interference Agreement, dated March 1, 1999,
between the Company and Michael Kearney.
10.93++++ Contract No. NAS 9-18800 between NASA and Johnson Engineering
dated April 28, 1993.
10.94++++ Cost Plus Incentive Fee Contract No. SHB 1014 dated August 14,
1997 between the Boeing Company and the Registrant.
10.95++++ Amended and Restated Employment and Non-Interference Agreement,
dated April 1, 1997, between the Company and Dr. Shelly A.
Harrison, amended and restated as of January 15, 1999.
10.97++++ Lease for property at 555 Forge River Dr. Suite #150, Webster,
TX between Johnson Engineering and CD UP LP a wholly owned
subsidiary of Carey Diversified LLC, successor in interest to
J.A. Billip Development Corporation dated April 30, 1993, as
amended.
10.98++++ Lease for property at 18100 Upper Bay Road, Suite #208, Houston,
TX between Johnson Engineering Corporation and Nassau
Development Company, dated February 19, 1998.
10.99++++ Lease for property at 920, 926 and 928 Gemini Ave., Houston, TX
under Standard Commercial Lease between Johnson Engineering
Corporation and Lakeland Development dated February 1, 1998.
10.100++++ Lease for property at 300 D Street, SW, Suite #814, Washington,
DC, between the Registrant and The Washington Design Center, LLC
dated December 16, 1998.
10.101++++ Lease for property at 16850 Titan, Houston, TX between Johnson
Engineering Corporation and Computer Extension Systems, Inc.
dated August 1, 1999.
10.102++++ Agreement of Sale and Purchase of Leasehold Interest between
Eastern American Technologies Corporation and SPACEHAB,
Incorporated dated August 1997.
10.103*////// SPACEHAB, Incorporated 1997 Employee Stock Purchase Plan.
10.104 Secured Promissory Note, dated March 30, 1999, between the
Company and The CIT Group/Equipment Financing, Inc.
10.105 Amendment No 2 to Loan and Security Agreement, dated October 15,
1999 between the Company, First Union National Bank and certain
other parties.
10.106+++++ Agreement between Astrotech Space Operations, Inc. and McDonnell
Douglas Corporation, dated January 7, 2000.
10.107+++++ Agreement between Astrotech Space Operations, Inc. and Lockheed
Martin Commercial Launch Services, Inc. dated January 24, 2000.
10.108 Amendment No. 3 to Loan and Security Agreement, dated January
31, 2000 between the Company, First Union National Bank and
certain other parties.
10.109 Employment and Non-Interference Agreement, dated February 14,
2000, between the Company and Julia A. Pulzone.
10.110 Amendment No. 4 to Loan and Security Agreement, dated May 18,
2000 between the Company, First Union National Bank and certain
other parties.
10.111 Third Amendment and Assignment of Industrial Real Estate Lease,
and Consent to Assignment of Industrial Real Estate Lease, dated
July 24, 2000, between the Company, American National Insurance
Company and Pall Corporation.
48
10.112 Financing and Security Agreement, dated August 9, 2000, by and
among Bank of America, N.A. and the Company, Johnson Engineering
Corporation, Astrotech Space Operations, Inc. and Space Media,
Inc.
10.113*++++ Employment and Non-Interference Agreement, dated as of January
1, 2001, between the Company and Michael Kearney.
16.*++ Changes in Registrant's Certifying Accountant.
21.*// Subsidiary of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG LLP.
* Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (File No. 33-97812) and all amendments
thereto, originally filed with the Securities and Exchange
Commission on October 5, 1995.
** Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended December 31, 1995, filed February 14,
1996.
*** Incorporated by reference to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 1996, filed with the
Securities and Exchange Commission on September 17, 1996.
**** Incorporated by reference to the Registrant's Annual Report on
Form 10-K/A for the year ended June 30, 1996, filed with the
Securities and Exchange Commission on December 20, 1996.
***** Incorporated by reference to the Registrant's Report on Form
10-Q/A for the quarter ended September 30, 1996, filed with the
Securities and Exchange Commission on December 20, 1996.
*/ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on February
27, 1997.
*// Incorporated by reference to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 1997, filed with the
Securities and Exchange Commission on September 12, 1997.
*/// Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended September 30, 2000, filed November
14, 2000.
*//// Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended December 31, 1997, filed February 5,
1998.
*///// Incorporated by reference to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 1998, filed with the
Securities and Exchange Commission on September 17, 1998.
*////// Incorporated by reference to the Registrant's Definitive Proxy
Statement, filed with the Securities and Exchange Commission on
September 12, 1997.
+ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on April 1,
1999.
49
++ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on August 19,
1999.
+++ Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended December 31, 1998.
++++ Incorporated by reference to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 1999, filed with the
Securities and Exchange Commission on September 17, 1999.
+++++ Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended March 31, 2000, filed with the
Securities and Exchange Commission on May 12, 2000.
*+ Incorporated by reference to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 2000, filed with the
Securities and Exchange Commission on September 12, 2000.
*++ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on September
13, 2000.
*+++ Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended September 30, 2000.
*++++ Incorporated by reference to the Registrant's Report on Form
10-Q for the quarter ended March 31, 2001.
The following Reports on Form 8-K were filed by the Registrant during the period
covered by this report.
(a) Reports on Form 8-K.
A report on Form 8-K was filed September 13, 2000 announcing the
dismissal of KPMG LLP as the independent public accountants of
the Company and the appointment of Ernst & Young LLP as its new
independent accountants for the fiscal year ended June 30, 2001,
subject to stockholder ratification. Stockholder ratification
was obtained at the Annual Meeting of Stockholders on October
12, 2000.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
SPACEHAB, Incorporated
By: /s/ Dr. Shelley A. Harrison
---------------------------
Dr. Shelley A. Harrison
Chairman of the Board and
Chief Executive Officer
Date:
By: /s/ Julia A. Pulzone
-----------------------
Julia A. Pulzone
Senior Vice President, Finance
and Chief Financial Officer
Date:
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of this
registrant in the capacities and on the dates indicated.
/s/ Hironori Aihara Director October 15, 2001
------------------------------------
Hironori Aihara
/s/ Melvin D. Booth Director October 15, 2001
------------------------------------
Melvin D. Booth
/s/ Dr. Edward E. David, Jr. Director October 15, 2001
------------------------------------
Dr. Edward E. David, Jr.
/s/ Richard Fairbanks.III Director October 15, 2001
------------------------------------
Richard Fairbanks
/s/ Michael E. Kearney Director October 15, 2001
------------------------------------
Michael Kearney
/s/ Josef Kind. Director October 15, 2001
------------------------------------
Josef Kind
/s/ Gordon S. Macklin Director October 15, 2001
------------------------------------
Gordon S. Macklin
/s/ Yury P. Semenov Director October 15, 2001
------------------------------------
Dr. Yury P. Semenov
/s/ James R. Thompson Director October 15, 2001
------------------------------------
James R. Thompson
51