UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended...............March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission file number 0-27206
SPACEHAB, Incorporated
1595 Spring Hill Road
Suite 360
Vienna, Virginia 22182
(703) 821-3000
Incorporated in the State of I.R.S. Employer
Washington
Identification
No. 91-1273737
The number of shares of Common Stockoutstanding as of the close of
business on May 1, 1998:
Class Number of Shares
Outstanding
Common Stock 11,163,954
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
------ -----
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
MARCH 31, 1998 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART 1 FINANCIAL INFORMATION Page
Item 1. Unaudited Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 and March 31, 1998 3
Condensed Consolidated Statements of Operations for
the Three and Nine months ended March 31, 1997 and 1998 4
Condensed Consolidated Statements of Cash Flows for the
Nine months ended March 31, 1997 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
SPACEHAB, INCORPORATED AND SUBSIDIARY
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
1997 1998
(audited) (unaudited)
------------ ------------
ASSETS
<S> ............................................ <C> <C>
Cash and cash equivalents ...................... $ 12,886,731 $ 84,962,330
Receivables .................................... 5,176,255 12,972,376
Prepaid and other current assets ............... 199,247 1,766,573
------------ ------------
Total current assets ....................... 18,262,233 99,701,279
Property, plant and equipment, net of
accumulated depreciation and amortization
of $38,115,620 and $41,996,592 ................ 90,961,873 100,890,281
Goodwill, net of accumulated amortization of ... 3,394,773 3,267,444
$55,947 and $187,105
Deferred mission costs ......................... 1,438,910 1,918,090
Other assets, net .............................. 392,587 5,774,449
------------ ------------
Total assets .............................. $114,450,376 $211,551,543
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable, current portion ............. $ -- $ 3,160,000
Loan payable under credit agreement,
current portion ........................... 500,000 500,000
Accounts payable and accrued expenses ..... 2,408,111 4,655,624
Accrued consulting and subcontracting
services .................................. 9,052,308 6,870,578
Advanced billings ......................... 846,855 377,212
Total current liabilities ............ 12,807,274 15,563,414
------------ ------------
Notes payable to shareholder ................... 11,225,246 11,895,001
Loan payable under credit agreement, net of
current portion ................................ 1,500,000 1,000,000
Note payable, net of current portion ........... -- 9,547,123
Convertible notes payable ...................... -- 63,250,000
Deferred flight revenue ........................ 2,295,898 18,569,648
------------ ------------
Total liabilities .................... 27,828,418 119,825,186
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized
30,000,000 shares, issued and outstanding
11,146,237 and 11,163,954 shares,
respectively ............................ 81,057,164 81,197,574
Additional paid-in capital ................ 16,299 16,299
Accumulated earnings ...................... 5,548,495 10,512,484
------------ ------------
Total stockholders' equity ........... 86,621,958 91,726,357
------------ ------------
Total liabilities and stockholders'
equity ............................. 114,450,376 211,551,543
============ ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
----------------------------- ----------------------------
1997 1998 1997 1998
------------- ------------ ------------ ------------
<S> .................................. <C> <C> <C> <C>
Revenue .............................. $ 15,031,345 $ 18,997,057 $ 38,136,763 $ 39,290,001
Costs of revenue:
Integration and operations ........ 5,804,721 7,563,134 14,777,180 18,370,066
Depreciation ...................... 2,376,139 978,460 7,128,416 2,935,381
Insurance other direct costs ...... 136,801 520,116 243,051 915,116
------------ ------------ ------------ ------------
Total costs of revenue ......... 8,317,661 9,061,710 22,148,647 22,220,563
------------ ------------ ------------ ------------
Gross profit ......................... 6,713,684 9,935,347 15,988,116 17,069,438
Operating expenses:
Marketing, general and
administrative .................. 2,663,375 3,979,981 6,543,551 10,021,402
Research and development .......... 136,776 741,796 451,340 1,793,373
------------ ------------ ------------ ------------
Total operating expenses ....... 2,800,151 4,721,777 6,994,891 11,814,775
------------ ------------ ------------ ------------
Income from operations ......... 3,913,533 5,213,570 8,993,225 5,254,663
Interest expense, net of capitalized
amounts ............................ (187,201) (1,253,367) (865,518) (2,631,701)
Interest and other income ............ 375,501 931,151 1,190,075 2,341,030
------------ ------------ ------------ ------------
Income before income taxes ..... 4,101,833 4,891,354 9,317,782 4,963,992
Income tax expense ................... 894,659 -- 2,124,659 --
------------ ------------ ------------ ------------
Income before extraordinary item 3,207,174 4,891,354 7,193,123 4,963,992
Extraordinary item - gain on early
retirement of debt, net of taxes ... -- -- 3,274,029 --
------------ ------------ ------------ ------------
Net income ..................... $ 3,207,174 $ 4,891,354 $ 10,467,152 $ 4,963,992
============ ============ ============ ============
Basic earnings per share:
Income before extraordinary item ... $ 0.29 $ 0.44 $ 0.65 $ 0.45
Extraordinary item ................. -- -- 0.29 --
------------ ------------ ------------ ------------
Net income per share - basic ......... $ 0.29 $ 0.44 $ 0.94 $ 0.45
============ ============ ============ ============
Shares used in computing net income
per share - basic ................. 11,146,236 11,156,274 11,109,721 11,152,312
============ ============ ============ ============
Diluted earnings per share:
Income before extraordinary item ... $ 0.29 $ 0.37 $ 0.65 $ 0.44
Extraordinary item ................. -- -- 0.29 --
------------ ------------ ------------ ------------
Net income per share - diluted ....... $ 0.29 $ 0.37 $ 0.94 $ 0.44
============ ============ ============ ============
Shares used in computing net income
per share - assuming dilution ..... 11,153,855 16,062,335 11,149,679 11,407,595
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended March 31,
1997 1998
------------- --------------
Cash flows provided by (used for) operating activities:
<S> ......................................... <C> <C>
Net income ............................. $ 10,467,152 $ 4,963,992
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ........ 7,420,550 4,115,536
Gain on early retirement of debt,
net of taxes, before legal expenses (3,383,891) --
Amortization of financing fees ....... -- 340,939
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable ........................ 1,915,136 (7,796,121)
Increase in prepaid and other
current assets ................... (681,184) (1,567,326)
Decrease (increase) in deferred
mission costs .................... 611,744 (479,180)
Increase in other assets ........... (145,656) (1,774,900)
Increase (decrease) in deferred
flight revenue .................... (14,309,595) 16,273,750
Increase (decrease) in accounts
payable and accrued expenses ..... (1,493,235) 2,247,513
Decrease in advanced billings ...... -- (469,643)
Increase in accrued consulting
and subcontracting services ...... 2,892,632 1,736,128
------------ ------------
Net cash provided by operating
activities ................. 3,293,653 17,590,688
------------ ------------
Cash flows used for investing activities:
Payments for modules under
construction ...................... (3,679,552) (13,360,122)
Purchase of Astrotech, net of cash
acquired .......................... (19,960,021) --
Payments for building under
construction ...................... -- (3,205,236)
Purchase of property and equipment .... (2,878,931) (504,547)
------------ ------------
Net cash used for investing
activities ................... (26,518,504) (17,069,905)
------------ ------------
Cash flows provided by (used for) financing activities:
Payment of note payable to Insurers ... (3,185,060) (500,000)
Payment of debt placement fees ....... -- (4,042,714)
Proceeds from issuance of convertible
notes payable ..................... -- 63,250,000
Payment of legal fees on early
retirement of debt ................ (109,986) --
Proceeds from note payable ............ -- 14,119,025
Payment of note payable ............... (1,411,902)
Proceeds from issuance of common stock 24,000 140,407
------------ ------------
Net cash provided by (used for)
financing activities ......... (3,271,046) 71,554,816
------------ ------------
Net increase (decrease) in cash
and cash equivalents ......... (26,495,897) 72,075,599
Cash and cash equivalents at beginning
of period .............................. 50,795,548 12,886,731
------------ ------------
Cash and cash equivalents at end of
period ............................. $ 24,299,651 $ 84,962,330
============ ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of SPACEHAB, Incorporated and subsidiary ("SPACEHAB" or the
"Company") as of March 31, 1998, and the results of their operations for the
three and nine month periods ended March 31, 1997 and 1998 and their cash flows
for the nine months ended March 31, 1997 and 1998. However, the consolidated
financial statements are unaudited, and do not include all related footnote
disclosures. The results of operations for the three and nine months ended March
31, 1998 are not necessarily indicative of the results that may be expected for
the full year. The Company's results of operations fluctuate significantly from
quarter to quarter. The interim unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements appearing in the Company's Form 10-K for the year ended
June 30, 1997.
2. Earnings per Share:
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which
establishes new guidelines for the calculations of earnings per share. Earnings
per share for all prior periods have been restated to reflect the
provisions of this Statement.
The following are reconciliations of the numerators and denominators of the
basic and diluted earnings per share computations for "income before
extraordinary item" and "extraordinary item" for the three and nine month
periods ended March 31, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
Three months ended March Three months ended March
31, 1998 31, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- ----------
Basic EPS:
Income available to
<S> .................. <C> <C> <C> <C> <C> <C>
common stockholders $4,891,354 11,156,274 $ 0.44 $3,207,174 11,146,236 $ 0.29
Effect of dilutive
securities:
Convertible notes
payable ........... $ 990,803 4,642,202 -- -- -- --
Options and warrants -- 263,859 -- -- 7,619 --
---------- ---------- ----- ---------- ---------- ------
Diluted EPS:
Income available to
common stockholders $5,882,157 16,062,335 $ 0.37 $3,207,174 11,153,855 $ 0.29
========== ========== ====== ========== ========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine months ended March Nine months ended March
31, 1998 31, 1997
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- ----------
Basic EPS:
Income before
<S> <C> <C> <C> <C> <C> <C>
extraordinary item $4,963,992 11,151,312 $0.45 $7,193,123 11,109,721 $0.65
Extraordinary -- -- -- $3,274,029 11,109,721 $0.29
Effect of dilutive
securities:
Convertible notes
payable -- -- -- -- 36,406 --
Options and warrants -- 256,283 -- -- 3,552 --
---------- ----------- ------ ----------- ----------- -----
Diluted EPS:
Income available to
common stockholders:
Income before
extraordinary item $4,963,992 11,407,595 $0.44 $7,193,123 11,149,679 $0.65
Extraordinary item -- -- -- $3,274,029 11,149,679 $0.29
</TABLE>
Convertible notes payable outstanding as of March 31, 1998, convertible into
4,642,202 shares of common stock at $13.625 per share and due October 2007, were
not included in the computation of diluted EPS for the nine month period ended
March 31, 1998 as the inclusion of the converted notes would be anti-dilutive.
Options and warrants to purchase 1,525,351 shares of common stock, at prices
ranging from $8.63 to $14.88 per share, were outstanding for the nine months
ended March 31, 1997, but were not included in the computation of diluted EPS
because the options' and warrants' exercise prices were greater than the average
market price of the common shares during the nine months ended March 31, 1997.
Similarly, additional options to purchase 50,000 shares of common stock at a
price of $7.00 per share were also not included in the diluted EPS calculation
for the three month period ended March 31, 1997. The options expire between June
24, 1997 and August 1, 2005 and warrants expire between June 30, 1997 and June
21, 1998.
Options and warrants to purchase 1,818,597 and 1,811,021 shares of common stock,
at prices ranging from $11.00 to $14.00 per share, were outstanding for the
three and nine month periods ended March 31, 1998, respectively. These were not
included in the computation of diluted EPS because the options' and warrants'
exercise prices were greater than the average market price of the common shares
during the three and nine month periods ended March 31, 1998. The options expire
between June 24, 1998 and October 21, 2004 and warrants expire June 21, 1998.
3. Depreciation of Flight Modules:
Effective July 1, 1997, the Company extended the estimated useful lives of its
space modules through 2012. This change in accounting estimate is treated
prospectively and is based on current available information from NASA, which has
estimated the life of the Space Shuttle program through at least 2012.
4. Revenue Recognition:
Revenue is recognized upon completion of each module flight under the Mir
contract. Total contract revenue is allocated to each flight based on the amount
of services the Company provides on the flight relative to total services
provided for all flights under contract. Obligations associated with a specific
mission, e.g., integration services, are also recognized upon completion of the
mission. For new 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 reported based on costs incurred on a
per mission basis over the period of the contract. The percentage of completion
method will result in the recognition of revenue over the period of contract
performance, thereby decreasing quarter by quarter fluctuations of reported
revenue. Revenue provided by the Astrotech payload processing facilities is
recognized ratably over the occupancy period of the satellites at the Astrotech
facilities.
5. Statements of Cash Flows - Supplemental Information:
(a) Cash paid for interest costs was $1.49 million and $0.87 million for the
nine months ended March 31, 1998 and 1997, respectively. The Company capitalized
interest of approximately $1.35 million and $0.11 million during the nine months
ended March 31, 1998 and 1997, respectively. (b) The Company paid $1.34 million
and $2.10 million for income taxes during the nine months ended March 31, 1998
and 1997, respectively.
6. New Credit Facilities:
On June 16, 1997, the Company entered into a $10.0 million 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,
and are collateralized by certain assets of the Company. The term of the
agreement is through October 1999. As of March 31, 1998, the Company had not
drawn against the line of credit.
On July 14, 1997, the Company's wholly-owned subsidiary, Astrotech, entered into
a five year credit facility with a financial institution for loans of up to
$15.0 million. 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. As of March 31, 1998, the Company had drawn
$14.12 million against this loan. As of March 31, 1998, the outstanding balance
on this loan was $12.71 million.
In October 1997, the Company completed a private placement offering for $63.25
million of aggregate principal of 8% 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 $59.91 million to be used for capital
expenditures associated with the development and construction of space related
assets and for general corporate purposes.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
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) the "General" and
"Liquidity and Capital Resources" sections of this Item 2. Such statements are
subject to certain risks and uncertainties, including those discussed herein,
which could cause actual results to differ materially from those projected in
such statements.
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles.
The Company currently operates under two contracts with NASA, the Mir
Contract, with a total contract value of $90.2 million and the Research and
Logistics Module Services Contract, (the "REALMS Contract"), a $61.8 million
contract for two research missions on board the Space Shuttle and a logistics
mission to resupply the International Space Station. To date, the Company has
recognized $79.4 million of the Mir contract value, representing the completion
of the first six missions. The remaining $10.8 million represents the final Mir
option mission scheduled to be flown during the fourth quarter of fiscal 1998.
The value of the newly awarded REALMS contract is $42.8 million for three firm
missions for NASA. The additional $19.0 million will be derived from three of
NASA's major International Space Station partners; the European Space Agency
(ESA), the National Space Development Agency of Japan (NASDA) and the Canadian
Space Agency (CSA). The Company has the potential to increase the total current
REALMS contract value of $61.8 million by approximately $22.0 million through
module usage sales to commercial customers for microgravity space research.
Additionally, the REALMS contract has an option for a fourth mission valued at a
minimum of $15.8 million. The first two missions under the REALMS Contract are
scheduled for flights in the second and fourth quarters of fiscal 1999; the
third is currently projected for launch in May 2000.
SPACEHAB generates revenue by providing lockers and/or volume within the
SPACEHAB Modules, and by integration and operations support services provided to
scientists and researchers responsible for the experiments and/or by NASA or
International Agencies to carry logistics supplies for Module missions aboard
the Shuttle system. Under the Mir Contract, the Company recognizes revenue only
at the completion of each Space Shuttle mission utilizing Company assets.
Accordingly, the Company's quarterly revenue and profits have fluctuated
dramatically based on NASA's launch schedule and will continue to do so under
the Mir Contract and any other contract for which revenue is recognized only
upon completion of a mission. For the REALMS contract and for future contact
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 on a
per mission basis over the period of the contract. The percentage-of-completion
method results in the recognition of revenue over the period of contract
performance, thereby decreasing the quarter-by-quarter fluctuations of reported
revenue.
Astrotech revenue is derived from various multiyear 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.
In addition, Astrotech will generate additional revenue from an exclusive
multiyear agreement to process all Sea Launch program payloads at the Boeing
facility in Long Beach, California.
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.
Expenses associated with sustaining engineering are expensed as incurred.
Mission specific expenses relating to the Mir Contract are recorded as assets
and not expensed until the specific Space Shuttle mission is flown and the
related revenue is recognized. 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 expensed as incurred. Marketing, general and administrative, research and
development and interest and other expenses are recognized when incurred.
RESULTS OF OPERATIONS
For the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997.
Revenue. The Company recorded revenue of approximately $19.00 million and
$15.03 million for the three months ended March 31, 1998 and 1997, respectively.
In accordance with the Company's revenue recognition policy for the Mir
Contract, revenue is recorded at the completion of a mission when the SPACEHAB
modules are returned to the Company. Revenue was recognized for the sixth Mir
Contract mission ($13.60 million) during the quarter ended March 31, 1998 in
addition to revenue generated from the REALMS Contract ($2.83 million) and from
Astrotech ($2.53 million). In contrast, revenue for the quarter ended March 31,
1997 was primarily derived from the Mir Contract ($13.81 million).
Costs of Revenue. Costs of revenue for the quarter ended March 31, 1998
increased 8.94% to $9.06 million, as compared to $8.32 million for quarter ended
March 31, 1997. The primary components of costs of revenue for the quarter ended
March 31, 1998 include integration and operation costs under the Mir Contract
($5.33 million), the REALMS Contract ($1.04 million), and the NASDA/ESA Contract
($0.15 million); Astrotech operations ($1.47 million); and, depreciation ($0.98
million). The primary components of costs of revenue for the quarter ended March
31, 1997 included integration and operations costs under the Mir Contract ($5.30
million), the NASDA/ESA Contract ($0.19 million); and, depreciation ($2.38
million). The decrease in depreciation expense during 1998 is primarily
attributable to the impact of extending the estimated useful lives of the
Company's modules. This change in accounting estimate is treated prospectively
and is based on current available information from NASA, which extends the
estimated useful life of the space shuttle program to at least 2012.
Operating Expenses. Operating expenses increased approximately 68.62% to
approximately $4.72 million for the three months ended March 31, 1998 as
compared to approximately $2.80 million for the three months ended March 31,
1997. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional costs of approximately $0.21 million incurred for
operating the Astrotech subsidiary, which was acquired in February 1997.
Research and Development costs increased 442.4% to $0.74 million from $0.14
million. This increase was due to the Company's continuous efforts to develop
space- related assets.
Interest Expense. Interest expense was approximately $1.25 million for the
three months ended March 31, 1998 as compared to approximately $0.19 million for
the three months ended March 31, 1997. There was also approximately $1.35
million and $0.10 million of interest capitalized amounts for the quarter ended
March 31, 1998 and 1997, respectively. The capitalized is interest was based on
the construction of the Company's science module with double module hardware,
which will be placed in service beginning in late 1999. Additional amounts were
capitalized during the quarter ended March 31, 1998, relating to the
construction of an expanded facility for Astrotech which was acquired in
February 1997.
Interest and Other Income. Interest and other income was approximately $0.93
million and $0.38 million for the three months ended March 31, 1998 and 1997,
respectively. This increase is due to interest earned on short-term investment
vehicles by the Company for the investment of proceeds received from the
Company's debt financings completed during July and October 1997.
Net Income. Net income was approximately $4.89 million, or $0.44 per share
(basic EPS), for the quarter ended March 31, 1998, on 11,156,274 shares, as
compared to $3.21 million, or $0.29 per share (basic EPS), for the quarter ended
March 31, 1997, on 11,146,236 shares. There is no income tax expense for the
three months ended March 31, 1998 primarily due to depreciation timing
differences between book and tax on the Company's flight modules.
For the nine months ended March 31, 1998 as compared to the nine months ended
March 31, 1997.
Revenue. The Company recorded revenue of approximately $39.29 million and
$38.14 million for the nine months ended March 31, 1998 and 1997, respectively.
Revenue recognized during the nine months ended March 31, 1998 was from the Mir
Contract ($27.20 million), REALMS Contract ($4.55 million), NASDA/ESA Contract
($0.03 million) and Astrotech ($7.51 million). Conversely, for the nine months
ended March 31, 1997 the Company's revenue was attributable to the Mir Contract
($27.83 million), the CMAM Contract ($7.96 million), the NASDA/ESA Contracts
($1.13 million) and Astrotech ($1.22 million).
Costs of Revenue. Costs of revenue for the nine months ended March 31, 1998
increased 0.03% to $22.22 million, as compared to $22.15 million for the nine
months ended March 31, 1997. The primary components of costs of revenue for the
nine months ended March 31, 1998 include integration and operation costs under
the Mir Contract ($12.84 million), REALMS Contract ($1.97 million), and the
NASDA/ESA Contract ($0.35 million); Astrotech operations ($3.93 million); and,
depreciation ($2.94 million). In contrast, the primary components of costs of
revenue for the nine months ended March 31, 1997 included integration and
operations costs under the Mir Contract ($12.35 million), the NASDA/ESA Contract
($1.04 million) and the CMAM Contract ($1.07 million); and, depreciation ($7.13
million). The decrease in depreciation expense is attributable to the impact of
extending the estimated useful lives of the Company's modules. This change in
accounting estimate is treated prospectively and is based on current available
information from NASA, which extends the estimated useful life of the Space
Shuttle program to at least 2012.
Operating Expenses. Operating expenses increased by approximately 68.90% to
approximately $11.81 million for the nine months ended March 31, 1998 as
compared to approximately $6.99 million for the nine months ended March 31,
1997. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional costs of approximately $0.88 million for operating
the Astrotech subsidiary, which was acquired in February 1997. Research and
development costs increased 297.34% to $1.79 million from $0.45 million. This
increase is due to the Company's efforts to develop space related assets
including the Integrated Cargo Carrier and the SPACEHAB Universal Communications
System to be used in future space flights.
Interest Expense. Interest expense was approximately $2.63 million for the
nine months ended March 31, 1998 as compared to approximately $0.87 million for
the nine months ended March 31, 1997. There was also approximately $1.35 million
and $0.10 million of interest capitalized during the nine months ended March 31,
1998 and 1997, respectively. Interest is capitalized based on the construction
of the Company's science module with double module hardware. Additional amounts
were capitalized during the nine months ended March 31, 1998 based on costs
incurred on the construction of an expanded facility for Astrotech.
Interest and Other Income. Interest and other income was approximately $2.34
million and $1.19 million for the nine months ended March 31, 1998 and 1997,
respectively. This increase is due to interest earned by the Company on
short-term investment of proceeds received from the Company's credit facilities.
Net Income. Net income was approximately $4.96 million, or $0.45 per share
(basic and diluted EPS), on 11,152,312 shares (basic EPS) as compared to $10.47
million, or $0.94 per share (basic EPS), for the nine months ended March 31,
1997, on 11,109,721 shares. There is no income tax expense for the nine months
ended March 31, 1998 primarily due to depreciation timing differences between
book and tax on the Company's flight modules.
.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
The Company has historically financed its capital expenditures, research and
development and working capital requirements with progress payments under its
contracts, including the CMAM Contract, the Mir Contract, the NASDA/ESA
Contracts and Astrotech's operations, as well as with proceeds received from
private 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
$43.48 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
March 31, 1998, no amounts were drawn on this line of credit. In July 1997,
Astrotech obtained a five-year term loan (the "Term Loan Agreement"), which is
guaranteed by SPACEHAB, and provides for draws of up to $15.0 million for
general corporate purposes. As of March 31, 1998, the Company had drawn $14.12
million on this loan and had an outstanding balance on that date of $12.71
million. Further, on October 21, 1997 the Company completed a private placement
offering of convertible subordinated notes (the "Notes Offering"), which
provided the Company with net proceeds of approximately $59.91 million to be
used for capital expenditures associated with the development and construction
of space related assets and for general corporate purposes.
Cash Flows from Operating Activities. Cash flows provided by operating
activities for the nine months ended March 31, 1998 and 1997, were $17.59
million and $3.29 million respectively. The increase in cash flows provided by
operating activities is due primarily to a significant increase in deferred
flight revenue, which reflects billings during the nine months ended March 31,
1998 for the option missions under the Mir contract, the REALMS contract and the
NASDA/ESA Contracts.
Cash Flows from Investing Activities. For the nine months ended March 31,
1998 and 1997, cash flows used for investing activities consisted of capital
expenditures of approximately $13.36 million and $3.68 million, respectively. Of
this amount, $8.71 million of the expenditures in the current year are
attributable to the construction of the Company's science module with double
module hardware, which module is to be completed in early 1999. The Company
anticipates that it will spend between $35.0 million and $38.0 million in total
on the asset. As of March 31, 1998, the Company has spent approximately $21.72
million on this asset. In addition, the Company has spent approximately $3.65
million for the construction of an expanded facility for Astrotech.
Cash Flows from Financing Activities. Cash flows provided by (used for)
financing activities were approximately $71.55 million and ($3.27) million for
the nine months ended March 31, 1998 and 1997, respectively. During the nine
months ended March 31, 1998, the Company received net proceeds of approximately
$14.12 million and made payments of $1.41 million under the Term Loan Agreement.
In August 1997, the Company also made a payment of $0.50 million under the
Credit Agreement. In October 1997, the Company received net proceeds of
approximately $59.91 million by completing an offering of $55.00 million of its
8% Convertible Subordinated Notes due 2007 as well as exercise of the
underwriters' over-allotment for an additional $8.25 million.
The Company believes that cash flows from the Notes Offering, the Term Loan
Agreement, the Revolving Line of Credit and other current financing activities
will be sufficient to meet any cash flow requirements from operations and other
funding requirements for capital asset construction and development for at least
the next twelve months.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits. The separate Index to Exhibits accompanying this filing is
incorporated herein by reference.
(b)Reports on Form 8-K. No Report on Form 8-K was filed during the period
ended March 31, 1998.
Exhibit No. Description of Exhibits
10.1* ESA Contract, dated October 10, 1997, between the Registrant
and INTOSPACE GmbH (the "ESA Contract").
10. 2*** NAS 97-199, dated December 21, 1997, between the
Registrant and NASA (the "REALMS Contract").
10. 3*** Letter Contract Number SHB 1014, dated August 13, 1997,
between the Registrant and McDonnell Douglas
Aerospace-Huntsville, (as amended).
10. 4*** Employment Agreement and Non-Interference Agreement dated
January 15, 1998, between the Company and Chester M. Lee.
10. 5*** Employment Agreement and Non-Interference Agreement dated
January 15, 1998, between the Company and David A. Rossi.
10. 6*** Amendment number 1 to Employment Agreement and
Non-Interference Agreement dated April 1, 1997, between the
Company and Shelley A. Harrison.
10. 7*** Amendment number 1 to Loan and Security Agreement dated
December 31, 1997, between the Company and First Union
National Bank.
11. Statement regarding Computation of Earnings Per Common Share.
21.** Subsidiary of the Registrant
27 Financial Data Schedule
* Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended September 30, 1997 filed with the Securities and
Exchange Commission on November 6, 1997.
** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1997 filed with the Securities and
Exchange Commission on September 12, 1997.
*** Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended December 31, 1997 filed with the Securities and Exchange
Commission on February 6, 1998.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPACEHAB, INCORPORATED
Date: May 07, 1998 /S/ MARGARET E. GRAYSON
----------------------------------
Margaret E. Grayson
Vice President of Finance (CFO)
Treasurer, and Assistant
Secretary
(Principal Financial and
Accounting
Officer)
Exhibit 11
SPACEHAB, INCORPORATED AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
1997 1998 1997 1998
----------- ----------- ----------- -----------
Net Income and Adjusted Earnings:
Net income applicable to common
shareholders used for basic
<S> <C> <C> <C> <C>
computations $3,207,174 $4,891,354 $7,193,123 $4,963,992
----------- ----------- ----------- -----------
Dilution adjustments:
Savings in convertible note
payable interest expense
net of tax -- 990,803 -- --
----------- ----------- ----------- -----------
Adjusted net income applicable to
common shareholders assuming
dilution $3,207,174 $5,882,157 $7,193,123 $4,963,992
=========== =========== =========== ===========
Average number of shares of common
stock used for basic computation 11,146,236 11,156,274 11,109,721 11,151,312
----------- ----------- ----------- -----------
Diluted adjustments (1):
Weighted Average Shares and
Share Equivalents Outstanding:
Assumed exercise of options and
warrants 7,619 263,859 3,552 256,283
Assumed conversion of
convertible debt -- 4,642,202 36,406 --
----------- ----------- ----------- -----------
Total number of shares assumed to be
outstanding assuming dilution 11,153,855 16,062,335 11,149,679 11,407,595
----------- ----------- ----------- -----------
Earnings Common Per Share:
Income per common share:
Income before extraordinary item $ 0.29 $ 0.44 $ 0.65 $ 0.45
Extraordinary item -- -- 0.29 --
=========== =========== =========== ===========
Basic $ 0.29 $ 0.44 $ 0.94 $ 0.45
=========== =========== =========== ===========
Income before extraordinary item $ $ $ $
0.29 0.37 0.65 0.44
Extraordinary item - - 0.29 -
----------- ----------- ----------- -----------
Diluted (1): $ 0.29 $ 0.37 $ 0.94 $ 0.44
=========== =========== =========== ===========
</TABLE>
(1) The assumed exercise of options and warrants and the conversion of
convertible debt is anti-dilutive but are included in the calculation of
dilutive earnings per share in accordance with Regulation S-K Item 601
(a)(11).
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001907
<NAME> SPACEHAB, INC
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> mar-31-1998
<CASH> 84,962,330
<SECURITIES> 0
<RECEIVABLES> 12,972,376
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99,701,279
<PP&E> 100,890,281
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<TOTAL-ASSETS> 211,551,543
<CURRENT-LIABILITIES> 15,563,414
<BONDS> 0
0
0
<COMMON> 81,197,574
<OTHER-SE> 16,299
<TOTAL-LIABILITY-AND-EQUITY> 211,551,543
<SALES> 18,997,057
<TOTAL-REVENUES> 18,997,057
<CGS> 9,061,710
<TOTAL-COSTS> 14,105,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,253,367
<INCOME-PRETAX> 4,891,354
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,891,354
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,891,354
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.37
</TABLE>
