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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, 2000.
[_] 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 State of Washington IRS Employer Identification
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
18,2000: 11,345,032.
Aggregate market value of Common Stock (no par value) held by non-affiliates of
the registrant on August 19, 2000, based upon the closing price of the Common
Stock on the Nasdaq National Market of $5.8125 was approximately $65,942,999.
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 ___.
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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 October 12, 2000.
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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
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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 is currently
completing 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 activities for a new asset, a docking double
module (the "Docking Double Module" or "DDM"), that could be used by NASA to
provide more flexible re-supply services to the ISS. The DDM name was changed to
Adaptable Double Module ("ADM") during the year ended June 30, 2000. The ADM
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 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 2000, SPACEHAB Modules have flown
fourteen 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 core business by acquiring Johnson Engineering
Corporation ("JE"), now designated as Engineering Services or "ES" for company
management reporting, on July 1, 1998. With over 687 employees, ES performs
several critical services for NASA including flight crew support services,
operations, training and 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. ES also designs and
fabricates flight hardware, such as flight crew equipment
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and crew quarters habitability outfitting, as well as providing stowage
integration services. ES is also 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 and media corporation that will create
proprietary space-themed content for television and Internet broadcasting from
the ISS. SMI anticipates commencing operations in the year ending June 30 2001,
broadcasting from the Russian-built Zvezda service module, which was launched
and attached to the ISS in July 2000. SMI is also managing the Company's
S*T*A*R*S(TM) (Space Technology And Research Students) global space education
program. The S*T*A*R*S 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.
In the year ended June 30, 2000, the Company also began development, in
partnership with RSC 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. The Company anticipates launching Enterprise in the year ending June 30,
2003. Enterprise is designed to offer space station users stowage space, power
and other utilities, and laboratory facilities for long-duration research. It
also will house the world's first commercial television and Internet
broadcasting studio in space. The Enterprise and SMI initiatives are in line
with the Company's long-term strategy of making space accessible to global mass
markets. SMI plans to draw on RSC Energia's extensive archives of the Russian
space program for content. The archives are being provided to SMI under
agreement with RSC Energia. The Company anticipates financing SMI operations
during the start up phase through funds raised from third party strategic
investors. Financing for the Enterprise module is anticipated to be obtained
from both working capital and external sources of capital.
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.
Company Strategy
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SPACEHAB's goal is to become a global market leader providing products and
services supporting the human space flight, logistics and satellite launch
industries. The Company seeks to achieve this goal through implementation of the
following strategy:
1. Expanding Scope of Business. SPACEHAB continuously evaluates
opportunities to offer new products and services to its customer base and to
develop assets and acquire complementary, attractively valued businesses. For
example, the Company is completing construction of the Research Double Module,
developing the ADM 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. 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. The acquisition of ES 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. The formation of SMI and the
construction of the Enterprise module will enable the Company to further
diversify its customer base into global mass markets.
2. Focusing on Quality of Service. SPACEHAB has completed fourteen
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 Position as Low-Price Provider. The Company continues to
offer its payload processing and logistics support services to NASA and other
customers using SPACEHAB-owned 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
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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.
ES performs services under a cost-plus award and incentive fee contract for
government services that is requested by 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 ES to implement
commercial best practices to reduce cost. ES's capabilities also provide a base
with which to pursue commercial opportunities.
4. Continuing Entrepreneurial Initiative. 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")),
Alenia Spazio S.p.A. ("Alenia"), and Intospace GmbH in Europe; and RSC Energia
in Russia. On August 2, 1999, Astrium 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
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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 June 2001. Expenditures for the RDM through the year ended
June 30, 2000 were $45.4 million. The Company anticipates expenditures of
approximately $3.0 million to complete this asset and place it into service.
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.
SPACEHAB has addressed the need to carry unpressurized cargo to the ISS by
designing and developing the ICC. The ICC 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
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ISS, STS-96, in May 1999. In order to more fully meet NASA's requirements for
attached cargo, the Company has initiated preliminary design efforts of a
vertical carrier and other derivatives with characteristics similar to the ICC.
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
Lockeed 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 summer of 2001, 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 $5.7 million and $1.1 million in the year ended June 30, 2000 and
1999, respectively. Astrotech is in the process of obtaining financing for this
project from a financial institution and anticipates completion of the financing
in the first quarter of the year ended June 30, 2001.
Astrotech operates its payload processing services under multi-year
agreements with Lockheed Martin to support the processing of commercial Atlas
payloads 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 continues 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". Development of the
Oriole suborbital launch vehicle continued in the year ended June 30, 2000
culminating in the successful static test firing in April 2000 of the solid
rocket motor. Astrotech plans to market the Oriole to NASA in support of its
suborbital microgravity and scientific research programs, and to the Department
of Defense ("DoD") in support of its Theater High Altitude Air Defense ("THAAD")
target missile programs. The successful test launch of the Oriole was completed
on July 7, 2000 from NASA Wallops Flight Facility in Virginia.
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; (ii) supporting new space
launch facilities and related payload processing functions internationally; and
(iii) expanding its sounding rocket services to include the provision of
microgravity research by developing research facilities and flight hardware.
ES 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. ES also designs and
fabricates flight hardware, such as flight crew equipment and crew quarters
habitability outfitting, as well as providing stowage integration services. ES
is also responsible for configuration management support to the ISS program
management office. ES's ability to perform detailed design, fabrication, and
operations complements the Company's traditional strengths in conceptual design
and program management. The acquisition of ES provides many of the critical
skills and capabilities used to perform SPACEHAB services that currently are
acquired through subcontracting relationships.
ES primarily operates under the Flight Crew Systems Development contract
("FCSD Contract") which is currently a $332.5 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 notified the Company that it plans to
exercise it's option to extend certain tasks for an additional year through
April 2002. The additional contract value of these tasks is estimated to be
$54.5 million.
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SMI will create proprietary content from the ISS for broadcast and Internet
distribution. 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. The Company is also offering
something new on Enterprise; the world's first commercial television and
Internet broadcasting studio in space. These initiatives are in line with our
long-term strategy of reaching global mass markets, through television and
Internet broadcasting from Enterprise. Space Media is also managing the
Company's S*T*A*R*S (Space Technology And Research Students) global space
education program, and Enterprise will accommodate an expansion of this
successful and rapidly growing initiative. SPACEHAB is estimating a launch for
Enterprise in early 2003.
In 1998 the Company entered into a joint venture agreement with Guigne
Technologies Ltd. to build the SpaceDRUMS(TM), 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 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
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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 three
markets: (i) microgravity and life sciences space research, (ii) space support
services such as space station logistics and resupply, ground operations and
payload processing and training and (iii) creation of high value audiences
through production and distribution of multimedia space focused content.
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
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 seven times per year for the
foreseeable future. As currently planned, the ISS 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,
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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 includes 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 and the development of hardware for the ISS crew living quarters
that is scheduled for launch in 2003.
Competition
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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 has commenced 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. The Company has maintained strong strategic relationships with United
Space Alliance and Boeing, In the international market, SPACEHAB formed a
strategic alliance with DaimlerChrysler Aerospace AG, now part of the largest
European aerospace corporation, Astrium. As part of the agreement with Astrium,
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 to
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, and resupply of food, supplies 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 with the
remainder being MPLM missions.
Astrotech's company-owned 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 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 and 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.
ES's competitors are those aerospace companies that provide engineering and
fabrication services. ES's competitors include Boeing, Lockheed Martin, United
Space Alliance, Barrios Technologies, Inc., Hernandez Engineering, Inc.,
Cimarron and Oceaneering International, Inc.
SMI has one potential competitor, Dreamtime.
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Dependence on a Single Customer
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Approximately $91 million (or 86 percent) of the Company's the year ended
June 30, 2000 revenue was generated from two NASA contracts - the Research and
Logistics Mission Support Contract ("REALMS") and the FCSD Contract. While
Astrotech, and the STS-95 and STS-107 commercial customer contracts represented
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 for ES 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.
Backlog
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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, 2000, both the U.S. Senate and House of Representatives have
authorized and approved an annual appropriation of $13.6 billion for NASA,
including $2.3 billion for the ISS, indicating a commitment by the government to
the space industry. However, there can be no assurance that the level of
approved funding will be adequate for NASA to complete all of its initiatives
including those relating to the contracts with the Company.
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, 2000 and 1999, the Company's contract backlog was
approximately $218 million and $167.3 million, respectively, of which $129
million and $149.5 million, respectively, represented U.S. government backlog
and $89 million and $17.8 million, respectively, represented non-U.S government
contracts.
Contract History
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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 $100.8
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 and STS-107 are approximately
$33.2 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
7
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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 research module to
support microgravity research payloads and two double logistics module flights
to the ISS to support 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, is scheduled
to fly in September 2000; and STS-107 a research mission, is scheduled to fly in
June, 2001. The REALMS Contract provides an opportunity for the Company to
provide similar services to commercial customers on STS-95 and STS-107. 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.
During the year ended June 30, 2000, Astrotech completed negotiations of
long-term extensions to their payload processing contracts with their two
largest customers, Boeing and Lockheed Martin. 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.
ES operates under the FCSD Contract with NASA, a $332.5 million multitask
contract which commenced in May 1993, and is scheduled to conclude in April,
2001. NASA has notified the Company that it plans to exercise it's option to
extend certain tasks for an additional year through April 2002. The additional
contract value of tasks is approximately $54.5 million which has not been
officially added to the FCSD Contract at this time. ES 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. ES also designs and fabricates flight hardware, such as flight
crew equipment and crew quarters habitability outfitting as well as providing
stowage integration services. ES is also responsible for configuration
management support to the ISS program management office.
Research and Development
------------------------
The Company believes that the timely development of new products and
enhancements to existing hardware are essential to maintaining its competitive
position. The Company incurred $2.4 million, $3.6 million and $4.3 million in
research and development expenditures during the years ended June 30, 2000, 1999
and 1998, respectively.
$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. In 1998 approximately $1.9 million
was spent on the design, development and qualification of the new SPACEHAB
Universal Communications System ("SHUCS"). Beginning in the nine months ended
June 30, 1996 and continuing throughout the year ended June 30, 1998, the
Company worked on the development of this new proprietary module communications
system that will be independent of the Space
8
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Shuttle's existing data downlink. SPACEHAB began capital asset construction of
SHUCS in the fourth quarter of the year ended June 30, 1998. In addition, in
1998, the Company spent approximately $0.6 million for research and development
of the ICC. 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. In addition, $1.8 million was spent in the year ended June
30, 1998 on various studies conducted by third parties. 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.
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, 2000, the Company and its wholly and majority-owned
subsidaries employed 776 regular employees, 28 of whom are employed by the
Astrotech subsidiary, 7 are employed by the SMI subsidiary and 687 are employed
by ES. Of these employees, approximately 15 percent hold advanced degrees,
including 11 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 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
ES, currently occupy ten locations, with the corporate headquarters located at
300 D Street SW, Suite 814, Washington, DC 20024. The corporate headquarters
occupy 15,499 square-feet of office space and house 30 employees including
SPACEHAB's 23 person executive management, finance and marketing team,
Astrotech's 5 person management and administrative team and SMI's 2 person
executive management team. The term of the present lease expires on December 16,
2007.
SPACEHAB has 25 employees encompassing sales and marketing, flight services
and health and sciences located at 1331 Gemini Avenue, Suites 300 & 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. In addition, ES occupies a portion of these premises and approximately
5,000 square feet houses 75 employees supporting marketing, finance and
corporate services on a month-to-month basis.
The Company's payload processing facility, housing a 3-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
9
<PAGE>
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.
Astrotech occupies three additional locations. The 7 person management
and technical sounding rocket team, 2 full time employees and 5 contract
employees, are located at 6305 Ivy Lane, Suite 520, Greenbelt, MD 20770. This
facility is approximately 6,000 square-feet of leased office space. The term of
the present lease is a five-year period expiring on May 31, 2003.
Astrotech's 12-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 May 2001. These buildings presently
occupy one-fourth 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 four buildings comprising 16,500
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.
ES occupies five locations. Its headquarters are located at 555 Forge
River Road, Suite 150, Webster, Texas 77058. The headquarters house ES's 257-
person engineering team within a 69,000 square-foot facility. This office lease
will expire on June 30, 2003.
ES 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 January 31, 2001.
ES also occupies two facilities used for storage, shipping and
receiving at 926 and 928 Gemini Ave, Houston, Texas 77058. These facilities are
approximately 4,000 square feet and 9,000 square feet respectively. The lease
will expire on April 30, 2002.
ES also occupies approximately 9,000 square feet of space at 18100
Upper Bay Road, Houston, Texas 77058 that houses a 21-person engineering and
laboratory team. The lease will expire on April 30, 2001.
ES 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 will expire on July 31,2001.
Additionally, ES has more than 300 additional employees who are housed
at various government facilities within the Houston area.
On July 24, 2000 SPACEHAB entered into a lease for 125,000 square feet
of space at 13130 State Highway 3, Houston, Texas. The lease will expire in
March 2003.
The Company believes that its current facilities and equipment are
generally well maintained and in good condition and are adequate for its present
and foreseeable needs.
Item 3. Litigation
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, 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
10
<PAGE>
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 2000 and 1999 are as follows:
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
Fiscal 1999: High Low
------------ ---- ---
First Quarter $11 3/4 $ 8 1/4
Second Quarter $10 3/4 $ 7
Third Quarter $10 13/16 $ 6
Fourth Quarter $ 6 1/8 $ 5
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.
The Company has authorized 30,000,000 shares of Common Stock. At August
18, 2000, 11,345,032 shares of Common Stock were outstanding. The Company had
approximately 3,522 shareholders of record and beneficial holders of its Common
Stock on June 30, 2000.
On August 2, 1999, Astrium, 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 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, allowing them to
purchase the additional 358,334 preferred shares. The preferred stock purchase
increased Astrium's 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) 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.
<TABLE>
<CAPTION>
Nine/1/ Months Year Year Year Year
Ended Ended Ended Ended Ended
June 30 June 30 June 30 June 30 June 30
-----------------------------------------------------------------
1996 1997 1998 1999 2000
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Statement of Operations Data:
Revenue/2/ $56,397 $ 56,601/3/ $64,087 $107,720/8/ $105,708
Costs of revenue 20,985 35,046 36,321 89,283 87,931
-----------------------------------------------------------------
Gross profit 35,412 21,555 27,766 18,437 17,777
Selling, general and
administrative expenses 4,056 8,567 13,712 14,599 17,832/9/
Research and development expenses 100 1,252 2,620 3,636 2,440/10/
-----------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C>
Operating income (loss) 31,256 12,662 12,697 202 (2,495)
Interest expense, net of 699 955 4,480 4,905 3,773
capitalized amounts
Net income (loss) 28,829 13,832/4/ 12,131 (2,589) (3,844)
Net income (loss) per common $3.19 $1.24 $0.84 ($0.23) ($0.34)
share - Diluted/5/
Shares used in computing net
income (loss) Per common share -
diluted/5/ 9,343 11,160 14,571 11,185 11,273
Other Data:
Cash provided by (used for) $13,151 ($5,995) $31,604 ($6,331) $1,424
operations
Total investing activities 6,266 29,308/6/ 23,113 58,619/7/ 29,794
Balance Sheet Data (at period end):
Working capital (deficiency) $45,942 $3,159 $62,660 $12,374 ($1,601)
Total assets 129,709 114,450 220,604 204,346 225,109
Long-term debt, excluding 17,318 12,725 85,322 78,810 75,901
current portion
Stockholders' equity 71,596 86,622 96,408 94,165 102,703
</TABLE>
------------------------------
/1/ Effective October 1, 1995, the Company changed its fiscal year-end to June
30.
/2/ 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.
/3/ Includes revenues of $2,860 generated by Astrotech subsequent to its
acquisition on February 12, 1997.
/4/ Includes an extraordinary gain of $3,274, net of taxes and legal fees,
relating to the amendment and restatement of a credit agreement.
/5/ 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.
/6/ Includes $20,134 of consideration for the purchase of Astrotech.
/7/ Includes $24,745 of consideration for the purchase of ES and a $1,400
investment in a joint venture.
/8/ Includes revenues of $58.4 million generated by Johnson Engineering
subsequent to its acquisition on July 1, 1998.
/9/ Includes approximately $1.8 million of expenses associated with the startup
of SMI.
/10/ Includes approximately $0.5 million of expenses associated the construction
of the Enterprise module.
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
the Astrotech Space Operations, L.P. ("Astrotech"), Johnson Engineering
Corporation ("JE"), now designated Engineering Services ("ES") for company
management reporting, and Space Media, Inc. ("SMI") subsidiaries define the
Company.
During the year ended June 30, 1998, the Company operated under two
contracts with NASA. First, the Mir Contract, with a total contract value of
$91.5 million, including $39.0 million for three Mir option missions that were
flown in the year ended June 30, 1998. Second, the Research and Logistics
Mission Support contract ("REALMS"), with a total current contract value of
$100.8 million originally consisting of four missions, but increased to six
missions currently, three of which were flown in October of 1998, May of 1999
and May of 2000. This contract also provides SPACEHAB an opportunity to have
direct commercial relationships with other space agencies by providing them
research space in the modules. In fact, on the October 1998 flight, most of the
revenue recognized came from customers other than NASA.
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 Flight Crew System
Development contract ("FCSD") with ES. The Company's revenues for the year ended
June 30, 1999 were generated primarily from the REALMS Contract and contracts
with related
12
<PAGE>
commercial customers, with two missions flown during the fiscal year, and the
FCSD Contract. The Company's revenues for the year ended June 30, 1998 were
generated primarily from the Mir Contract, with three missions flown during the
fiscal year and the REALMS Contract and contracts with related commercial
customers.
SPACEHAB generates revenue by providing a turnkey service that includes
access to the modules and provides integration and operations support services
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. Under the Commercial Middeck Augmentation Module ("CMAM") contract and
Mir Contracts, the Company recognized revenue only at the completion of each
Space Shuttle mission using Company assets. Accordingly, the Company's quarterly
revenue and profits fluctuated dramatically based on NASA's launch schedule and
will continue to do so for any contract for which revenue is recognized only
upon completion of a mission. For the REALMS Contract and 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. 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. With respect to the FCSD cost-plus
award and incentive fee contract, revenue is recognized based on costs incurred
plus a proportionate amount of 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 SPACEHAB 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. Expenses associated with sustaining engineering are
expensed as incurred. Mission specific expenses relating to the CMAM Contract
and the Mir Contract were deferred as assets and not expensed until the specific
Space Shuttle mission was flown and the related revenue was recognized. 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 ES. 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.
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.
ES's revenue is derived primarily from the FCSD Contract which is a
$332.5 million multitask contract which was scheduled to conclude in April 2001.
NASA has notified the Company that it plans to exercise it's option to extend
certain tasks for an additional year through April 2002. The additional contract
value of tasks is approximately $54.5 million which has not been officially
added to the FCSD contract at this time. ES performs services under a cost-plus
award and incentive fee contract for government services that is requested and
directed by NASA.
On April 11, 2000, the Company announced the formation of Space Media,
Inc. ("SMI"), a majority-owned subsidiary and media corporation that expects to
create proprietary space-themed content for television and Internet broadcasting
from the International Space Station ("ISS"). SMI anticipates commencing
operations in the year ended June 30, 2001, broadcasting from the Russian-built
Zvezda service module, which was launched and attached to the ISS in July 2000.
SMI is also managing the Company's S*T*A*R*S(TM) (Space Technology And Research
Students) global space education program. The S*T*A*R*S program currently is
planning to launch student-designed experiments on a Space Shuttle mission in
2001 for schools in Australia, Canada, China, Israel, Japan, Singapore,
Thailand, and the United States.
13
<PAGE>
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 had no revenue for the year ended June 30, 2000.
Results of Operations
---------------------
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, $7.6
million from Astrotech, $58.2 million from ES and $0.3 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, $9.8
million from Astrotech, $58.4 million from ES 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 and for ES 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, $4.7 million were for integration and operations at Astrotech, $53.1
million for cost of revenue at ES, 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, $4.6 million for integration and operations at
Astrotech, $53.8 million for cost of revenue at ES, and depreciation of $5.0
million. Cost of revenue for ES 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. ES 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 and expenses associated with ES'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. 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 Income. Interest and other income was approximately $0.7 million
and $1.6 million for the years ended June 30, 2000 and 1999, respectively. This
decrease is due primarily to the Company's use of cash for start up expenses of
Space Media, expenditures for property, plant and equipment and debt payments.
Interest income is earned by the Company through the short-term investment of
available funds.
Net Income (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 ($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.
14
<PAGE>
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.
Fiscal Year Ended June 30, 1999 as Compared to the Fiscal Year Ended June 30,
1998
Revenue. The Company's revenue increased approximately 68% to $107.7
million for the year ended June 30, 1999, as compared to $64.1 million for the
year ended June 30, 1998. For the year ended June 30, 1999, $39.1 million was
recognized from the REALMS contract and related commercial customers, $9.8
million from Astrotech, $58.4 million from ES, which was acquired on July 1,
1998, and $0.4 million of miscellaneous revenue. Conversely, for the year ended
June 30, 1998 revenue of $39.0 million was recognized from the Mir Contract,
$14.3 million from the REALMS Contract and related commercial customers and
$10.8 million from Astrotech. The decrease in module revenue from the year ended
June 30, 1998 is attributable to the delay in the deployment and assembly of the
ISS. When deployed and assembled, the Company believes that the ISS will provide
additional opportunities for SPACEHAB module missions, although there can be no
assurance that additional missions will be contracted for or occur. Astrotech's
revenue declined from the year ended June 30, 1998 due to launch vehicle
failures which have been subsequently corrected.
Costs of Revenue. Costs of revenue for the year ended June 30, 1999
increased 146% to $89.3 million, as compared to $36.3 million for the year ended
June 30, 1998. For the year ended June 30, 1999 $25.9 million of costs were for
integration and operation costs under the REALMS Contract and related commercial
customers, $4.6 million were for integration and operations at Astrotech, $53.8
million for cost of revenue at ES, and depreciation of $5.0 million. In
contrast, the primary costs of revenue for the year ended June 30, 1998, are
$19.2 million for integration and operation costs under the Mir Contract, $7.8
million under the REALMS Contract and related commercial customers, $4.4 million
for integration and operations at Astrotech, and depreciation of $4.9 million.
Operating Expenses. Operating expenses increased by 21.0% to approximately
$18.2 million for the year ended June 30, 1999, as compared to approximately
$15.1 million for the year ended June 30, 1998. This increase is due primarily
to the inclusion of ES's operating expenses of approximately $2.5 million, staff
additions and related expenses during the first half of the year and increased
consulting expenses partially offset by the decrease in research and development
costs of $0.7 million. Research and development costs for the year ended June
30, 1999 were $3.6 million, as compared to $4.3 million for the year ended June
30, 1998. This decrease is due primarily to the completion of the Integrated
Cargo Carrier ("ICC") and the Spacehab Universal Communications System ("SHUCS")
research and development efforts, partially offset by research and development
expenses associated with Astrotech's sounding rocket program.
Interest Expense. Interest expense was approximately $7.4 million for the
year ended June 30, 1999, as compared with approximately $6.4 million for the
year ended June 30, 1998. The increased interest expense is due primarily to a
full year of interest expense on the $63.3 million of convertible notes as
compared to a partial year in 1998. $2.5 million of interest expense was
capitalized in 1999 as compared to $2.0 million in 1998. Interest is capitalized
on the in progress construction of the Company's modules and payload processing
facilities.
Interest Income. Interest and other income was approximately $1.6 million
and $3.9 million for the years ended June 30, 1999 and 1998, respectively. This
decrease is due primarily to the Company's use of cash for the purchase of JE
and expenditures for property, plant and equipment and debt payments. Interest
income is earned by the Company through the short-term investment of funds.
Net Income (Loss). Net loss for the year ended June 30, 1999, was
approximately ($2.6) million, or ($0.23) per share (basic and fully diluted
EPS), on 11,184,742 shares as compared to $9.6 million, or $0.86 per share
(basic EPS), for the year ended June 30, 1998, on 11,154,271 shares and $0.84
per share, fully diluted, on 14,571,278 shares. Income tax expense (benefit) for
these periods was ($0.5) million and $2.5 million for the years ended June 30,
1999 and 1998, respectively.
The effects of inflation and changing prices have not significantly
impacted the Company's revenue or income from continuing operations during years
ended June 30, 1999 and 1998.
Liquidity and Capital Resources
-------------------------------
The Company has incurred net losses in the years ended June 30, 2000 and
1999. The Company has historically financed its capital expenditures, research
and development and working capital
15
<PAGE>
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 current $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.
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. As of June 30, 2000, the Company
had loans payable of $7.6 million. 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 shareholder 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, 2000, the Company had loans payable of $7.9
million. An amended agreement with the senior debt holders requires that an
interest rate of 8.25 percent be applied to the senior debt with an outstanding
balance of $0.7 million as of June 30, 2000.
On August 2, 1999, Astrium GmbH ("Astrium"), 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
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, allowing them to purchase the additional 358,334 preferred shares. The
preferred stock purchase increased Astrium's 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 years ended June 30, 2000 and 1999, the Company was in breach of
certain loan 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 for the year ended June 30,
2000 and amended on a going forward basis. The New Credit Facility also contains
certain financial covenants. Although there can be no assurances, the Company
believes it will be in compliance with the amended covenants of the Term Loan
and New Credit Facility during the year ended June 30, 2001.
Cash Flows From Operating Activities. Cash provided by (used for)
operations for the years ended June 30, 2000, 1999, and 1998 was $1.4 million,
($6.3) million and $31.6 million, respectively. The significant change in cash
provided by operations between the years ended June 30, 2000 and 1999 is
attributable to the increase in deferred flight revenue primarily from customer
payments for STS-106 and for a future science mission. In addition, the amount
of goodwill recorded relative to the purchase of JE was reduced by $1.2 million
as certain escrow funds were returned to the Company. The significant changes
between 1999 and 1998 were; the ($2.6) million loss due primarily to the delay
in the ISS deployment and assembly, which delayed Space Shuttle missions to the
ISS, and a ($7.8) million change in deferred flight revenue due to the decrease
in progress payments for the missions under the REALMS Contract and related
commercial customers. Progress payments of $11.8 million were recorded at the
end of 1998 for missions STS-95 and STS-96. Those missions flew in 1999. The
reduction of those progress
16
<PAGE>
payments was partially offset by progress payments for STS-107, which is
scheduled for flight in June 2001.
Cash Flows Used in Investing Activities. For the years ended June 30, 2000,
1999, and 1998, cash flows used in investing activities were $29.8 million,
$58.6 million and $23.1 million, respectively. Expenditures for the year ended
June 30, 2000 were primarily for the continued construction of the Company's
flight assets including, among others, the Research Double Module ("RDM"),
Adaptable Double Module ("ADM"), 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 ES, $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. For the year ended June 30, 1998, the major portion of the
investing expenditures was for the construction of the RDM which began in the
year ended June 30, 1997.
Cash Flows From Financing Activities. For the years ended June 30, 2000,
1999, and 1998, cash flows provided by (used for) financing activities were
$14.0 million, ($6.0) million and $70.9 million, respectively. During the year
ended June 30, 2000 the Company received $11.9 million from the issuance of
convertible preferred shares to Astrium 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. During the
year ended June 30, 1998, the Company received net proceeds of approximately
$14.1 million and made payments of $2.1 million under the Term Loan Agreement.
In October 1997, the Company received net proceeds after commissions and other
expenses of approximately $59.9 million by completing an offering of $63.3
million of its 8 percent Convertible Subordinated Notes due 2007.
Capital Commitments/Financing Developments
As described above, the Company has several on-going asset construction
efforts underway, all of which will require substantial amounts of additional
capital. The Company's current available cash and cash equivalents, and amounts
available under the New Credit Facility are not adequate to fully meet these
financing requirements through the completion of construction of these assets.
Astrotech is in the process of obtaining financing for the payload processing
facility expansion from a financial institution and anticipates completion of
the financing in the first quarter of the year ended June 30, 2001. The Company
anticipates financing the Enterprise module from working capital and third party
financing during the year ended June 30, 2001. The Company anticipates the
ability to finance SMI by investments from strategic investors during the year
ended June 30, 2001. However, the Company has no commitments from any third
party financing or strategic investor sources for the Enterprise module or SMI
operations.
There can be no assurance that the Company will be successful in obtaining
the financings as described above. In the event that the Company is not
successful in obtaining such financings, the Company would be forced to delay,
suspend or abandon certain of the asset construction plans described above and
may be forced to reduce its operating expenditures. 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 would be sufficient to enable the Company to meet its cash requirements
for the next twelve months.
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and if it is, the type of hedge transaction. Management of the
Company anticipates that, due to its limited use of derivative instruments,
adoption of
17
<PAGE>
SFAS No. 133 will not have a significant effect on the results of operations or
financial position of the Company.
In December 1999, the SEC issued Staff Accounting Bulletin No. ("SAB") 101,
Revenue Recognition in Financial Statements, which provided additional guidance
in applying generally accepted accounting principles for revenue recognition.
The Company believes that its revenue recognition policy is in compliance with
SAB 101.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving stock
Compensation ("FIN 44"). FIN 44 further defines accounting consequences of
various modifications to the terms of a previously fixed stock option or award
under APB Opinion No. 25, Accounting for Stock Issued to Employees. FIN 44
becomes effective on July 1, 2000, but certain conclusions in FIN 44 cover
specific events that occur after either December 15, 1998 or January 12, 2000.
The Company is currently evaluating the effect of FIN 44 on the Company's
financial results, but the Company does not anticipate any material effects from
implementing FIN 44.
In May 2000, the Emerging Issues Task Force ("EITF") released Issue No. 00-
2, Accounting for Web Site Development Costs. EITF 00-2 establishes standards
for determining the capitalization or expensing of incurred costs relating to
the development of Internet web sites based on the respective stage of
development. The Issue is effective for fiscal quarters beginning after June 30,
2000 (including costs incurred for projects in process at the beginning of the
quarter of adoption). The Company is currently evaluating the effect of EITF 00-
2 on the Company's financial results.
Year 2000 Readiness Disclosure Statement
----------------------------------------
The Year 2000 ("Y2K") issue is the result of computer programs that were written
using two digits rather than four to define the applicable year. Any computer
program that has date-sensitive software may recognize the date using "00" as
the year 1900 rather than the year 2000. This error could result in systems
failures and computational errors causing disruptions of operations, including,
among other things, the temporary inability to process transactions, send
invoices or engage in similar normal business activities.
SPACEHAB had established a Y2K program to address both information-technology
("IT") and non-IT problems that may exist within the SPACEHAB system, including
its vendors and customers, e.g. NASA and the Space Shuttle. As a result of
SPACEHAB's Y2K program, the company transitioned to the new millennium without
any identified system or system related problems. The Central Processing Unit
("CPU") on the ground support electrical equipment at SPACEHAB's payload
processing facility is not Y2K compliant. SPACEHAB implemented its contingency
plan, as previously disclosed, and changed the year on the CPU to 1972. The CPU
will report the correct day and month but the year will currently be reported as
1973. This change only affects the date printed on reports. The current ground
support equipment is expected to be replaced by the end of calendar year 2000.
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.
18
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Independent Auditors' Report
The Board of Directors
SPACEHAB, Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheets of SPACEHAB,
Incorporated and subsidiaries (the Company) as of June 30, 2000 and 1999, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-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 1999, and the results of
their operations and their cash flows for each of the years in the three-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
19
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30,
------------------------
Assets 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,949 $ 21,346
Accounts receivable, net (note 4) 25,798 17,471
Prepaid expenses and other current assets 2,328 1,146
------------------------------------------------------------------------------------------------------------------------
Total current assets 35,075 39,963
------------------------------------------------------------------------------------------------------------------------
Property and equipment:
Flight assets 106,950 98,594
Module improvements in progress 66,066 49,553
Payload processing facilities 29,398 23,348
Furniture, fixtures equipment and leasehold improvements 12,650 9,936
------------------------------------------------------------------------------------------------------------------------
215,064 181,431
Less accumulated depreciation and amortization (56,380) (49,247)
------------------------------------------------------------------------------------------------------------------------
Property and equipment, net 158,684 132,184
Goodwill, net of accumulated amortization of $2,428 and $1,339, respectively 23,301 25,498
Investment in Guigne, net (note 19) 1,800 1,400
Other assets, net 6,249 5,301
------------------------------------------------------------------------------------------------------------------------
Total assets $ 225,109 $ 204,346
========================================================================================================================
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) 4,500 -
Accounts payable 11,347 3,772
Accrued expenses 6,986 9,409
Accrued subcontracting services 1,999 6,787
Deferred revenue 8,385 4,162
------------------------------------------------------------------------------------------------------------------------
Total current liabilities 36,676 27,589
------------------------------------------------------------------------------------------------------------------------
Loans payable under credit agreement, net of current portion (note 6) 333 667
Loans payable, net of current portion (note 8) 4,458 7,033
Convertible notes payable to shareholder (note 7) 7,860 7,860
Accrued contract costs 880 940
Deferred revenue 6,870 -
Deferred income taxes (note 13) 2,080 2,842
Convertible subordinated notes payable (note 8) 63,250 63,250
------------------------------------------------------------------------------------------------------------------------
Total liabilities 122,407 110,181
------------------------------------------------------------------------------------------------------------------------
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 -
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
Common stock, no par value, authorized 30,000,000 shares, issued
and outstanding 11,345,032 and 11,229,646 shares, respectively 82,074 81,585
Additional paid-in capital 16 16
Retained earnings 8,720 12,564
------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 102,702 94,165
------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 225,109 $ 204,346
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
June 30, June 30, June 30,
2000 1999 1998
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 105,708 $ 107,720 $ 64,087
-----------------------------------------------------------------------------------------------------------------------
Costs of revenue 87,931 89,283 36,321
-----------------------------------------------------------------------------------------------------------------------
Gross profit 17,777 18,437 27,766
-----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and administrative 17,832 14,599 10,731
Research and development 2,440 3,636 4,338
-----------------------------------------------------------------------------------------------------------------------
Total operating expenses 20,272 18,235 15,069
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (2,495) 202 12,697
Interest expense, net of capitalized interest (note 3) (3,773) (4,905) (4,480)
Interest and other income, net 662 1,615 3,914
-----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (5,606) (3,088) 12,131
Income tax expense (benefit) (note 13) (1,762) (499) 2,527
-----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (3,844) $ (2,589) $ 9,604
=======================================================================================================================
Basic earnings (loss) per share:
Net income (loss) per share - basic $ (0.34) $ (0.23) $ 0.86
=======================================================================================================================
Shares used in computing net income (loss) per share - basic 11,272,767 $11,184,742 11,154,271
=======================================================================================================================
Diluted earnings (loss) per share:
Net income (loss) per share - diluted $ (0.34) $ (0.23) $ 0.84
=======================================================================================================================
Shares used in computing net income (loss) per share - diluted 11,272,767 11,184,742 $14,571,278
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
======================================================================================================================
Convertible Preferred
Stock Common Stock
-------------------------- ------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1997 - $ - 11,146,237 $ 81,057
Common stock issued upon stock option exercises - - 8,725 60
Common stock issued under employee stock purchase plan - - 13,199 122
Net income - - - -
----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 - $ - 11,168,161 $ 81,239
======================================================================================================================
Common stock issued upon stock option exercises - - 1,070 8
Common stock issued under employee stock purchase plan - - 60,415 338
Net loss - - - -
======================================================================================================================
Balance at June 30, 1999 - $ - 11,229,646 $ 81,585
======================================================================================================================
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
======================================================================================================================
<CAPTION>
Additional Total
Paid-In Retained Stockholders'
Capital Earnings Equity
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at June 30, 1997 $ 16 $ 5,549 $ 86,622
Common stock issued upon stock option exercises - - 60
Common stock issued under employee stock purchase plan - - 122
Net income - 9,604 9,604
------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 $ 16 $ 15,153 $ 96,408
============================================================================================================
Common stock issued upon stock option exercises - - 8
Common stock issued under employee stock purchase plan - - 338
Net loss - (2,589) (2,589)
------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 $ 16 $ 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 $ 16 $ 8,720 $ 102,702
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
22
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended Year ended Year ended
June 30, 2000 June 30, 1999 June 30, 1998
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,844) $ (2,589) $ 9,604
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization 8,222 7,017 5,587
Amortization of debt placement costs 528 538 226
Valuation allowance of investment in Guigne (200) - -
Interest converted to notes payable - - 670
Changes in assets and liabilities:
Increase in accounts receivable (8,327) (3,126) (803)
Increase in prepaid expenses and other current assets (1,182) (290) (351)
Decrease (increase) in deferred mission costs (1,031) - 1,439
Increase in other assets (240) (14) (1,980)
Increase (decrease) in deferred flight revenue 11,093 (7,762) 9,628
Increase in accounts payable and accrued expenses 1,955 345 3,633
Increase (decrease) in advance billings - (1,567) 720
Increase (decrease) in accrued subcontracting services (4,788) 97 553
Increase (decrease) in deferred taxes (762) 1,020 2,678
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 1,424 (6,331) 31,604
----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for flight assets under construction (23,009) (27,381) (17,245)
Payments for building under construction (4,868) (871) (3,988)
Purchases of property, equipment and leasehold improvements (2,361) (4,222) (1,880)
Purchase of Engineering Services, 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 (29,794) (58,619) (23,113)
-----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of note payable to insurers (333) (500) (500)
Payment of debt placement costs - - (3,984)
Proceeds from issuance of convertible preferred stock 11,892 - -
Proceeds from issuance of convertible subordinated notes payable - - 63,250
Proceeds from note payable - 1,000 14,119
Proceeds from revolving line of credit 4,500 - -
Payments of note payable (2,575) (2,842) (2,118)
Payments of note payable to shareholder - (4,035) -
Proceeds from exercise of stock options - 8 60
Proceeds from issuance of common stock, net of expenses 489 338 122
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 13,973 (6,031) 70,949
----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (14,397) (70,981) 79,440
Cash and cash equivalents at beginning of year 21,346 92,327 12,887
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 6,949 $ 21,346 $ 92,327
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Company and Operating Environment
23
<PAGE>
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 three
pressurized laboratory and logistics supply modules, which significantly
enhance the capabilities of the Space Shuttle fleet. The Company is
currently constructing a research module with associated double module
hardware and the adaptable double module. The Company is also currently
constructing a module that will be primarily used as a broadcast and
multimedia production facility attached to the International Space Station
("ISS"). The Company's modules are unique to the Space Shuttle fleet or
ISS.
To date, the Company has successfully completed fourteen 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, 2000, 1999, and 1998 approximately 86%, 80% and 68% 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, now designated "ES" for
company management reporting. ES 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. ES also designs and fabricates flight hardware,
such as flight crew equipment and crew quarters' habitability outfitting as
well as providing stowage integration services. ES 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 and media corporation that
expects to create proprietary space-themed content for television and
Internet broadcasting from the ISS. SMI anticipates commencing operations
during the year ended June 30, 2001, broadcasting from the Russian-built
Zvezda service module, which was launched and attached to the ISS in July
2000. SMI is also managing the Company's S*T*A*R*S(TM) (Space Technology
And Research Students) global space education program. The S*T*A*R*S
program currently is planning to launch student-designed experiments on a
Space Shuttle mission in 2001 for schools in Australia, Canada, China,
Israel, Japan, Singapore, Thailand, and the United States.
During the year ended June 30, 2000, the Company also began
development, in partnership with RSC Energia of Korolev, Russia, of a
commercial space station habitat module. Named Enterprise, this
multipurpose module will be attached to the ISS. The Company anticipates
launching Enterprise in the year ended June 30, 2003.
The Company has incurred net losses in the years ended June 30, 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 Company has several on-going asset construction efforts underway,
all of which require substantial amounts of additional capital. The
Company's current available cash and cash equivalents and amounts under its
new credit facility are not adequate to fully meet these
24
<PAGE>
financing requirements through the completion of construction of these
assets. Astrotech is in the process of obtaining financing for the payload
processing facility expansion from a financial institution and anticipates
completion of the financing in the Company's first quarter of 2001. The
Company anticipates financing the Enterprise module from working capital
and third party financing during the year ended June 30, 2001. The Company
anticipates financing SMI by investments from strategic investors during
the year ended 2001. However, the Company has no commitments from any third
party financing or strategic investor sources for the Enterprise module or
SMI operations.
There can be no assurance that the Company will be successful in
obtaining the financings as described above. In the event that the Company
is not successful in obtaining such financings, the Company would be forced
to delay, suspend or abandon certain of the asset construction plans
described above and may be required to reduce its operating expenditures.
The Company believes that the cash flows from operations, borrowings under
its new credit facility and spending reductions related to discretionary
capital expenditures and other expenses would be sufficient to enable the
Company to meet its cash requirements for the next twelve months.
(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, ES 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.
Through June 30, 1997, the Company's flight modules were depreciated
over a ten-year period using the straight-line method. 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 was based on then currently available information from NASA, which
estimated the duration of the Space Shuttle program through at least 2012.
As a result of this change in estimate, the Company's net income increased
by $6.2 million for the year ended June 30, 1998.
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.
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
25
<PAGE>
of such an investment is initially recorded at cost and is increased to
reflect the Company's share of the investee's income and is reduced to
reflect the Company's share of the investee's losses. For those investments
for which the Company has provided substantially all of the investee's
funding, the Company uses the modified equity method of accounting whereby
100% of the investee's current period earnings or losses are recognized.
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
Prior to the Research and Logistics Mission Support ("REALMS")
contract (note 10), the Company recognized revenue upon completion of each
module flight. Total contract price was allocated to each flight based on
the amount of services the Company provided on the flight relative to the
total services provided for all flights under contract. Obligations
associated with a specific mission, e.g. integration services, were also
recognized upon completion of the mission. Costs directly related to
specific missions were deferred until the respective missions were
completed.
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 Astrotech's payload
processing services is recognized ratably over the occupancy period of the
satellite while in the Astrotech facilities. Revenue provided by ES 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.
Research and Development
Research and development costs are expensed as incurred.
26
<PAGE>
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 carryforward.
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 is 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 1999 and 1998 amounts have been reclassified to conform with
the 2000 consolidated financial statement presentation.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and if it is, the type of
hedge transaction. Management of the Company anticipates that, due to its
limited use of derivative instruments, adoption of SFAS No. 133 will not
have a significant effect on the results of operations or financial
position of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") staff
released Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements, which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. In June
2000, the SEC staff extended the effective date of SAB No. 101 until the
fourth quarter of fiscal 2001. Management does not expect SAB No. 101 to
have a material effect on the Company's financial position or results of
operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving stock
Compensation ("FIN"). FIN 44 further defines accounting consequences of
various modifications to the terms of a previously fixed stock option or
award under APB Opinion No. 25, Accounting for Stock Issued to Employees.
FIN 44 becomes effective on July 1, 2000, but certain conclusions in FIN 44
cover specific events that
27
<PAGE>
occur after either December 15, 1998 or January 12, 2000. The Company is
currently evaluating the effect of FIN 44 on the Company's financial
results, but the Company does not anticipate any material effects from
implementing FIN 44.
In May 2000, the Emerging Issues Task Force ("EITF") released Issue
No. 00-2, Accounting for Web Site Development Costs. EITF 00-2 establishes
standards for determining the capitalization or expensing of incurred costs
relating to the development of Internet web sites based on the respective
stage of development. The Issue is effective for fiscal quarters beginning
after June 30, 2000 (including costs incurred for projects in process at
the beginning of the quarter of adoption). The Company is currently
evaluation the effect of EITF 00-2 on the Company's financial results.
(3) Statements of Cash Flows - Supplemental Information
Cash paid for interest costs was approximately $6.9 million, $5.4
million and $3.4 million million for the years ended June 30, 2000, 1999
and 1998, respectively. The Company capitalized interest of approximately
$3.7 million, $2.5 million and $2.0 million during the years ended June 30,
2000, 1999 and 1998, respectively, related to the module improvements and
building in progress.
The Company paid income taxes of approximately $0.0 million, $0.4
million and $19,000 for the years ended June 30, 2000, 1999 and 1998,
respectively.
(4) Accounts Receivable
At June 30, 2000 and 1999, accounts receivable consisted of (in thousands):
2000 1999
-------------------------------------------------------------------
U.S. government contracts:
Billed $ 18,506 $ 10,523
Unbilled 3,400 2,661
-------------------------------------------------------------------
Total U.S. government contracts 21,906 13,184
-------------------------------------------------------------------
Commercial contracts:
Billed 1,612 3,481
Unbilled 2,280 806
-------------------------------------------------------------------
Total commercial contracts 3,892 4,287
-------------------------------------------------------------------
Total accounts receivable $ 25,798 $ 17,471
-------------------------------------------------------------------
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) Acquisitions
28
<PAGE>
Johnson Engineering
On July 1, 1998, the Company paid approximately $24.7 million,
including transaction costs, to acquire all of the capital stock of Johnson
Engineering Corporation ("JE"). The business combination has been accounted
for using the purchase method under Accounting Principles Board Opinion No.
16, Business Combinations, (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 $23.4 million was recorded. Such
goodwill is being amortized on a straight-line basis over 25 years. The
purchase price has been allocated as follows (in thousands):
Cash $ 0
Prepaid and other current assets 306
Accounts receivable, net 8,366
Inventory 5
Property, plant and equipment, net 446
Other assets 622
Goodwill 23,362
Current liabilities (7,434)
Accrued contract costs (928)
---------------
Total purchase price $ 24,745
===============
The following represents unaudited pro forma combined results of
operations as if the acquisition of JE had occurred as of July 1, 1997, (in
thousands, except per share data):
Year ended
June 30, 1998
(unaudited)
---------------------------------------------------------------------------
Revenue $ 116,266
Gross profit 34,280
Net income 9,251
---------------------------------------------------------------------------
Net income per common share - basic $ 0.83
Net income per common share - diluted $ 0.82
---------------------------------------------------------------------------
During the year ended June 30, 2000, the amount of goodwill ascribed
to the acquisition was reduced by $1.2 million as certain escrow funds were
returned to the Company.
The Space Store
On June 28, 2000, the Company paid approximately $0.2 million,
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 $0.2 million 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 subsidary 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.
29
<PAGE>
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, 2000, the remaining balance due
under the term loan is due in installments of $0.33 million on each of
August 1, 2000 and 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 $57,000 and $40,000 for the
years ended June 30, 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, 2000. 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. As such, all principal
payments are due under these notes on August 1, 2001. However, during the
year ended June 30, 1998, the Company began paying interest quarterly. The
Company paid $0.8 million and $0.4 million of interest during the year
ended June 30, 2000 and 1999, respectively.
(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 has 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.
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 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
30
<PAGE>
date of the original loan. Principal payments of $3.1 million are due
in the year ended 2001, 2002, and principal payments of $1.4 million
are due in FY 2003. At June 30, 2000, the Company had an outstanding
balance of $7.6 million under this credit facility and accrued interest
of $0.3 million.
For the years ended June 30, 2000 and 1999, the Company was in
breach of certain loan covenants of the loan payable and the revolving
loan. The covenant for the revolving loan was waived through its term
and the covenant on the loan payable was waived for the year ended June
30, 2000 and amended on a going forward basis. The New Credit Facility
also contains certain financial covenants. Although there can be no
assurances, the Company believes it will be in compliance with the
amended covenants of the term loan and new credit facility during the
year ended June 30, 2001.
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.
(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, 2000
and 1999 in accordance with SFAS No. 107, Disclosures about Fair Value
of Financial Instruments (in thousands):
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------------------ ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial liabilities:
Loans payable under
credit agreement $ 667 579 $ 1,000 920
Notes payable to shareholder 7,860 7,860 7,860 7,860
Loans payable under credit facility 7,583 7,583 10,159 10,159
Convertible notes payable 63,250 44,908 63,250 50,600
---------------------------------------------------------------------------------------------------
</TABLE>
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.
(10) NASA Contracts
Mir Space Station Contract
On July 14, 1995, NASA and the Company completed final
negotiations to provide the Company's flight modules and related
integration services over four missions to the Russian Space Station
Mir. The contract was subsequently amended which resulted in a total
contract value of $91.5 million and the addition of three missions.
31
<PAGE>
During the year ended June 30, 1998, the Company recognized $39.0
million of revenue under the Mir contract. Work under the Mir contract,
as amended, was completed with its final mission in June 1998.
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, 2000 , this contract was amended whereby the
REALMS contract value was increased to $100.8 million and the number of
missions were increased to six.
During the years ended June 30, 2000, 1999 and 1998, the Company
recognized $33.3 million, $28.2 million and $14.3 million of revenue,
respectively, under this contract.
Flight Crew Systems Development Contract ("FCSD")
ES primarily operates under NASA's FCSD Contract which is
currently a $332.5 million multi-task cost plus-award and incentive fee
contract. The contract commenced in May 1993 and is scheduled to
conclude in April 2001. NASA has notified the Company that it plans to
exercise it's option to extend certain tasks for an additional year
through April 2002. The additional contract value of the tasks is
estimated to be approximately $54.5 million. ES 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. ES also
designs and fabricates flight hardware, such as flight crew equipment
and crew quarters habitability outfitting as well as providing stowage
integration services. ES is also responsible for configuration
management of the ISS.
During the years ended June 30, 2000 and 1999 the Company
recognized $57.9 million and $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, 2000, approximately 1,579,592 shares of common
stock were reserved for future grants of stock options under the
Company's three stock option plans.
Non-qualified Options
32
<PAGE>
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 shares. 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, 2000, employees have
purchased 189,000 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,
2000, there were 1,000,000 options issued and outstanding under the SMI
Plan at a weighted average exercise price of $1.00. The options vest
equally over a four year period and have a life of 10 years. There were
no shares exercisable as of June 30, 2000.
33
<PAGE>
Stock Option Activity Summary
The following table summarizes the Company's stock option plans,
excluding the SMI plan:
<TABLE>
<CAPTION>
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
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at June 30, 1997 439,986 $ 12.01 1,233,223 $ 8.20 50,000 $ 7.00
Granted 10,000 10.13 257,338 11.00 145,000 10.92
Exercised - - 3,725 10.02 5,000 10.13
Forfeited 149,941 12.16 8,583 11.96 - -
-------------------------------------------------------------------------------------------------------------------
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 - -
-------------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 1999 493,804 $ 13.42 1,909,226 $ 9.50 240,000 $ 9.37
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
-------------------------------------------------------------------------------------------------------------------
Options exercisable at:
June 30, 1998 295,978 $ 12.17 983,620 $ 8.55 45,000 $ 7.00
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
Weighted-average fair value at
date of grant during the fiscal
period ended
June 30, 1998 10,000 $ 4.25 257,338 $ 3.83 145,000 $ 3.43
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
-------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
The following table summarizes information about the Company's
stock options outstanding at June 30, 2000:
<TABLE>
<CAPTION>
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
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 24.00 6,100 2.25 $ 24.00 6,100 $ 24.00
$ 10.625 - $ 14.50 1,389,149 4.74 12.37 1,004,202 12.67
$ 4.75 - $10.125 1,826,337 5.57 6.70 1,051,331 6.11
$ 4.125 35,000 9.29 4.13 - 4.13
---------------------------------------------------------------------------------------------------
$ 4.125 -$24.00 3,256,586 5.25 $ 9.67 2,061,633 $ 8.79
===================================================================================================
</TABLE>
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 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):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 2000 June 30, 1999 June 30, 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss):
As reported $ (3,844) $ (2,589) $ 9,604
Pro forma (4,996) (4,424) 8,772
================================================================================================
Net income (loss) per share - basic:
As reported $ (0.34) $ (0.23) $ 0.86
Pro forma (0.44) (0.40) 0.79
================================================================================================
</TABLE>
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 2000, 1999 and 1998, 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, 2000, 1999 and 1998
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 components of income tax expense (benefit) are as follows (in
thousands):
35
<PAGE>
<TABLE>
<CAPTION>
Years ended June 30,
---------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ - $ (1,447) $ -
State and local - 15 -
--------------------------------------------------------------------------------------------------
- (1,432) -
--------------------------------------------------------------------------------------------------
Deferred:
Federal (1,477) 847 2,148
State and local (285) 86 379
--------------------------------------------------------------------------------------------------
(1,762) 933 2,527
--------------------------------------------------------------------------------------------------
Income tax expense (benefit) $ (1,762) $ (499) $ 2,527
==================================================================================================
</TABLE>
A reconciliation of the expected amount of income tax expense
(benefit), calculated by applying the statutory federal income tax rate
of 34 percent to income (loss) before income taxes, to the actual
amount of income tax expense (benefit) recognized follows (in
thousands):
<TABLE>
<CAPTION>
Years ended June 30,
-------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected expense (benefit) $ (1,906) $ (1,050) $ 4,241
Change in valuation allowance 43 169 (2,058)
State income tax (188) (15) 299
Other non-deductibles, primarily goodwill
amortization 289 397 45
--------------------------------------------------------------------------------------------------
Income tax expense (benefit) $ (1,762) $ (499) $ 2,527
==================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of June 30, 2000 and 1999 are presented below (in
thousands):
<TABLE>
<CAPTION>
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 10,472 $ 7,863
General business credit carryforwards 2,170 2,189
Alternative minimum tax credit carryforwards 3,292 3,292
Capitalized research and development costs 110 270
Capitalized start-up and organization costs 751 -
Other 999 900
--------------------------------------------------------------------------------------------------
Total gross deferred tax assets 17,794 14,514
Less - valuation allowance (212) (169)
--------------------------------------------------------------------------------------------------
Net deferred tax assets 17,582 14,345
--------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 18,550 16,700
Other 115 487
--------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 18,665 17,187
--------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ (1,083) $ (2,842)
==================================================================================================
</TABLE>
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, 2000, 1999 and 1998 were an increase of $43,000, $0.2
million and a decrease of $2.1 million, respectively.
36
<PAGE>
At June 30, 2000, the Company had accumulated net operating
losses of approximately $26.2 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 2020.
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 2001 and 2008; the alternative minimum tax credits
carryforward indefinitely.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the 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.
Based upon the level of projected future regular taxable income over
the periods, which the deferred tax assets are deductible, management
believes that the Company will realize the benefits of these
deductions. As of June 30, 2000, the Company provided a valuation
allowance of $212 thousand against deferred tax assets. The amount of
the deferred tax assets considered realizable, however, could be
reduced if estimates of future regular taxable income during the
carryforward period are reduced.
(14) Net Income (Loss) Per Share
The following are reconciliations of the numerators and
denominators of the basic and diluted earnings (loss) per share
computations for the years ended June 30, 2000, 1999 and 1998 (in
thousands, except share data):
<TABLE>
<CAPTION>
Per common Assuming
share Dilution
----------------------------------------------------------------------------------------------
<S> <C> <C>
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
----------------------------------------------------------------------------------------------
Year Ended June 30, 1998
Net income $ 9,604 $ 9,604
Assuming conversion of convertible subordinated notes $ - $ 2,625
----------------------------------------------------------------------------------------------
Net income, as adjusted $ 9,604 $ 12,229
----------------------------------------------------------------------------------------------
Weighted average outstanding common shares 11,154,271 11,154,271
Outstanding stock options - 269,898
Assuming conversion of convertible subordinated notes - 3,147,109
----------------------------------------------------------------------------------------------
Adjusted shares 11,154,271 14,571,278
----------------------------------------------------------------------------------------------
</TABLE>
Options and warrants to purchase 899,131 shares of common stock,
at prices ranging from $7.50 to $24.00 per share were outstanding for
the year ended June 30, 1998. These were not included in the
computations of diluted earnings per share because the options' and
warrants' exercise prices were greater than the average market price of
the common shares during the years ended June 30, 1998.
37
<PAGE>
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, 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, 2000,
1999 and 1998, the Company contributed $1.5 million, $0.8 million and
$0.1 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 five logistics double module missions.
Additionally, there are several tasks that are separately priced to
yield a contract value of up to $129.2 million. As of June 30, 2000,
$27.6 million has been incurred under this commitment.
Module Construction Contracts
During the year ended June 30, 1997, the Company entered into a
$36.8 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 is in the process of
completing its construction which is expected to be completed in
September of fiscal year 2001. The Company has incurred approximately
$43.0 million in construction costs through June 30, 2000. The Company
is in the process of negotiating a revised contract with Boeing
relative to the research double module.
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 August 2000. The Company
plans to extend the letter agreement. The Company has incurred $3.9
million in costs through June 30, 2000.
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):
38
<PAGE>
<TABLE>
<CAPTION>
Capital Operating
Year ending June 30, Leases Leases
---------------------------------------------------------------------------------------------------
<S> <C> <C>
2001 $ 58 $ 2,497
2002 28 2,465
2003 18 2,054
2004 17 866
2005 and thereafter - 5,481
--------------------------------------------------------------------------------------------------
121 $ 13,363
=========
Less: amount representing interest between 9% and 12% (20)
------------------------------------------------------------------------------------
Present value of net minimum capital lease payments $ 101
====================================================================================
</TABLE>
Rent expense for the years ended June 30, 2000, 1999 and 1998 was
approximately $2.1 million, $2.2 million and $0.5 million,
respectively.
(17) Segment information
Based on its organization, the Company operates in four business
segments; Astrotech, ES, SMI and SPACEHAB. Astrotech, acquired in
February 1997, 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. ES is
primarily engaged in providing engineering services and products to the
Federal Government and NASA, primarily under the FCSD Contract. SMI was
established in April 2000, to provide proprietary content from the ISS
for broadcast and Internet distribution. SPACEHAB was founded to
commercially develop space habitat modules to operate in the cargo bay
of the Space Shuttles. SPACEHAB provides access to the modules and
integration and operations support services for both NASA and
commercial customers.
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 to the various segments.
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:
39
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
Year Ended June 30, 2000: Net Depreciation
Pre-Tax Fixed And
Revenue Income (loss) Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 39,871 $ (928) $129,709 $5,702
Astrotech 7,583 (2,944) 25,975 983
ES 58,254 108 3,000 1,537
SMI - (1,842) - -
--------------------------------------------------------------------
$105,708 $(5,606) $158,684 $8,222
====================================================================
<CAPTION>
Year Ended June 30, 1999: Net Depreciation
Pre-Tax Fixed And
Revenue Income (loss) Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 39,477 $(2,925) $109,912 $4,689
Astrotech 9,845 (505) 20,625 1,164
ES 58,398 342 1,647 1,164
SMI - - - -
--------------------------------------------------------------------
$107,720 $(3,088) $132,184 $7,017
====================================================================
<CAPTION>
Year ended June 30, 1998: Net Depreciation
Pre-Tax Fixed And
Revenue Income Assets Amortization
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $ 53,262 $10,308 $ 92,815 $4,413
Astrotech 10,825 1,823 19,773 1,174
ES - - - -
SMI - - - -
--------------------------------------------------------------------
$ 64,087 $12,131 $112,588 $5,587
====================================================================
</TABLE>
(18) Convertible Preferred Stock
On August 2, 1999, Astrium, 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 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,
allowing them to purchase the additional 358,334 preferred shares. The
preferred stock purchase increased Astrium's 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.
(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.
40
<PAGE>
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. In addition,
the Company is entitled to one seat on GI's seven-member board of
directors, but does not have significant influence over the operational
and financial policies of GI. Accordingly, the Company will account 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) 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):
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------------------
September 30 December 31 March 31 June 30
------------------------------------------------------------------------------------------------------ -------------
<S> <C> <C> <C> <C>
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)
----------------------------------------------------------------------------------------------------------------------
Year ended June 30, 1998
Revenue $ 2,537 $ 17,756 $18,997 $24,797
Income (loss) from operations (5,685) 5,833 5,214 7,335
Net income (loss) (5,654) 5,727 4,891 4,640
Net income (loss) per share - basic (0.51) 0.51 0.44 0.42
Net income (loss) per share - diluted (0.51) 0.43 0.37 0.35
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
(A)(I) Previous Independent Accountants
(i) On September 7, 2000, SPACEHAB, Incorporated (the "Company")
dismissed KPMG LLP as the independent public accountants of the Company.
(ii) The reports of KPMG LLP on the financial statements of the Company
for each of the past two fiscal years ended June 30, 2000 and 1999, contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.
(iii) The decision to change accountants was recommended by the Audit
Committee and approved by the Company's Board of Directors acting through its
Executive Committee.
(iv) During the Company's two most recent fiscal years and through
September 7, 2000, the Company has had no disagreements with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of KPMG LLP would have caused it to make reference to the subject
matter of the disagreements in its report on the financial statements of the
Company for such years.
(v) During the Company's two most recent fiscal years and through
September 7, 2000, the Company has had no reportable events (as defined in Item
304(a)(I)(v) of Regulation S-K).
(A)(2) The Board of Director of the Company has approved the appointment of
Ernst & Young LLP as its new independent accountants for the fiscal year ended
June 30, 2001, subject to stockholder ratification.
(i) and (ii) Prior to the engagement of Ernst & Young, LLP, the Company had
not consulted with Ernst & Young LLP during its two most recent fiscal years and
through the date of this report in any matter regarding: (i) either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and any written report provided to the
Company nor was oral advice provided that Ernst & Young LLP concluded was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue, or (ii) any matter that was
the subject of either a disagreement or a reportable event described in
Paragraph (a)(v) above.
(A)(3) The Company has requested that KPMG LLP furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the statements made above. A copy of such letter will be filed as
Exhibit 16.1 to Form 8-K.
41
<PAGE>
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 2000 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 2000 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 2000 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 2000 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 subsidiary and related notes, together with the
report thereon of KPMG LLP, the Company's independent auditors, are
set forth herein as indicated below.
<TABLE>
<CAPTION>
Page
<S> <C>
Report of KPMG LLP, Independent Public Accountants............................... 19
Consolidated Balance Sheets ..................................................... 20
Consolidated Statements of Operations ........................................... 21
Consolidated Statements of Stockholders' Equity ................................. 22
Consolidated Statements of Cash Flows............................................ 23
Notes to Consolidated Financial Statements....................................... 24
</TABLE>
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.
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).
42
<PAGE>
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).
10.16* Agreement of Sublease, dated April 9, 1991, by and between
Eastern American Teak Corporation and the Registrant (land lease
for Cape Canaveral, Florida facility).
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.
43
<PAGE>
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.
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 Daimler-
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
44
<PAGE>
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).
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.
10.96++++ European Marketing Agreement between Intospace GmbH and the
Registrant dated June 12, 1998.
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.
45
<PAGE>
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.
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.
21.*// Subsidiary of the Registrant.
23. Consent of KPMG LLP.
27. Financial Data Schedule.
* 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, 1997, filed November 6, 1997.
*//// 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.
46
<PAGE>
++ 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.
The following Reports on Form 8-K were filed by the Registrant during the
period covered by this report.
None.
47
<PAGE>
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: September 12, 2000
By: /s/ Julia A. Pulzone
-----------------------------
Julia A. Pulzone
Vice President of Finance and
Chief Financial Officer
Date: September 12, 2000
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 September 12, 2000
----------------------------------
Hironori Aihara
/s/ Melvin D. Booth Director September 12, 2000
----------------------------------
Melvin D. Booth
/s/ Dr. Edward E. David, Jr. Director September 12, 2000
-------------------------------
Dr. Edward E. David, Jr.
/s/ Richard Fairbanks Director September 12, 2000
-------------------------------
Richard Fairbanks
/s/ Josef Kind Director September 12, 2000
-------------------------------
Josef Kind
/s/ Gordon S. Macklin Director September 12, 2000
-------------------------------
Gordon S. Macklin
/s/ David A. Rossi Director September 12, 2000
-------------------------------
David A. Rossi
/s/ James R. Thompson Director September 12, 2000
-------------------------------
James R. Thompson
Guiseppe Viriglio Director September 12, 2000
-------------------------------
Guiseppe Viriglio
48
