<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended...............September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission file number 0-27206
SPACEHAB, Incorporated
300 D Street, SW
Suite 814
Washington, DC 20024
(202) 488-3500
<TABLE>
<CAPTION>
<S> <C>
Incorporated in the State of Washington IRS Employer Identification
Number 91-1273737
</TABLE>
The number of shares of Common Stock outstanding as of the close of business on
November 1, 2000:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
----- ----------------------------
<S> <C>
Common Stock 11,374,245
</TABLE>
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ -----
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
SEPTEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2000 and
June 30, 2000 3
Unaudited Condensed Consolidated Statements of Operations for the three months
ended September 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows for the
three months ended September 30, 2000 and 1999 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except share data) September 30, June 30,
2000 2000
(unaudited)
------------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 6,184 $ 6,949
Accounts receivable, net 12,342 25,798
Prepaid expenses and other current assets 2,515 2,328
-------- --------
Total current assets 21,041 35,075
Property, plant, and equipment, net of
Accumulated depreciation and amortization
of $58,258 and $56,380, respectively 166,903 158,684
Goodwill, net of accumulated amortization of $2,699 and $2,428,
respectively 23,029 23,301
Investment in Guigne, net 1,800 1,800
Other assets, net 7,440 6,249
-------- --------
Total assets $220,213 $225,109
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable under credit agreement, current portion $ 333 $ 333
Loans payable, current portion 3,126 3,126
Revolving loan payable 4,650 4,500
Accounts payable & accrued expenses 20,129 18,333
Accrued subcontracting services 2,323 1,999
Deferred revenue 4,250 8,385
-------- --------
Total current liabilities 34,811 36,676
Loans payable under credit agreement, net of current portion - 333
Loans payable, net of current portion 3,588 4,458
Convertible notes payable to shareholder 7,860 7,860
Accrued contract costs 411 880
Deferred revenue 6,870 6,870
Deferred income taxes 2,080 2,080
Convertible subordinated notes payable 63,250 63,250
-------- --------
Total liabilities 118,870 122,407
Commitments and contingencies
Stockholders' equity:
Series B Senior Convertible Preferred Stock (authorized 2,500,000
shares, issued and outstanding 1,333,334,
liquidation preference of $12,000) 11,892 11,892
Common stock, no par value, authorized
30,000,000 shares, issued and outstanding
11,374,245 and 11,345,032 shares, respectively 82,195 82,074
Additional paid-in capital 16 16
Retained earnings 7,240 8,720
-------- --------
Total stockholders' equity 101,343 102,702
-------- --------
Total liabilities and stockholders' equity $220,213 $225,109
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months
Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Revenue $ 26,966 $ 25,978
Costs of revenue 22,524 23,835
----------- -----------
Gross profit 4,442 2,143
Operating expenses:
Selling, general and administrative 5,930 3,739
Research and development 114 491
----------- -----------
Total operating expenses 6,044 4,230
----------- -----------
Loss from operations (1,602) (2,087)
Interest expense, net of capitalized interest 812 1,163
Interest and other income, net (162) (234)
----------- -----------
Loss before income taxes (2,252) (3,016)
Income tax benefit (772) (1,057)
----------- -----------
Net loss $ (1,480) $ (1,959)
=========== ===========
Basic loss per share:
Net loss per share - basic $ (0.13) $ (0.17)
=========== ===========
Shares used in computing net
loss per share - basic 11,345,353 11,229,960
=========== ===========
Diluted loss per share:
Net loss per share - diluted $ (0.13) $ (0.17)
=========== ===========
Shares used in computing net
loss per share - diluted 11,345.353 11,229,960
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended September 30,
2000 1999
------------ -------------
<S> <C> <C>
Operating activities:
Net loss $ (1,480) $ (1,959)
Adjustments to reconcile net loss to
net cash provided by (used for) operating activities:
Depreciation and amortization 2,290 2,081
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 13,456 (306)
Decrease (increase) in prepaid expenses and other current assets (187) (512)
Decrease (increase) in other assets (1,331) (949)
Increase (decrease) in deferred flight revenue (4,135) (523)
Increase (decrease) in accounts payable and
accrued expenses (1,204) 4,896
Increase (decrease) in accrued subcontracting services 324 (5,059)
Increase (decrease) in deferred taxes - 67
------------ -------------
Net cash provided by (used for) operating activities 7,733 (2,264)
------------ -------------
Investing activities:
Payments for flight assets under construction (4,793) (5,594)
Payments for building under construction (2,028) (444)
Purchases of property, equipment and leasehold improvements (745) (1,231)
Investment in joint venture - (200)
------------ -------------
Net cash used for investing activities (7,566) (7,469)
------------ -------------
Financing activities:
Payment of loan payable (870) (781)
Payment of note payable under credit agreement (333) (333)
Proceeds from issuance of common stock 121 123
Proceeds from revolving line of credit 150 -
Proceeds from issuance of preferred stock, net of expenses - 8,688
------------ -------------
Net cash (used for) provided by financing activities (932) 7,697
------------ -------------
Net decrease in cash and cash equivalents (765) (2,036)
Cash and cash equivalents at beginning of period 6,949 21,346
------------ -------------
Cash and cash equivalents at end of period $ 6,184 $ 19,310
============ =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of SPACEHAB, Incorporated and subsidiaries ("SPACEHAB" or the
"Company") as of September 30, 2000, and the results of their operations and
cash flows for the three month periods ended September 30, 2000 and 1999.
However, the consolidated financial statements are unaudited, and do not include
all related footnote disclosures. Certain amounts presented for prior periods
have been reclassified to conform with the fiscal year 2001 presentation.
The consolidated results of operations for the three months ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
full year. The Company's results of operations have fluctuated significantly
from quarter to quarter (see note 3). The interim unaudited condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements appearing in the Company's
Form 10-K for the year ended June 30, 2000.
2. Earnings per Share:
The following are reconciliations of the numerators and denominators of the
basic and diluted earnings per share computations for the three-month periods
ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
(in thousands except per share data) Basic Diluted
----- -------
<S> <C> <C>
September 30, 2000
Net loss $ (1,480) $ (1,480)
Weighted average outstanding common shares 11,345,353 11,345,353
------------------------------------------------------------------------
September 30, 1999
Net loss $ (1,959) $ (1,959)
Weighted average outstanding common shares 11,229,960 11,229,960
------------------------------------------------------------------------
</TABLE>
Convertible notes payable outstanding as of September 30, 2000, convertible into
4,642,202 shares of common stock at $13.625 per share and due October 2007, were
not included in the computation of diluted EPS for the three months ended
September 30, 2000 and 1999, as the inclusion of the converted notes would be
anti-dilutive for these periods.
Options to purchase 1,318,070 shares of common stock at prices ranging from
$4.875 to $5.125 per share were outstanding as of September 30, 2000, but were
not included in the computation of diluted EPS as the inclusion of these options
would be anti-dilutive. These options expire between July 3, 2005 and December
20, 2010.
Options and warrants to purchase 2,414,303 shares of common stock, at prices
ranging from $5.75 to $24.00 per share, were outstanding as of September 30,
2000 but were not included in the computation of diluted EPS because the options
and warrants exercise prices were greater than the average market price of the
common shares during the three months ended September 30, 2000. The options
expire between April 10, 2001 and July 1, 2008.
Options to purchase 99,993 shares of common stock at prices of $5.125 per share
were outstanding as of September 30, 1999, but were not included in the
computation of diluted EPS as the inclusion of these options would be anti-
dilutive. These options expire July 1, 2004.
Options and warrants to purchase 1,876,541 shares of common stock, at prices
ranging from $5.75 to $24.00 per share, were outstanding as of September 30,
1999 but were not included in the computation of diluted EPS because the options
6
<PAGE>
exercise prices were greater than the average market price of the common shares
during the three months ended September 30, 1999. The options expire between
November 1, 1999 and July 1, 2008.
3. Revenue Recognition:
Under the Research and Logistics Mission Support ("REALMS") contract and for new
contract awards for which the capability to successfully complete the contract
can be reasonably assured and the costs at completion can be reliably estimated
at contract inception, revenue is recognized under the percentage-of-completion
method. This percentage-of-completion method allows the Company to report
revenue based on costs incurred on a per mission basis over the period of that
mission. The percentage of completion method results in the recognition of
revenue over the period of contract performance. Revenue provided by the
Astrotech payload processing facilities is recognized ratably over the occupancy
period of the satellites at the Astrotech facilities. Revenue provided by
Johnson Engineering Corporation, now designated Engineering Services or "ES" for
company management reporting, is primarily based on 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
and estimated amounts recognized as award fees are recognized in the period they
become known.
4. Statements of Cash Flows - Supplemental Information:
(a) Cash paid for interest costs was $0.5 million and $0.6 million for the
three months ended September 30, 2000 and September 30, 1999 respectively. The
Company capitalized interest of approximately $1.1 million and $0.8 million
during the three months ended September 30, 2000 and 1999, respectively.
(b) The Company paid no income taxes during the three months ended September
30, 2000 and September 30, 1999.
5. Credit Facilities:
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 August 8,
2000, $4.5 million was drawn on the line of credit which was replaced on August
9, 2000. On August 9, 2000, the Company entered into a $15 million revolving
credit facility with a different financial institution, which provides a working
capital line of credit with a letter of credit sub-limit of $10.0 million (the
"New Credit Facility"). This New Credit Facility replaced the $10 million
Revolving Line of Credit. Certain assets of the Company collateralize the new
credit facility. The term of the new agreement is through August 2003. As of
September 30, 2000, $4.7 million was drawn the New Credit Facility.
In July 1997, Astrotech obtained a five-year term loan (the "Term Loan
Agreement"), which is guaranteed by SPACEHAB, and provides for loans of up to
$15.0 million for general corporate purposes. As of September 30, 2000, the
Company had loans payable of $6.7 million. 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 September 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 $0.3 million as of September 30, 2000.
In October 1997, the Company completed a private placement offering for $63.3
million of aggregate principal of its 8% Convertible Subordinated Notes due
2007. Interest is payable semi-annually. The notes are convertible into the
common stock of the Company at a rate of $13.625 per share. This offering
provided the Company with net proceeds of approximately $59.9 million to be used
for capital expenditures associated with the development and construction of
space related assets, the purchase of Johnson Engineering and for other general
corporate purposes.
7
<PAGE>
6. Preferred Stock:
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.
7. Segment Information:
Based on its organization, the Company operates in four business segments;
Astrotech, ES, Space Media, Inc. ("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
Flight Crew System Development ("FCSD") Contract. SMI was established in April
2000, to provide proprietary content from the International Space Station
("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 or expense items including taxes
and corporate overhead have not been allocated to the various segments.
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended September 30, 2000
Pre-Tax Net Depreciation
Income Fixed And
Revenue (loss) Assets Amortization
----------------------------------------------------------------
<S> <C> <C> <C> <C>
SPACEHAB $11,181 $ 122 $134,424 $1,462
Astrotech 1,111 (1,029) 29,010 246
ES 14,629 (27) 3,469 433
SMI 45 (1,318) 0 8
----------------------------------------------------------------
$26,966 $(2,252) $166,903 $2,149
================================================================
Three Months Ended September 30, 1999
Net Depreciation
Pre-Tax Fixed And
Revenue Income Assets Amortization
----------------------------------------------------------------
SPACEHAB $ 5,610 $(3,645) $114,981 $1,336
Astrotech 2,801 138 20,918 249
ES 17,567 491 1,903 342
SMI - - - -
----------------------------------------------------------------
$25,978 $(3,016) $137,802 $1,927
================================================================
</TABLE>
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
This document may contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including (without limitation) the "General" and
"Liquidity and Capital Resources" sections of this Item 2. Such statements are
subject to certain risks and uncertainties, including those discussed herein,
which could cause actual results to differ materially from those projected in
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 ISS, technological
difficulties, product demand and market acceptance risks, the effect of economic
conditions, uncertainty in government funding and the impact of competition.
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles. SPACEHAB currently
provides space within and on the modules for both NASA and commercial customers.
Astrotech was established in 1984 to provide 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. Johnson Engineering
Corporation, now designated Engineering Services or "ES" for Company management
reporting, was incorporated in the state of Colorado in 1973 and is primarily
engaged in providing engineering services and products to the federal
government. 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. On June 28, 2000 SMI acquired all of the capital
stock of The Space Store. The Space Store, an on line retail operation, is a
wholly owned subsidiary of SMI. The Space Store offers an assortment of space-
related products.
The Company currently operates under two significant contracts with NASA: (1)
the REALMS Contract, a $130.9 million contract for two research missions aboard
the Space Shuttle, three logistics missions to re-supply the ISS and one
Integrated Cargo Carrier ("ICC") mission; and (2) the Flight Crew Systems
Development Contract ("FCSD Contract") currently a $319.1 million multitask
cost-plus-award and incentive-fee contract, that commenced in May 1993 and was
scheduled to conclude in April 2001. NASA has notified the Company that it
plans to exercise its option to extend certain tasks for an additional year
through April 2002.
The value of the NASA portion of the REALMS contract is $100.8 million for
four firm module missions and one ICC mission. The commercial value is
currently $30.1 million with an additional $5.1 million non-REALMS commercial
value. The Company has the potential to increase the total REALMS Contract
value by an additional $11.7 million through module usage sales to commercial
customers for micro gravity space research such as the European Space Agency
("ESA"), the National Space Development Agency of Japan ("NASDA") and the
Canadian Space Agency ("CSA"). The first mission under the REALMS Contract,
STS-95 which carried Senator John Glenn back into space, was completed in
October 1998. The second, third and fourth missions, which were re-supply
mission to the ISS, flew in May 1999 (STS-96), May 2000 (STS-101) and September
2000 (STS-106). The remaining module mission currently under contract, STS-107,
is scheduled for launch in the summer of 2001. Two ICC missions, STS-102 and
STS-105, are scheduled to fly in February 2001 and June 2001, respectively.
NASA executed a modification to the REALMS contract in October 1999 whereby
pricing is defined for six different mission configurations. This modification
provides for NASA to execute missions as necessary for operations at
predetermined prices through the termination date of the contract.
In November 1999, Astrotech received a six-year contract extension from
Lockheed Martin for Atlas V payload processing (with options through 2010) and a
ten-year contract from Boeing for Delta IV payload processing. The minimum
revenue commitments under these contracts combined is $82 million over 10 years.
9
<PAGE>
Revenue
-------
SPACEHAB generates revenue by: (i) providing lockers and/or volume within
and on the SPACEHAB modules; (ii) integration and operations support services
provided to scientists and researchers responsible for the experiments; and/or
(iii) from NASA or International Agencies to carry logistics supplies for module
missions aboard the Shuttle system. For the REALMS contract and for contract
awards for which the capability to successfully complete the contract can be
demonstrated at contract inception, revenue recognition is being reported under
the percentage-of-completion method based on costs incurred on a per mission
basis over the period of the mission. The percentage-of-completion method
results in the recognition of revenue over the period of contract performance.
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.
In addition, Astrotech generates revenue from an exclusive multi-year agreement
to process all Sea Launch program payloads at the Sea Launch facility in Long
Beach, California.
Engineering Services generates revenue primarily from its multi-year cost
plus award and incentive-fee contract with NASA. ES's flight crew support
services include operations, training and fabrication of mockups at NASA's
Neutral Buoyancy Laboratory, and at NASA's Space Vehicle Mockup Facility
("SVMF"), where astronauts train for both Space Shuttle and International Space
Station missions. ES also designs and fabricates flight hardware including
flight crew equipment and crew quarters habitability outfitting and provides
stowage integration services. ES is also responsible for configuration
management of the ISS. Revenue provided by ES is recognized to the extent of
costs incurred plus award fee using the percentage of completion method,
measured on costs incurred. Award fees, which provide earnings based on contract
performance as determined by periodic NASA evaluations, are recorded when the
amounts can be reasonably estimated or are awarded.
Space Media, Inc. had no significant revenue for the period ended September
30, 2000 except for an immaterial amount generated by it's wholly owned
subsidiary, The Space Store, an online retail business, through the sale of
space-related products.
Costs of Revenue
----------------
Costs of revenue for SPACEHAB missions include integration and operations
expenses associated with the performance of three types of efforts: (i)
sustaining engineering in support of all missions under a contract, (ii) mission
specific support and (iii) other costs of revenue including depreciation
expense, related insurance, costs associated with both the Astrotech and
SPACEHAB payload processing facilities and ES's direct and indirect costs under
the FCSD Contract.
10
<PAGE>
RESULTS OF OPERATIONS
For the three months ended September 30, 2000 as compared to the three months
ended September 30, 1999.
Revenue. Revenue increased by 4% to approximately $27.0 million as
-------
compared to approximately $26.0 million for the three months ended September 30,
2000 and 1999, respectively. For the period ended September 30, 2000 revenue of
$11.2 million was recognized from the REALMS Contract with NASA and with related
commercial customers, $14.6 million from ES under the FCSD Contract, $1.1
million from Astrotech and $45 thousand from SMI. In contrast, for the period
ended September 30, 1999, revenue of $5.6 million was recognized from the REALMS
Contract with NASA and with related commercial customers, $17.6 million from ES
under the FCSD contract and $2.8 million from Astrotech. The increase in
revenue under the REALMS contract and related commercial customers is primarily
attributable to mission STS-106, which was added to the contract in the fourth
quarter of fiscal year 2000 and flew in September 2000. Revenue at ES decreased
due to the deletion of flight hardware products when the FCSD contract was
modified in structure. Astrotech's revenue declined due to the slippage of
satellite launches for the quarter and the temporary decrease in U.S. industry
satellite launches. The decrease in satellite launches is the result of launch
vehicle failures, which have been subsequently corrected.
Costs of Revenue. Costs of revenue for the quarter ended September 30,
-----------------
2000 decreased by 6% to $22.5 million, as compared to $23.8 million for the
prior year's quarter. For the quarter ended September 30, 2000, integration and
operations costs for the REALMS and related commercial customer contracts were
$6.8 million, $1.1 million for Astrotech payload processing, $13.2 million for
ES, $29,000 for SMI and $1.4 million of depreciation expense. For the quarter
ended September 30, 1999, integration and operations costs for the REALMS and
related commercial customer contracts were $5.4 million, $1.2 million for
Astrotech payload processing, $15.9 million for ES, and $1.3 million of
depreciation expense. The increase in cost of revenue for the REALMS and
related commercial customer contracts is primarily attributable to the addition
of STS-106 to the contract. ES costs decreased due to the deletion of certain
items from the FCSD contract. Astrotech's costs essentially remained the same.
Operating Expenses. Operating expenses increased approximately 43% to
------------------
approximately $6.0 million for the three months ended September 30, 2000 as
compared to approximately $4.2 million for the three months ended September 30,
1999. Selling, general and administrative expenses increased as compared to the
same period last year primarily due to the inclusion of SMI this year, as well
as increased personnel costs and increased marketing expenses at ES to diversify
into commercial markets.
Research and development expenses decreased approximately $0.4 million for
the period ended September 30, 2000 as compared to the comparable period last
year due to the Company's emphasis on completing existing assets in progress.
Interest and Other Expense. Interest expense was approximately $0.8
---------------------------
million for the three months ended September 30, 2000 and approximately $1.2
million for the three months ended September 30, 1999. There was also
approximately $1.1 million and $0.8 million of interest capitalized for the
quarters ended September 30, 2000 and 1999, respectively. Interest is
capitalized based on the construction of the Company's modules and additional
facilities being constructed by Astrotech.
Interest and Other Income. Interest and other income was approximately
-------------------------
$0.2 million for the three months ended September 30, 2000 and 1999,
respectively. Interest is earned on the Company's short-term investments.
Income Taxes. Based on the Company's projected taxable loss for fiscal
-------------
year 2001, the Company recorded a tax benefit of $0.8 million for the quarter
ended September 30, 2000, as compared to $1.1 million tax benefit for the
quarter ended September 30, 1999.
Net Loss. The net loss for the quarter ended September 30, 2000 was
---------
approximately ($1.5) million or ($.13) per share (basic and diluted EPS) on
11,345,353 shares as compared to a net loss of ($2.0) million or ($0.17) per
share (basic and diluted EPS) on 11,229,960 shares for the quarter ended
September 30, 1999.
11
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LIQUIDITY AND CAPITAL RESOURCES
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 August 8,
2000, $4.5 million was drawn on the line of credit, which was replaced on August
9, 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.
As of September 30, 2000, $4.7 million was drawn on the New Credit Facility.
In July 1997, Astrotech obtained a five-year term loan (the "Term Loan
Agreement"), which is guaranteed by SPACEHAB, and provides for loans of up to
$15.0 million for general corporate purposes. As of September 30, 2000, the
Company had loans payable of $6.7 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 Johnson Engineering Corporation 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
September 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 $0.3
million as of September 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.
Cash Flows from Operating Activities. Cash flows provided by (used for)
operating activities for the three months ended September 30, 2000 and September
30, 1999 were $7.7 million and ($2.3) million, respectively. The significant
change during the current period was the decrease in accounts receivable by
$13.5 million due to collection of receivables for the STS-101 and STS-106
missions. Other assets increased by $1.3 million primarily due to the tax
benefit accrued for the current quarter. Deferred flight revenue decreased by
$4.1 million due to recognition of all deferred revenue on STS-106, which flew
in September 2000.
Cash Flows from Investing Activities. For the three months ended September
30, 2000 and 1999, cash flows used for investing activities consisted of
approximately $7.6 million and $7.5 million, respectively. The significant
difference between the two periods was the additional expenditures of $2.0
million for the construction of payload processing facilities at Astrotech
relative to the contract extensions with Boeing and Lockheed Martin. The
facility is expected to be complete during the summer of 2001. For the three
months ended September 30, 2000, $4.8 million was spent for the construction of
flight assets, primarily the Research Double Module ("RDM") which is expected to
be completed in the first half of this fiscal year, and the EnterpriseTM module.
Cash Flows from Financing Activities. Cash flows (used for) provided by
financing activities were approximately $0.1 million and $7.7 million for the
three months ended September 30, 2000 and 1999, respectively. The
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significant change between the two periods was due to the receipt of $8.7
million, net of expenses, from Astium, a shareholder, on August 2, 1999, in
exchange for 975,000 authorized and unissued shares Series B Senior Convertible
Preferred Stock. $0.2 million was drawn on the New Credit Facility for certain
closing expenses relative to terminating the Revolving Line of Credit.
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 second 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 SFAS No. 133 will not have a significant effect on the results of
operations or financial position of the Company.
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.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk.
SPACEHAB's primary exposure to market risk relates to interest rates.
SPACEHAB's financial instruments which are subject to interest risk principally
include the New Credit Facility, the Term Loan Agreement and fixed rate long
term debt. SPACEHAB's long-term debt obligations are generally not callable
until maturity. SPACEHAB does not use interest rate swaps or derivative
financial instruments to manage its exposure to fluctuations in interest rates.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The separate Index to Exhibits accompanying this filing
is incorporated herein by reference.
(b) Reports on Form 8-K.
A report on Form 8-K was filed September 13, 2000 announcing the
dismissal of KPMG LLP as the independent public accountants of
the Company and the appointment of Ernst & Young LLP as its new
independent accountants for the fiscal year ended June 30, 2001,
subject to stockholder ratification. Stockholder ratification
was obtained at the Annual Meeting of Stockholders on October
12, 2000.
Exhibit No. Description of Exhibits
----------- -----------------------
21. Subsidiaries of the Registrant
27. Financial Data Schedule
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPACEHAB, INCORPORATED
Date: November 14, 2000 /s/Julia A. Pulzone
------------------------------------------
Julia A. Pulzone
Senior Vice President, Finance
and Chief Financial Officer
/s/David A. Rossi
------------------------------------------
David A. Rossi
President and Chief Operating Officer
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