UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended...............March 31, 1997 OR ( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 0-27206 SPACEHAB, Incorporated 1595 Spring Hill Road Suite 360 Vienna, Virginia 22182 (703) 821-3000 Incorporated in the State of I.R.S. Employer Washington Identification No. 91-1273737 The number of shares of Common Stock outstanding as of the close of business on May 06, 1997: Class Number of Shares Outstanding Common Stock 11,146,237 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 ------ ------
SPACEHAB, INCORPORATED MARCH 31, 1997 QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS PART 1 FINANCIAL INFORMATION Page Item 1. Unaudited Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1996 and March 31, 1997 3 Condensed Consolidated Statements of Operations for the Three and Nine months ended March 31, 1996 and 1997 4 Condensed Consolidated Statements of Cash Flows for the Nine months ended March 31, 1996 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12
PART 1: FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS SPACEHAB, INCORPORATED AND SUBSIDIARY Condensed Consolidated Balance Sheets <TABLE> <CAPTION> June 30, March 31, 1996 1997 (audited) (unaudited) ------------- -------------- ASSETS <S> <C> <C> Cash and Cash Equivalents ...................... $ 50,795,548 $ 24,299,651 Receivables .................................... 5,445,765 5,103,684 Prepaid and other current assets ............... 184,660 914,775 ------------- ------------- Total current assets ...................... 56,425,973 30,318,110 Property, plant and equipment, net of accumulated depreciation and amortization of $27,987,042 and $35,407,592 ................ 70,490,451 87,094,680 Deferred mission costs ......................... 2,705,422 2,093,678 Other assets, net .............................. 86,769 3,589,221 ------------- ------------- Total assets .............................. $ 129,708,615 $ 123,095,689 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loan payable under credit agreement, current portion ........................... $ 2,500,000 $ 500,000 Accounts payable and accrued expenses ..... 3,270,882 2,628,145 Accrued consulting and subcontracting services .................................. 4,712,733 7,605,365 Deposits and other liabilities ............ -- 707,061 ------------- ------------- Total current liabilities ............ 10,483,615 11,440,571 Loan payable under credit agreement, net of current portion ................................ 6,179,062 1,500,000 Notes payable to shareholder ................... 9,968,503 10,896,001 Convertible note payable ....................... 1,170,338 -- Deferred flight revenue ........................ 30,311,227 16,001,631 ------------- ------------- Total liabilities .................... 58,112,745 39,338,203 Commitments Stockholders' equity Common stock, no par value, authorized 30,000,000 shares, issued and outstanding 11,069,237 and 11,146,237 shares, respectively ............................ 79,862,700 81,057,164 Additional paid-in capital ................ 16,299 16,299 Accumulated equity (deficit) .............. (8,283,129) 2,184,023 ------------- ------------- Total stockholders' equity ........... 71,595,870 83,257,486 ============= ============= Total liabilities and stockholders' equity ............................. $ 129,708,615 $ 123,095,689 ============= ============= </TABLE> See accompanying notes to unaudited condensed consolidated financial statements.
SPACEHAB, INCORPORATED AND SUBSIDIARY Unaudited Condensed Consolidated Statements of Operations <TABLE> <CAPTION> Three Months Nine Months Ended March 31, Ended March 31, ---------------------------- ---------------------------- 1996 1997 1996 1997 ------------ ------------ ------------ ------------- <S> <C> <C> <C> <C> Revenue ............................ $ -- $ 15,031,345 $ -- $ 38,136,763 Costs of revenue: Integration and operations ...... 2,544,590 5,804,721 8,024,932 14,777,180 Depreciation .................... 2,064,104 2,376,139 6,192,312 7,128,416 Insurance and other ............. -- 136,801 -- 243,051 ------------ ------------ ------------ ------------ Total costs of revenue ....... 4,608,694 8,317,661 14,217,244 22,148,647 Gross profit (loss) ................ (4,608,694) 6,713,684 (14,217,244) 15,988,116 Operating expenses: Marketing, general and .......... 1,848,950 2,663,375 4,001,286 6,543,551 administrative Research and development ........ -- 136,776 100,000 451,340 ------------ ------------ ------------ ------------ Total operating expenses ..... 1,848,950 2,800,151 4,101,286 6,994,891 ------------ ------------ ------------ ------------ Income (loss) from operations (6,457,644) 3,913,533 (18,318,530) 8,993,225 Interest expense, net of capitalized amounts .......................... 75,701 187,201 778,439 865,518 Interest and other income .......... (511,598) (375,501) (590,519) (1,190,075) Other expense ...................... -- -- 52,599 -- ------------ ------------ ------------ ------------ Income (loss) before income .. (6,021,747) 4,101,833 (18,559,049) 9,317,782 taxes Income tax expense ................. -- 894,659 15,664 2,124,659 ------------ ------------ ------------ ------------ Income (loss) before extraordinary item ......... (6,021,747) 3,207,174 (18,574,713) 7,193,123 Extraordinary item - gain on early retirement of debt, net of taxes and legal fees .................... -- -- -- 3,274,029 ------------ ------------ ------------ ------------ Net income (loss) ............ $ (6,021,747) $ 3,207,174 $(18,574,713) $ 10,467,152 ============ ============ ============ ============ Net income (loss) per common and common equivalent share: Income (loss) before extraordinary item ........................... $ (0.55) $ 0.29 $ (2.65) $ 0.65 Extraordinary item ............... -- -- -- 0.29 ------------ ------------ ------------ ------------ Net income (loss) per common and common Equivalent share ............ $ (0.55) $ 0.29 $ (2.65) $ 0.94 ============ ============ ============ ============ Shares used in computing net income (loss)per common and common equivalent share .................. 10,999,478 11,173,489 7,017,088 11,138,701 ============ ============ ============ ============ </TABLE> See accompanying notes to unaudited condensed consolidated financial statements.
SPACEHAB, INCORPORATED AND SUBSIDIARY Unaudited Condensed Consolidated Statements of Cash Flows <TABLE> <CAPTION> Nine Months Ended March 31, 1996 1997 -------------- --------------- Cash flows provided by operating activities: <S> <C> <C> Net income (loss) .................... $(18,574,713) $ 10,467,152 Adjustments to reconcile net income (loss) to net cash provided (used)by operating activities: Depreciation and amortization ....... 6,379,082 7,420,550 Gain on early retirement of debt, net of taxes, before legal expenses ........................... -- (3,383,891) Interest converted to notes payable . 826,948 927,498 Changes in assets and liabilities: Decrease (increase) in accounts receivable ....................... (2,057,699) 1,915,136 Decrease (increase) in prepaid insurance ........................ (56,430) (51,438) Decrease (increase) in prepaid and other current assets ............. (224,003) (629,746) Decrease (increase) in deferred mission costs .................... (5,904,569) 611,744 Decrease (increase) in other assets 5,942 (145,656) Increase (decrease) in deferred flight revenue ................... 29,238,299 (14,309,595) Increase (decrease) in accounts payable and accrued expenses ..... 1,147,954 (1,493,235) Increase (decrease) in launch costs payable .......................... (152,500) -- Increase (decrease) in accrued consulting and subcontracting services ......................... 2,743,071 2,892,632 ------------ ------------ Total adjustments ............. 31,946,095 (6,246,001) ------------ ------------ Net cash provided by operating activities .......... 13,371,382 4,221,151 ------------ ------------ Cash flows used by investing activities: Payments for modules in construction . (8,480,983) (4,607,050) Purchase of Astrotech, net of cash acquired ............................. -- (19,960,021) Purchase of property plant and equipment ........................... (328,378) (2,878,931) ------------ ------------ Net cash used by investing activities .................. (8,809,361) (27,446,002) ------------ ------------ Cash flows used by financing activities: Payment of note payable to Insurers .. -- (3,185,060) Payment of loan payable under credit agreement ........................... (3,217,691) -- Payment of loan payable to McDonnell Douglas ............................. (1,855,235) -- Payment of legal fees on early retirement of debt .................. -- (109,986) Proceeds from exercise of employee stock options ....................... 180,000 24,000 Proceeds from private placement of stock ............................... 3,600,000 -- Proceeds from issuance of common stock 43,302,319 -- ------------ ------------ Net cash provided (used) by financing activities ........ 42,009,393 (3,271,046) ------------ ------------ Net increase (decrease) in cash and cash equivalents ........ 46,571,414 (26,495,897) Cash and cash equivalents at beginning of period ............................ 1,437,481 50,795,548 ------------ ------------ Cash and cash equivalents at end of period ................................. $ 48,008,895 $ 24,299,651 ============ ============ </TABLE> See accompanying notes to unaudited condensed consolidated financial statements.
SPACEHAB, INCORPORATED 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 ("SPACEHAB" or the "Company")and its wholly-owned subsidiary, Astrotech Space Operations, Inc. as of March 31, 1997, and the results of their operations for the three and nine months ended March 31, 1996 and 1997 and cash flows for the nine months ended March 31, 1996 and 1997. However, the consolidated financial statements are unaudited, and do not include all related footnote disclosures. The results of operations for the three and nine months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the full year. The Company's results of operations fluctuate significantly from quarter to quarter. The interim unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements appearing in the Company's Form 10-K/A for the period ended June 30, 1996. 2. Revenue Recognition Revenue is recognized at the completion of each of the remaining missions under the existing Russian Space Station Mir contract, including options. 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 reported based on costs incurred over the period of the contract. During the first quarter of fiscal 1997, SPACEHAB began integration work on two international experiments, one for NASDA, the Japanese Space Agency, and one for ESA, the European Space Agency. The percentage of completion method will result in the recognition of revenue over the period of contract performance, thereby decreasing the quarter by quarter fluctuation of reported revenue. Payload processing revenue provided from the Astrotech facilities (see note 5) is recognized on a straight-line basis over the occupancy period of the facilities. 3. Statements of Cash Flows - Supplemental Information (a)Cash paid for interest costs was approximately $778,000 and $866,000 for the nine months ended March 31, 1996 and 1997, respectively. The Company capitalized interest of approximately $85,000 and $106,000 during the nine months ended March 31, 1996 and 1997, respectively. (b)The Company paid approximately $16,000 and $2.1 million for income taxes during the nine months ended March 31, 1996 and 1997, respectively. (c)During the nine months ended March 31, 1996, all of the Company's 4,011,345 shares of preferred stock were automatically converted to 1,671,312 shares of common stock concurrent with the Company's initial public offering. (d)During the nine months ended March 31, 1997, the Company's convertible note payable, with a carrying value of approximately $1.2 million, was converted into 75,000 shares of common stock. 4. Amended and Restated Credit Agreement During August 1996, the Company entered into an amended and restated credit agreement with its two senior lenders, which became effective on August 20, 1996. As a result of this agreement the Company has recognized an extraordinary gain of approximately $4.2 million, before applicable income taxes and other related expenses. Prior to the completion of this August 20, 1996 amendment, SPACEHAB had outstanding debt under the credit agreement of approximately $8.7 million to one of the senior lenders, $3.2 million bearing interest at a rate of 1% per month and $5.5 million non-interest bearing. A payment of $2.5 million was made on August 20, 1996 and an unsecured note in the amount of $2 million was given to this senior lender. The $2 million note is non-interest bearing and will be repaid over five years beginning in August 1997. All other remaining indebtedness to this senior lender was canceled. There was no outstanding indebtedness to the second senior lender and the Company projected no requirements for borrowing under the $6 million revolving line of credit provided by the second senior lender. This lending commitment was terminated in the August 20, 1996 amendment and restatement in exchange for release of all liens and restrictive covenants of this second lender. 5. Acquisition of Astrotech On February 6, 1997 the Company agreed to acquire the assets and certain liabilities of Astrotech Space Operations, L.P. ("Astrotech"), a subsidiary of Northrop Grumman Corporation. Astrotech is nationally recognized as the leading provider of commercial satellite launch processing services and payload processing facilities. 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. SPACEHAB paid approximately $20.0 million, including transaction costs, to acquire substantially all of the assets and certain of the liabilities of Astrotech. The purchase was effective on February 12, 1997. The business combination is being accounted for using the purchase method under Accounting Principles Board Opinion No. 16, "Business Combinations," ("APB Opinion 16") to record the purchase of the assets and certain liabilities of Astrotech. The purchase price has been allocated to the assets and liabilities acquired based on preliminary estimates of fair value as of the date of acquisition. The final allocation of the purchase price will be determined when appraisals and other studies are completed. Based on the allocation of the purchase price over the net assets acquired, goodwill of approximately $3,357,000 was recorded. Such goodwill is being amortized on a straight-line basis over 20 years. The purchase price has been allocated as follows: <TABLE> <S> <C> Petty cash ...................... $ 2,042 Receivables ..................... 1,573,055 Land ............................ 580,000 Buildings ....................... 13,389,000 Furniture, fixtures and equipment 2,319,159 Goodwill ........................ 3,356,796 Other assets .................... 48,931 Accounts payable ................ (141,025) Customer deposits ............... (1,165,895) ------------ Total purchase price ............ $ 19,962,063 ============ </TABLE> APB Opinion 16 requires, for purchase business combinations, the presentation of pro forma combined results of operations for the current year and preceding year as if the combination had occurred at the beginning of the period. The following unaudited pro forma results of operations are not necessarily indicative of actual or future results of operations. <TABLE> <CAPTION> Three Months Nine Months Ended March 31, Ended March 31, ---------------------------- ---------------------------- 1996 1997 1996 1997 ------------ ------------- ------------- ------------ <S> <C> <C> <C> <C> Revenue .................... $ 2,615,006 $ 15,819,518 $ 8,412,000 $ 41,893,936 Gross profit (loss) ........ (2,777,371) 6,939,331 (8,102,396) 17,439,282 Income (loss)before extraordinary item ......... (4,650,998) 3,331,155 (13,712,787) 7,244,246 Net income (loss) .......... $ (4,650,998) $ 3,331,155 $(13,712,787) $ 10,518,861 ============ ============ ============ ============ Net income (loss) per common and common equivalent share $ (0.42) $ 0.30 $ (1.95) $ 0.95 ============ ============ ============ ============ </TABLE> ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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, that could cause actual results to differ materially from those projected in such statements. GENERAL SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated in 1984 to commercially develop space habitat modules to operate in the cargo bay of the Space Shuttles. 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 Corporation. Astrotech is nationally recognized as the leading provider of commercial satellite launch processing services and payload processing facilities. 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. SPACEHAB recognizes revenue under its two principal contracts with the U.S. National Aeronautics and Space Administration ("NASA"), the CMAM Contract and the Mir Contract, upon the completion of each Space Shuttle mission carrying SPACEHAB Modules. The CMAM contract supported scientific and commercial microgravity research on five Space Shuttle flights while the Mir Contract provides logistics to the Russian Mir Space Station. Revenue is comprised of payment for leasing lockers and/or volume within the SPACEHAB Modules and for the integration and operations support services provided to scientists and researchers responsible for the experiments and/or logistics supplies for SPACEHAB missions aboard the shuttle system. 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. In late September of 1996, SPACEHAB entered into an agreement with the Japanese Space Agency (NASDA) and with the European Space Agency (ESA)(the "NASDA/ESA" contract), pursuant to which SPACEHAB will provide hardware and integration and operations for scientific microgravity experiments to NASDA and ESA aboard the SPACEHAB Double Module on STS-84. This mission is currently scheduled for May of 1997. During the first quarter of fiscal 1997, SPACEHAB began integration work on the NASDA/ESA contract. The percentage of completion method results in the recognition of revenue over the period of contract performance, thereby decreasing the quarter by quarter fluctuation of reported revenue. Revenue provided by the Astrotech payload processing facilities is recognized on a percentage of completion basis. Revenue is recognized ratably over the occupancy period of the facilities. Astrotech recently signed an exclusive contract with Lockheed Martin to process all Atlas launch vehicle payloads for the next three years as well as a fifteen year contract to support Boeing's Sea Launch program. 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 experiment support. Expenses associated with sustaining engineering are expensed as incurred. Mission specific expenses relating to the CMAM Contract and the Mir Contract are recorded as assets and not expensed until the specific Space Shuttle mission is flown and the related revenue is recognized. Costs associated with performance of the NASDA/ESA contract are expensed as incurred. Other costs of revenue include depreciation expense, which is allocated to each SPACEHAB Module on a straight line basis over a ten year useful life. 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. Marketing, general and administrative, interest, and other expenses are recognized when incurred. RESULTS OF OPERATIONS For the three months ended March 31 , 1997 as compared to the three months ended March 31, 1996. Revenue. The Company recorded revenue of approximately $15.0 million for the three months ended March 31, 1997. There was no revenue recognized during the three months ended March 31, 1996. In accordance with the Company's revenue recognition policy for the Mir and the CMAM Contracts, revenue is recorded at the completion of a mission when the SPACEHAB modules are returned to the Company. Revenue of approximately $13.6 million was recognized for a Mir flight during the third quarter of 1997. Approximately $204,000 of the Company's revenue for the three months ended March 31, 1997 was related to the NASDA/ESA contract and is recorded on a percentage of completion basis. There was approximately $1.2 million in revenue recorded from the Company's payload processing subsidiary, which is recognized on a straight-line basis over the period of occupancy of the facilities. Costs of Revenue. Costs of revenue for the quarter ended March 31, 1997 increased 80.40% to $8.3 million, as compared to $4.6 million for quarter ended March, 1996. This increase is due primarily to an increase of approximately $3.3 million of integration and operations expenses. Because mission specific expenses are reported at the time of a flight under the Mir and CMAM contracts, these expenses are significantly higher during a quarter in which there is a flight. There was one flight during the quarter March 31, 1997 and no flights during the quarter ended March 31, 1996. The flight during the quarter ended March 31, 1997 was a Logistics Double Module flight. Flights using Double Modules incur more integration and operation expenses than those of a Single Module. Integration costs related to the CMAM and Mir Contracts were $0 and $5.3 million, respectively, for the quarter ended March 31, 1997, as compared with $0.7 million and $1.4 million, respectively, for the quarter ended March 31, 1996. NASDA/ESA contract costs were approximately $0.2 million for the quarter ended March 31, 1997. There were no NASDA/ESA costs incurred during the quarter ended March 31, 1996. Additionally, integration and operation costs incurred by Astrotech's payload processing facilities were approximately $0.3 million for the period February 13, 1997 through March 31, 1997. Operating Expenses. Operating expenses increased approximately 51.4% to approximately $2.8 million for the three months ended March 31, 1997 as compared to approximately $1.8 million for the three months ended March 31, 1996. This increase is due primarily to the Company's efforts to increase staff, adding strength in engineering, design and research and development. As of March 31, 1997, the Company's staff had increased by over fifty percent compared to the quarter ended March 31, 1996. Additionally, the Company incurred operating expenses from its payload processing facilities of approximately $0.2 million during the period February 13, 1997 through March 31, 1997. Interest Expense. Interest expense was approximately $0.3 million for the three months ended March 31, 1997 as compared to approximately $0.4 million for the three months ended March 31, 1996. Of this amount, approximately $0.1 million was capitalized for the quarter ended March 31, 1997. This compared to approximately $0.3 million for the quarter ended March 31, 1996. Interest was capitalized during the construction of the Company's Science Double Module during the quarter ended March 31, 1997 whereas capitalized amounts during the quarter ended March 31, 1996 were based on the Logistics Double Module. It is anticipated that this Science Double Module will be available for flight during the second quarter of fiscal year 1999. Interest and Other Income. Interest and other income was approximately $0.4 million for the three months ended March 31, 1997 as compared to $0.5 million for the quarter ended March 31, 1996. This decrease is due to short term interest earned by the Company for the investment of proceeds received from the Company's initial public offering of common stock (the "Offering"). Net Income/Loss. Net income was approximately $3.2 million, or $0.29 per share for the quarter ended March 31, 1997, on 11,173,489 weighted average shares, as compared to a net loss of $6.0 million, or $.55 per share for the quarter ended March 31, 1996, on 10,999,478 shares. For the nine months ended March 31, 1997 as compared to the nine months ended March 31, 1996. Revenue. The Company recorded revenue of approximately $38.1 million for the nine months ended March 31, 1997. No revenue was recorded during the nine months ended March 31, 1996 since there were no Space Shuttle flights carrying SPACEHAB Modules during that period. Approximately $1.1 million of the Company's revenue for the nine months ended March 31, 1997, was related to the NASDA/ESA contract and is recorded on a percentage of completion basis. There was approximately $1.2 million in revenue recorded from the Company's payload processing subsidiary, which is recognized on a straight-line basis over the period of occupancy of the facilities. Costs of Revenue. Costs of revenue for the nine months ended March 31, 1997 increased 55.8% to $22.1 million, as compared to $14.2 million for nine months ended March 31, 1996. This increase is due primarily to an increase of approximately $6.8 million of integration and operations expenses. This increase is primarily attributable to the difference in flight schedules. Integration and operations costs relating to the CMAM and the Mir Contracts were approximately $1.0 million and $12.4 million, respectively, for the nine months ended March 31, 1997, as compared with $4.1 million and $3.3 million, respectively, for the nine months ended March 31, 1996. The NASDA/ESA contract costs were approximately $1.0 million for the nine months ended March 31, 1997. There were no NASDA/ESA costs incurred during the nine months ended March 31, 1996. Additionally, integration and operation costs incurred by Astrotech's payload processing was approximately $0.3 million for the period February 13, 1997 through March 31, 1997. Operating Expenses. Operating expenses increased by approximately 70.6% to approximately $7.0 million for the nine months ended March 31, 1997 as compared to approximately $4.1 million for the nine months ended March 31, 1996. This increase is due primarily to the Company's efforts to add strength to its engineering, design and research and development departments. Additionally, the Company incurred operating expenses from its payload processing facilities of approximately $0.2 million during the period February 13, 1997 through March 31, 1997. Interest Expense. Interest expense was approximately $1.0 million for the nine months ended March 31, 1997 as compared to approximately $1.1 million for the nine months ended March 31, 1996. Of this amount, there was approximately $0.1 million and $0.5 million of interest capitalized during the nine months ended March 31, 1997 and 1996, respectively. Interest was capitalized during the construction of the Company's Science Double Module for the nine months ended March 31, 1997 and the Logistics Double Module for the nine months ended March 31, 1996. Interest and Other Income. Interest and other income was approximately $1.2 million for the nine months ended March 31, 1997 as compared to approximately $.6 million for the nine months ended March 31, 1996. This increase is due to short term interest earned by the Company for the investment of proceeds received from the Company's Offering. Net Income/Loss. Net income was approximately $10.5 million, or $0.94 per share for the nine months ended March 31, 1997, on 11,138,701 weighted average shares, as compared to a net loss of $18.6 million, or $2.65 per share for the nine months ended March 31, 1996, on 7,017,088 weighted average shares. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its capital expenditures, research and development and working capital requirements with progress payments under both the CMAM Contract and the Mir Contract, and proceeds received from private equity offerings and borrowings under credit facilities. During December 1995, SPACEHAB completed the Offering which provided the Company with net proceeds of approximately $43.5 million. Cash Flows provided by Operating Activities. Cash provided by operations for the nine months ended March 31, 1997 and 1996, were $4.2 million and $13.4 million, respectively. This decrease is substantially due to a significant decrease in deferred flight revenue. This decrease is offset by decreases in deferred mission costs and accounts receivable related to missions that were flown during the nine months ended March 31, 1997. Cash Flows used by Investing Activities. For the nine months ended March 31, 1997 and 1996, cash flows used by investing activities were approximately $27.4 million and $8.8 million, respectively. A significant portion of the expenditures during the nine months ended March 31, 1997 were attributed to the purchase of Astrotech, and the continuing construction of the Company's Science Double Module. The Company began work at the beginning of fiscal year 1997 on its Science Double Module. The Company anticipates that it will spend between $30.0 million and $35.0 million on the project. This compares to the nine months ended March 31, 1996, where substantially all of the investing activity was due to capital expenditures for the Company's Logistics Double Module. Cash Flows provided (used) by Financing Activities. Cash flows provided (used) by financing activities were approximately ($3.3) million and $42.0 million for the nine months ended March 31, 1997 and 1996, respectively. On August 20, 1996, the Credit Agreement was amended and restated. Under this amendment, the revolving credit commitment from McDonnell Douglas was canceled. In addition, in exchange for the full satisfaction of two term loans owed to a group of insurance companies, the Company paid $2.5 million to said companies at closing and agreed to pay an additional $2.0 million under a new non-interest bearing term loan. The new term loan is due in installments of $0.5 million in each of August 1997 and 1998, and $0.333 million in each of August 1999, 2000 and 2001. Under the new agreement all prior liens and encumbrances on the Company's assets and all prior restrictive covenants have been released. A significant portion of the cash provided by financing activities during the nine months ended March 31, 1996 was provided by the proceeds of approximately $43.3 million from the Company's issuance of common stock in the Offering and $3.8 million in proceeds from a private placement of common stock and the exercise of employee stock options.
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. During the three months ended March 31, 1997, the following report was filed on Form 8-K under Item 2, Acquisition or Disposition of Assets: 1. The report was dated February 12, 1997 and filed on February 27, 1997 announcing the Registrant's acquisition of substantially all of the assets of Astrotech Space Operations, L.P. Exhibit No. Description of Exhibits 10.1** NASDA Contract, dated July 1996, between the Registrant and Mitsubishi Corporation (the "NASDA/ESA Contracts"). 10.2** ESA Contract, dated September 18, 1996, between the Registrant and INTOSPACE GmbH (the "NASDA/ESA Contracts") 10.3* 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. 11. Statement re Computation of Per Share Earnings. 27 Financial Data Schedule * Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ending June 30, 1996 filed with the Securities and Exchange Commission on December 20, 1996. ** Incorporated by reference to the Registrant's Form 10-Q/A for the quarter ended September 30, 1996 filed with the Securities and Exchange Commission on December 20 1996.
Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPACEHAB, INCORPORATED Date: May 09, 1997 /S/ MARGARET E. GRAYSON ------------------ ---------------------------------- Margaret E. Grayson Vice President of Finance (CFO) Treasurer, and Assistant Secretary (Principal Financial and Accounting Officer)
Exhibit 11 SPACEHAB, INCORPORATED AND SUBSIDIARY COMPUTATION OF EARNINGS PER COMMON SHARE <TABLE> <CAPTION> Three Months Nine Months Ended March 31, Ended March 31, 1996 1997 1996 1997 ------------- ------------ ------------ ------------- Net Income (Loss) and Adjusted Earnings: Net income (loss) applicable to common shareholders used for <S> <C> <C> <C> <C> primary computations ........... $ (6,021,747) $ 3,207,174 $(18,574,713) $ 10,476,152 ------------ ------------ ------------ ------------ Fully diluted adjustments: Savings in convertible note payable interest expense, net of tax ..................... 19,228 -- 57,122 -- ------------ ------------ ------------ ------------ Adjusted net income (loss) applicable to common shareholders assuming full dilution ................ $ (6,002,519) $ 3,207,174 $(18,517,591) $ 10,476,152 ============ ============ ============ ============ Average number of shares of common stock and common stock equivalents used for primary computation ...... 10,999,478 11,173,489 7,017,088 11,138,701 ------------ ------------ ------------ ------------ Fully diluted adjustments (2): Weighted Average Shares and Share Equivalents Outstanding: Assumed exercise of options and warrants ................ 126,096 16,656 -- -- Assumed conversion of convertible debt .............. 75,000 -- 75,000 36,405 ------------ ------------ ------------ ------------ Total number of shares assumed to be outstanding assuming full dilution 11,200,574 11,190,145 7,092,088 11,175,106 ------------ ------------ ------------ ------------ Earnings Common Per Share: Income (loss) per common and common equivalent share: Income (loss) before extraordinary item ............ $ (0.55) $ 0.29 $ (2.65) $ 0.65 Extraordinary item ............... -- -- -- 0.29 ------------ ------------ ------------ ------------ Primary (1) ...................... $ (0.55) $ 0.29 $ (2.65) $ 0.94 ============ ============ ============ ============ Income (loss) before extraordinary item ............ $ (0.55) $ 0.29 $ (2.61) $ 0.65 Extraordinary item ............... -- -- -- 0.29 ------------ ------------ ------------ ------------ Fully Diluted (2): ............... $ (0.54) $ 0.29 $ (2.61) $ 0.94 ============ ============ ============ ============ </TABLE> (1) The assumed exercise of options and warrants in periods of net loss are anti-dilutive and are not included in the computation and presentation of primary earnings per share. (2) The assumed exercise of options, warrants, conversion of convertible debt, and conversion of preferred stock are anti-dilutive but are included in the calculation of fully dilutive earnings per share in accordance with Regulation S-K Item 601 (a)(11).