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FOR IMMEDIATE RELEASE

SPACEHAB REPORTS IMPROVED FINANCIAL RESULTS FOR FISCAL 2002

August 28, 2002, Washington, D.C. – SPACEHAB Inc. (NASDAQ/NMS: SPAB), a leading provider of commercial space services, today announced financial results for its 2002 fiscal year and fourth quarter, which ended June 30, 2002. Net loss for fiscal year 2002 was $2.4 million or $0.20 per basic and diluted share as compared to a net loss of $12.8 million or $1.12 per basic and diluted share for the previous year.

SPACEHAB revenue was $102.8 million in fiscal year 2002 as compared to $105.3 million in fiscal year 2001. Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled approximately $15.8 million for 2002, compared to $0.8 million for 2001. Gross margin was 20.4 percent for fiscal year 2002 as compared to 12.4 percent in fiscal year 2001. Non-cash charges totaled $16.6 million for fiscal year 2002 as compared to $13.0 million for fiscal year 2001.

SPACEHAB’s fiscal year 2002 operating income was $1.1 million. Excluding non-recurring charges and non-core operations, SPACEHAB would have generated an operating income of $5.4 million. Operating income included losses incurred by Space Media Inc. (SMI), SPACEHAB’s majority-owned subsidiary. Operating expenses for the year also included $1.9 million in non-recurring costs relating to competition for a contract with NASA’s Marshall Space Flight Center in Huntsville, Alabama. In addition, SPACEHAB recorded a non-recurring non-cash charge of $770,000 primarily for excess facilities that have been subleased.

Though Space Media acquired an unaffiliated equity investor in the first quarter of fiscal year 2002, SPACEHAB is required to record all of SMI’s losses for financial reporting purposes. SMI’s net loss for the year was $1.6 million. SMI’s ongoing business activity is now limited to its spacestore.com online retail operation and its STARS Academy global education program, which plans to launch six student-designed experiments on Space Shuttle mission STS-107.

Throughout fiscal year 2002, SPACEHAB continued to strengthen its balance sheet, repaying approximately $14.0 million of debt. Cash and cash equivalents totaled $2.7 million as of June 30, 2002, compared to $34,000 as of June 30, 2001. Current liabilities decreased to $38.9 million as of June 30, 2002, from $60.2 million as of June 30, 2001, representing a net reduction of $21.3 million, including a $5.8 million reduction of trade accounts payable and accrued operating expenses.

For the fourth quarter of fiscal year 2002, net loss was $241,000 or $0.02 per basic and diluted share compared to a net loss of $5.6 million or $0.49 per share for fourth quarter 2001. Fourth quarter 2002 revenue was $28.0 million compared to $29.9 million for the same period a year ago. Fourth quarter 2002 EBITDA were $3.1 million as compared to $2.4 million for the same period a year ago. Gross margin was 17.4 percent for fourth quarter fiscal year 2002 as compared to 9.5 percent in fourth quarter fiscal year 2001. Non-cash charges totaled $3.9 million for fourth quarter fiscal year 2002. SPACEHAB recorded a $2.1 million tax benefit in the fourth quarter, representing a refund of taxes paid in prior years.

SPACEHAB’s fourth quarter fiscal year 2002 operating income was $104,000. Excluding non-recurring charges and non-core operations, SPACEHAB would have generated operating income of $1.2 million. Operating income for the quarter included $194,000 of losses incurred by Space Media. Operating expenses for the quarter included $345,000 in non-recurring costs relating to competition for a contract with NASA’s Marshall Space Flight Center. In the fourth quarter, SPACEHAB recorded $770,000 in non-recurring non-cash charges for excess facilities subleased.

SPACEHAB Chairman and Chief Executive Officer Dr. Shelley A. Harrison stated, “The Company began the fiscal year taking on the challenge of completing its financial recovery plan. SPACEHAB’s management has successfully executed the plan outlined in January 2001 – a critical step toward returning the company to a strengthened financial position and rebuilding shareholder equity. The company has secured further new business, building its firm backlog to $211.5 million as of the end of fiscal year 2002.”

SPACEHAB Senior Vice President, Finance and Chief Financial Officer Julia A. Pulzone stated, “SPACEHAB reported profits in the second and third quarters of 2002, and we’re continuing a vigorous cost-cutting campaign to improve profitability. Except for one-time charges on rent reserves, the Company would have shown a profit for the fourth quarter as well. Our challenge for fiscal year 2003 is to increase our profits, improve liquidity, and continue to restore investor confidence.”

SPACEHAB signed a $42.5 million contract modification with NASA in third quarter fiscal year 2002 for two ISS resupply missions using Logistics Single Modules and Integrated Cargo Carriers. These missions are currently scheduled to launch in calendar year 2003. SPACEHAB is continuing talks with NASA regarding additional new missions.

NASA Shuttle research mission STS-107, currently scheduled to launch January 16, 2003, will mark the first flight of SPACEHAB’s Research Double Module. The mission originally was scheduled to launch in May 2000 but has been postponed several times due primarily to the rescheduling of other missions. In fiscal year 2002, SPACEHAB completed negotiations with NASA for a $26.7 million equitable adjustment payment to compensate for costs incurred by STS-107 launch delays through September 2001. Later in the year, NASA approved an equitable adjustment agreement valued at $20.6 million to cover payments for delays in the period from October 2001 through July 19, 2002. Due to further launch schedule delays in the STS-107 mission, NASA has accepted SPACEHAB’s proposal for an equitable adjustment payment for work being performed on this mission from July 19 to launch. NASA has agreed to an equitable adjustment for this period that is comparable to adjustments paid to SPACEHAB for previous launch delays.

In the fourth quarter of fiscal year 2002, NASA granted SPACEHAB’s Johnson Engineering subsidiary a five-month, $14.2 million extension of its Flight Crew Systems Development contract. NASA subsequently exercised its options for three additional one-month extensions of this contract, worth approximately $9 million. Including these options, the period of performance for this contract provides for services through December 2002.

SPACEHAB’s Astrotech Space Operations subsidiary completed financing and construction of its new Spacecraft Processing Facility expansion project in Florida in fiscal year 2002 to support commercial launch service providers. The first satellite processed in the new facility was launched successfully on August 21, 2002, aboard an Atlas V Evolved Expendable Launch Vehicle, one of the newest class of expendable launch vehicles.

“SPACEHAB remains focused on increasing profitability on our existing business backlog while pursuing core areas of new business growth,” said SPACEHAB President and Chief Operating Officer Michael E. Kearney. “We aim to continue expanding our customer base, extending our global reach, building new strategic partnerships and strengthening existing alliances, while maintaining our reputation for quality and innovation.”

With more than $100 million in annual revenue, SPACEHAB Inc. is a leading provider of commercial space services. The Company develops, owns, and operates habitat and laboratory modules and cargo carriers aboard NASA’s Space Shuttles. Its Johnson Engineering subsidiary provides orbiter crew compartment integration and space station stowage and configuration management, supports astronaut training, and builds space-flight mockup trainers at NASA's Johnson Space Center in Houston. SPACEHAB’s Astrotech subsidiary provides commercial satellite processing services at facilities in Florida and California. Additionally, through The Space Store, Space Media provides space merchandise to the public and space enthusiasts worldwide (www.thespacestore.com).

This release may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Such risks and uncertainties include, but are not limited to, whether SPACEHAB will fully realize the economic benefits under its NASA and other customer contracts, the timing and mix of Space Shuttle missions, the successful development and commercialization of new space assets, technological difficulties, product demand, timing of new contracts, launches and business, market acceptance risks, the effect of economic conditions, uncertainty in government funding, the impact of competition, and other risks detailed in the SPACEHAB’s Securities and Exchange Commission filings.

FOR MORE INFORMATION

Linda Billings Director of Communications SPACEHAB Inc. – Washington Office 202/488-3500 Ext. 201 Toll-free 888/647-9543 billings@hqspacehab.com

Julia A. Pulzone Chief Financial Officer SPACEHAB Inc. – Washington Office 202/488-3500 Ext. 236 Toll-free 888/647-9543 pulzone@hqspacehab.com

Note: A Webcast of SPACEHAB’s conference call with investors will be available after 2 p.m. EDT Thursday August 29, 2002, at: http://www.firstcallevents.com/service/ajwz364849950gf12.html.

 

Table follows

SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations

(1) The Company recorded a non-cash charge for excess facilities that have been subleased at a cost lower than the Company’s obligation.

(2) The Company recorded a non-cash non-recurring charge to establish a full valuation allowance on its deferred tax asset as of June 30, 2001.