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FOR IMMEDIATE RELEASE

SPACEHAB REPORTS $1.2 MILLION PROFIT FOR SECOND QUARTER OF FISCAL 2003
Company to Carry on NASA Work in Wake of Columbia Tragedy

Highlights

Washington, D.C., February 6, 2003 – SPACEHAB, Incorporated (NASDAQ/NMS: SPAB), a leading provider of commercial space services with over $100 million in annual revenue, today announced financial results for the Company’s second quarter of fiscal year 2003, ended December 31, 2002.

Second Quarter Results

SPACEHAB reported an increase in revenues to $28.1 million for the second quarter of 2003 compared to $27.7 million for second quarter of 2002. Gross profit decreased $2.0 million to $5.3 million, or 19% of revenue, for second quarter 2003. Margins in the current quarter were lower due to changes in the mix of business under contract.

The Company reported net income of $1.2 million, or $0.09 per diluted share for this quarter, which is a 79% increase from net income of $700,000, or $0.05 per diluted share for the same period a year ago. SPACEHAB’s net income for the second quarter of fiscal 2003 represented an improvement of nearly $1.3 million, or $0.10 per diluted share, from a loss of ($94,000), or ($0.01) per diluted share, as reported in its first quarter fiscal 2003 results. The Company noted that its recording of a $503,000 tax benefit in the second quarter, representing a refund of taxes paid in prior years, also contributed to the Company’s growth in net income for the quarter.

Operating expenses declined $2.5 million to $2.7 million for the second quarter of fiscal 2003, a result of continuing company-wide cost reduction efforts and elimination of non-core operating expenses. Second quarter fiscal year 2003 EBITDA (earnings before interest, taxes, depreciation, and amortization) was $5.4 million compared to $5.8 million for the second quarter of 2002. Noncash charges totaled $2.9 million for the second quarter of fiscal 2003 versus $3.7 million for the second quarter of fiscal 2002.

Six Month Results

Revenues increased 10% to $54.9 million for the six months ended December 31, 2002, compared to $50.0 million for the six months ended December 31, 2001. Gross profit remained unchanged at 19% of revenue for the six months ended December 31, 2002, compared to the same period a year ago.

Net income was $1.1 million, or $0.08 per diluted share, for the six months ended December 31, 2002, compared to a net loss of ($2.2) million, or ($0.19) per diluted share, for the same period a year ago.

Operating expenses for the six months ended December 31, 2002 declined $4.0 million to $6.2 million, compared to the six months ended December 31, 2001. Previous fiscal year operating expenses included $2.6 million in non-recurring costs. EBITDA for the six months ended December 31, 2002 was $10.2 million, compared to $6.5 million for the six months ended December 31, 2001, an increase of 57%. EBITDA variances are an outcome of improved results from operations and lower noncash charges.

“Our management team is dedicated to growing our operations, providing quality service, and financial recovery -- all of which are on track and improving as reflected in today’s financial report,” said Dr. Shelley A. Harrison, Chairman and Chief Executive Officer of SPACEHAB. “With a large backlog of over $173 million, outstanding customer support provided by our business units, and a commitment to our stakeholders, we are delivering on our pledge of strengthening our business,” said Dr. Harrison.

Balance Sheet

During the second quarter of fiscal year 2003, SPACEHAB repaid $0.9 million of debt obligations, and has repaid $3.5 million of debt for the fiscal year to date. SPACEHAB’s total remaining term debt obligations, excluding convertible subordinated notes payable, were $21.9 million at December 31, 2002, including a facility mortgage of $18.1 million secured and funded by contract payments. Cash and cash equivalents totaled $1.8 million as of December 31, 2002.

“SPACEHAB continues to improve its financial position, managing operating margins and costs while reducing debt obligations,” said Julia A. Pulzone, Senior Vice President, Finance and Chief Financial Officer of SPACEHAB. “We are pleased that our ongoing efforts are demonstrating steady financial improvement and strengthening our balance sheet.”

STS-107 Space Shuttle Mission

Through the second quarter of fiscal 2003, SPACEHAB’s Space Flight Services business unit completed preparations for the STS-107 Space Shuttle mission which launched on January 16, 2003. SPACEHAB managed the integration of approximately 8,300 pounds of research payloads for NASA, other space agencies, and commercial customers worldwide. Approximately 7,500 pounds of these payloads were contained within the SPACEHAB Research Double Module (RDM).

On February 1, 2003, the RDM was lost in the tragic STS-107 accident. SPACEHAB is working under NASA’s leadership to support the investigation as we continue our operations in support of NASA’s Space Flight Program. The RDM has a net book value of $67.2 million at December 31, 2002. The loss of the RDM is partially covered by NASA and commercial insurance sources. The Company’s commercial insurance on the module was $17.7 million. The Company has not yet begun negotiating the value of the NASA coverage. Other options for recovering the value of the RDM are also being evaluated.

At this time the Company is not planning to replace the RDM. SPACEHAB’s Space Flight Services business unit has two additional modules and other flight assets available to support the Company’s current NASA contracts. These same assets can be used to support future NASA contracts.

Update of Ongoing Operations

SPACEHAB’s Space Flight Services business unit is continuing its operations, finalizing preparations for the STS-114 mission. SPACEHAB is providing a cargo carrier, known as the External Stowage Platform 2, or ESP2, that will be deployed and permanently mounted to the orbiting International Space Station (ISS). The Company continues to support two additional ISS resupply missions, STS-116 and STS-118, with its existing modules.

SPACEHAB’s Johnson Engineering subsidiary continues to support NASA with its facility operations and maintenance effort at the Neutral Buoyancy Laboratory and Space Vehicle Mockup Facility as well as configuration management support to the ISS Program. SPACEHAB subsidiary, Astrotech Space Operations, provided payload processing services for the EUTELSAT W-5 satellite in the second quarter of fiscal 2003. Astrotech also supported processing for two missions at its Vandenberg Air Force Base facilities, the tandem ICESat/CHIPSat mission for NASA and the U.S. Air Force Coriolis spacecraft for Spectrum Astro.

Financial and Operational Outlook

“We believe long-term shareholder value must be built on consistent profitability through sound operational and financial management. SPACEHAB has been continuously focused on these objectives, building upon its strong foundation through provision of high value services,” concluded Dr. Harrison.

About SPACEHAB

With more than $100 million in annual revenue, SPACEHAB, Incorporated 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, ISS 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 California and Florida. Additionally, through The Space Store, Space Media provides space merchandise to the public and space enthusiasts worldwide (www.thespacestore.com).

This release contains 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 the Company will fully realize the economic benefits under its NASA and other customer contracts, the timing and mix of Space Shuttle missions, the impact of the recent Columbia tragedy on the Company’s existing and future business operations, the amount of insurance coverage the Company expects to receive for its RDM, which was lost as part of the Columbia tragedy, 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 Company’s Securities and Exchange Commission filings.

For more information, contact:

Kimberly Campbell Director of Marketing SPACEHAB, Inc. -- Headquarters Office Phone 713.558.5049 Fax 713.558.5960 campbell@spacehab.com

Julia A. Pulzone Chief Financial Officer SPACEHAB, Inc. -- Washington Office Phone 202.488.3500 Toll free 888.647.9543 pulzone@hqspacehab.com

Website: www.spacehab.com
Conference call: A Webcast of SPACEHAB’s earnings conference call with investors will be available after 2 p.m. EDT Friday, February 7, 2003, at: http://www.firstcallevents.com/service/ajwz373144662gf12.html.

Tables follow

SPACEHAB, INCORPORATED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations

ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ (in thousands, except share data)		Three Months Ended December 31,				Six Months Ended December 31,
		2002		2001		2002		2001
Revenue	$	ÝÝÝÝÝÝÝÝÝÝÝ 28,050	$	ÝÝÝÝÝÝÝ 27,727	$	ÝÝÝÝÝ 54,862	$	ÝÝÝÝÝ 50,019
Costs of revenue		ÝÝÝÝÝÝÝÝÝÝÝ 22,758		ÝÝÝÝÝÝÝ 20,471		ÝÝÝÝÝ 44,393		ÝÝÝÝÝ 40,337
Gross profit		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 5,292		ÝÝÝÝÝÝÝÝÝ 7,256		ÝÝÝÝÝÝ 10,469		ÝÝÝÝÝÝ 9,682
Operating expenses:
Ý Selling, general and administrative		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 2,667		ÝÝÝÝÝÝÝÝÝ 5,121		ÝÝÝÝÝ 6,083		ÝÝÝÝ 10,057
Ý Research and development		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 73		ÝÝÝÝÝÝÝÝÝÝÝÝ 125		ÝÝÝÝÝÝÝÝÝÝ 85		ÝÝÝÝÝÝÝÝÝ 143
ÝÝÝÝ Total operating expenses		ÝÝÝÝÝÝ ÝÝÝÝÝÝÝ2,740		ÝÝÝÝÝÝÝÝÝ 5,246		ÝÝÝÝÝ 6,168		ÝÝÝÝ 10,200
ÝÝÝÝ Income (loss) from operations		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 2,552		ÝÝÝÝÝÝÝÝÝ 2,010		ÝÝÝÝÝÝ 4,301		ÝÝÝÝÝÝÝÝ (518)
Interest expense, net of capitalized amounts		(1,839)		(1,308)		(3,699)		(2,743)
Interest and other income, net		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ (41)		ÝÝÝÝÝÝÝÝÝÝÝÝ (17)		ÝÝÝÝÝÝÝÝÝÝ (30)		ÝÝÝÝÝ 1,124
ÝÝÝÝ Income (loss) before income taxes		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 672		ÝÝÝÝÝÝÝÝÝÝ 685		ÝÝÝÝÝÝÝÝ 572ÝÝ		(2,137)
Income tax benefit (expense)		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 503		ÝÝÝÝÝÝÝÝ ÝÝÝ(27)		ÝÝÝÝÝÝÝ 509		ÝÝÝÝÝÝÝÝÝÝ (55)
ÝÝÝÝ Net income (loss)	$	ÝÝÝÝÝÝÝÝÝÝÝÝ 1,175	$	ÝÝÝÝÝÝÝÝÝ 658	$	ÝÝÝÝÝ 1,081	$	ÝÝÝÝÝ (2,192)
Basic Income (loss) per share:
Net Income (loss) per share - basic	$	0.10	$	0.06	$	ÝÝÝÝÝÝÝÝÝÝ 0.09	$	(0.19)
Shares used in computing net income (loss) per share - basic		12,234,266		11,833,602		12,194,775		11,740,655
Diluted income (loss) per share:
Net income (loss) per share - diluted	$	0.09	$	0.05	$	ÝÝÝÝÝÝÝÝÝ 0.08	$	(0.19)
Shares used in computing net income (loss )		13,606,199		13,166,936		13,558,802		11,740,655

Selected Financial Data by Segment (Unaudited)

(In Thousands)		Three Months Ended December 31,				Six Months Ended December 31,
		2002		2001		2002		2001
Revenue
ÝÝÝÝ Space Flight Services	$	14,072	$	15,416	$	26,439	$	25,018
ÝÝÝÝ Johnson Engineering		9,879		9,952		21,153		20,127
ÝÝÝÝ Astrotech Space Operations		3,804		1,988		6,650		4,235
ÝÝÝÝ Space Media, Inc.		212		239		336		363
ÝÝÝÝ All Other		83		132		284		276
Total Revenue	$	28,050	$	27,727	$	54,862	$	50,019
Earnings (loss) before tax
ÝÝÝÝ Space Flight Services	$	(1,090)	$	ÝÝÝÝÝÝÝÝÝ 1,251	$	(2,095)	$	(2,286)
ÝÝÝÝ Johnson Engineering		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 863		ÝÝÝÝÝÝÝÝÝÝÝÝ 834		ÝÝÝÝÝÝ 1,562		1,236
ÝÝÝÝ Astrotech Space Operations		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 1,189		ÝÝÝÝÝÝÝÝÝÝÝÝ (59)		ÝÝÝÝÝÝ 1,507		1,578
ÝÝÝÝ Space Media, Inc.		(109)		(450)		(192)		(1,046)
ÝÝÝÝ All Other		(181)		(891)		(210)		(1,619)
Earnings (loss) before tax	$	ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 672	$	ÝÝÝÝÝÝÝÝÝÝ 685	$	ÝÝÝÝÝÝÝÝÝ 572	$	(2,137)

 

 

 

 

 

 

 

 

 

 

SPACEHAB, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(In thousands)	December 31,		September
	2002		30, 2002
	(unaudited)		(unaudited)
ASSETS
Cash and cash equivalents	$1,792		$574
Accounts receivable, net	14,364		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 14,610
Prepaid expenses and other current assets	721		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 908
ÝÝÝÝ Total current assets	16,877		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 16,092
Property, plant, and equipment, net of
Ý accumulated depreciation and amortization	ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 170,875		ÝÝÝÝÝÝÝÝÝÝÝÝ 172,793
All other assets, net	ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 27,846		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 28,437
ÝÝÝÝ Total assets	$215,598		Ý$217,322
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	35,662		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 37,297
Long-term liabilities	91,173		ÝÝÝÝÝÝÝÝÝÝÝÝÝ 92,484
Minority interest in consolidated subsidiary	750		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 750
Stockholders' equity	88,013		ÝÝÝÝÝÝÝÝÝÝÝÝÝÝ 86,791
ÝÝÝÝ Total liabilities and stockholders' equity	$215,598		$217,322