Spacehab, Inc.

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Spacehab, Inc.

300 D Street S.W., Suite 814
Washington, DC 20024
U.S.A.
Telephone: (202) 488-3500
Fax: (202) 488-3100
Web site: http://www.spacehab.com

Public Company
Incorporated: 1984
Employees: 831
Sales: $105.71 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: SPAB
NAIC: 51334 Satellite Telecommunications; 54171 Research and Development in the Physical, Engineering, and Life Sciences; 92711 Space Research and Technology; 336419 Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Spacehab, Inc. is the only private company to own and operate space vehicles; namely, pressurized modules used to house experiments on board space shuttles and the international space station. Clients include various governmental space agencies, private corporations, and research institutions. The company has moved to become less dependent on NASA by acquiring a satellite services company and an astronaut training firm, and establishing a media company.

Smithsonian Origins

The idea for what would become Spacehab, Inc. originated in 1983 with Robert Citron, a former scientist with the Smithsonian Institution. According to the New York Times, Citron, who then lived in Seattle, conceived of a pressurized container for tourists to be carried in the cargo bay of the space shuttle. Round-trip airfare would be $1 million. NASA turned down this proposal, but voiced interest in a similar module for manned experiments.

Spacehab’s name was created as a contraction of “Space Habitat.” The company’s new mission was to provide a commercial supplement to the similar-sounding Spacelab, which was NASA’s version of the mobile laboratory that flew inside the space shuttle beginning in 1983. Spacelab was limited by funding and ultimately flew on only five flights between 1983 and 1992.

Unlike other government contractors, Spacehab would own its product and would seek service contracts for the use of it. The company raised $2 million before the explosion of the Challenger in January 1986. NASA suspended shuttle launches for two years following the accident.

During that time, Spacehab began looking for a CEO, and signed on Richard Jacobson in February 1987. Prior to his appointment, he had led the McDonnell Douglas Delta rocket program. He was preparing to retire when McDonnell Douglas offered to become the prime contractor for Spacehab. Spacehab’s chairman, James Beggs, also had long ties to the space industry, championing the commercialization of space while an administrator at NASA. In 1987, Spacehab’s offices were relocated opposite NASA’s in Washington, D.C., near the Smithsonian Institution’s National Air and Space Museum.

In the spring of 1988, the government of Taiwan offered to finance the Spacehab project’s entire $75 million estimated cost. Taiwan had been excluded from NASA’s space projects because the United States did not officially recognize its government. Unfortunately for Spacehab, however, the president of Taiwan died before their deal could be consummated. (Spacehab did receive about $10 million from private Taiwanese investors in 1989, though.)

Later in 1988, Spacehab landed a major contract from NASA. The agency authorized Spacehab to develop a 1,000 cubic foot pressurized space habitat module for the cargo bay of the space shuttle. The company would pay NASA $28 million for each of six flights to cover transportation costs and other expenses, and would lease space for up to 50 scientific experiments on the space shuttle.

Encouraged by the NASA contract, more investors— including Chemical Bank, Mitsubishi Trust Bank, and Industrial Bank of Japan—committed another $150 million to the project in 1989. The Industrial Bank of Japan dropped out within a year, however, to be replaced by Banque National de Paris and Paribas.

A Big Sale in 1990

By the fall of 1990, Spacehab had four contracts worth $50 million for space on its ten-foot by 13.5-foot aluminum module, which multiplied the space shuttle’s manned experiment capacity by a factor of four. In November, NASA bought 200 of Spacehab’s 300 available slots on six shuttle flights for $184 million. Spacehab had been the only company to respond to NASA’s request for bids for research space in March 1990. Commercial operations like Spacehab offered NASA’s research centers a less cumbersome administrative means to get experiments into orbit than the traditional procurement process.

Because Spacehab had only eight employees in 1991, the company farmed out the design and manufacturing work. McDonnell Douglas Space Systems Company became the prime contractor for the module. Aeritalia (later Alenia SpA) designed and built most of it, while the Mitsubishi Corporation of Japan acted as its home country’s sales agent. By this time, Spacehab had $40 million committed to the module, mostly from its manufacturing partners and overseas investors. The module was expected to cost $92 million to build, plus more than $5 million a year to insure.

The buyback arrangement with NASA enabled Spacehab to secure $64 million in financing from Chase Manhattan Bank in March 1991, a deal that took two years to complete. Although the Bush administration was generally sympathetic to the space program, NASA remained subject to the whims of the federal government, with every contract subject to Congress’s annual appropriations process. A group of 150 insurers led by Lloyd’s of London provided unique insurance against these risks, while McDonnell Douglas guaranteed against cost overruns. All told, the modules cost $150 million to build.

By the middle of 1991, Spacehab had a backlog worth $250 million. Its two 1,100-cubic-foot modules, with 25 lockers each, were capable of carrying 50 experiments in all. The company was renting each locker for $1.8 million a flight—the first of which was scheduled for December 1992, but later postponed.

The Spacehab module took its first flight on the space shuttle Endeavor in July 1993. The mission lasted ten days. The Discovery then carried the module in February 1994 and February 1995. The Washington Post recorded that these three missions were backed by 46 corporations, 27 universities, and eight research institutes, as well as NASA. They studied the possibility of growing protein crystals (used in drug synthesis) or assembling semiconductors in space. In July 1995, Spacehab won a $54 million, four-mission contract to resupply Russia’s Mir space station.

Public in 1995

Spacehab launched an initial public offering on the NASDAQ exchange in December 1995. This act presented people with a rare opportunity to invest in a company solely dedicated to the commercialization of space. The company’s lack of consistent revenues, however, made it a purchase for the long term. The share price fell from $12 to $8 within a year.

By this time, there had been a change in the executive ranks. Dr. Shelley A. Harrison became chairman, while Richard P. Hora—formerly with General Dynamics Corp.—became president. Prior to these changes, Harrison had co-founded Cymbal Technologies, the company that developed bar code scanners. He had taken over Spacehab through his venture capital firm, had been on the board of directors since August 1987, and became chairman in August 1993 and CEO in April 1996.

In 1996, Spacehab was building a new module double the size of the original to help meet NASA’s massive demand for experimentation space. NASA reportedly found it cost only a tenth as much to hire Spacehab’s module as it would have to maintain its own. In 1997, NASA awarded Spacehab a Research and Logistic Mission Support (REALMS) contract that allowed the agency more flexibility in ordering Spacehab’s services.

Spacehab changed its conservative accounting practices in 1997 to allow it to report revenues earned before missions were completed. The company acquired Astrotech Space Operations, L.P., a provider of satellite processing services, from Northrop Grumman Corporation in February 1997. This became another factor keeping zeroes out of the company’s quarterly income reports and making it less dependent on NASA. Spacehab bought another NASA contractor, Johnson Engineering Corpo-ration, in July 1998. This unit (renamed Spacehab Engineering Services) conducted training for astronauts at the Johnson Space Center in Houston. All of these occurrences led to Spacehab’s reporting of a net income of $9.6 million on revenues of $64 million for the 1998 fiscal year.

In May 1999, the Spacehab module was used to resupply the first elements of the long-awaited international space station (ISS) under construction. Spacehab bought the first option on commercial space aboard the ISS from the Canadian Space Agency in August 1999. By this time, David A. Rossi was serving as Spacehab’s president.

Company Perspectives:

A robust space program is an investment in the nation’s future prosperity. In the next millennium, large scale business activity in space will exploit the advantages of this unique environment. Spacehab will be at the forefront of this endeavor, providing value-added, commercial access to space, meeting the needs of customers, and developing strategic alliances with other global leaders. We are committed to the success of our customers’ endeavors in space commerce and to building value for our investors. Look for Spacehab to become the internationally recognized leader in providing new and continuing space support services.

In December 1999, Spacehab contracted with RSC (Rocket Space Corporation) Energia of Korolev, Russia to build a manned, pressurized module (dubbed “Enterprise”) to attach to the ISS for commercial purposes. The two companies were sharing the cost of building the $100 million module, which was expected to launch via a Russian rocket in 2002 (later rescheduled for 2003).

Microgravity experiments similar to those performed on the space shuttles were also scheduled for the ISS module. Spacehab formed a joint venture (Spacehab Canada, Inc.) with the Canadian telecommunications company EMS Technologies, Inc. to market its commercial space on the ISS.

New Horizons in a New Millennium

Spacehab planned to make the first independent television and Internet broadcasts from space, mostly centering on activi-ties aboard the ISS. Its tiny TV studio aboard the Enterprise module would have two cameras, remote controlled from Earth. Spacehab set up Space Media, Inc. to handle the Enterprise’s multimedia applications. “Sharing the excitement and wonder of space exploration with everyone, everywhere,” was its mission, according to Harrison. Broadcasts were scheduled to begin in late 2000. Space Media also acquired an e-commerce site, The Space Store, which offered space-related items, including a $2 million used Soviet space capsule (the Soyuz TM-26).

Spacehab won contracts for second and third ISS resupply missions via space shuttle in 2000. These missions ferried food and equipment needed by the first permanent crew, and were scheduled for that October. By this time, Spacehab’s long-term strategic partners included Daimler Chrysler Aerospace (or DASA, which merged with Matra Marconi to form Astrium) and the Mitsubishi Corporation.

Spacehab prepared to debut its Research Double Module (RDM) on a space shuttle flight in early 2001. Part of the mission involved the company’s Space Technology and Re-search Students (STARS) program, which carried experiments from students in five different countries. The STARS program’s experiments included one from China to see how well silk-worms produce silk in zero gravity. Spacehab hoped to have up to a million students involved as the company moved into the future.

Principal Subsidiaries

Astrotech Space Operations, L.P.; Johnson Engineering Corporation; Space Media, Inc.; Spacehab Canada Inc.

Principal Divisions

Spacehab Flight Services; Spacehab Engineering Services; Astrotech.

Principal Competitors

Boeing Co.; Lockheed Martin Corp.; Spaceport Systems International; United Space Alliance.

Key Dates:

1984:: Spacehab is incorporated.
1986:: The Challenger disaster halts space shuttle flights for two years.
1988:: NASA authorizes development of a module for the shuttle cargo bay.
1990:: NASA buys two-thirds of Spacehab’s capacity on six shuttle flights.
1992:: The first Spacehab mission is launched.
1995:: Spacehab goes public.
1997:: Spacehab buys Astrotech and Johnson Engineering.
2000:: Space Media prepares to broadcast from the International Space Station.