Loral Reports Strong Q3 Results

Loral Press Release

Loral Space & Communications Inc. (Nasdaq:LORL – News) today announced its financial results for the three and nine months ended September 30, 2009. Notable achievements for the company include:

  • Telesat and Space Systems/Loral (SS/L) financial results continued to reflect strong performance.
  • SS/L’s third quarter Adjusted EBITDA was $32 million, contributing to a nine month total Adjusted EBITDA of $54 million, more than double the Adjusted EBITDA of the first nine months of 2008.
  • Telesat’s Nimiq 5 satellite, built by SS/L, was successfully launched in the quarter and began commercial service in October.
  • Telesat’s growth initiatives include a replacement satellite currently under construction at SS/L and a Direct-to-Home television satellite to be leased to Bell TV, which is expected to begin construction in the first quarter of 2010.

“Our solid performance continues to deliver outstanding results,” said Michael B. Targoff, chief executive officer of Loral. “Our performance in both the manufacturing and services segments during this time of economic distress reinforces our future outlook for further shareholder value creation.”

Combined segment revenues, for both Satellite Manufacturing and Satellite Services, for the quarter ending September 30, 2009, were $424 million compared to $386 million for the third quarter in 2008. Combined segment Adjusted EBITDA for the quarter was $145 million, compared to $114 million for the third quarter of 2008. Combined segment revenues for the first nine months of the year were $1.3 billion compared to $1.2 billion for the first nine months of 2008. Combined segment Adjusted EBITDA for the nine months ending September 30, 2009 was $391 million compared to $334 million for the first nine months of 2008.

Loral includes all of Telesat’s revenues and Adjusted EBITDA in segment results. Loral’s income statement, however, reflects its 64 percent economic interest in Telesat under the equity method of accounting. All of Telesat’s results are converted from Canadian generally accepted accounting principles (GAAP) to U.S. GAAP. After eliminations, primarily related to Telesat, Loral’s revenues for the quarter were $249 million compared to $213 million for the third quarter of 2008. Adjusted EBITDA for the third quarter of 2009, after eliminations, was $27 million compared to $6 million for the third quarter of 2008. For the first nine months of 2009, revenues after eliminations were $733 million compared to $639 million for the first nine months of 2008. Adjusted EBITDA after eliminations for the first nine months of 2009 was $38 million compared to $20 million for the first nine months of 2008.

Loral reported net income for the quarter of $108 million compared to a loss of $44 million for the third quarter of 2008. Net income for the first nine months of 2009 was $172 million, which compares to Loral’s net loss of $63 million for the nine months ended September 30, 2008. The dramatic improvement in both periods is primarily the result of foreign exchange rate fluctuations.

The company ended the third quarter of 2009 with $173 million in cash and cash equivalents with no borrowings. At year end 2008 the company had $118 million of cash and cash equivalents and $55 million of borrowings. This represents an improvement in net cash of $111 million.

Satellite Manufacturing

Space Systems/Loral booked five satellite orders in the first nine months of 2009 contributing to a robust backlog on September 30, 2009 of $1.6 billion compared to $1.4 billion on December 31, 2008. Orders included a broadband satellite for Hughes Network Services, two satellites for Intelsat, one satellite for Telesat and a satellite for Hong Kong-based AsiaSat. There have also been six successful launches of SS/L-built satellites this year, and another is scheduled for later this week.

“In addition to the five contracts already awarded this year, we continue to see strong customer activity,” said Mr. Targoff. “This is likely to lead to additional bookings in the near term.” SS/L’s performance in the third quarter of 2009 showed marked improvement over the same period in 2008. In the third quarter of 2009, SS/L reported revenues before eliminations of $254 million compared to $216 million in the third quarter of 2008. Satellite manufacturing revenues increased by approximately $100 million for the nine months ending September 30, 2009 compared to the nine months ending September 30, 2008, increasing to $746 million from $646 million.

Benefiting from the combination of scope increases on certain contracts (which positively impacted our results by approximately $10 million), improved revenues, and good operating performance, Adjusted EBITDA was particularly high for the quarter at $32 million, compared to $10 million for the third quarter of 2008. Adjusted EBITDA for the nine-month period ending September 30, 2009 was $54 million which was up from $25 million for the first nine months of 2008.

Satellite Services

With the successful launch of Nimiq 5 in September, Telesat continues to increase its revenue producing fleet. Nimiq 5 began commercial service on October 10, 2009 and is fully contracted to EchoStar for its entire life. Revenue from this satellite will be reflected in fourth quarter results. New growth initiatives include Telstar 14R, a high power replacement satellite that will increase capacity in the Americas and over the Atlantic Ocean. Telstar 14R is under construction at SS/L, and is scheduled for launch in 2011. Additionally, as previously noted, Telesat is procuring a new direct broadcast satellite, which will be fully leased to Bell TV.

Telesat’s performance continues to improve, consistent with expectations. In Canadian dollars, revenues for the third quarter of 2009 were CAD 187 million compared to CAD 177 million in the third quarter of 2008. Third quarter Adjusted EBITDA was CAD 129 million compared to CAD 113 million in the third quarter 2008. For the first nine months of 2009, revenues were CAD 594 million compared to CAD 518 million in 2008, and Adjusted EBITDA for the first nine months of the year was CAD 411 million compared to CAD 319 million in the first nine months of 2008.

In U.S. dollars, Telesat revenues were $171 million for the quarter, compared to $170 million in 2008. Adjusted EBITDA for the quarter was $118 million compared to $108 million in the third quarter of 2008. Revenues for the nine months ended September 30, 2009 were $508 million compared to $509 million in 2008, and Adjusted EBITDA for the first nine months of the year was $352 million compared to $313 million for the first nine months of 2008.

The reporting of Telesat results is complicated by differences between U.S. GAAP and Canadian GAAP, and by exchange rate fluctuations. Disregarding changes in the U.S. dollar / Canadian dollar exchange rate, Telesat revenues for the third quarter of 2009 would have increased by approximately $5 million compared to the same period in 2008. On the same basis Telesat’s Adjusted EBITDA for the third quarter of 2009 would have been approximately $15 million higher than third quarter Adjusted EBITDA in 2008.

On the same basis, Telesat’s revenues for the first nine months of 2009 would have increased by approximately $40 million over the first nine months of 2008 and Adjusted EBITDA would have increased by approximately $60 million.

Net income for the third quarter of 2009 was $168 million, compared to the net loss of $53 million reported in the same period of 2008. Net income for the nine months ending September 30, 2009 was $279 million compared to the net loss of $131 million for the same period in 2008. The magnitude of this change is primarily the result of foreign exchange gains in the third quarter of 2009 and foreign exchange losses in the same period in 2008.

At the end of the third quarter, Telesat had a backlog of $4.4 billion, $109 million total cash and $3.0 billion of debt.