##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-14180
 LORAL SPACE & COMMUNICATIONS INC.
 (Exact name of registrant specified in the charter)
 Jurisdiction of incorporation: Delaware
 IRS identification number: 87-0748324
 600 Third Avenue
New York, New York 10016
(Address of principal executive offices)
Telephone: (212) 697-1105
 (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon stock, $.01 par value
    
    NASDAQ
 Securities registered pursuant to Section 12(g) of the Act:
 Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405
of the Securities Act. YesoNoþ
 Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
 þ o
 o o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
   þ o
  Part and Item Number ofDocument
    
    Form 10-K into which incorporatedLoral Notice of Annual Meeting of
Stockholders and Proxy Statement for
the Annual
    
    Part II, Item 5(d)Meeting of Stockholders
to be held May 24, 2011
    
    Part III, Items 11 through 14




---



##### 



LORAL SPACE AND COMMUNICATIONS INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2010
 PART IItem 1: Business
    
    
    1Item 1A: Risk Factors
    
    
    14Item 1B: Unresolved Staff Comments
    
    
    32Item 2: Properties
    
    
    32Item 3: Legal Proceedings
    
    
    33Item 4: Removed and Reserved
    
    
    33PART IIItem 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    34Item 6: Selected Financial Data
    
    
    35Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    37Item 7A: Quantitative and Qualitative Disclosures about Market Risk
    
    
    64Item 8: Financial Statements and Supplementary Data
    
    
    65Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    66Item 9A: Controls and Procedures
    
    
    66Item 9B: Other Information
    
    
    69PART IIIItem 10: Directors and Executive Officers of the Registrant
    
    
    69Item 11: Executive Compensation
    
    
    69Item 12: Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    69Item 13: Certain Relationships and Related Transactions
    
    
    69Item 14: Principal Accountant Fees and Services
    
    
    70PART IVItem 15: Exhibits and Financial Statement Schedules
    
    
    70Signatures
    
    
    76Exhibit 10.27Exhibit 10.35Exhibit 14.1Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




---



##### Table of Contents



PART I
 
 Item 1. Business
 THE COMPANY
 Overview
   Satellite Manufacturing:
  Satellite Services:
  Segment Overview
 Satellite Manufacturing
    1




---



##### Table of Contents



Market and Competition
  Satellite Manufacturing Performance (1)
 Year ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Total segment revenues
    
    $
    1,165
    
    
    $
    1,008
    
    
    $
    881Eliminations
    
    
    (6
    )
    
    
    (15
    )
    
    
    (12
    )Revenues from satellite manufacturing as reported
    
    $
    1,159
    
    
    $
    993
    
    
    $
    869Segment Adjusted EBITDA before eliminations
    
    $
    143
    
    
    $
    91
    
    
    $
    45
 (1)
    
    See Consolidated Operating Results in Managements Discussion and Analysis of
Financial Condition and Results of Operations for significant items that affect comparability
between the periods presented (see Note 15 to the Loral consolidated financial statements for
the definition of Adjusted EBITDA).  2




---



##### Table of Contents



Satellite Services
   Broadcast:
 DTH.
 Video Distribution.
 Occasional Use Services.
 Enterprise Services:
 Data networks in North America and the related ground segment and maintenance services
supporting these networks.
 International Enterprise Networks.
 Ka-band Internet Services.
  3




---



##### Table of Contents



Telecommunication Carrier Services.
 Government Services.
 Consulting & Other:
     Market and Competition
   4




---



##### Table of Contents



Fixed Satellite Operators
   Regional and domestic providers:
 
    
    in North America: Ciel, ViaSat/WildBlue, HNS, EchoStar, Satmex and Hispamar;
    
    in Europe, Middle East, Africa: Eutelsat, Arabsat, Nilesat, HellasSat, Turksat
and Spacecom;
    
    in Asia: AsiaSat, Measat, Thaicom, APT, PT Telkom, Optus and Asia Broadcast
Satellite; and
    
    in Latin America: Satmex, Star One, Arsat, HispaSat and Hispamar.
   Terrestrial Service Providers
  Consulting Services
  Satellite Fleet & Ground Resources
   5




---



##### Table of Contents



:
 ExpectedOrbital Location
    
    
    
    Manufacturers
    
    End-of-Regions
    
    Launch
    
    End-of-Service
    
    Orbital
    
    Transponders(1)Covered
    
    Date
    
    Life
    
    Maneuver Life(1)
    
    C-band(2)
    
    
    Ku-band(2)
    
    
    Ka-band
    
    
    L-band(3)
    
    
    ModelNimiq 1
    
    91.1° WL Canada,
    
    May 1999
    
    2011
    
    2024
    
    
    
    
    
    32@24MHz
    
    
    
    
    
    
    
    
    
    
    A2100 AXContinental United States
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Lockheed Martin)Nimiq 2(4)
    
    91.1° WL Canada,
    
    December 2002
    
    2015
    
    2021
    
    
    
    
    
    11@24MHz
    
    
    
    
    
    
    
    
    
    
    A2100 AXContinental United
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Lockheed Martin)StatesNimiq 4
    
    82° WL Canada
    
    September 2008
    
    2023
    
    2027
    
    
    
    
    
    32@24 MHz
    
    
    8@54 MHz
    
    
    
    
    
    
    E3000 
(EADS Astrium)Nimiq 5
    
    72.7° WL Canada,
    
    September 2009
    
    2024
    
    2035
    
    
    
    
    
    32@24MHz
    
    
    
    
    
    
    
    
    
    
    SS/L 1300Continental United StatesAnik F1(5)
    
    107.3° WL South
    
    November 2000
    
    2016
    
    2018
    
    12@36MHz
    
    
    16@27MHz
    
    
    
    
    
    
    
    
    
    
    BSS702 (Boeing)AmericaAnik F2
    
    111.1° WL Canada,
    
    July 2004
    
    2019
    
    2027
    
    24@36MHz
    
    
    32@27MHz
    
    
    31@56/112 MHz
    
    
    
    
    
    
    BSS702 (Boeing)Continental United
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6@500MHzStates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1@56/112MHzAnik F1R(3)
    
    107.3° WL North
    
    September 2005
    
    2020
    
    2023
    
    24@36MHz
    
    
    32@27MHz
    
    
    
    
    
    
    2@20MHz
    
    
    E3000America
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (EADS Astrium)Anik F3
    
    118.7° WL Canada,
    
    April 2007
    
    2022
    
    2026
    
    24@36MHz
    
    
    32@27MHz
    
    
    2@75MHz
    
    
    
    
    
    
    E3000Continental United
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500MHz)
    
    
    
    
    
    
    (EADS Astrium)StatesTelstar 11N
    
    37.55° WL North and
    
    February 2009
    
    2024
    
    2026
    
    
    
    
    
    39@27/54MHz
    
    
    
    
    
    
    
    
    
    
    SS/L 1300Central America,Europe, Africa and themaritime AtlanticOcean regionTelstar 12(6)
    
    15° WL Eastern United
    
    October 1999
    
    2012
    
    2016
    
    
    
    
    
    37@54MHz
    
    
    
    
    
    
    
    
    
    
    SS/L 1300States, SE Canada,Europe, Russia, MiddleEast, South Africa,portions of South andCentral AmericaTelstar 14/Estrela
    
    63° WL Brazil And
    
    January 2004
    
    2019
    
    2011
    
    
    
    
    
    9@72MHz
    
    
    
    
    
    
    
    
    
    
    SS/L 1300do Sul
    
    portions of Latin
    
    
    
    
    
    
    
    
    
    
    
    9@36MHzAmerica, North
    
    
    
    
    
    
    
    
    
    
    
    2@28MHzAmerica, Atlantic
    
    
    
    
    
    
    
    
    
    
    
    1@56MHzOceanTelstar 18(7)
    
    138° EL India, South
    
    June 2004
    
    2017
    
    2018
    
    18@36MHz
    
    
    6@54MHz
    
    
    
    
    
    
    
    
    
    
    SS/L 1300East Asia, China,
    
    
    
    
    
    
    
    1@54MHz
    
    
    1@40MHzAustralia And Hawaii
 (1)
    
    Telesats current estimate of when each satellite will be decommissioned, taking
account of anomalies and malfunctions the satellites have experienced to date and other
factors such as remaining fuel levels, consumption rates and other available engineering data.
These estimates are subject to change and it is possible that the actual orbital maneuver life
of any of these satellites will be shorter than Telesat currently anticipates. Further, it is
anticipated that the payload capacity of each satellite may be reduced prior to the estimated
end of commercial service life. For example, Telesat currently anticipates that it will need
to commence the turndown of transponders on Anik F1, as a result of further degradation in
available power.(2)
    
    Includes the DBS Ku-Band, extended C-band and extended Ku-band in certain cases.(3)
    
    Telesat does not provide service in the L-band. The L-band payload is licensed to
Telesats customer by the FCC.(4)
    
    It is expected that the available capacity in Nimiq 2 will be reduced over time as a
result of power system limitations due to malfunctions affecting available power. The number
of Ku-band transponders stated above refers to the number of active saturated Ku-band
transponders as of December 31, 2010.(5)
    
    Anik F1s orbital maneuver life is constrained by power availability.(6)
    
    Telstar 12 has 38 54 MHz transponders. Four of these transponders are leased to
Eutelsat to settle coordination issues and Telesat leases back three of these transponders.  6




---



##### Table of Contents



(7)
    
    Includes 16.6 MHz of C-band capacity provided to the Government of Tonga in lieu of
a cash payment for the use of the orbital location. The satellite carries additional
transponders (the APT transponders), not shown on
the table, as to which APT has a prepaid lease through the end of life of the satellite in
consideration for APTs funding a portion of the satellites cost. This transaction was
accounted for as a sales-type lease, because substantially all of the benefits and risks
incident to the ownership of the leased transponders were transferred to APT. Telesat has agreed
with APT among other things that if Telesat is able to obtain the necessary approvals and
licenses from the U.S. government under U.S. export laws, it would transfer title to the APT
transponders on Telstar 18 to APT, as well as a corresponding interest in the elements on the
satellite that are common to or shared by the APT transponders and the Telesat transponders. As
required under its agreement with APT, Telesat acquired two transponders from APT for an
additional payment in August 2009.  
    
    Satmex 5:Three-36MHz Ku-band transponders;
    
    Satmex 6:Two-36MHz C-band transponders; Two-36MHz Ku-band transponders; and
    
    Agila 2 (Mabuhay):Two-36MHz C-band transponders and five and one half 36 MHz Ku-band
transponders
  Telstar 14R/Estrela do Sul 2
    
    Nimiq 6
    
    Anik G1Orbital Location
    

63o WL
    
    TBD
    
    107.3° WLRegions Covered
    
    South America,
    
    Canada,
    
    Canada, ContinentalContinental US,
    
    Continental US
    
    US, South America,Andean Region,
    
    
    
    Pacific OceanNorth and Mid-AtlanticOcean RegionPlanned In-Service Date
    
    Second half of 2011
    
    Mid-2012
    
    Second half of 2012Manufacturers End-of-Service-Life
    
    2026
    
    2027
    
    2027Customer Committed Capacity
    
    N/A
    
    100%
    
    35%Transponders:Ku-band
    
    58 @36 MHz
    
    32 @ 24 MHz
    
    16 @ 27 MHz12 @ 36 MHzC-band
    
    
    
    
    
    24 @ 36 MHzX-band
    
    
    
    
    
    3 @ 36 MHzModel
    
    SS/L 1300
    
    SS/L 1300
    
    SS/L 1300
 Satellite Services Performance (1)
   7




---



##### Table of Contents



1 3
 Year ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Revenue:Total segment revenues
    
    $
    797
    
    
    $
    692
    
    
    $
    685Affiliate eliminations(2)
    
    
    (797
    )
    
    
    (692
    )
    
    
    (685
    )Revenues from satellite services as reported
    
    $
    
    
    
    $
    
    
    
    $
    Adjusted EBITDA:Total segment Adjusted EBITDA
    
    $
    607
    
    
    $
    488
    
    
    $
    436Affiliate eliminations(2)
    
    
    (607
    )
    
    
    (488
    )
    
    
    (427
    )Adjusted EBITDA from satellite services after eliminations
    
    $
    
    
    
    $
    
    
    
    $
    9
 (1)
    
    See Consolidated Operating Results in Managements Discussion and Analysis of
Financial Condition and Results of Operations for significant items that affect comparability
between the periods presented (see Note 15 to the consolidated financial statements for the
definition of Adjusted EBITDA).(2)
    
    Affiliate eliminations represent the elimination of amounts attributable to Telesat.   Other
 o o
 REGULATION
 Satellite Manufacturing
 Export Regulation and Economic Sanctions Compliance
   8




---



##### Table of Contents



Satellite Services
 Telecommunications Regulation
  Canadian Regulatory Environment
     9




---



##### Table of Contents



United States Regulatory Environment
      10




---



##### Table of Contents



Regulation Outside Canada and the United States
     International Regulatory Environment  International Telecommunication Union
    11




---



##### Table of Contents



PATENTS AND PROPRIETARY RIGHTS
 Satellite Manufacturing
  Satellite Services
    12




---



##### Table of Contents



RESEARCH AND DEVELOPMENT
 Satellite Manufacturing
  Satellite Services
  FOREIGN OPERATIONS
  Satellite Manufacturing
  Satellite Services
  EMPLOYEES
    13




---



##### Table of Contents



OTHER
  AVAILABLE INFORMATION
  
 Item 1A. Risk Factors
 I. Financial and Telesat Investment Risk Factors
 Our revenues and profitability may be adversely affected by swings in the global financial markets,
which may have a material adverse effect on our customers and suppliers.
  The SS/L credit agreement is subject to financial and other covenants that must be met for SS/L to
utilize the revolving facility.
  Our potential indebtedness makes us vulnerable to adverse developments.
   14




---



##### Table of Contents



Increases in interest rates could increase interest costs under SS/Ls credit facility.
  Instability in financial markets could adversely affect our ability to access additional capital.
  Loral Space & Communications Inc., the parent company, is a holding company with no current
operations; we are dependent on cash flow from our operating subsidiaries and affiliates to meet
our financial obligations.
 1 3
     15




---



##### Table of Contents



While we own 64% of Telesat on an economic basis, we own only 33 1 / 3 % of its
voting stock and therefore do not have the right to elect or appoint a majority of its Board of
Directors.
 1 3 2 3 2 3
 Our equity investment in Telesat may be at risk because of Telesats leverage.
       16




---



##### Table of Contents



Certain asset sales by Telesat may trigger material adverse tax consequences for us.
  The Telesat information in this report is based solely on information provided to us by Telesat.
  Telesats financial results and our U.S. dollar reporting of Telesats financial results will be
affected by volatility in the Canadian/U.S. dollar exchange rate.
   XTAR has not generated sufficient revenues to meet all of its contractual obligations, which are
substantial.
   17




---



##### Table of Contents



As part of our business strategy, we may complete acquisitions, undertake restructuring efforts or
engage in other strategic transactions. These actions could adversely affect our business, results
of operations and financial condition.
  II. Segment Risk Factors
 
    
    Risk Factors Associated With Satellite Manufacturing
 The satellite manufacturing market is highly competitive.
   The cyclicality of SS/Ls end-user markets could have a material adverse effect on our financial
results.
  Many of SS/Ls contracts with its customers include performance incentives that subject us to risk.
   18




---



##### Table of Contents



The satellite manufacturing industry is characterized by technological change, and if SS/L cannot
continue to develop, manufacture and market innovative satellite applications that meet customer
requirements our sales may suffer.
  It is possible that SS/Ls satellites will not be successfully developed or manufactured.
  Certain of SS/Ls on-orbit satellites have known performance issues.
    19




---



##### Table of Contents



SS/Ls major customers account for a sizable portion of SS/Ls revenues, and the loss of, or a
reduction in, orders from these customers could result in a decline in revenues.
  SS/Ls future operating results are dependent on the growth in the businesses of SS/Ls customers
and on SS/Ls ability to sell to new customers.
  SS/Ls contracts are subject to adjustments, cost overruns and termination.
     20




---



##### Table of Contents



A dispute could arise relating to a satellite in construction.
  Certain of SS/Ls customers are highly leveraged and may not fulfill their contractual payment
obligations with SS/L.
   There can be no assurance that SS/L will have sufficient funds to meet its cash requirements in the
future.
   21




---



##### Table of Contents



Many of SS/Ls costs are fixed and SS/L may not be able to cut costs sufficiently to maintain
profitability in the event of a downturn in its business.
  The availability of facility space and qualified personnel may affect SS/Ls ability to perform its
contracts in a timely and efficient manner.
  SS/Ls ability to obtain certain satellite construction contracts depends, in part, on its ability
to provide the customer with financing.
  SS/L relies on certain key suppliers whose failure or delayed performance could adversely affect
us.
   22




---



##### Table of Contents



SS/L faces risks in conducting business internationally and is subject to risks that may have a
material adverse effect on our results of operations.
   
    
    political and economic instability in foreign markets;
    
    restrictive trade policies of the U.S. government and foreign governments;
    
    inconsistent product regulation by foreign agencies or governments;
    
    imposition of product tariffs and burdens;
    
    the cost of complying with a variety of U.S. and international laws and
regulations, including regulations relating to import-export control;
    
    the complexity and necessity of using non-U.S. representatives and consultants;
    
    inability to obtain required U.S. or foreign country export licenses; and
    
    foreign currency exposure. See  SS/L is exposed to foreign currency
exchange rate risks that could have a material adverse effect on our business,
results of operations or financial condition.
 SS/L relies on patents, and infringement by SS/L of third-party patents would increase its costs,
and third parties may challenge its patents.
    23




---



##### Table of Contents



SS/Ls operations are subject to business interruptions and casualty losses.
  SS/L relies on its information technology systems to manage numerous aspects of SS/Ls business and
a disruption of these systems could adversely affect SS/Ls business.
  SS/L is exposed to foreign currency exchange rate risks that could have a material adverse effect
on our business, results of operations or financial condition.
   SS/L is subject to U.S. and foreign laws and regulations, including U.S. export control and
economic sanctions laws, which may result in delays, lost business and additional costs, and any
changes in any of these laws and regulations may have a material and adverse effect on our business
and results of operations.
    24




---



##### Table of Contents



SS/L uses estimates in accounting for many contracts. Changes in these estimates could have a
material adverse effect on our future financial results.
   Industry consolidation in the satellite services industry may adversely affect SS/L.
  We do not control satellite procurement decisions at Telesat.
   25




---



##### Table of Contents



Federal government contracts may be terminated by the federal government at any time prior to their
completion and contain other unfavorable provisions, which could lead to unexpected loss of sales
and reduction in backlog.
  
    
    terminate or modify existing contracts;
    
    reduce the value of existing contracts through partial termination;
    
    delay the payment of SS/Ls invoices by government payment offices;
    
    audit SS/Ls contract-related costs; and
    
    suspend SS/L from receiving new contracts pending resolution of any
alleged violations of procurement laws or regulations.
  SS/Ls business could be adversely affected by a negative audit or other actions, including
suspension or debarment, by the federal government.
  
    
    Risk Factors Associated With Satellite Services
 A substantial amount of Telesat revenues are derived from only a few of its customers. A loss of
one or more of these major customers, or a material adverse change in any such customers business
or financial condition, could materially reduce Telesat future revenues and contracted backlog.
   26




---



##### Table of Contents



Launch delays or failures may result in delays in operations.
    After launch, satellites remain vulnerable to in-orbit failures which may result in reduced
revenues and profits and other financial consequences.
   It may be difficult to obtain full insurance coverage for satellites that have, or are part of a
family of satellites that has, experienced problems in the past; moreover, not all
satellite-related losses will be covered by insurance.
   27




---



##### Table of Contents



Telesat competes for market share, customers and orbital slots.
   Changes in the Canadian competitive environment could adversely affect Telesat.
   Telesat operates in a highly regulated industry and government regulations may adversely affect its
business.
   28




---



##### Table of Contents



Telesats ability to replace one of its satellites is subject to additional risk and cannot be
assured.
  III. Other Risks
 Third parties have significant rights with respect to our affiliates.
 1 3
 The loss of executive officers and our inability to retain other key personnel could materially
adversely affect our operations.
   29




---



##### Table of Contents



MHR may be viewed as our controlling stockholder and may have conflicts of interest with us in the
future.
  Changes in tax rates or policies or changes to our tax liabilities could affect operating results.
  The future use of tax attributes is limited.
  There is a thin trading market for our common stock.
   30




---



##### Table of Contents



The market for our stock could be adversely affected by future issuance of significant amounts of
our common stock.
   We are subject to the Foreign Corrupt Practices Act.
  We may incur costs to comply with or address liabilities under environmental regulations.
   31




---



##### Table of Contents



Accounting standards periodically change and the application of our accounting policies and methods
may require management to make estimates about matters that are uncertain.
  Litigation and Disputes
 We are involved in a number of ongoing lawsuits.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 Corporate
  Satellite Manufacturing
     32




---



##### Table of Contents



Satellite Services
    
 Item 3. Legal Proceedings
  
 Item 4. (Removed and Reserved)
  33




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 (a) Market Price and Dividend Information
    High
    
    
    LowYear ended December 31, 2010Quarter ended December 31, 2010
    
    $
    85.16
    
    
    $
    51.30Quarter ended September 30, 2010
    
    
    56.85
    
    
    
    41.53Quarter ended June 30, 2010
    
    
    45.45
    
    
    
    33.30Quarter ended March 31, 2010
    
    
    36.55
    
    
    
    26.35Year ended December 31, 2009Quarter ended December 31, 2009
    
    $
    34.89
    
    
    $
    24.74Quarter ended September 30, 2009
    
    
    29.06
    
    
    
    19.27Quarter ended June 30, 2009
    
    
    34.83
    
    
    
    19.75Quarter ended March 31, 2009
    
    
    22.90
    
    
    
    8.90
  (b) Approximate Number of Holders of Common Stock
   34




---



##### Table of Contents



(c) Dividends
  (d) Securities Authorized for Issuance under Equity Compensation Plans
  (e) Comparison of Cumulative Total Returns
  
 
 Item 6. Selected Financial Data
    35




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
(In thousands, except per share data)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Statement of operations data:Revenues:Satellite Manufacturing
    
    $
    1,158,985
    
    
    $
    993,400
    
    
    $
    869,398
    
    
    $
    761,363
    
    
    $
    636,632Satellite Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,091
    
    
    
    160,701Total Revenues
    
    
    1,158,985
    
    
    
    993,400
    
    
    
    869,398
    
    
    
    882,454
    
    
    
    797,333Operating income (loss)(1)
    
    
    80,608
    
    
    
    20,211
    
    
    
    (193,977
    )
    
    
    45,256
    
    
    
    29,818Income (loss) before income taxes and equity in net income
(losses) of affiliates(2)(3)
    
    
    93,094
    
    
    
    26,975
    
    
    
    (151,523
    )
    
    
    157,786
    
    
    
    30,117Income tax benefit (provision)(4)
    
    
    308,622
    
    
    
    (5,571
    )
    
    
    (45,744
    )
    
    
    (83,457
    )
    
    
    (20,880
    )Income (loss) before equity in net income (losses) of affiliates
    
    
    401,716
    
    
    
    21,404
    
    
    
    (197,267
    )
    
    
    74,329
    
    
    
    9,237Equity in net income (losses) of affiliates(5)
    
    
    85,625
    
    
    
    210,298
    
    
    
    (495,649
    )
    
    
    (21,430
    )
    
    
    (7,163
    )Net income (loss)
    
    
    487,341
    
    
    
    231,702
    
    
    
    (692,916
    )
    
    
    52,899
    
    
    
    2,074Net (income) loss attributable to noncontrolling interest
    
    
    (495
    )
    
    
    
    
    
    
    
    
    
    
    (23,240
    )
    
    
    (24,794
    )Net income (loss) attributable to Loral
    
    
    486,846
    
    
    
    231,702
    
    
    
    (692,916
    )
    
    
    29,659
    
    
    
    (22,720
    )Preferred dividends
    
    
    
    
    
    
    
    
    
    
    (24,067
    )
    
    
    (19,379
    )
    
    
    Beneficial conversion feature related to the issuance of Loral
Series A-1 Preferred Stock(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,685
    )
    
    
    Net income (loss) applicable to Lorals common shareholders
    
    $
    486,846
    
    
    $
    231,702
    
    
    $
    (716,983
    )
    
    $
    (15,405
    )
    
    $
    (22,720
    )Basic and diluted income (loss) per share:Basic income (loss) per share
    
    $
    16.18
    
    
    $
    7.79
    
    
    $
    (35.13
    )
    
    $
    (0.77
    )
    
    $
    (1.14
    )Diluted income (loss) per share
    
    $
    15.63
    
    
    $
    7.73
    
    
    $
    (35.13
    )
    
    $
    (0.77
    )
    
    $
    (1.14
    )Cash flow data:Provided by (used in) operating activities
    
    $
    41,949
    
    
    $
    154,562
    
    
    $
    (202,210
    )
    
    $
    27,123
    
    
    $
    88,002(Used in) provided by investing activities
    
    
    (54,057
    )
    
    
    (48,750
    )
    
    
    (47,308
    )
    
    
    61,519
    
    
    
    (175,978
    )Provided by (used in) financing activities
    
    
    9,704
    
    
    
    (55,155
    )
    
    
    52,372
    
    
    
    39,510
    
    
    
    (1,278
    )
 December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance sheet data:Cash and cash equivalents
    
    $
    165,801
    
    
    $
    168,205
    
    
    $
    117,548
    
    
    $
    314,694
    
    
    $
    186,542Short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,588Total assets
    
    
    1,754,909
    
    
    
    1,253,452
    
    
    
    995,867
    
    
    
    1,702,939
    
    
    
    1,729,911Debt, including current portion
    
    
    
    
    
    
    
    
    
    
    55,000
    
    
    
    
    
    
    
    128,084Non-current liabilities
    
    
    414,013
    
    
    
    380,143
    
    
    
    381,836
    
    
    
    289,602
    
    
    
    321,015EquityLoral shareholders equity
    
    $
    900,320
    
    
    $
    431,991
    
    
    $
    209,657
    
    
    $
    973,558
    
    
    $
    647,002Non-controlling interest
    
    
    629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214,256Total equity
    
    $
    900,949
    
    
    $
    431,991
    
    
    $
    209,657
    
    
    $
    973,558
    
    
    $
    861,258
 (1)
    
    During 2008, we recorded a goodwill impairment charge of $187.9 million. In
connection with the Telesat transaction, which closed on October 31, 2007, we recognized a
gain of $104.9 million in 2007 on the contribution of substantially all of the assets and
related liabilities of Loral Skynet to Telesat. See Note 6 to the Loral consolidated financial
statements.(2)
    
    In connection with the Telesat transaction during 2007, we recognized a gain on
foreign exchange contracts of $89.4 million.(3)
    
    During 2008, we recorded income of $58.3 million related to a gain on litigation
recovery from Rainbow DBS and a loss of $19.5 million related to the award of attorneys fees
and expenses to the plaintiffs for shareholder litigation concluded during 2008.  36




---



##### Table of Contents



(4)
    
    During the fourth quarter of 2010, we determined, based on all available evidence,
that a full valuation allowance was no longer required on our deferred tax assets and,
therefore, $335.3 million of the valuation allowance was reversed as an income tax benefit
(see Note 9 to the Loral consolidated financial statements).(5)
    
    Beginning October 31, 2007, our principal affiliate is Telesat. Loral also has
investments in XTAR and joint ventures providing Globalstar service, which are accounted for
under the equity method. On December 21, 2007 Loral agreed to sell its interest in Globalstar
do Brasil S.A. which resulted in Loral recording a charge of $11.3 million in 2007.(6)
    
    As of December 23, 2008, in accordance with a court ordered restated certificate
of incorporation, the previously issued Loral Series-1 Preferred stock was cancelled. As the
fair value of Lorals common stock from January 1 to December 23, 2008 was less than the
conversion price ($30.1504), we did not record any beneficial conversion feature during 2008
(see Note 10 to the Loral consolidated financial statements). 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with our consolidated
financial statements (the financial statements) included in Item 15 of this Annual Report on Form
10-K
  1 3
  Disclosure Regarding Forward-Looking Statements
 Except for the historical information contained in the following discussion and analysis, the
matters discussed below are not historical facts, but are forward-looking statements as that term
is defined in the Private Securities Litigation Reform Act of 1995. In addition, we or our
representatives have made and may continue to make forward-looking statements, orally or in
writing, in other contexts. These forward-looking statements can be identified by the use of words
such as believes, expects, plans, may, will, would, could, should, anticipates,
estimates, project, intend, or outlook or other variations of these words. These
statements, including without limitation those relating to Telesat, are not guarantees of future
performance and involve risks and uncertainties that are difficult to predict or quantify. Actual
events or results may differ materially as a result of a wide variety of factors and conditions,
many of which are beyond our control. For a detailed discussion of these and other factors and
conditions, please refer to the Commitments and Contingencies section below and to our other
periodic reports filed with the Securities and Exchange Commission (SEC). We operate in an
industry sector in which the value of securities may be volatile and may be influenced by economic
and other factors beyond our control. We undertake no obligation to update any forward-looking
statements.
 Overview
 Businesses
   37




---



##### Table of Contents



Satellite Manufacturing
        38




---



##### Table of Contents



Satellite Services
 1 3
          39




---



##### Table of Contents



General
    o
  40




---



##### Table of Contents



Consolidated Operating Results
        41




---



##### Table of Contents



Revenues:
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Satellite Manufacturing
    
    $
    1,165.1
    
    
    $
    1,008.7
    
    
    $
    881.4Satellite Services
    
    
    797.3
    
    
    
    691.6
    
    
    
    685.2Segment revenues
    
    
    1,962.4
    
    
    
    1,700.3
    
    
    
    1,566.6Eliminations(1)
    
    
    (6.1
    )
    
    
    (15.3
    )
    
    
    (12.0
    )Affiliate eliminations(2)
    
    
    (797.3
    )
    
    
    (691.6
    )
    
    
    (685.2
    )Revenues as reported(3)
    
    $
    1,159.0
    
    
    $
    993.4
    
    
    $
    869.4
        42




---



##### Table of Contents



Adjusted EBITDA:
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Satellite Manufacturing
    
    $
    143.1
    
    
    $
    90.6
    
    
    $
    45.1Satellite Services
    
    
    606.7
    
    
    
    488.1
    
    
    
    436.5Corporate expenses
    
    
    (17.9
    )
    
    
    (21.4
    )
    
    
    (14.9
    )Segment Adjusted EBITDA before eliminations
    
    
    731.9
    
    
    
    557.3
    
    
    
    466.7Eliminations(1)
    
    
    (1.5
    )
    
    
    (1.7
    )
    
    
    (1.6
    )Affiliate eliminations(2)
    
    
    (606.7
    )
    
    
    (488.1
    )
    
    
    (427.2
    )Adjusted EBITDA
    
    $
    123.7
    
    
    $
    67.5
    
    
    $
    37.9
        43




---



##### Table of Contents



Reconciliation of Adjusted EBITDA to Net Income (Loss):
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Adjusted EBITDA
    
    $
    123.7
    
    
    $
    67.5
    
    
    $
    37.9Depreciation, amortization and stock-based compensation(4)
    
    
    (36.3
    )
    
    
    (47.3
    )
    
    
    (44.0
    )Directors indemnification expense (5)
    
    
    (6.8
    )
    
    
    
    
    
    
    Impairment of goodwill(6)
    
    
    
    
    
    
    
    
    
    
    (187.9
    )Operating income (loss)
    
    
    80.6
    
    
    
    20.2
    
    
    
    (194.0
    )Interest and investment income
    
    
    13.5
    
    
    
    8.3
    
    
    
    11.9Interest expense
    
    
    (3.1
    )
    
    
    (1.4
    )
    
    
    (2.3
    )Gain on litigation, net
    
    
    5.0
    
    
    
    
    
    
    
    38.8Impairment of available for sale securities
    
    
    
    
    
    
    
    
    
    
    (5.8
    )Other expense
    
    
    (2.9
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Income tax benefit (provision) (7)
    
    
    308.6
    
    
    
    (5.6
    )
    
    
    (45.7
    )Equity in net income (losses) of affiliates
    
    
    85.6
    
    
    
    210.3
    
    
    
    (495.7
    )Net income (loss)
    
    $
    487.3
    
    
    $
    231.7
    
    
    $
    (692.9
    )
 (1)
    
    Represents the elimination of intercompany sales and intercompany Adjusted EBITDA,
primarily for satellites under construction by SS/L for Loral and its wholly owned
subsidiaries.(2)
    
    Represents the elimination of amounts attributed to Telesat whose results are
reported in our consolidated statements of operations as equity in net income (losses) of
affiliates.(3)
    
    Includes revenues from affiliates of $137.2 million, $92.1 million and $84.0 million
for the years ended December 31, 2010, 2009 and 2008, respectively.(4)
    
    Includes non-cash stock-based compensation of $2.5 million, $7.5 million and $7.6
million for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 10 to the
financial statements).(5)
    
    Represents indemnification expense, net of insurance recovery, in connection with
defense costs incurred by MHR-affiliated directors in the Delaware shareholder derivative case
(see Note 14 to the financial statements).(6)
    
    During the fourth quarter of 2008, we determined that the implied fair value of SS/L
goodwill had dropped below its carrying value, and we recorded this impairment charge.(7)
    
    During the fourth quarter of 2010, we determined, based on all available evidence,
that a full valuation allowance was no longer required on our deferred tax assets and,
therefore, $335.3 million of the valuation allowance was reversed as an income tax benefit
(see Note 9 to the financial statements). 
  44




---



##### Table of Contents



2010 Compared with 2009 and 2009 Compared with 2008
  Revenue from Satellite Manufacturing
 % Increase(Decrease)Year Ended
    
    
    2010
    
    
    2009December 31,
    
    
    vs.
    
    
    vs.2010
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Revenue from Satellite Manufacturing
    
    $
    1,165
    
    
    $
    1,008
    
    
    $
    881
    
    
    
    16
    %
    
    
    14
    %Eliminations
    
    
    (6
    )
    
    
    (15
    )
    
    
    (12
    )
    
    
    (60
    %)
    
    
    25
    %Revenue from Satellite
Manufacturing as reported
    
    $
    1,159
    
    
    $
    993
    
    
    $
    869
    
    
    
    17
    %
    
    
    14
    %
   Cost of Satellite Manufacturing
 % Increase(Decrease)Year Ended
    
    
    2010
    
    
    2009December 31,
    
    
    vs.
    
    
    vs.2010
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Cost of Satellite Manufacturing
    
    $
    987
    
    
    $
    880
    
    
    $
    788
    
    
    
    12
    %
    
    
    12
    %Cost of Satellite
Manufacturing as a % of
Satellite Manufacturing
revenues
    
    
    85
    %
    
    
    89
    %
    
    
    91
    %
   45




---



##### Table of Contents



Selling, General and Administrative Expenses
 % Increase(Decrease)Year Ended
    
    
    2010
    
    
    2009December 31,
    
    
    vs.
    
    
    vs.2010
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Selling, general
and
administrative
expenses
    
    
    85
    
    
    
    93
    
    
    
    97
    
    
    
    (9
    %)
    
    
    (4
    %)% of revenues
    
    
    7
    %
    
    
    9
    %
    
    
    11
    %
   Gain on Recovery from Customer Bankruptcy
  Directors Indemnification Expense
  Impairment of Goodwill
   46




---



##### Table of Contents



Interest and Investment Income
 Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(In millions)Interest and investment income
    
    $
    14
    
    
    $
    8
    
    
    $
    12
   Interest Expense
 Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(In millions)Interest cost before capitalized interest
    
    $
    3
    
    
    $
    1
    
    
    $
    3Capitalized interest
    
    
    
    
    
    
    
    
    
    
    (1
    )Interest expense
    
    $
    3
    
    
    $
    1
    
    
    $
    2
   Gain on Litigation, Net
   Impairment of Available for Sale Securities
  Other Expense
   47




---



##### Table of Contents



Income Tax Provision
     Taxation
 Equity in Net Income (Losses) of Affiliates
 Year EndedDecember 31,2010
    
    
    2009
    
    
    2008(In millions)Telesat
    
    $
    92.8
    
    
    $
    213.2
    
    
    $
    (479.6
    )XTAR
    
    
    (7.0
    )
    
    
    (2.7
    )
    
    
    (16.1
    )Other
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    $
    85.6
    
    
    $
    210.3
    
    
    $
    (495.7
    )
   48




---



##### Table of Contents



Year Ended December 31
    
    
    Year Ended December 312010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    821.4
    
    
    
    788.7
    
    
    
    731.1
    
    
    
    797.3
    
    
    
    691.6
    
    
    
    685.2Operating expenses
    
    
    (196.5
    )
    
    
    (232.0
    )
    
    
    (275.3
    )
    
    
    (190.7
    )
    
    
    (203.4
    )
    
    
    (258.0
    )Gain on
disposition of long-lived assets
    
    
    3.9
    
    
    
    33.4
    
    
    
    
    
    
    
    3.7
    
    
    
    29.3
    
    
    
    Impairment of long-lived and
intangible assets
    
    
    
    
    
    
    
    
    
    
    (485.4
    )
    
    
    
    
    
    
    
    
    
    
    (454.9
    )Depreciation, amortization and
stock-based compensation
    
    
    (256.8
    )
    
    
    (262.5
    )
    
    
    (241.1
    )
    
    
    (249.3
    )
    
    
    (230.2
    )
    
    
    (226.0
    )Operating income (loss)
    
    
    371.9
    
    
    
    327.6
    
    
    
    (270.7
    )
    
    
    361.0
    
    
    
    287.3
    
    
    
    (253.7
    )Interest expense
    
    
    (241.6
    )
    
    
    (260.0
    )
    
    
    (246.5
    )
    
    
    (234.5
    )
    
    
    (228.0
    )
    
    
    (231.1
    )Foreign exchange gains (losses)
    
    
    164.0
    
    
    
    500.9
    
    
    
    (698.0
    )
    
    
    159.2
    
    
    
    439.2
    
    
    
    (654.2
    )(Losses) gains on financial
instruments
    
    
    (79.2
    )
    
    
    (169.9
    )
    
    
    271.8
    
    
    
    (76.9
    )
    
    
    (149.0
    )
    
    
    254.7Other income (expense)
    
    
    0.6
    
    
    
    (0.9
    )
    
    
    (3.9
    )
    
    
    0.6
    
    
    
    (0.7
    )
    
    
    (3.6
    )Income tax (provision) benefit
    
    
    (42.4
    )
    
    
    (2.5
    )
    
    
    149.2
    
    
    
    (41.2
    )
    
    
    (2.2
    )
    
    
    139.9Net income (loss)
    
    
    173.3
    
    
    
    395.2
    
    
    
    (798.1
    )
    
    
    168.2
    
    
    
    346.6
    
    
    
    (748.0
    )Average exchange rate for
translating Canadian dollars
to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0302
    
    
    
    1.1405
    
    
    
    1.0670
 As of December 31,
    
    
    As of December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Balance Sheet Data:Current assets
    
    
    290.8
    
    
    
    251.4
    
    
    
    291.4
    
    
    
    238.7Total assets
    
    
    5,298.8
    
    
    
    5,260.4
    
    
    
    5,309.4
    
    
    
    4,994.7Current liabilities
    
    
    293.9
    
    
    
    206.3
    
    
    
    294.5
    
    
    
    195.9Long-term debt, including current portion
    
    
    2,923.0
    
    
    
    3,110.4
    
    
    
    2,928.9
    
    
    
    2,953.3Total liabilities
    
    
    4,137.1
    
    
    
    4,257.0
    
    
    
    4,145.3
    
    
    
    4,041.9Redeemable preferred stock
    
    
    141.4
    
    
    
    141.4
    
    
    
    141.7
    
    
    
    134.3Shareholders equity
    
    
    1,020.4
    
    
    
    862.0
    
    
    
    1,022.4
    
    
    
    818.5Period end exchange rate for translating
Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    0.9980
    
    
    
    1.0532
     49




---



##### Table of Contents



Backlog
  2010
    
    
    2009Satellite Manufacturing
    
    $
    1,625
    
    
    $
    1,632Satellite Services
    
    
    5,477
    
    
    
    5,230Total backlog before eliminations
    
    
    7,102
    
    
    
    6,862Satellite Manufacturing eliminations
    
    
    (4
    )
    
    
    (9
    )Satellite Services eliminations
    
    
    (5,477
    )
    
    
    (5,230
    )Total backlog
    
    $
    1,621
    
    
    $
    1,623
    Critical Accounting Matters
  Revenue Recognition
    50




---



##### Table of Contents



Billed Receivables and Long-Term Receivables
  Inventories
  Fair Value Measurements
  Level 1:
 Level 2:
 Level 3:
  51




---



##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)AssetsCash equivalents: Money market funds
    
    $
    162,487
    
    
    $
    
    
    
    $
    Available-for-sale securities: Communications industry
    
    $
    1,427
    
    
    $
    
    
    
    $
    Derivatives: Foreign exchange contracts
    
    $
    
    
    
    $
    4,548
    
    
    $
    Non-qualified pension plan assets
    
    $
    2,039
    
    
    $
    
    
    
    $
    13LiabilitiesDerivatives: Foreign exchange contracts
    
    $
    
    
    
    $
    15,007
    
    
    $
    
  Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
  Taxation
    52




---



##### Table of Contents



Pension and other employee benefits
      Stock-Based Compensation
   53




---



##### Table of Contents



Goodwill and Other Intangible Assets
  Contingencies
   54




---



##### Table of Contents



Accounting Standards Issued and Not Yet Implemented
  Liquidity and Capital Resources
 Loral
     Cash and Available Credit
    55




---



##### Table of Contents



Cash Management
   Orbital Receivables
   Liquidity
     56




---



##### Table of Contents



Risks to Cash Flow
    57




---



##### Table of Contents



58




---



##### Table of Contents



Telesat
 Cash and Available Credit
  Liquidity
   59




---



##### Table of Contents



Debt
  December 31,
    
    
    December 31,Maturity
    
    Currency
    
    
    2010
    
    
    2009(In CAD millions)Senior Secured Credit Facilities:Revolving facility
    
    October 31, 2012
    
    CAD or USD equivalent
    
    
    
    
    
    
    Canadian term loan facility
    
    October 31, 2012
    
    CAD
    
    
    170
    
    
    
    185U.S. term loan facility
    
    October 31, 2014
    
    USD
    
    
    1,699
    
    
    
    1,811U.S. term loan II facility
    
    October 31, 2014
    
    USD
    
    
    146
    
    
    
    155Senior notes
    
    November 1, 2015
    
    USD
    
    
    691
    
    
    
    730Senior subordinated notes
    
    November 1, 2017
    
    USD
    
    
    217
    
    
    
    229CAD
    
    
    2,923
    
    
    
    3,110Less: deferred financing costs and repayment options
    
    
    
    
    
    
    (54
    )
    
    
    (65
    )2,869
    
    
    
    3,045Current portion
    
    
    
    CAD
    
    
    (97
    )
    
    
    (23
    )Long term portion
    
    
    
    CAD
    
    
    2,772
    
    
    
    3,022
 1 4
   Interest Expense
   60




---



##### Table of Contents



Derivatives
    Interest rate risk
  Capital Expenditures
  XTAR
    61




---



##### Table of Contents



Contractual Obligations and Other Commercial Commitments
  Contractual Obligations:
 Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsOperating leases(1)
    
    $
    46,504
    
    
    $
    11,435
    
    
    $
    15,838
    
    
    $
    10,606
    
    
    $
    8,625Unconditional purchase obligations(2)
    
    
    454,140
    
    
    
    292,105
    
    
    
    162,035
    
    
    
    
    
    
    
    Other long-term obligations(3)
    
    
    29,884
    
    
    
    19,906
    
    
    
    1,044
    
    
    
    1,126
    
    
    
    7,808Revolving credit agreement(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations(5)
    
    $
    530,528
    
    
    $
    323,446
    
    
    $
    178,917
    
    
    $
    11,732
    
    
    $
    16,433
 Other Commercial Commitments:
 Total
    
    
    Amount of Commitment Expiration Per PeriodAmounts
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More thanCommitted
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsStandby letters of credit
    
    $
    4,911
    
    
    $
    4,911
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (1)
    
    Represents future minimum payments under operating leases with initial or remaining
terms of one year or more.(2)
    
    SS/L has entered into various purchase commitments with suppliers due to the long
lead times required to produce purchased parts.(3)
    
    Represents our commitment in connection with an agreement entered into between Loral
and ViaSat for the purchase by Loral of a portion of the ViaSat-1 satellite which is being
constructed by SS/L for ViaSat as well as commitments for related gateway infrastructure and
equipment. In March 2011, Telesat agreed to assume and Loral agreed to assign its commitments
related to this project to Telesat in March 2011 (see Note 16 to the financial statements).(4)
    
    On December 20, 2010, SS/L amended and restated its revolving credit agreement with
several banks and other financial institutions. The credit agreement provides for a $150
million senior secured revolving credit facility. The credit agreement matures on January 24,
2014 (see Note 8 to the financial statements). No amounts were outstanding under the credit
agreement at December 31, 2010.(5)
    
    Does not include our
liabilities for uncertain tax positions of $122.8 million.
Because the timing of future cash outflows associated with our liabilities for uncertain tax
positions is highly uncertain, we are unable to make reasonably reliable estimates of the
period of cash settlement with the respective taxing authorities (see Note 9 to the financial
statements). Does not include obligations for pensions and other postretirement benefits, for
which we expect to make employer contributions of $39.1 million in 2011. We also expect to
make significant employer contributions to our plans in future years. Net Cash Provided by (Used in) Operating Activities
     62




---



##### Table of Contents



Net Cash (Used in) Provided By Investing Activities
    Net Cash Provided by (Used in) Financing Activities
    Off-Balance Sheet Arrangements
  Other
   63




---



##### Table of Contents



Affiliate Matters
   Year Ended December 31,2010
    
    
    2009
    
    
    2008(In millions)Revenues
    
    $
    137.2
    
    
    $
    92.1
    
    
    $
    84.0Elimination of Lorals proportionate share of profits
relating to affiliate transactions
    
    
    (14.7
    )
    
    
    (10.1
    )
    
    
    (5.0
    )Profits relating to affiliate transactions not eliminated
    
    
    8.3
    
    
    
    5.7
    
    
    
    2.8
 Commitments and Contingencies
  
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency
 Loral
   Foreign Currency
    
    
    U.S. $(In millions)Future revenues  Japanese yen
    
    ¥
    201.0
    
    
    $
    2.5Future expenditures  Japanese yen
    
    ¥
    4,253.8
    
    
    $
    52.2Future revenues  euros
    
    
    12.6
    
    
    $
    16.7Future expenditures  euros
    
    
    7.5
    
    
    $
    9.9
 Derivatives
   64




---



##### Table of Contents



To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In millions)2011
    
    
    111.4
    
    
    $
    142.3
    
    
    $
    147.32012
    
    
    27.0
    
    
    
    32.6
    
    
    
    35.52013
    
    
    27.0
    
    
    
    32.9
    
    
    
    35.5
    165.4
    
    
    $
    207.8
    
    
    $
    218.3
   Telesat
  Interest
   
 Item 8. Financial Statements and Supplementary Data
   65




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
 Internal Control  Integrated
Framework
   66




---



##### Table of Contents



Changes in Internal Controls Over Financial Reporting
  Inherent Limitations on Effectiveness of Controls
   67




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework
    Internal
Control  Integrated Framework
  DELOITTE & TOUCHE LLP
 
  68




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
 Executive Officers of the Registrant
  Name
    
    Age
    
    PositionMichael B. Targoff
    
    
    66
    
    
    Chief Executive Officer since March 1, 2006,
President since January 2008 and Vice Chairman of
the Board of Directors since November 2005. Prior
to that, founder of Michael B. Targoff & Co.Avi Katz
    
    
    52
    
    
    Senior Vice President, General Counsel and
Secretary since January 2008. Vice President,
General Counsel and Secretary from November 2005
to January 2008.Richard P. Mastoloni
    
    
    46
    
    
    Senior Vice President of Finance and Treasurer
since January 2008. Vice President and Treasurer
from November 2005 to January 2008.Harvey B. Rein
    
    
    57
    
    
    Senior Vice President and Chief Financial Officer
since January 2008. Vice President and Controller
from November 2005 to January 2008.John Capogrossi
    
    
    57
    
    
    Vice President and Controller since January 2008.
Executive Director, Financial Planning and
Analysis, from October 2006 to January 2008.
Assistant Controller from November 2005 to
October 2006.
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions
   69




---



##### Table of Contents



Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
  Index to Financial Statements and Financial Statement ScheduleLoral Space & Communications Inc. and Subsidiaries:Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Equity for the years ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7(a) 2. Financial Statement ScheduleSchedule II
    
    
    F-56Separate Financial Statements of Subsidiaries not consolidated Pursuant to Rule 3-09 of Regulation S-XTelesat Holdings Inc. and Subsidiaries:Report of Independent Registered Chartered Accountants
    
    
    F-57Consolidated Statements of Earnings (Loss) for the years ended December 31, 2010, 2009 and 2008
    
    
    F-58Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2010, 2009
and 2008
    
    
    F-59Consolidated Statements of Shareholders Equity for the year ended December 31, 2010 with comparative
figures for the periods ended December 31, 2009, December 31, 2008
    
    
    F-60Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-61Consolidated Statements of Cash Flow for the years ended December 31, 2010, 2009 and 2008
    
    
    F-62Notes to the 2010 Consolidated Financial Statements
    
    
    F-63
  70




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber

    
    Description2.1
    
    
    Debtors Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code dated June 3, 2005(1)2.2
    
    
    Modification to Debtors Fourth Amended Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code dated August 1, 2005(2)2.3
    
    
    Letter Agreement among Loral Space & Communications Inc., Loral Skynet Corporation,
Public Sector Pension Investment Board, 4363205 Canada Inc. and 4363213 Canada Inc.
dated December 14, 2006(5)2.4
    
    
    Share Purchase Agreement among 4363213 Canada Inc., BCE Inc. and Telesat dated
December 16, 2006(5)2.5
    
    
    Letter Agreement among Loral Space & Communications Inc., Public Sector Pension
Investment Board and BCE Inc. dated December 16, 2006(5)2.6
    
    
    Asset Transfer Agreement, dated as of August 7, 2007, by and among 4363205 Canada
Inc., Loral Skynet Corporation and Loral Space & Communications Inc.(7)2.7
    
    
    Amendment No. 1 to Asset Transfer Agreement, dated as of September 24, 2007, by and
among 4363205 Canada Inc., Loral Skynet Corporation and Loral Space &
Communications Inc.(8)2.8
    
    
    Asset Purchase Agreement, dated as of August 7, 2007, by and among Loral Skynet
Corporation, Skynet Satellite Corporation and Loral Space & Communications Inc.(7)3.1
    
    
    Restated Certificate of Incorporation of Loral Space & Communications Inc. dated
May 19, 2009(17)3.2
    
    
    Amended and Restated Bylaws of Loral Space & Communications Inc. dated December 23,
2008(13)3.3
    
    
    Amendment No. 1 to Bylaws of Loral Space & Communications dated January 12, 2010(21)10.1
    
    
    Amended and Restated Credit Agreement, dated as of December 20, 2010, by and among
Space Systems/Loral, Inc., as borrower, the several banks and other financial
institutions or entities from time to time party thereto, Credit Suisse Securities
(USA) LLC, as documentation agent, ING Bank N.V., as syndication agent, J.P. Morgan
Securities LLC and Credit Suisse Securities (USA) LLC, as joint lead arrangers and
joint bookrunners, and JPMorgan Chase Bank, N.A., as administrative agent(25)10.2
    
    
    Ancillary Agreement, dated as of August 7, 2007, by and among Loral Space &
Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment
Board, 4363205 Canada Inc. and 4363230 Canada Inc.(7)10.3
    
    
    Adjustment Agreement, dated as of October 29, 2007, between Telesat Interco Inc.
(formerly 4363213 Canada Inc.), BCE Inc. and Telesat(9)10.4
    
    
    Omnibus Agreement, dated as of October 30, 2007, by and among Loral Space &
Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment
Board, Red Isle Private Investments Inc. and Telesat Holdings Inc. (formerly
4363205 Canada Inc.)(9)
  71




---



##### Table of Contents



ExhibitNumber

    
    Description10.5
    
    
    Shareholders Agreement, dated as of October 31, 2007, between Public Sector Pension
Investment Board, Red Isle Private Investments Inc., Loral Space & Communications
Inc., Loral Space & Communications Holdings Corporation, Loral Holdings
Corporation, Loral Skynet Corporation, John P. Cashman, Colin D. Watson, Telesat
Holdings Inc. (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly
4363213 Canada Inc.), Telesat and MHR Fund Management LLC(9)10.6
    
    
    Consulting Services Agreement, dated as of October 31, 2007, by and between Loral
Space & Communications Inc. and Telesat(9)10.7
    
    
    Indemnity Agreement, dated as of October 31, 2007, by and among Loral Space &
Communications Inc., Telesat, Telesat Holdings Inc., Telesat Interco Inc. and Henry
Gerard (Hank) Intven(9)10.8
    
    
    Acknowledgement and Indemnity Agreement, dated as of October 31, 2007, between
Loral Space & Communications Inc., Telesat, Telesat Holdings Inc. (formerly 4363205
Canada Inc.), Telesat Interco Inc. (formerly 4363213 Canada Inc.) and McCarthy
Tétrault LLP(9)10.9
    
    
    Amended and Restated Registration Rights Agreement dated December 23, 2008 by and
among Loral Space & Communications Inc. and the Persons Listed on the Signature
Pages Thereof(13)10.10
    
    
    Letter Agreement, dated as of June 30, 2009, by and among Loral Space &
Communications Inc, MHR Capital Partners Master Account LP, MHR Capital Partners
(100) LP, MHR Institutional Partners LP, MHRA LP, MHRM LP, MHR Institutional
Partners II LP, MHR Institutional Partners IIA LP and MHR Institutional Partners
III LP.(18)10.11
    
    
    Letter Agreement dated April 30, 2010 relating to indemnification among the Special
Committee of the Board of Directors of Loral Space & Communications Inc. and Mark
Rachesky, Hal Goldstein, Sai Devahaktuni, MHR Fund Management LLC and certain
entities affiliated with MHR Fund Management LLC (23)10.12
    
    
    Settlement Agreement dated December 15, 2010 between XL Specialty Insurance
Company, Arch Insurance Company, U.S. Specialty Insurance Company, Loral Space &
Communications Inc., Mark H. Rachesky, Hal Goldstein and Sai S. Devabhaktuni, and
(for purposes of paragraphs 6 and 7 and 9 through 20 only) MHR Fund Management LLC
and certain of its affiliated entities(24)10.13
    
    
    Partnership Interest Purchase Agreement dated December 21, 2007 by and among GSSI,
LLC, Globalstar, Inc., Loral/DASA Globalstar, LP, Globalstar do Brasil, SA.,
Loral/DASA do Brasil Holdings Ltda., Loral Holdings LLC, Global DASA LLC, LGP
(Bermuda) Ltd., Mercedes-Benz do Brasil Ltda. (f/k/a DaimlerChrysler do Brasil
Ltda.) and Loral Space & Communications Inc.(10)10.14
    
    
    Beam Sharing Agreement, dated as of January 11, 2008, by and between Loral Space &
Communications Inc. and ViaSat Inc.(11)10.15
    
    
    Satellite Capacity and Gateway Service Agreement dated as of December 31, 2009
between Loral Space & Communications Inc. and Barrett Xplore Inc.(20)10.16
    
    
    Gateway Facilities Assignment and Assumption Agreement dated as of March 1, 2011 by
and between Telesat Canada, Loral Space & Communications Inc. and Loral Canadian
Gateway Corporation(26)10.17
    
    
    Space Segment Assignment and Assumption Agreement dated as of March 1, 2011 by and
between Telesat IOM Limited and Loral Space & Communications Inc.(26)10.18
    
    
    Barrett Assignment Agreement dated as of March 1, 2011 by and between Telesat IOM
Limited and Loral Space & Communications Inc.(26)
  72




---



##### Table of Contents



ExhibitNumber

    
    Description10.19
    
    
    Employment Agreement between Loral Space & Communications Inc. and Michael B.
Targoff dated as of March 28, 2006 and amended and restated as of December 17,
2008(15) 10.20
    
    
    Form of Officers and Directors Indemnification Agreement between Loral Space &
Communications Inc. and Loral Executives(3) 10.21
    
    
    Loral Space Management Incentive Bonus Program (Adopted as of December 17,
2008)(13) 10.22
    
    
    Loral Space & Communications Inc. 2005 Stock Incentive Plan (Amended and Restated
as of April 3, 2009)(16) 10.23
    
    
    Form of Amended and Restated Non-Qualified Stock Option Agreement under Loral Space
& Communications Inc. 2005 Stock Incentive Plan for Senior Management dated as of
December 21, 2005 and amended and restated as of November 10, 2008(15) 10.24
    
    
    Non-Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005
Stock Incentive Plan between Loral Space & Communications Inc. and Michael B.
Targoff dated March 28, 2006(4) 10.25
    
    
    Restricted Stock Unit Agreement dated March 5, 2009 between Loral Space &
Communications Inc. and Michael B. Targoff(14) 10.26
    
    
    Restricted Stock Unit Agreement dated March 5, 2010 between Loral Space &
Communications Inc. and Michael B. Targoff(22) 10.27
    
    
    Restricted Stock Unit Agreement dated March 5, 2011 between Loral Space &
Communications Inc. and Michael B. Targoff  10.28
    
    
    Option Agreement dated October 27, 2009, between Loral Space & Communications Inc.
and Michael B. Targoff(19) 10.29
    
    
    Form of Restricted Stock Unit Agreement dated October 27, 2009 between Loral Space
& Communications Inc. and Loral executives(19) 10.30
    
    
    Form of Phantom Stock Appreciation Rights Agreement relating to Space
Systems/Loral, Inc. dated October 27, 2009 between Loral Space & Communications
Inc. and Loral and SS/L executives(19) 10.31
    
    
    Form of Director 2006 Restricted Stock Agreement(6) 10.32
    
    
    Form of Director 2007 Restricted Stock Agreement(6) 10.33
    
    
    Form of Director 2008 Restricted Stock Agreement(15) 10.34
    
    
    Form of Director 2009 Restricted Stock Unit Agreement(22) 10.35
    
    
    Form of Director 2010 Restricted Stock Unit Agreement 10.36
    
    
    Form of Employee Restricted Stock Agreement(6) 10.37
    
    
    Amended and Restated Space Systems/Loral, Inc. Supplemental Executive Retirement
Plan (Amended and Restated as of December 17, 2008)(13) 10.38
    
    
    Loral Savings Supplemental Executive Retirement Plan (Amended and Restated as of
December 17, 2008)(13) 10.39
    
    
    Loral Space & Communications Inc. Severance Policy for Corporate Officers (Amended
and Restated as of December 17, 2008)(13) 14.1
    
    
    Code of Conduct, Revised as of November 1, 2010
  73




---



##### Table of Contents



ExhibitNumber

    
    Description21.1
    
    
    List of Subsidiaries of the Registrant23.1
    
    
    Consent of Deloitte & Touche LLP23.2
    
    
    Consent of Deloitte & Touche LLP31.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 200299.1
    
    
    Credit Agreement, dated as of October 31, 2007, among Telesat Interco Inc.
(formerly 4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205 Canada
Inc.), 4363230 Canada Inc., Telesat LLC, certain subsidiaries of Telesat Holdings
Inc., as guarantors, the lenders party thereto from time to time, Morgan Stanley
Senior Funding, Inc., as administrative agent, and Morgan Stanley & Co.
Incorporated, as collateral agent for the lenders, UBS Securities LLC, as
syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia, as issuing
bank, and Citibank, N.A., Canadian Branch or any of its lending affiliates, as
co-documentation agents, and Morgan Stanley & Co. Incorporated, UBS Securities LLC
and J.P. Morgan Securities Inc., as joint lead arrangers and joint book running
managers(9)99.2
    
    
    Articles of Incorporation of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(9)99.3
    
    
    By-Law No. 1 of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(9)99.4
    
    
    Letter Agreement dated March 28, 2008 among Loral Space & Communications Inc.,
Loral Skynet Corporation, Public Sector Pension Investment Board, Red Isle Private
Investment Inc. and Telesat Holdings Inc.(12)
 (1)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on June 8,
2005.(2)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on August 5,
2005.(3)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on November 23,
2005.(4)
    
    Incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2005 filed on March 28, 2006.(5)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on December 21,
2006.(6)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on May 29,
2007.(7)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on August 9,
2007.(8)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on September
27, 2007.(9)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on November 2,
2007.(10)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed December 21,
2007.(11)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on January 16,
2008.(12)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on March 31,
2008.(13)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on December 23,
2008.(14)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on March 10,
2009.(15)
    
    Incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 filed on March 16, 2009.  74




---



##### Table of Contents



(16)
    
    Incorporated by reference from the Companys Current Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009 filed on May 11, 2009.(17)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on May 20,
2009.(18)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on June 30,
2009.(19)
    
    Incorporated by reference from the Companys Current Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009 filed on November 9, 2009.(20)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on January 7,
2010.(21)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on January 15,
2010.(22)
    
    Incorporated by reference from the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2009 filed on March 15, 2010.(23)
    
    Incorporated by reference from the Companys Current Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010 filed on May 10, 2010.(24)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on December 17,
2010.(25)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on December 22,
2010.(26)
    
    Incorporated by reference from the Companys Current Report on Form 8-K filed on March 3,
2011.
    
    Filed herewith.
    
    Management compensation plan. 
  75




---



##### Table of Contents



SIGNATURES
  LORAL SPACE & COMMUNICATIONS INC.By:
    /s/  MICHAEL B. TARGOFFMichael B. TargoffVice Chairman of the Board,
Chief Executive Officer and President Dated: March 15, 2011   Signatures
    
    Title
    
    Date/s/ MICHAEL B. TARGOFF

Michael B. Targoff
    
    Vice Chairman of the Board, 
Chief Executive Officer and President
    
    March 15, 2011/s/ MARK H. RACHESKY, M.D.

Mark H. Rachesky, M.D.
    
    Director, Non-Executive 
Chairman of the Board
    
    March 15, 2011/s/ SAI S. DEVABHAKTUNI
    
    Director
    
    March 15, 2011Sai S. Devabhaktuni/s/ HAL GOLDSTEIN

Hal Goldstein
    
    Director
    
    March 15, 2011/s/ JOHN D. HARKEY, JR.

John D. Harkey, Jr.
    
    Director
    
    March 15, 2011/s/ ARTHUR L. SIMON

Arthur L. Simon
    
    Director
    
    March 15, 2011/s/ JOHN P. STENBIT

John P. Stenbit
    
    Director
    
    March 15, 2011/s/ HARVEY B. REIN

Harvey B. Rein
    
    Senior Vice President and CFO
(Principal Financial Officer)
    
    March 15, 2011/s/ JOHN CAPOGROSSI

John Capogrossi
    
    Vice President and Controller
(Principal Accounting Officer)
    
    March 15, 2011
  76




---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 Loral Space & Communications Inc. and SubsidiariesReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Equity for the years ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule II
    
    
    F-56Separate Financial Statements of Subsidiaries not consolidated Pursuant to Rule 3-09 of Regulation S-XTelesat Holdings Inc. and Subsidiaries:Report of Independent Registered Chartered Accountants
    
    
    F-57Consolidated Statements of Earnings (Loss) for the years ended December 31, 2010, 2009 and 2008
    
    
    F-58Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2010, 2009
and 2008
    
    
    F-59Consolidated Statements of Shareholders Equity for the year ended December 31, 2010 with comparative
figures for the periods ended December 31, 2009, December 31, 2008
    
    
    F-60Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-61Consolidated Statements of Cash Flow for the years ended December 31, 2010, 2009 and 2008
    
    
    F-62Notes to the 2010 Consolidated Financial Statements
    
    
    F-63
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control  Integrated Framework
 DELOITTE & TOUCHE LLP
 
  F-2




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    165,801
    
    
    $
    168,205Contracts-in-process
    
    
    186,896
    
    
    
    190,809Inventories
    
    
    71,233
    
    
    
    83,671Deferred tax assets
    
    
    66,220
    
    
    
    4,068Other current assets
    
    
    28,927
    
    
    
    20,275Total current assets
    
    
    519,077
    
    
    
    467,028Property, plant and equipment, net
    
    
    235,905
    
    
    
    207,996Long-term receivables
    
    
    319,426
    
    
    
    248,097Investments in affiliates
    
    
    362,556
    
    
    
    282,033Intangible assets, net
    
    
    11,110
    
    
    
    20,300Long-term deferred tax assets
    
    
    294,019
    
    
    
    8,647Other assets
    
    
    12,816
    
    
    
    19,351Total assets
    
    $
    1,754,909
    
    
    $
    1,253,452LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    95,952
    
    
    $
    86,809Accrued employment costs
    
    
    52,017
    
    
    
    44,341Customer advances and billings in excess of costs and profits
    
    
    261,603
    
    
    
    291,021Other current liabilities
    
    
    30,375
    
    
    
    19,147Total current liabilities
    
    
    439,947
    
    
    
    441,318Pension and other postretirement liabilities
    
    
    244,817
    
    
    
    226,190Long-term liabilities
    
    
    169,196
    
    
    
    153,953Total liabilities
    
    
    853,960
    
    
    
    821,461Commitments and contingenciesEquity:Loral shareholders equity:Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding
    
    
    
    
    
    
    Common Stock:Voting common stock, $.01 par value; 50,000,000 shares
authorized, 20,924,874 and 20,390,752 shares issued and
outstanding
    
    
    209
    
    
    
    204Non-voting common stock, $0.1 par value; 20,000,000
shares authorized, 9,505,673 issued and outstanding
    
    
    95
    
    
    
    95Paid-in capital
    
    
    1,028,263
    
    
    
    1,013,790Accumulated deficit
    
    
    (32,374
    )
    
    
    (519,220
    )Accumulated other comprehensive loss
    
    
    (95,873
    )
    
    
    (62,878
    )Total shareholders equity attributable to Loral
    
    
    900,320
    
    
    
    431,991Noncontrolling interest
    
    
    629
    
    
    
    Total equity
    
    
    900,949
    
    
    
    431,991Total liabilities and equity
    
    $
    1,754,909
    
    
    $
    1,253,452
   F-3




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues
    
    $
    1,158,985
    
    
    $
    993,400
    
    
    $
    869,398Cost of revenues
    
    
    986,697
    
    
    
    880,486
    
    
    
    787,758Selling, general and administrative expenses
    
    
    84,823
    
    
    
    92,703
    
    
    
    97,015Directors indemnification expense
    
    
    6,857
    
    
    
    
    
    
    
    Gain on recovery from customer bankruptcy
    
    
    
    
    
    
    
    
    
    
    (9,338
    )Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    187,940Operating income (loss)
    
    
    80,608
    
    
    
    20,211
    
    
    
    (193,977
    )Interest and investment income
    
    
    13,550
    
    
    
    8,307
    
    
    
    11,857Interest expense
    
    
    (3,143
    )
    
    
    (1,422
    )
    
    
    (2,268
    )Gain on litigation, net
    
    
    5,000
    
    
    
    
    
    
    
    38,823Impairment of available for sale securities
    
    
    
    
    
    
    
    
    
    
    (5,823
    )Other expense
    
    
    (2,921
    )
    
    
    (121
    )
    
    
    (135
    )Income (loss) before income taxes and equity in net income (losses)
of affiliates
    
    
    93,094
    
    
    
    26,975
    
    
    
    (151,523
    )Income tax benefit (provision)
    
    
    308,622
    
    
    
    (5,571
    )
    
    
    (45,744
    )Income (loss) before equity in net income (losses) of affiliates
    
    
    401,716
    
    
    
    21,404
    
    
    
    (197,267
    )Equity in net income (losses) of affiliates
    
    
    85,625
    
    
    
    210,298
    
    
    
    (495,649
    )Net income (loss)
    
    
    487,341
    
    
    
    231,702
    
    
    
    (692,916
    )Net income attributable to noncontrolling interest
    
    
    (495
    )
    
    
    
    
    
    
    Net income (loss) attributable to Loral
    
    
    486,846
    
    
    
    231,702
    
    
    
    (692,916
    )Preferred dividends
    
    
    
    
    
    
    
    
    
    
    (24,067
    )Net income (loss) attributable to Loral common shareholders
    
    $
    486,846
    
    
    $
    231,702
    
    
    $
    (716,983
    )Net income (loss) per share attributable to Loral common shareholders:Basic
    
    $
    16.18
    
    
    $
    7.79
    
    
    $
    (35.13
    )Diluted
    
    $
    15.63
    
    
    $
    7.73
    
    
    $
    (35.13
    )Weighted average common shares outstanding:Basic
    
    
    30,085
    
    
    
    29,761
    
    
    
    20,407Diluted
    
    
    30,887
    
    
    
    29,981
    
    
    
    20,407
   F-4




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONSOLIDATED STATEMENTS OF EQUITY
 (In thousands)
 Series A-1
    
    
    Series B-1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedConvertible
    
    
    Convertible
    
    
    Common Stock
    
    
    
    
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Voting
    
    
    Non-Voting
    
    
    
    
    
    
    
    
    
    
    ComprehensiveShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Paid-In
    
    
    Accumulated
    
    
    Income
    
    
    Noncontrolling
    
    
    TotalIssued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss)
    
    
    Interest
    
    
    EquityBalance, January 1, 2008
    
    
    142
    
    
    $
    41,873
    
    
    
    901
    
    
    $
    265,777
    
    
    
    20,293
    
    
    $
    203
    
    
    
    
    
    
    
    
    
    
    $
    663,127
    
    
    $
    (33,939
    )
    
    $
    36,517
    
    
    
    
    
    
    $
    973,558Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (692,916
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,247
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (776,163
    )Issuance of Series -1 preferred stock
as payment for dividend
    
    
    3
    
    
    
    822
    
    
    
    78
    
    
    
    23,427
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,249Shares surrendered to fund withholding
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,621Series-1 preferred dividends
    
    
    
    
    
    
    618
    
    
    
    
    
    
    
    4,179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,797Cancellation and conversion of
Series-1 preferred stock to non-voting
common stock
    
    
    (145
    )
    
    
    (43,313
    )
    
    
    (979
    )
    
    
    (293,383
    )
    
    
    
    
    
    
    
    
    
    
    9,506
    
    
    $
    95
    
    
    
    336,601Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,067
    )
    
    
    
    
    
    
    
    
    
    
    (24,067
    )Balance, December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,287
    
    
    
    203
    
    
    
    9,506
    
    
    
    95
    
    
    
    1,007,011
    
    
    
    (750,922
    )
    
    
    (46,730
    )
    
    
    
    
    
    
    209,657Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231,702Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,148
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,554Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,404Shares surrendered to fund withholding
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,559
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,559
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    6,935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,935Balance, December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,391
    
    
    
    204
    
    
    
    9,506
    
    
    
    95
    
    
    
    1,013,790
    
    
    
    (519,220
    )
    
    
    (62,878
    )
    
    
    
    
    
    
    431,991Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    486,846
    
    
    
    
    
    
    $
    495Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,995
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454,346Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    547
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    13,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,995Shares surrendered to fund withholding
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,477
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,477
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,548Contribution by noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    134Balance, December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,925
    
    
    $
    209
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,028,263
    
    
    $
    (32,374
    )
    
    $
    (95,873
    )
    
    $
    629
    
    
    $
    900,949
   F-5




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    487,341
    
    
    $
    231,702
    
    
    $
    (692,916
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Non-cash items
    
    
    (379,507
    )
    
    
    (164,785
    )
    
    
    762,210Changes in operating assets and liabilities:Contracts-in-process
    
    
    (43,845
    )
    
    
    (7,913
    )
    
    
    (216,354
    )Inventories
    
    
    14,409
    
    
    
    17,482
    
    
    
    (12,787
    )Long-term receivables
    
    
    (5,964
    )
    
    
    (5,565
    )
    
    
    13,947Other current assets and other assets
    
    
    (8,527
    )
    
    
    2,806
    
    
    
    3,393Accounts payable
    
    
    9,453
    
    
    
    (5,628
    )
    
    
    23,681Accrued expenses and other current liabilities
    
    
    10,976
    
    
    
    (9,611
    )
    
    
    (22,455
    )Customer advances
    
    
    (43,229
    )
    
    
    80,350
    
    
    
    (19,710
    )Income taxes payable
    
    
    4,076
    
    
    
    21,426
    
    
    
    (55,034
    )Pension and other postretirement liabilities
    
    
    (9,069
    )
    
    
    (4,158
    )
    
    
    (19,010
    )Long-term liabilities
    
    
    5,835
    
    
    
    (1,544
    )
    
    
    32,825Net cash provided by (used in) operating activities
    
    
    41,949
    
    
    
    154,562
    
    
    
    (202,210
    )Investing activities:Capital expenditures
    
    
    (54,057
    )
    
    
    (43,557
    )
    
    
    (64,559
    )Decrease in restricted cash in escrow
    
    
    
    
    
    
    10
    
    
    
    18,637Investments in and advances to affiliates
    
    
    
    
    
    
    (5,480
    )
    
    
    (1,048
    )Other
    
    
    
    
    
    
    277
    
    
    
    (338
    )Net cash used in investing activities
    
    
    (54,057
    )
    
    
    (48,750
    )
    
    
    (47,308
    )Financing activities:(Repayments) borrowings under SS/L revolving credit facility
    
    
    
    
    
    
    (55,000
    )
    
    
    55,000Debt issuance costs
    
    
    (2,226
    )
    
    
    
    
    
    
    (2,628
    )Proceeds from the exercise of stock options
    
    
    13,995
    
    
    
    1,404
    
    
    
    Excess tax benefit associated with exercise of stock options
    
    
    412
    
    
    
    
    
    
    
    Other
    
    
    (2,477
    )
    
    
    (1,559
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    9,704
    
    
    
    (55,155
    )
    
    
    52,372(Decrease) increase in cash and cash equivalents
    
    
    (2,404
    )
    
    
    50,657
    
    
    
    (197,146
    )Cash and cash equivalents  beginning of year
    
    
    168,205
    
    
    
    117,548
    
    
    
    314,694Cash and cash equivalents  end of year
    
    $
    165,801
    
    
    $
    168,205
    
    
    $
    117,548
   F-6




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Principal Business
   Satellite Manufacturing:
  Satellite Services:
  1 3
  2. Basis of Presentation
     F-7




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Use of Estimates in Preparation of Financial Statements
   Cash and Cash Equivalents, Restricted Cash and Available for Sale Securities
  Concentration of Credit Risk
  Billed Receivables and Long-Term Receivables
    F-8




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Inventories
  Fair Value Measurements
  Level 1:
 Level 2:
 Level 3:
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  December 31, 2010
    
    
    December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)
    
    
    (In thousands)AssetsCash equivalentsMoney market funds
    
    $
    162,487
    
    
    $
    
    
    
    $
    
    
    
    $
    166,760
    
    
    $
    
    
    
    $
    Available-for-sale securitiesCommunications industry
    
    $
    1,427
    
    
    $
    
    
    
    $
    
    
    
    $
    856
    
    
    $
    
    
    
    $
    DerivativesForeign exchange contracts
    
    $
    
    
    
    $
    4,548
    
    
    $
    
    
    
    $
    
    
    
    $
    3,873
    
    
    $
    Non-qualified pension plan assets
    
    $
    2,039
    
    
    $
    
    
    
    $
    13
    
    
    $
    2,791
    
    
    $
    
    
    
    $
    81LiabilitiesDerivativesForeign exchange contracts
    
    $
    
    
    
    $
    15,007
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
   F-9




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Property, Plant and Equipment
  YearsLand improvements
    
    20Buildings and building improvements
    
    10 to 45Leasehold improvements
    
    2 to 17Equipment, furniture and fixtures
    
    5 to 10
  Intangible Assets
  Valuation of Long-Lived Assets
  Contingencies
  Revenue Recognition
   F-10




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Research and Development
  Derivative Instruments
 Note 13).
 Stock-Based Compensation
    F-11




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Deferred Compensation
  Income Taxes
     F-12




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Additional Cash Flow Information
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Non-cash operating items:Equity in net (income) losses of affiliates
    
    $
    (85,625
    )
    
    $
    (210,298
    )
    
    $
    495,649Deferred taxes
    
    
    (325,223
    )
    
    
    (192
    )
    
    
    29,385Depreciation and amortization
    
    
    33,732
    
    
    
    39,796
    
    
    
    36,367Stock based compensation
    
    
    2,548
    
    
    
    7,514
    
    
    
    7,621Provisions for inventory obsolescence
    
    
    4,297
    
    
    
    1,042
    
    
    
    Warranty expense (reversals) accruals
    
    
    (1,437
    )
    
    
    (65
    )
    
    
    431Provisions for bad debts on billed receivables
    
    
    
    
    
    
    2,759
    
    
    
    700Loss on disposition of fixed assets
    
    
    84
    
    
    
    
    
    
    
    63Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    187,940Impairment of available for sale securities
    
    
    
    
    
    
    
    
    
    
    5,823Amortization of prior service credit and actuarial gains
    
    
    (1,029
    )
    
    
    412
    
    
    
    (3,200
    )Amortization of fair value adjustments related to orbital incentives
    
    
    (1,639
    )
    
    
    (664
    )
    
    
    (3,088
    )Gain on disposition of available for sale securities
    
    
    
    
    
    
    
    
    
    
    (162
    )Unrealized (gain) loss on nonqualified pension plan assets
    
    
    (295
    )
    
    
    (831
    )
    
    
    1,391Non-cash net interest
    
    
    (1,230
    )
    
    
    (1,582
    )
    
    
    (149
    )(Gain) loss on foreign currency transactions and contracts
    
    
    (3,690
    )
    
    
    (2,676
    )
    
    
    3,439Net non-cash operating items
    
    $
    (379,507
    )
    
    $
    (164,785
    )
    
    $
    762,210Non-cash investing activities:Available for sale securities received in connection with the sale
of Globalstar do Brazil
    
    $
    
    
    
    $
    
    
    
    $
    6,000Capital expenditures incurred not yet paid
    
    $
    2,782
    
    
    $
    3,091
    
    
    $
    1,706Investment in affiliate not yet paid
    
    $
    
    
    
    $
    
    
    
    $
    1,048Non-cash financing activities:Issuance of restricted stock
    
    $
    
    
    
    $
    1,591
    
    
    $
    Contributions by noncontrolling interest
    
    $
    134
    
    
    $
    
    
    
    $
    Issuance of Loral Series-1 Preferred Stock as payment for dividend
    
    $
    
    
    
    $
    
    
    
    $
    24,248Accrued dividends on Loral Series-1 Preferred Stock
    
    $
    
    
    
    $
    
    
    
    $
    4,797Issuance of non-voting common stock and cancellation of Loral
Series-1 Preferred Stock
    
    $
    
    
    
    $
    
    
    
    $
    336,696Supplemental information:Interest paid
    
    $
    1,991
    
    
    $
    2,164
    
    
    $
    2,380Tax payments (refunds)
    
    $
    573
    
    
    $
    (17,972
    )
    
    $
    29,835
 Recent Accounting Pronouncements
 Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities, Consolidations Amendments to FASB Interpretation No. 46(R) that
  F-13




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Revenue Recognition (Topic 605) 
Multiple-Deliverable Revenue Arrangements Multiple-Element
Arrangements
  Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses, Receivables
 3. Accumulated Other Comprehensive Loss
  ProportionateShare of Telesat
    
    
    AccumulatedForeign Currency
    
    
    
    
    
    
    Unrealized Gains
    
    
    
    
    
    
    Other
    
    
    OtherTranslation
    
    
    
    
    
    
    (Losses) on
    
    
    Postretirement
    
    
    Comprehensive
    
    
    ComprehensiveAdjustments
    
    
    Derivatives
    
    
    Investments
    
    
    Benefits
    
    
    Loss
    
    
    Income (Loss)Balance at January 01, 2008
    
    $
    498
    
    
    $
    
    
    
    $
    442
    
    
    $
    35,577
    
    
    $
    
    
    
    $
    36,517Period Change
    
    
    (498
    )
    
    
    18,182
    
    
    
    (325
    )
    
    
    (100,606
    )
    
    
    
    
    
    
    (83,247
    )Balance at December 31, 2008
    
    
    
    
    
    
    18,182
    
    
    
    117
    
    
    
    (65,029
    )
    
    
    
    
    
    
    (46,730
    )Period Change
    
    
    
    
    
    
    (11,900
    )
    
    
    658
    
    
    
    233
    
    
    
    (5,139
    )
    
    
    (16,148
    )Balance at December 31, 2009
    
    
    
    
    
    
    6,282
    
    
    
    775
    
    
    
    (64,796
    )
    
    
    (5,139
    )
    
    
    (62,878
    )Period Change
    
    
    
    
    
    
    (13,035
    )
    
    
    340
    
    
    
    (17,251
    )
    
    
    (3,049
    )
    
    
    (32,995
    )Balance at December 31, 2010
    
    $
    
    
    
    $
    (6,753
    )
    
    $
    1,115
    
    
    $
    (82,047
    )
    
    $
    (8,188
    )
    
    $
    (95,873
    )
  F-14




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Foreign currency translation adjustments:Cumulative translation
    
    $
    
    
    
    $
    
    
    
    $
    (498
    )Derivatives:Unrealized (loss) gain on foreign currency hedges, net of tax
benefit of $6,368 and $1,132 in 2010 and 2008, respectively
    
    
    (9,422
    )
    
    
    (94
    )
    
    
    20,965Less: reclassification adjustment for gains included in net income,
net of tax benefit of $2,441 in 2010 and tax provision of $1,132 in
2008
    
    
    (3,613
    )
    
    
    (11,806
    )
    
    
    (2,783
    )Unrealized gain (loss) on derivatives, net
    
    
    (13,035
    )
    
    
    (11,900
    )
    
    
    18,182Unrealized gain on investments:Unrealized gain (loss) on available-for-sale securities, net of tax
provision of $230 in 2010 and tax benefit of $2,339 in 2008
    
    
    340
    
    
    
    658
    
    
    
    (3,685
    )Less: reclassification adjustment for losses included in net income,
net of tax provision of $2,338 in 2008
    
    
    
    
    
    
    
    
    
    
    3,360Unrealized gain (loss) on investments, net
    
    
    340
    
    
    
    658
    
    
    
    (325
    )Postretirement benefits:Net actuarial losses and prior service credits, net of tax benefit
of $11,254 in 2010 and tax provision of $37 for 2008
    
    
    (16,637
    )
    
    
    (179
    )
    
    
    (97,360
    )Amortization of actuarial gains and prior service credits, net of
tax benefit of $415 in 2010
    
    
    (614
    )
    
    
    412
    
    
    
    (3,246
    )Postretirement benefits
    
    
    (17,251
    )
    
    
    233
    
    
    
    (100,606
    )Proportionate share of Telesat other comprehensive income:Proportionate share of Telesat Holdco other comprehensive income,
net of tax benefit of $2,052 in 2010
    
    
    (3,049
    )
    
    
    (5,139
    )
    
    
    (4,065
    )Less: reclassification of our proportionate share of Telesat Holdco
other comprehensive income
    
    
    
    
    
    
    
    
    
    
    4,065Proportionate share of Telesat Holdco other comprehensive income, net
    
    
    (3,049
    )
    
    
    (5,139
    )
    
    
    Other comprehensive loss
    
    $
    (32,995
    )
    
    $
    (16,148
    )
    
    $
    (83,247
    )
 4. Contracts-in-Process, Long-Term Receivables and Inventories
 Contracts-in-Process
  December 31,2010
    
    
    2009U.S. government contracts:Amounts billed
    
    $
    265
    
    
    $
    520Unbilled receivables
    
    
    1,634
    
    
    
    1,5661,899
    
    
    
    2,086Commercial contracts:Amounts billed
    
    
    125,328
    
    
    
    123,514Unbilled receivables
    
    
    59,669
    
    
    
    65,209184,997
    
    
    
    188,723$
    186,896
    
    
    $
    190,809
    F-15




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Long-Term Receivables
   Long-TermReceivables2011
    
    $
    13,4352012
    
    
    31,9802013
    
    
    17,3352014
    
    
    17,4292015
    
    
    17,652Thereafter
    
    
    235,030332,861Less, current portion included in contracts-in-process
    
    
    (13,435
    )Long-term receivables
    
    $
    319,426
 Financing Receivables
  FinancingReceivables
    
    
    
    
    
    
    
    
    
    
    MoreSubject To
    
    
    
    
    
    
    90 Days or
    
    
    Than 90Total
    
    
    Unlaunched
    
    
    Launched
    
    
    Aging
    
    
    Current
    
    
    Less
    
    
    DaysSatellite Manufacturing:Orbitals ReceivablesLong term orbitals
    
    $
    298,977
    
    
    $
    133,688
    
    
    $
    165,289
    
    
    $
    165,289
    
    
    $
    165,289
    
    
    $
    
    
    
    $
    Short term unbilled
    
    
    11,009
    
    
    
    
    
    
    
    11,009
    
    
    
    11,009
    
    
    
    11,009
    
    
    
    
    
    
    
    Short term billed
    
    
    2,426
    
    
    
    
    
    
    
    2,426
    
    
    
    2,426
    
    
    
    659
    
    
    
    
    
    
    
    1,767312,412
    
    
    
    133,688
    
    
    
    178,724
    
    
    
    178,724
    
    
    
    176,957
    
    
    
    
    
    
    
    1,767Deferred Receivables
    
    
    2,893
    
    
    
    
    
    
    
    
    
    
    
    2,893
    
    
    
    2,893
    
    
    
    
    
    
    
    Consulting Services:Telesat receivables
    
    
    17,556
    
    
    
    
    
    
    
    
    
    
    
    17,556
    
    
    
    17,556
    
    
    
    
    
    
    
    332,861
    
    
    
    133,688
    
    
    
    178,724
    
    
    
    199,173
    
    
    
    197,406
    
    
    
    
    
    
    
    1,767Contracts-in-Process:Unbilled receivables
    
    
    50,294
    
    
    
    50,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    383,155
    
    
    $
    183,982
    
    
    $
    178,724
    
    
    $
    199,173
    
    
    $
    197,406
    
    
    $
    
    
    
    $
    1,767
    F-16




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  FinancingRating Categories
    
    ReceivablesA/BBB
    
    $
    37,303BB/B
    
    
    226,254B/CCC
    
    
    80,222Other
    
    
    39,376Total financing receivables
    
    $
    383,155
 Inventories
  December 31,
    
    
    December 31,2010
    
    
    2009Inventories-gross
    
    $
    104,029
    
    
    $
    119,528Impaired inventory
    
    
    (31,370
    )
    
    
    (28,297
    )72,659
    
    
    
    91,231Inventories included in other assets
    
    
    (1,426
    )
    
    
    (7,560
    )$
    71,233
    
    
    $
    83,671
  5. Property, Plant and Equipment
  December 31,2010
    
    
    2009Land and land improvements
    
    $
    27,036
    
    
    $
    26,852Buildings
    
    
    68,899
    
    
    
    68,698Leasehold improvements
    
    
    14,007
    
    
    
    11,133Equipment, furniture and fixtures
    
    
    185,801
    
    
    
    156,669Satellite capacity under construction (see Note 16)
    
    
    40,495
    
    
    
    27,412Other construction in progress
    
    
    20,187
    
    
    
    17,243356,425
    
    
    
    308,007Accumulated depreciation and amortization
    
    
    (120,520
    )
    
    
    (100,011
    )$
    235,905
    
    
    $
    207,996
   F-17




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 6. Investments in Affiliates
  December 31,2010
    
    
    2009Telesat Holdings Inc.
    
    $
    295,797
    
    
    $
    208,101XTAR, LLC
    
    
    65,293
    
    
    
    72,284Other
    
    
    1,466
    
    
    
    1,648$
    362,556
    
    
    $
    282,033
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Telesat Holdings Inc.
    
    $
    92,798
    
    
    $
    213,241
    
    
    $
    (479,579
    )XTAR, LLC
    
    
    (6,991
    )
    
    
    (2,743
    )
    
    
    (16,070
    )Other
    
    
    (182
    )
    
    
    (200
    )
    
    
    $
    85,625
    
    
    $
    210,298
    
    
    $
    (495,649
    )
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues
    
    $
    137,244
    
    
    $
    92,144
    
    
    $
    83,974Elimination of Lorals proportionate share of profits
relating to affiliate transactions
    
    
    (14,734
    )
    
    
    (10,071
    )
    
    
    (4,969
    )Profits relating to affiliate transactions not eliminated
    
    
    8,294
    
    
    
    5,671
    
    
    
    2,808
 Telesat
 1 3 2 3
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Statement of Operations Data:Revenues
    
    $
    797,283
    
    
    $
    691,566
    
    
    $
    685,187Operating expenses
    
    
    (190,632
    )
    
    
    (203,417
    )
    
    
    (258,010
    )Gain on disposition of long-lived assets
    
    
    3,714
    
    
    
    29,311
    
    
    
    Impairment of long-lived and intangible
assets
    
    
    
    
    
    
    
    
    
    
    (454,896
    )Depreciation, amortization and
stock-based compensation
    
    
    (249,318
    )
    
    
    (230,176
    )
    
    
    (225,949
    )Operating income (loss)
    
    
    361,047
    
    
    
    287,284
    
    
    
    (253,668
    )Interest expense
    
    
    (234,556
    )
    
    
    (227,986
    )
    
    
    (231,062
    )Foreign exchange gains (losses)
    
    
    159,191
    
    
    
    439,160
    
    
    
    (654,200
    )(Losses) gains on financial instruments
    
    
    (76,937
    )
    
    
    (148,954
    )
    
    
    254,700Other income (expense)
    
    
    619
    
    
    
    (764
    )
    
    
    (3,602
    )Income tax (expense) benefit
    
    
    (41,177
    )
    
    
    (2,185
    )
    
    
    139,872Net income (loss)
    
    
    168,187
    
    
    
    346,555
    
    
    
    (747,960
    )
  F-18




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended December 31,2010
    
    
    2009Balance Sheet Data:Current assets
    
    $
    291,367
    
    
    $
    238,698Total assets
    
    
    5,309,441
    
    
    
    4,994,684Current liabilities
    
    
    294,485
    
    
    
    195,890Long-term debt, including current portion
    
    
    2,928,916
    
    
    
    2,953,281Total liabilities
    
    
    4,145,336
    
    
    
    4,041,932Redeemable preferred stock
    
    
    141,718
    
    
    
    134,291Shareholders equity
    
    
    1,022,387
    
    
    
    818,461
  1 3
  XTAR
     F-19




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Year Ended December 31,2010
    
    
    2009
    
    
    2008Statement of Operations Data:Revenues
    
    $
    37,907
    
    
    $
    32,038
    
    
    $
    20,405Operating expenses
    
    
    (35,724
    )
    
    
    (34,594
    )
    
    
    (34,500
    )Depreciation and amortization
    
    
    (9,618
    )
    
    
    (9,618
    )
    
    
    (9,650
    )Operating loss
    
    
    (7,435
    )
    
    
    (12,174
    )
    
    
    (23,751
    )Gain on settlement of Arianespace incentive cap
    
    
    
    
    
    
    11,668
    
    
    
    Net loss
    
    
    (12,435
    )
    
    
    (4,849
    )
    
    
    (28,597
    )
 December 31,2010
    
    
    2009Balance Sheet Data:Current assets
    
    $
    9,290
    
    
    $
    10,372Total assets
    
    
    96,383
    
    
    
    107,084Current liabilities
    
    
    61,839
    
    
    
    45,672Total liabilities
    
    
    69,616
    
    
    
    67,882Members equity
    
    
    26,767
    
    
    
    39,202
  F-20




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Other
   7. Goodwill and Intangible Assets
 Goodwill
  Intangible Assets
  Weighted AverageRemainingAmortization
    
    
    December 31, 2010
    
    
    December 31, 2009Period
    
    
    Gross
    
    
    Accumulated
    
    
    Gross
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationInternally
developed software
and technology
    
    
    2
    
    
    $
    59,027
    
    
    $
    (54,702
    )
    
    $
    59,027
    
    
    $
    (45,972
    )Trade names
    
    
    15
    
    
    
    9,200
    
    
    
    (2,415
    )
    
    
    9,200
    
    
    
    (1,955
    )Total
    
    
    
    
    
    $
    68,227
    
    
    $
    (57,117
    )
    
    $
    68,227
    
    
    $
    (47,927
    )
  2011
    
    $
    2,9312012
    
    
    2,3142013
    
    
    4602014
    
    
    4602015
    
    
    460
  F-21




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,2010
    
    
    2009Gross fair value adjustments
    
    $
    (36,896
    )
    
    $
    (36,896
    )Accumulated amortization
    
    
    19,299
    
    
    
    16,446$
    (17,597
    )
    
    $
    (20,450
    )
  8. Debt Obligations
 SS/L Credit Agreement
   December 31,2010
    
    
    2009Letters of credit outstanding
    
    $
    4,911
    
    
    $
    4,921Borrowings
    
    
    
    
    
    
    Interest rate on revolver borrowings
    
    
    
    
    
    
    
 Year Ended December 31,2010
    
    
    2009Interest expense (including commitment and letter of credit fees)
    
    $
    818
    
    
    $
    1,168Amortization of issuance costs
    
    
    1,570
    
    
    
    878
     F-22




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  
    
    SS/L must not permit its consolidated leverage ratio as of (i) the last day of any
period of four consecutive fiscal quarters or (ii) the date of incurrence of certain
indebtedness to exceed 3.00 to 1.00.
 
    
    SS/L must maintain a minimum consolidated interest coverage ratio of at least 3.50 to
1.00 (or 3.00 to 1.00 if SS/L elects to provide a dividend to its shareholders of preferred
stock which entitles holders thereof to receive cash distributions based on orbital
incentives received by SS/L) as of the last day of any fiscal quarter for the period of
four consecutive fiscal quarters ending on such day.
    9. Income Taxes
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Current:U.S. Federal
    
    $
    (4,575
    )
    
    $
    (2,597
    )
    
    $
    21,213State and local
    
    
    (12,026
    )
    
    
    (3,166
    )
    
    
    (37,572
    )Total current
    
    
    (16,601
    )
    
    
    (5,763
    )
    
    
    (16,359
    )Deferred:U.S. Federal
    
    
    277,916
    
    
    
    669
    
    
    
    (29,574
    )State and local
    
    
    47,307
    
    
    
    (477
    )
    
    
    189Total deferred
    
    
    325,223
    
    
    
    192
    
    
    
    (29,385
    )Total income tax benefit (provision)
    
    $
    308,622
    
    
    $
    (5,571
    )
    
    $
    (45,744
    )
  F-23




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Decrease (increase) to unrecognized tax benefits
    
    $
    (5,517
    )
    
    $
    2,817
    
    
    $
    (25,962
    )Interest expense
    
    
    (5,391
    )
    
    
    (4,426
    )
    
    
    (6,169
    )Penalties
    
    
    (633
    )
    
    
    (701
    )
    
    
    (9,427
    )Total
    
    $
    (11,541
    )
    
    $
    (2,310
    )
    
    $
    (41,558
    )
      Year Ended December 31,2010
    
    
    2009
    
    
    2008Tax benefit (provision) at U.S. Statutory Rate of 35%
    
    $
    (32,583
    )
    
    $
    (9,441
    )
    
    $
    53,033Permanent adjustments which change statutory amounts:State and local income taxes, net of federal income tax
    
    
    (31,898
    )
    
    
    (16,703
    )
    
    
    (1,496
    )Equity in net income (losses) of affiliates
    
    
    (29,969
    )
    
    
    (73,604
    )
    
    
    173,477Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    (65,779
    )Losses in litigation
    
    
    (583
    )
    
    
    (526
    )
    
    
    (6,815
    )Provision for unrecognized tax benefits
    
    
    2,542
    
    
    
    (1,356
    )
    
    
    5,811Nondeductible expenses
    
    
    (987
    )
    
    
    (2,076
    )
    
    
    (1,501
    )Change in valuation allowance
    
    
    402,809
    
    
    
    96,617
    
    
    
    (202,510
    )Other, net
    
    
    (709
    )
    
    
    1,518
    
    
    
    36Total income tax benefit (provision)
    
    $
    308,622
    
    
    $
    (5,571
    )
    
    $
    (45,744
    )
  F-24




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Balance at January 1
    
    $
    120,124
    
    
    $
    108,592
    
    
    $
    59,903Increases related to prior year tax positions
    
    
    339
    
    
    
    8,855
    
    
    
    5,312Decreases related to prior year tax positions
    
    
    (1,933
    )
    
    
    (1,969
    )
    
    
    (1,225
    )Decrease as a result of statute expirations
    
    
    (1,886
    )
    
    
    (3,178
    )
    
    
    (1,832
    )Decrease as a result of tax settlements
    
    
    (5,207
    )
    
    
    (4,887
    )
    
    
    Increases related to current year tax positions
    
    
    20,774
    
    
    
    12,711
    
    
    
    46,434Balance at December 31
    
    $
    132,211
    
    
    $
    120,124
    
    
    $
    108,592
        F-25




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    December 31,2010
    
    
    2009Deferred tax assets:Postretirement benefits other than pensions
    
    $
    25,504
    
    
    $
    28,912Inventoried costs
    
    
    24,666
    
    
    
    17,932Net operating loss and tax credit carryforwards
    
    
    151,497
    
    
    
    180,874Compensation and benefits
    
    
    26,996
    
    
    
    29,339Deferred research & development costs
    
    
    6,575
    
    
    
    10,646Income recognition on long-term contracts
    
    
    24,686
    
    
    
    21,475Investments in and advances to affiliates
    
    
    34,227
    
    
    
    67,883Other, net
    
    
    5,468
    
    
    
    5,378Federal benefit of uncertain tax positions
    
    
    29,249
    
    
    
    22,488Pension costs
    
    
    70,268
    
    
    
    67,421Total deferred tax assets before valuation allowance
    
    
    399,136
    
    
    
    452,348Less valuation allowance
    
    
    (11,228
    )
    
    
    (414,038
    )Net deferred tax assets
    
    
    387,908
    
    
    
    38,310Deferred tax liabilities:Property, plant and equipment
    
    
    (23,189
    )
    
    
    (16,819
    )Intangible assets
    
    
    (4,480
    )
    
    
    (8,776
    )Total deferred tax liabilities
    
    
    (27,669
    )
    
    
    (25,595
    )Net deferred tax assets
    
    $
    360,239
    
    
    $
    12,715Classification on consolidated balance sheet:Current deferred tax assets
    
    $
    66,220
    
    
    $
    4,068Long-term deferred tax assets
    
    
    294,019
    
    
    
    8,647Total deferred tax assets
    
    $
    360,239
    
    
    $
    12,715
 10. Equity
 Common Stock
   F-26




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 In re: Loral Space and Communications
Consolidated Litigation
     Preferred Stock
       F-27




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Stock Plans
    Year EndedDecember 31,2009Risk  free interest rate
    
    
    2.72
    %Expected life (years)
    
    
    4.67Estimated volatility
    
    
    64.77
    %Expected dividends
    
    NoneWeighted average grant date fair value
    
    $
    11.39
  WeightedWeighted
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueShares
    
    
    Price
    
    
    Term
    
    
    (In thousands)Outstanding at January 1, 2010
    
    
    1,786,077
    
    
    $
    28.20
    
    
    2.3 years
    
    
    $
    6,523Granted
    
    
    
    
    
    $
    Exercised
    
    
    (643,662
    )
    
    $
    27.73Forfeited
    
    
    (7,500
    )
    
    $
    28.44Outstanding at December 31, 2010
    
    
    1,134,915
    
    
    $
    28.46
    
    
    1.3 years
    
    
    $
    54,524Vested and expected to vest at December 31, 2010
    
    
    1,134,915
    
    
    $
    28.46
    
    
    1.3 years
    
    
    $
    54,524Exercisable at December 31, 2010
    
    
    1,072,415
    
    
    $
    28.08
    
    
    1.2 years
    
    
    $
    51,930
  F-28




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Weighted AverageGrant-DateShares
    
    
    Fair ValueNon-vested restricted stock at January 1, 2010
    
    
    45,526
    
    
    $
    39.91Granted
    
    
    
    
    
    $
    Vested
    
    
    (39,526
    )
    
    $
    40.87Forfeited
    
    
    
    
    
    $
    Non-vested restricted stock at December 31, 2010
    
    
    6,000
    
    
    $
    33.58
    Year EndedDecember 31,2009Risk  free interest rate
    
    
    1.581
    %Estimated volatility
    
    
    59.83
    %Expected dividends
    
    NoneWeighted average grant date fair value
    
    $
    8.51
   F-29




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  WeightedAverageGrant-DateShares
    
    
    Fair ValueNon-vested RSUs at January 1, 2010
    
    
    223,250
    
    
    $
    11.03Granted
    
    
    15,000
    
    
    $
    38.34Vested
    
    
    (167,439
    )
    
    $
    10.42Forfeited
    
    
    
    
    
    $
    Non-vested RSUs at December 31, 2010
    
    
    70,811
    
    
    $
    18.25
    Vesting Date  March 18,Grant Date
    
    SARs granted
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014June-2009
    
    
    225,000
    
    
    
    50
    %
    
    
    25
    %
    
    
    25
    %
    
    
    
    
    
    
    Oct-2009
    
    
    217,500
    
    
    
    50
    %
    
    
    25
    %
    
    
    25
    %
    
    
    
    
    
    
    Oct-2009
    
    
    65,000
    
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %
    
    
    Dec-2009
    
    
    32,500
    
    
    
    50
    %
    
    
    25
    %
    
    
    25
    %
    
    
    
    
    
    
    May-2010
    
    
    175,000
    
    
    
    
    
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %
  WeightedAverageGrant-DateShares
    
    
    Fair ValueNon-vested SS/L Phantom SARs at January 1, 2010
    
    
    540,000
    
    
    $
    6.53Granted
    
    
    175,000
    
    
    
    2.73Vested
    
    
    (253,750
    )
    
    
    6.39Forfeited
    
    
    
    
    
    
    Non-vested SS/L Phantom SARs at December 31, 2010
    
    
    461,250
    
    
    $
    5.17
  F-30




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Total intrinsic value of options exercised
    
    $
    16,889
    
    
    $
    1,578
    
    
    $
    Total fair value of restricted stock vested
    
    $
    1,493
    
    
    $
    1,395
    
    
    $
    1,131Total fair value of stock awards vested
    
    $
    
    
    
    $
    1,591
    
    
    $
    Total fair value of restricted stock units vested
    
    $
    12,687
    
    
    $
    
    
    
    $
    
  11. Earnings (Loss) Per Share
  Year EndedDecember 31,2010Net income attributable to Loral common shareholders  basic
    
    $
    486,846Less: Adjustment for dilutive effect of Telesat stock options
    
    
    (4,177
    )Net income attributable to Loral common shareholders  diluted
    
    $
    482,669
   Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Common shares outstanding for diluted earnings (loss) per share:Weighted average common shares outstanding
    
    
    30,085
    
    
    
    29,761
    
    
    
    20,407Stock options
    
    
    495
    
    
    
    48
    
    
    
    Unvested restricted stock units
    
    
    206
    
    
    
    115
    
    
    
    Unvested restricted stock
    
    
    8
    
    
    
    4
    
    
    
    Unvested SS/L Phantom SARS
    
    
    93
    
    
    
    53
    
    
    
    Common shares outstanding for diluted earnings (loss) per share
    
    
    30,887
    
    
    
    29,981
    
    
    
    20,407
  F-31




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2009
    
    
    2008(In thousands)Stock options outstanding
    
    
    125
    
    
    
    2,034Unvested restricted stock units
    
    
    8
    
    
    
    Unvested restricted stock
    
    
    30
    
    
    
    96
 12. Pensions and Other Employee Benefits
 Pensions
  Other Benefits
   F-32




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Funded Status
  Pension Benefits
    
    
    Other BenefitsYear Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Reconciliation of benefit obligationObligation at beginning of period
    
    $
    420,076
    
    
    $
    380,919
    
    
    $
    67,392
    
    
    $
    66,587Service cost
    
    
    10,677
    
    
    
    9,436
    
    
    
    672
    
    
    
    863Interest cost
    
    
    24,673
    
    
    
    24,447
    
    
    
    3,411
    
    
    
    3,965Participant contributions
    
    
    1,507
    
    
    
    1,455
    
    
    
    1,968
    
    
    
    1,863Plan amendment
    
    
    
    
    
    
    
    
    
    
    (1,386
    )
    
    
    Actuarial loss (gain)
    
    
    41,826
    
    
    
    27,366
    
    
    
    (5,085
    )
    
    
    (1,764
    )Benefit payments
    
    
    (22,728
    )
    
    
    (23,547
    )
    
    
    (4,132
    )
    
    
    (4,122
    )Obligation at December 31,
    
    
    476,031
    
    
    
    420,076
    
    
    
    62,840
    
    
    
    67,392Reconciliation of fair value of plan assetsFair value of plan assets at beginning of period
    
    
    256,166
    
    
    
    211,982
    
    
    
    507
    
    
    
    742Actual return on plan assets
    
    
    28,133
    
    
    
    42,643
    
    
    
    2
    
    
    
    5Employer contributions
    
    
    24,932
    
    
    
    22,526
    
    
    
    1,924
    
    
    
    2,019Participant contributions
    
    
    1,507
    
    
    
    1,455
    
    
    
    1,968
    
    
    
    1,863Benefit payments
    
    
    (21,702
    )
    
    
    (22,440
    )
    
    
    (4,132
    )
    
    
    (4,122
    )Fair value of plan assets at December 31,
    
    
    289,036
    
    
    
    256,166
    
    
    
    269
    
    
    
    507Funded status at end of period
    
    $
    (186,995
    )
    
    $
    (163,910
    )
    
    $
    (62,571
    )
    
    $
    (66,885
    )
   Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Actuarial (loss) gain
    
    $
    (108,826
    )
    
    $
    (78,028
    )
    
    $
    12,402
    
    
    $
    8,464Amendments-prior service credit
    
    
    22,673
    
    
    
    25,392
    
    
    
    3,144
    
    
    
    2,485$
    (86,153
    )
    
    $
    (52,636
    )
    
    $
    15,546
    
    
    $
    10,949
  Pension Benefits
    
    
    Other BenefitsActuarial (loss) gain during the period
    
    $
    (34,334
    )
    
    $
    5,056Prior service credit during the period
    
    
    
    
    
    
    1,387Amortization of actuarial loss (gain)
    
    
    3,536
    
    
    
    (1,118
    )Amortization of prior service credit
    
    
    (2,719
    )
    
    
    (728
    )Total recognized in other comprehensive loss
    
    $
    (33,517
    )
    
    $
    4,597
  F-33




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Current Liabilities
    
    $
    1,223
    
    
    $
    1,236
    
    
    $
    3,526
    
    
    $
    3,369Long-Term Liabilities
    
    
    185,772
    
    
    
    162,674
    
    
    
    59,045
    
    
    
    63,516$
    186,995
    
    
    $
    163,910
    
    
    $
    62,571
    
    
    $
    66,885
     Pension Benefits
    
    
    Other BenefitsFor the Year Ended December 31,
    
    
    For the Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008Service cost
    
    $
    10,677
    
    
    $
    9,436
    
    
    $
    9,214
    
    
    $
    672
    
    
    $
    863
    
    
    $
    1,056Interest cost
    
    
    24,673
    
    
    
    24,447
    
    
    
    23,367
    
    
    
    3,411
    
    
    
    3,965
    
    
    
    4,108Expected return on plan assets
    
    
    (20,641
    )
    
    
    (17,176
    )
    
    
    (24,469
    )
    
    
    (31
    )
    
    
    (50
    )
    
    
    (72
    )Amortization of prior service
credit
    
    
    (2,719
    )
    
    
    (2,719
    )
    
    
    (2,718
    )
    
    
    (728
    )
    
    
    (481
    )
    
    
    (480
    )Amortization of net actuarial
loss (gain)
    
    
    3,536
    
    
    
    4,083
    
    
    
    (18
    )
    
    
    (1,118
    )
    
    
    (471
    )
    
    
    (30
    )Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (433
    )
    
    
    
    
    
    
    
    
    
    
    Net periodic cost
    
    $
    15,526
    
    
    $
    18,071
    
    
    $
    4,943
    
    
    $
    2,206
    
    
    $
    3,826
    
    
    $
    4,582
 Assumptions
  For the Year Ended December 31,2010
    
    
    2009
    
    
    2008Discount rate
    
    
    6.00
    %
    
    
    6.50
    %
    
    
    6.50
    %Expected return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    4.25
    %
    
    
    4.25
    %
    
    
    4.25
    %
  December 31,2010
    
    
    2009
    
    
    2008Discount rate
    
    
    5.50
    %
    
    
    6.00
    %
    
    
    6.50
    %Rate of compensation increase
    
    
    4.25
    %
    
    
    4.25
    %
    
    
    4.25
    %
  F-34




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   1% Increase
    
    
    1% DecreaseEffect on total of service and interest
cost components of net periodic
postretirement health care benefit cost
    
    $
    84
    
    
    $
    (84
    )Effect on the health care component of the
accumulated postretirement benefit
obligation
    
    $
    2,358
    
    
    $
    (2,154
    )
 Plan Assets
      Actual AllocationDecember 31,
    
    
    Target Allocation2010
    
    
    2009
    
    
    Target
    
    
    Target RangeEquities
    
    
    61
    %
    
    
    59
    %
    
    
    60
    %
    
    
    50-65
    %Fixed Income
    
    
    39
    %
    
    
    41
    %
    
    
    40
    %
    
    
    35-50
    %100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  F-35




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Target AllocationTarget
    
    
    Target RangeU.S. Large Cap Equities
    
    
    35
    %
    
    
    30-40
    %U.S. Small Cap Equities
    
    
    5
    %
    
    
    3-7
    %Non-U.S. Equities
    
    
    15
    %
    
    
    10-20
    %Alternative Equity Investments
    
    
    5
    %
    
    
    0-15
    %Total Equities
    
    
    60
    %
    
    
    50-65
    %Fixed Income
    
    
    35
    %
    
    
    30-40
    %Alternative Fixed Income Investments
    
    
    5
    %
    
    
    0-15
    %Total Fixed Income
    
    
    40
    %
    
    
    35-50
    %Total Target Allocation
    
    
    100
    %
    
    
    100
    %
  Fair Value Measurements
   F-36




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Fair Value MeasurementsQuoted PricesIn Active Markets
    
    
    Significant
    
    
    SignificantFor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsAsset Category
    
    Total
    
    
    Percentage
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)At December 31, 2010:CashEquity securities:U.S. large-cap(1)
    
    $
    86,866
    
    
    
    30
    %
    
    
    
    
    
    $
    86,866U.S. small-cap(2)
    
    
    16,002
    
    
    
    6
    %
    
    $
    3,783
    
    
    
    12,219Non-U.S.(3)
    
    
    53,101
    
    
    
    18
    %
    
    
    1,249
    
    
    
    51,852Alternative investments:Equity long/short fund(4)
    
    
    11,993
    
    
    
    4
    %
    
    
    
    
    
    
    6,111
    
    
    $
    5,882Private equity fund(5)
    
    
    6,934
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    6,934174,896
    
    
    
    61
    %
    
    
    5,032
    
    
    
    157,048
    
    
    
    12,816Fixed income securities:Commingled funds(6)
    
    
    110,152
    
    
    
    38
    %
    
    
    
    
    
    
    110,152Alternative investments:Distressed opportunity limited
partnership(7)
    
    
    3,598
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    3,598Diversified alternatives fund(8)
    
    
    353
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    353Other limited partnerships(9)
    
    
    37
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    37114,140
    
    
    
    39
    %
    
    
    
    
    
    
    110,152
    
    
    
    3,988$
    289,036
    
    
    
    100
    %
    
    $
    5,032
    
    
    $
    267,200
    
    
    $
    16,804At December 31, 2009:CashEquity securities:U.S. large-cap(1)
    
    $
    79,854
    
    
    
    31
    %
    
    
    
    
    
    $
    79,854U.S. small-cap(2)
    
    
    13,087
    
    
    
    5
    %
    
    
    
    
    
    
    13,087Non-U.S.(3)
    
    
    45,957
    
    
    
    18
    %
    
    
    
    
    
    
    45,957Alternative investments:Equity long/short fund(4)
    
    
    5,468
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    $
    5,468Private equity fund(5)
    
    
    6,245
    
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    6,245150,611
    
    
    
    59
    %
    
    
    
    
    
    
    138,898
    
    
    
    11,713Fixed income securities:Commingled funds(6)
    
    
    98,998
    
    
    
    39
    %
    
    
    
    
    
    
    98,998Alternative investments:Distressed opportunity limited
partnership(7)
    
    
    3,204
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    3,204Diversified alternatives fund(8)
    
    
    3,135
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    3,135Other limited partnerships(9)
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218105,555
    
    
    
    41
    %
    
    
    
    
    
    
    98,998
    
    
    
    6,557$
    256,166
    
    
    
    100
    %
    
    
    
    
    
    $
    237,896
    
    
    $
    18,270
 (1)
    
    Investments in common stocks that rank among the largest 1,000 companies in the U.S.
stock market.(2)
    
    Investments in common stocks that rank among the small capitalization stocks in the
U.S. stock market.(3)
    
    Investments in common stocks of companies from developed and emerging countries
around the world.(4)
    
    Investments primarily in long and short positions in equity securities of U.S. and
non-U.S. companies. We are invested in two funds; one fund has semi-annual tender offer
redemption periods on June 30 and December 31.(5)
    
    Fund invests in portfolios of secondary interest in established venture capital,
buyout, mezzanine and special situation funds on a global basis. The Company committed to
invest up to $10 million in this fund, and $7.30 million and $6.95 million has been invested
through December 31, 2010 and 2009, respectively. Fund is valued on a quarterly lag with
adjustment for subsequent cash activity.(6)
    
    Investments in bonds representing many sectors of the broad bond market with both
short-term and intermediate-term maturities.  F-37




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (7)
    
    Investments mainly in discounted debt securities, bank loans, trade claims and other
debt and equity securities of financially troubled companies. This partnership has a one year
lock-up period with semi-annual withdrawal rights on June 30 and December 31 thereafter. Our
initial investment was made August 3, 2009.(8)
    
    Fund is a fund of hedge funds. Fund is closed and currently unwinding its holdings.
The remaining portfolio which was deemed illiquid has been sold with cash distribution to
shareholders made as the assets are transferred to the purchaser. Fund was valued on a one
month lag with adjustment for subsequent cash activity.(9)
    
    Company invested in other partnerships that have reached their end of life and have
closed and are unwinding their holdings. Mainly partnerships that provided mezzanine
financing.   Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Private
    
    
    Equity
    
    
    Distressed
    
    
    Diversified
    
    
    OtherEquity
    
    
    Long/Short
    
    
    Opportunity
    
    
    Alternatives
    
    
    LimitedFund
    
    
    Fund
    
    
    Ltd. Partnership
    
    
    Fund
    
    
    Partnership
    
    
    Total(In thousands)Beginning balance at
January 1, 2009
    
    $
    6,645
    
    
    $
    
    
    
    $
    
    
    
    $
    8,735
    
    
    $
    402
    
    
    $
    15,782Unrealized gain/(loss)
    
    
    (1,050
    )
    
    
    468
    
    
    
    204
    
    
    
    (525
    )
    
    
    192
    
    
    
    (711
    )Realized gain/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,095
    )
    
    
    (344
    )
    
    
    (1,439
    )Purchases
    
    
    650
    
    
    
    5,000
    
    
    
    3.000
    
    
    
    
    
    
    
    
    
    
    
    8,650Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,980
    )
    
    
    (32
    )
    
    
    (4,012
    )Ending balance at
December 31, 2009
    
    
    6,245
    
    
    
    5,468
    
    
    
    3,204
    
    
    
    3,135
    
    
    
    218
    
    
    
    18,270Unrealized gain/(loss)
    
    
    339
    
    
    
    414
    
    
    
    394
    
    
    
    (884
    )
    
    
    (66
    )
    
    
    197Realized gain/(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (697
    )
    
    
    233
    
    
    
    (464
    )Purchases
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    1,335Sales
    
    
    (950
    )
    
    
    
    
    
    
    
    
    
    
    (1,201
    )
    
    
    (383
    )
    
    
    (2,534
    )Ending balance at
December 31, 2010
    
    $
    6,934
    
    
    $
    5,882
    
    
    $
    3,598
    
    
    $
    353
    
    
    $
    37
    
    
    $
    16,804
     F-38




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Benefit Payments
  Other BenefitsGross
    
    
    MedicarePension
    
    
    Benefit
    
    
    SubsidyBenefits
    
    
    Payments
    
    
    Receipts2011
    
    $
    26,922
    
    
    $
    4,186
    
    
    $
    2882012
    
    
    27,411
    
    
    
    4,457
    
    
    
    3232013
    
    
    27,900
    
    
    
    4,556
    
    
    
    3562014
    
    
    28,738
    
    
    
    4,686
    
    
    
    3882015
    
    
    29,388
    
    
    
    4,812
    
    
    
    4232016 to 2020
    
    
    161,400
    
    
    
    25,447
    
    
    
    2,535
 Employee Savings (401k) Plan
 2 3
 13. Financial Instruments, Derivative Instruments and Hedging
 Financial Instruments
  Foreign Currency
   F-39




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Foreign Currency
    
    
    U.S. $(In thousands)Future revenues  Japanese yen
    
    ¥
    201,007
    
    
    $
    2,465Future expenditures  Japanese yen
    
    ¥
    4,253,762
    
    
    $
    52,159Future revenues  euros
    
    
    12,584
    
    
    $
    16,678Future expenditures  euros
    
    
    7,498
    
    
    $
    9,937
 Derivatives and Hedging Transactions
    Cash Flow Hedges
    F-40




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2011
    
    
    111,363
    
    
    $
    142,269
    
    
    $
    147,3052012
    
    
    27,000
    
    
    
    32,649
    
    
    
    35,5292013
    
    
    27,000
    
    
    
    32,894
    
    
    
    35,437
    165,363
    
    
    $
    207,812
    
    
    $
    218,271
 Balance Sheet Classification
  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair ValueDerivatives designated as
hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    4,152
    
    
    Other current liabilities
    
    $
    9,451Other liabilities
    
    
    5,3604,152
    
    
    
    
    
    14,811Derivatives not
designated as hedging
instrumentsForeign exchange contracts
    
    Other current assets
    
    
    396
    
    
    Other current liabilities
    
    
    133Other liabilities
    
    
    63Total derivatives
    
    
    
    $
    4,548
    
    
    
    
    $
    15,007
  Asset DerivativesBalance SheetLocation
    
    Fair ValueDerivatives designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    1,860Foreign exchange contracts
    
    Other assets
    
    
    1,8463,706Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other assets
    
    
    167Total derivatives
    
    
    
    $
    3,873
  F-41




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Cash Flow Hedge Gains (Losses) Recognition
  Gain Reclassified from
    
    
    Gain (Loss) on DerivativeAccumulated
    
    
    Ineffectiveness andLoss Recognized
    
    
    OCI into Income
    
    
    Amounts Excluded fromDerivatives in Cash Flow
    
    in OCI on Derivatives
    
    
    (Effective Portion)
    
    
    Effectiveness TestingHedging Relationships
    
    (Effective Portion)
    
    
    Location
    
    Amount
    
    
    Location
    
    AmountYear ended December 31, 2010Foreign exchange contracts
    
    $
    (15,790
    )
    
    Revenue
    
    $
    6,054
    
    
    Revenue
    
    $
    636Interest income
    
    $
    (13
    )Year ended December 31, 2009Foreign exchange contracts
    
    $
    (94
    )
    
    Revenue
    
    $
    11,806
    
    
    Revenue
    
    $
    (1,085
    )Interest income
    
    $
    (72
    )
 Gain Recognized in Incomeon DerivativesCash Flow Derivatives Not Designated as Hedging Instruments
    
    Location
    
    AmountYear ended December 31, 2010Foreign exchange contracts
    
    Revenue
    
    $
    33Year ended December 31, 2009Foreign exchange contracts
    
    Revenue
    
    $
    335
  14. Commitments and Contingencies
 Financial Matters
   2010Balance of deferred amounts at January 1
    
    $
    37,167Warranty costs incurred including payments
    
    
    (1,292
    )Accruals relating to pre-existing contracts (including changes in estimates)
    
    
    (145
    )Balance of deferred amounts at December 31
    
    $
    35,730
  F-42




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     F-43




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Transactions with Affiliates Telesat
 Satellite Matters
    F-44




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Transactions with Affiliates  Telesat
 Regulatory Matters
  Lease Arrangements
  Gross
    
    
    SubleaseRent
    
    
    Income
    
    
    Net RentYear ended December 31, 2010
    
    $
    18,911
    
    
    $
    
    
    
    $
    18,911Year ended December 31, 2009
    
    $
    16,337
    
    
    $
    
    
    
    $
    16,337Year ended December 31, 2008
    
    $
    12,154
    
    
    $
    (6
    )
    
    $
    12,148
  2011
    
    $
    11,4352012
    
    
    9,0172013
    
    
    6,8212014
    
    
    5,8832015
    
    
    4,723Thereafter
    
    
    8,625$
    46,504
 Legal Proceedings
 Insurance Coverage Litigation
 In re: Loral
Space and Communications Inc. Consolidated Litigation Babus
  F-45




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Reorganization Matters
  Indemnification Claims of Directors and Officers of Old Loral. Old Loral Class Action Securities Litigations
  F-46




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Old Loral Class Action Securities Litigations
 Beleson Beleson Christ Christ Reorganization Matters  Indemnification Claims of
Directors and Officers of Old Loral.
 Christ Beleson Beleson Christ Christ Beleson Beleson
  F-47




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Other and Routine Litigation
  15. Segments
      F-48




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Segment Information
(In thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)RevenuesSatellite manufacturing:External revenues
    
    $
    1,021,768
    
    
    $
    901,283
    
    
    $
    785,534Intersegment revenues(1)
    
    
    143,318
    
    
    
    107,401
    
    
    
    95,913Satellite manufacturing revenues
    
    
    1,165,086
    
    
    
    1,008,684
    
    
    
    881,447Satellite services revenues(2)
    
    
    797,283
    
    
    
    691,566
    
    
    
    685,187Segment revenues before eliminations
    
    
    1,962,369
    
    
    
    1,700,250
    
    
    
    1,566,634Intercompany eliminations(3)
    
    
    (6,101
    )
    
    
    (15,284
    )
    
    
    (12,049
    )Affiliate eliminations(4)
    
    
    (797,283
    )
    
    
    (691,566
    )
    
    
    (685,187
    )Total revenues as reported
    
    $
    1,158,985
    
    
    $
    993,400
    
    
    $
    869,398Segment Adjusted EBITDASatellite manufacturing
    
    $
    143,076
    
    
    $
    90,565
    
    
    $
    45,055Satellite services(2)
    
    
    606,651
    
    
    
    488,149
    
    
    
    436,514Corporate(5)
    
    
    (17,866
    )
    
    
    (21,371
    )
    
    
    (14,875
    )Adjusted EBITDA before eliminations
    
    
    731,861
    
    
    
    557,343
    
    
    
    466,694Intercompany eliminations(3)
    
    
    (1,465
    )
    
    
    (1,673
    )
    
    
    (1,569
    )Affiliate eliminations(4)
    
    
    (606,651
    )
    
    
    (488,149
    )
    
    
    (427,176
    )Adjusted EBITDA
    
    
    123,745
    
    
    
    67,521
    
    
    
    37,949Reconciliation to Operating IncomeDepreciation, Amortization and Stock-Based CompensationSatellite manufacturing
    
    
    (34,675
    )
    
    
    (44,203
    )
    
    
    (38,646
    )Satellite services(2)
    
    
    (249,318
    )
    
    
    (230,176
    )
    
    
    (220,843
    )Corporate
    
    
    (1,605
    )
    
    
    (3,107
    )
    
    
    (5,342
    )Segment depreciation before affiliate eliminations
    
    
    (285,598
    )
    
    
    (277,486
    )
    
    
    (264,831
    )Affiliate eliminations(4)
    
    
    249,318
    
    
    
    230,176
    
    
    
    220,843Depreciation, amortization and stock-based compensation as
reported
    
    
    (36,280
    )
    
    
    (47,310
    )
    
    
    (43,986
    )Directors indemnification expense (6)
    
    
    (6,857
    )
    
    
    
    
    
    
    Satellite manufacturing  impairment of goodwill(7)
    
    
    
    
    
    
    
    
    
    
    (187,940
    )Operating income (loss) as reported
    
    $
    80,608
    
    
    $
    20,211
    
    
    $
    (193,977
    )Capital ExpendituresSatellite manufacturing
    
    $
    35,378
    
    
    $
    26,426
    
    
    $
    53,883Satellite services(2)
    
    
    254,020
    
    
    
    231,654
    
    
    
    255,506Corporate
    
    
    18,679
    
    
    
    17,131
    
    
    
    10,676Segment capital expenditures before affiliate eliminations(8)
    
    
    308,077
    
    
    
    275,211
    
    
    
    320,065Affiliate eliminations(4)
    
    
    (254,020
    )
    
    
    (231,654
    )
    
    
    (255,506
    )Capital expenditures as reported
    
    $
    54,057
    
    
    $
    43,557
    
    
    $
    64,559
 As of December 31,2010
    
    
    2009(In thousands)Total Assets(8)Satellite manufacturing
    
    $
    920,647
    
    
    $
    863,866Satellite services(9)
    
    
    5,605,239
    
    
    
    5,202,785Corporate
    
    
    538,464
    
    
    
    181,485Total Assets before affiliate eliminations
    
    
    7,064,350
    
    
    
    6,248,136Affiliate eliminations(4)
    
    
    (5,309,441
    )
    
    
    (4,994,684
    )Total assets as reported
    
    $
    1,754,909
    
    
    $
    1,253,452
 (1)
    
    Intersegment revenues include $137 million, $92 million and $84 million for the
years ended December 31, 2010, 2009 and 2008, respectively, of revenue from affiliates.(2)
    
    Satellite services represents Telesat. Satellite services Adjusted EBITDA also
includes approximately $9 million for the year ended December 31, 2008, related to the
distribution from a bankruptcy claim against a former customer of Loral Skynet.  F-49




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (3)
    
    Represents the elimination of intercompany sales and intercompany Adjusted EBITDA
for a satellite under construction by SS/L for Loral.(4)
    
    Affiliate eliminations represent the elimination of amounts attributable to Telesat
whose results are reported under the equity method of accounting in our consolidated
statements of operations (see Note 6).(5)
    
    Includes corporate expenses incurred in support of our operations and includes our
equity investments in XTAR and Globalstar service providers.(6)
    
    Represents indemnification expense, net of insurance recovery, in connection with
defense costs incurred by MHR affiliated directors in the Delaware shareholder derivative case
(see Note 14).(7)
    
    During 2008, we determined that the implied fair value of SS/L goodwill had
decreased below its carrying value, and we recorded an impairment charge for the entire
goodwill balance of $187.9 million to reflect this impairment.(8)
    
    Amounts are presented after the elimination of intercompany profit.(9)
    
    Includes $2.4 billion and $2.3 billion of satellite services goodwill related to
Telesat as of December 31, 2010 and 2009, respectively. Revenue by Customer Location
  For the Year Ended December 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    645,769
    
    
    $
    534,294
    
    
    $
    612,282Canada
    
    
    137,195
    
    
    
    92,094
    
    
    
    83,767Spain
    
    
    85,161
    
    
    
    85,499
    
    
    
    25,506Luxembourg
    
    
    70,678
    
    
    
    61,673
    
    
    
    11,398United Kingdom
    
    
    57,976
    
    
    
    101,499
    
    
    
    68,956Mexico
    
    
    49,157
    
    
    
    22
    
    
    
    1,024Peoples Republic of China (including Hong Kong)
    
    
    44,135
    
    
    
    54,677
    
    
    
    13,236The Netherlands
    
    
    26,721
    
    
    
    59,509
    
    
    
    50,110France
    
    
    24,657
    
    
    
    344
    
    
    
    Other
    
    
    17,536
    
    
    
    3,789
    
    
    
    3,119$
    1,158,985
    
    
    $
    993,400
    
    
    $
    869,398
   F-50




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 16. Related Party Transactions
 Transactions with Affiliates
 Telesat
      For Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Revenues from Telesat satellite construction contracts
    
    $
    137,195
    
    
    $
    92,095
    
    
    $
    83,767Milestone payments received from Telesat
    
    
    168,130
    
    
    
    89,419
    
    
    
    79,107
   F-51




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   ViaSat/Telesat
        F-52




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   XTAR
  MHR Fund Management LLC
   F-53




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  For Year Ended December 31,2008Loral Series-1 Preferred StockDividends paid in the form of additional shares Number of shares
    
    
    80,423 Amount
    
    $
    24,248
    17. Selected Quarterly Financial Information
(unaudited, in thousands, except per share amounts)
 Quarter EndedYear ended December 31, 2010
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues
    
    $
    228,914
    
    
    $
    279,962
    
    
    $
    323,438
    
    
    $
    326,671Operating income (loss)
    
    
    (16,267
    )
    
    
    23,098
    
    
    
    39,621
    
    
    
    34,156Income (loss) before income taxes and equity in net
income (losses) of affiliates
    
    
    (13,704
    )
    
    
    26,355
    
    
    
    41,462
    
    
    
    38,981Equity in net income (losses) of affiliates
    
    
    44,592
    
    
    
    (44,374
    )
    
    
    40,011
    
    
    
    45,396Net income (loss)
    
    
    29,373
    
    
    
    (19,665
    )
    
    
    72,392
    
    
    
    405,241Net income (loss) attributable to Loral common
shareholders
    
    
    29,373
    
    
    
    (19,665
    )
    
    
    72,392
    
    
    
    404,746Basic and diluted income (loss) per share(1):Basic income (loss) per share
    
    
    0.98
    
    
    
    (0.66
    )
    
    
    2.40
    
    
    
    13.36Diluted income (loss) per share
    
    
    0.97
    
    
    
    (0.66
    )
    
    
    2.29
    
    
    
    12.87
  F-54




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Quarter EndedYear ended December 31, 2009
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues
    
    $
    212,491
    
    
    $
    271,447
    
    
    $
    249,237
    
    
    $
    260,225Operating income (loss)
    
    
    (5,480
    )
    
    
    (7,695
    )
    
    
    14,849
    
    
    
    18,537Income (loss) before income taxes and equity in net
income (losses) of affiliates
    
    
    (5,180
    )
    
    
    (4,563
    )
    
    
    16,012
    
    
    
    20,706Equity in net income (losses) of affiliates
    
    
    (5,668
    )
    
    
    85,276
    
    
    
    93,071
    
    
    
    37,619Net income (loss)
    
    
    (10,828
    )
    
    
    74,295
    
    
    
    108,424
    
    
    
    59,811Net income (loss) attributable to Loral common
shareholders
    
    
    (10,828
    )
    
    
    74,295
    
    
    
    108,424
    
    
    
    59,811Basic and diluted income (loss) per share(1):Basic income (loss) per share
    
    
    (0.36
    )
    
    
    2.50
    
    
    
    3.64
    
    
    
    2.01Diluted income (loss) per share
    
    
    (0.36
    )
    
    
    2.48
    
    
    
    3.61
    
    
    
    1.97
 (1)
    
    The quarterly earnings per share information is computed separately for each period.
Therefore, the sum of such quarterly per share amounts may differ from the total for the year.  F-55




---



##### Table of Contents



SCHEDULE II
 LORAL SPACE & COMMUNICATIONS INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 2010, 2009 and 2008
(In thousands)
 AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    Deductions
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    From
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts(1)
    
    
    Reserves(2)
    
    
    PeriodYear ended 2008Allowance for billed receivables
    
    $
    223
    
    
    $
    700
    
    
    $
    
    
    
    $
    
    
    
    $
    923Inventory allowance
    
    $
    28,446
    
    
    $
    
    
    
    $
    
    
    
    $
    (1,246
    )
    
    $
    27,200Deferred tax valuation allowance
    
    $
    241,228
    
    
    $
    202,510
    
    
    $
    82,611
    
    
    $
    (38,587
    )
    
    $
    487,762Year ended 2009Allowance for billed receivables
    
    $
    923
    
    
    $
    2,759
    
    
    $
    
    
    
    $
    
    
    
    $
    3,682Inventory allowance
    
    $
    27,200
    
    
    $
    1,042
    
    
    $
    55
    
    
    $
    
    
    
    $
    28,297Deferred tax valuation allowance
    
    $
    487,762
    
    
    $
    (96,617
    )
    
    $
    22,893
    
    
    $
    
    
    
    $
    414,038Year ended 2010Allowance for billed receivables
    
    $
    3,682
    
    
    $
    
    
    
    $
    
    
    
    $
    (3,459
    )
    
    $
    223Inventory allowance
    
    $
    28,297
    
    
    $
    4,297
    
    
    $
    
    
    
    $
    (1,224
    )
    
    $
    31,370Deferred tax valuation allowance
    
    $
    414,038
    
    
    $
    (402,809
    )(3)
    
    $
    
    
    
    $
    
    
    
    $
    11,229
 (1)
    
    The allowance for long-term receivables is recorded as a reduction to revenues.
Changes in the deferred tax valuation allowance which have been charged to other accounts have
been recorded in accumulated other comprehensive income (loss), goodwill and other deferred
tax assets.(2)
    
    Deductions from reserves reflect write-offs of uncollectible billed receivables,
disposals of inventory and reversal of excess deferred tax valuation allowance recorded as a
reduction to goodwill.(3)
    
    During the fourth quarter of 2010, we determined, based on all available evidence,
that a full valuation allowance was no longer required on our deferred tax assets and,
therefore, $335.3 million of the valuation allowance was reversed as an income tax benefit. In
addition, the valuation allowance was reduced by $67.5 million recorded as benefit to
continuing operations.  F-56




---



##### Table of Contents



Report of Independent Registered Chartered Accountants
   Managements Responsibility for the Consolidated Financial Statements
  Auditors Responsibility
    Opinion
   
  F-57




---



##### Table of Contents



Telesat Holdings Inc.
 
 Consolidated Statements of Earnings (Loss)
for the years ended December 31,
 (in thousands of Canadian dollars)
    
    Notes
    
    
    2010
    
    
    2009
    
    
    2008Operating revenuesService revenues
    
    
    
    
    
    
    801,144
    
    
    
    767,138
    
    
    
    680,791Equipment sales revenues
    
    
    
    
    
    
    20,217
    
    
    
    20,060
    
    
    
    30,584Total operating revenues
    
    
    (4)
    
    
    
    821,361
    
    
    
    787,198
    
    
    
    711,375Amortization
    
    
    
    
    
    
    251,194
    
    
    
    256,867
    
    
    
    235,640Operations and administration
    
    
    
    
    
    
    186,467
    
    
    
    219,690
    
    
    
    247,550Cost of equipment sales
    
    
    
    
    
    
    15,575
    
    
    
    16,380
    
    
    
    24,368Impairment loss on long-lived
assets
    
    
    (10)
    
    
    
    
    
    
    
    
    
    
    
    2,373Impairment loss on intangible
assets
    
    
    (11)
    
    
    
    
    
    
    
    
    
    
    
    483,000Total operating expenses
    
    
    
    
    
    
    453,236
    
    
    
    492,937
    
    
    
    992,931Earnings (loss) from operations
    
    
    
    
    
    
    368,125
    
    
    
    294,261
    
    
    
    (281,556
    )Interest expense
    
    
    (5), (18)
    
    
    
    (253,086
    )
    
    
    (272,780
    )
    
    
    (257,313
    )(Loss) gain on changes in fair
value of financial instruments
    
    
    (18)
    
    
    
    (11,168
    )
    
    
    (116,992
    )
    
    
    241,720Gain (loss) on foreign exchange
    
    
    (18)
    
    
    
    163,998
    
    
    
    499,366
    
    
    
    (697,288
    )Other income (expense)
    
    
    (6)
    
    
    
    4,339
    
    
    
    31,859
    
    
    
    (1,713
    )Earnings (loss) before income
taxes
    
    
    
    
    
    
    272,208
    
    
    
    435,714
    
    
    
    (996,150
    )Income tax (expense) recovery
    
    
    (7)
    
    
    
    (44,017
    )
    
    
    (4,949
    )
    
    
    164,879Net earnings (loss)
    
    
    
    
    
    
    228,191
    
    
    
    430,765
    
    
    
    (831,271
    )Net earnings (loss) applicable to
common shares
    
    
    
    
    
    
    228,191
    
    
    
    430,765
    
    
    
    (831,271
    )
   F-58




---



##### Table of Contents



Telesat Holdings Inc.
 
 Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31,
 (in thousands of Canadian dollars)
    
    2010
    
    
    2009
    
    
    2008Net earnings (loss)
    
    
    228,191
    
    
    
    430,765
    
    
    
    (831,271
    )Other comprehensive income (loss):Unrealized foreign currency
translation gains (losses) of
self sustaining foreign
operations, net of related taxes
(2010  nil, 2009  $346, 2008
 ($2,090))
    
    
    1,215
    
    
    
    320
    
    
    
    (7,143
    )Comprehensive income (loss)
    
    
    229,406
    
    
    
    431,085
    
    
    
    (838,414
    )
   F-59




---



##### Table of Contents



Telesat Holdings Inc.
 
 Consolidated Statements of Shareholders Equity
 Accumulateddeficit andAccumulated
    
    
    Accumulatedother
    
    
    other
    
    
    
    
    
    
    Total(in thousands of
    
    
    
    
    
    Common
    
    
    Preferred
    
    
    Accumulated
    
    
    comprehensive
    
    
    comprehensive
    
    
    Contributed
    
    
    shareholdersCanadian dollars)
    
    Notes
    
    
    shares
    
    
    Shares
    
    
    deficit
    
    
    loss
    
    
    loss
    
    
    surplus
    
    
    equityBalance at January
1, 2008
    
    
    
    
    
    
    756,414
    
    
    
    541,764
    
    
    
    (4,051
    )
    
    
    (599
    )
    
    
    (4,650
    )
    
    
    
    
    
    
    1,293,528Stock-based
compensation
    
    
    (19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,448
    
    
    
    5,448Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (831,271
    )
    
    
    
    
    
    
    (831,271
    )
    
    
    
    
    
    
    (831,271
    )Unrealized
foreign currency
translation
losses on
translation of
self sustaining
foreign
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,143
    )
    
    
    (7,143
    )
    
    
    
    
    
    
    (7,143
    )Balance at December
31, 2008
    
    
    
    
    
    
    756,414
    
    
    
    541,764
    
    
    
    (835,322
    )
    
    
    (7,742
    )
    
    
    (843,064
    )
    
    
    5,448
    
    
    
    460,562Stock based
compensation
    
    
    (19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,649
    
    
    
    5,649Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    430,765
    
    
    
    
    
    
    
    430,765
    
    
    
    
    
    
    
    430,765Unrealized
foreign currency
translation
gains on
translation of
self-sustaining
foreign
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    320
    
    
    
    
    
    
    
    320Balance at December
31, 2009
    
    
    
    
    
    
    756,414
    
    
    
    541,764
    
    
    
    (404,557
    )
    
    
    (7,422
    )
    
    
    (411,979
    )
    
    
    11,097
    
    
    
    897,296Stock based
compensation
    
    
    (19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,653
    
    
    
    5,653Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228,191
    
    
    
    
    
    
    
    228,191
    
    
    
    
    
    
    
    228,191Dividends
declared on
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )Unrealized
foreign currency
translation
gains on
translation of
self-sustaining
foreign
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,215
    
    
    
    1,215
    
    
    
    
    
    
    
    1,215Balance at December
31, 2010
    
    
    
    
    
    
    756,414
    
    
    
    541,764
    
    
    
    (176,396
    )
    
    
    (6,207
    )
    
    
    (182,603
    )
    
    
    16,750
    
    
    
    1,132,325
   F-60




---



##### Table of Contents



Telesat Holdings Inc.
 
 Consolidated Balance Sheets
as at December 31,
 (in thousands of Canadian dollars)
    
    Notes
    
    
    2010
    
    
    2009AssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    220,295
    
    
    
    154,189Accounts receivable, net
    
    
    (8)
    
    
    
    44,109
    
    
    
    70,203Current future tax asset
    
    
    (7)
    
    
    
    1,900
    
    
    
    2,184Other current assets
    
    
    (9)
    
    
    
    26,476
    
    
    
    29,018Total current assets
    
    
    
    
    
    
    292,780
    
    
    
    255,594Satellites, property and other equipment,
net
    
    
    (4), (10)
    
    
    
    1,994,122
    
    
    
    1,926,190Other long-term assets
    
    
    (9), (18)
    
    
    
    112,816
    
    
    
    56,924Intangible assets, net
    
    
    (11)
    
    
    
    461,060
    
    
    
    510,675Goodwill
    
    
    (11)
    
    
    
    2,446,603
    
    
    
    2,446,603Total assets
    
    
    
    
    
    
    5,307,381
    
    
    
    5,195,986LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    
    
    
    
    49,906
    
    
    
    43,413Other current liabilities
    
    
    (12)
    
    
    
    128,296
    
    
    
    127,704Debt due within one year
    
    
    (13)
    
    
    
    96,848
    
    
    
    23,602Total current liabilities
    
    
    
    
    
    
    275,050
    
    
    
    194,719Debt financing
    
    
    (13), (18)
    
    
    
    2,771,802
    
    
    
    3,021,820Future tax liability
    
    
    (7)
    
    
    
    310,552
    
    
    
    269,193Other long-term liabilities
    
    
    (12)
    
    
    
    676,217
    
    
    
    671,523Senior preferred shares
    
    
    (14)
    
    
    
    141,435
    
    
    
    141,435Total liabilities
    
    
    
    
    
    
    4,175,056
    
    
    
    4,298,690Shareholders equityCommon shares (74,252,460 common shares
issued and outstanding)
    
    
    (15)
    
    
    
    756,414
    
    
    
    756,414Preferred shares
    
    
    (15)
    
    
    
    541,764
    
    
    
    541,7641,298,178
    
    
    
    1,298,178Accumulated deficit
    
    
    (18)
    
    
    
    (176,396
    )
    
    
    (404,557
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (6,207
    )
    
    
    (7,422
    )(182,603
    )
    
    
    (411,979
    )Contributed surplus
    
    
    (19)
    
    
    
    16,750
    
    
    
    11,097Total shareholders equity
    
    
    
    
    
    
    1,132,325
    
    
    
    897,296Total liabilities and shareholders equity
    
    
    
    
    
    
    5,307,381
    
    
    
    5,195,986
   F-61




---



##### Table of Contents



Telesat Holdings Inc.
 
 Consolidated Statements of Cash Flows
for the years ended December 31,
 (in thousands of Canadian dollars)
    
    Notes
    
    
    2010
    
    
    2009
    
    
    2008Cash flows from operating activitiesNet (loss) earnings
    
    
    
    
    
    
    228,191
    
    
    
    430,765
    
    
    
    (831,271
    )Adjustments to reconcile net
earnings (loss) to cash flows from
operating activities:Amortization
    
    
    
    
    
    
    251,194
    
    
    
    256,867
    
    
    
    235,640Future income taxes
    
    
    
    
    
    
    41,738
    
    
    
    4,598
    
    
    
    (175,951
    )Unrealized foreign exchange
(gain) loss
    
    
    (18)
    
    
    
    (170,048
    )
    
    
    (522,636
    )
    
    
    694,677Unrealized loss (gain) on
derivatives
    
    
    (18)
    
    
    
    13,955
    
    
    
    116,992
    
    
    
    (237,965
    )Dividends on senior preferred
shares
    
    
    (5)
    
    
    
    2,075
    
    
    
    13,540
    
    
    
    9,855Stock-based compensation expense
    
    
    (19)
    
    
    
    5,653
    
    
    
    5,649
    
    
    
    5,448(Gain) loss on disposal of assets
    
    
    (6)
    
    
    
    (3,826
    )
    
    
    (33,430
    )
    
    
    252Impairment losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    485,373Other
    
    
    
    
    
    
    (25,098
    )
    
    
    (46,803
    )
    
    
    (44,447
    )Customer prepayments on future
satellite services
    
    
    
    
    
    
    30,982
    
    
    
    82,966
    
    
    
    88,587Customer refunds
    
    
    
    
    
    
    
    
    
    
    (17,566
    )
    
    
    Operating assets and liabilities
    
    
    (16)
    
    
    
    (30,006
    )
    
    
    7,203
    
    
    
    48,859344,810
    
    
    
    298,145
    
    
    
    279,057Cash flows used in investing
activitiesSatellite programs
    
    
    
    
    
    
    (257,725
    )
    
    
    (258,083
    )
    
    
    (263,763
    )Property additions
    
    
    
    
    
    
    (3,966
    )
    
    
    (6,118
    )
    
    
    (8,862
    )Proceeds on disposals of assets
    
    
    
    
    
    
    26,926
    
    
    
    71,400
    
    
    
    5,120Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,006(234,765
    )
    
    
    (192,801
    )
    
    
    (263,499
    )Cash flows from financing activitiesDebt financing
    
    
    
    
    
    
    
    
    
    
    23,880
    
    
    
    186,687Repayment of debt financing
    
    
    
    
    
    
    (34,946
    )
    
    
    (53,855
    )
    
    
    (91,560
    )Capitalized debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,131
    )Dividends paid on preferred shares
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    Capital lease payments
    
    
    
    
    
    
    (3,306
    )
    
    
    (14,620
    )
    
    
    (30,954
    )Satellite performance incentive
payments
    
    
    
    
    
    
    (5,099
    )
    
    
    (5,418
    )
    
    
    (3,524
    )(43,381
    )
    
    
    (50,013
    )
    
    
    41,518Effect of changes in exchange rates
on cash and cash equivalents
    
    
    
    
    
    
    (558
    )
    
    
    319
    
    
    
    (740
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    66,106
    
    
    
    55,650
    
    
    
    56,336Cash and cash equivalents, beginning
of period
    
    
    
    
    
    
    154,189
    
    
    
    98,539
    
    
    
    42,203Cash and cash equivalents, end of
period
    
    
    (16)
    
    
    
    220,295
    
    
    
    154,189
    
    
    
    98,539Supplemental disclosure of cash flow
informationInterest paid
    
    
    
    
    
    
    281,525
    
    
    
    287,733
    
    
    
    286,784Income taxes paid
    
    
    
    
    
    
    3,391
    
    
    
    6,499
    
    
    
    8,866284,916
    
    
    
    294,232
    
    
    
    295,650
   F-62




---



##### Table of Contents



Telesat Holdings Inc.
 
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 1. BACKGROUND OF THE COMPANY AND BASIS OF PRESENTATION
    2. SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  Revenue Recognition
   F-63




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
   Cash and Cash Equivalents
  Inventories
  Satellites, Property and Other Equipment
   YearsSatellites
    
    
    6 to 15Transponders under capital lease
    
    
    6 to 14Earth stations
    
    
    5 to 30Office buildings and other
    
    
    3 to 30
    F-64




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
   Leases
  Impairment of Long-Lived Assets
  Translation of Foreign Currencies
    Financing costs
   F-65




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
 Financial Instruments
      Goodwill and Other Intangible Assets
   F-66




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
  YearsRevenue backlog
    
    
    4 to 17Customer relationships
    
    
    11 to 21Favorable leases
    
    
    4 to 5Concession rights
    
    
    15Transponder rights
    
    
    5 to 14Patents
    
    
    18
     Deferred Revenues
  Deferred Satellites Performance Incentive Payments
   F-67




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
 Employee Benefit Plans
    Stock-Based Compensation Plans
  Income Taxes
  
    
    the temporary differences between the carrying amounts of assets and
liabilities for accounting purposes and the amounts used for tax
purposes; and
    
    the benefit of unutilized tax losses that will more likely than not be
realized and carried forward to future years to reduce income taxes.
  Recent Accounting Pronouncements
 Changes in Accounting Policies
   F-68




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 2. SIGNIFICANT ACCOUNTING POLICIES  (continued)
 Future Accounting Policies
  3. BUSINESS ACQUISITIONS
 Fifth Dimension Television Acquisition
  4. SEGMENTED INFORMATION
   
    
    Broadcast distribution or collection of video and audio signals in
the North American and International markets which include television
transmit and receive services, occasional use, bundled Digital Video
Compression and radio services.
    
    Enterprise provision of satellite capacity and ground network
services for voice, data, and image transmission and internet access
around the world.
    
    Consulting and other all consulting services related to space and
earth segments, government studies, satellite control services and
R&D.
  RevenuesYear ended December 31,
    
    2010
    
    
    2009
    
    
    2008Broadcast
    
    
    454,216
    
    
    
    406,712
    
    
    
    345,382Enterprise
    
    
    334,983
    
    
    
    349,530
    
    
    
    333,834Consulting and other
    
    
    32,162
    
    
    
    30,956
    
    
    
    32,159Total operating revenues
    
    
    821,361
    
    
    
    787,198
    
    
    
    711,375
  F-69




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 4. SEGMENTED INFORMATION  (continued)
 Geographic Information
  RevenuesYear ended December 31,
    
    2010
    
    
    2009
    
    
    2008Canada
    
    
    419,032
    
    
    
    397,225
    
    
    
    357,937United States
    
    
    261,136
    
    
    
    254,685
    
    
    
    240,505Europe, Middle East & Africa
    
    
    77,031
    
    
    
    66,028
    
    
    
    47,014Asia, Australia
    
    
    16,268
    
    
    
    23,976
    
    
    
    33,768Latin America & Caribbean
    
    
    47,894
    
    
    
    45,284
    
    
    
    32,151Total operating revenues
    
    
    821,361
    
    
    
    787,198
    
    
    
    711,375
  Satellites, property and other equipmentAt December 31,
    
    2010
    
    
    2009Canada
    
    
    1,644,049
    
    
    
    1,519,663United States
    
    
    342,941
    
    
    
    397,956all others
    
    
    7,132
    
    
    
    8,571Total satellites, property and other equipment
    
    
    1,994,122
    
    
    
    1,926,190
 IntangiblesAt December 31,
    
    2010
    
    
    2009Canada
    
    
    443,945
    
    
    
    492,435United States
    
    
    14,406
    
    
    
    15,505all others
    
    
    2,709
    
    
    
    2,735Total intangible assets
    
    
    461,060
    
    
    
    510,675
  Major Customers
   F-70




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 5. INTEREST EXPENSE
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Debt service costs
    
    
    255,391
    
    
    
    278,644
    
    
    
    286,466Dividends on senior preferred shares
    
    
    12,339
    
    
    
    13,540
    
    
    
    9,855Capitalized interest
    
    
    (14,644
    )
    
    
    (19,404
    )
    
    
    (39,008
    )253,086
    
    
    
    272,780
    
    
    
    257,313
 6. OTHER INCOME (EXPENSE)
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Interest income
    
    
    1,937
    
    
    
    636
    
    
    
    1,888Interest on performance incentive payments
    
    
    (5,016
    )
    
    
    (4,642
    )
    
    
    (4,057
    )Other (a)
    
    
    7,418
    
    
    
    35,865
    
    
    
    4564,339
    
    
    
    31,859
    
    
    
    (1,713
    )
 (a)
    
    On December 15, 2010, the Company sold its land, building and certain
equipment used at its corporate headquarters. Proceeds on the sale
were $18.5 million and the resulting gain of $2.8 million was included
in Other. During the year, additional asset disposals resulted in
gains of $1.0 million which were included in Other.On July 9, 2009, the Company terminated its leasehold interest in the Telstar 10
satellite and transferred certain related customer contracts. The satellite and related
revenue backlog and customer relationships were transferred for total consideration of
$80 million, of which approximately $8 million represented deferred payments collected
during the current period. The gain of $34.6 million was included in Other.In May 2009, Telesat Network Services Inc., a wholly-owned subsidiary of Telesat, sold
the equipment at its Kapolei site and transferred the operating lease for the premises
to the buyer of the equipment. Proceeds on this sale were $0.5 million and the resulting
loss of $0.2 million is included in Other.In May 2008, Skynet Satellite Corporation, a wholly-owned subsidiary of Telesat, sold
its Hawley facility. Proceeds on this sale were $4.1 million and the resulting loss on
the sale of $0.1 million is included in Other.In February 2008, Infosat Communications Inc., a wholly-owned subsidiary of Telesat,
sold its security division. Proceeds on this sale were $0.6 million and the resulting
gain on the sale of $0.4 million is included in Other. 7. INCOME TAXES
 Income tax expense (recovery)Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Current
    
    
    2,279
    
    
    
    351
    
    
    
    11,072Future
    
    
    41,738
    
    
    
    4,598
    
    
    
    (175,951
    )44,017
    
    
    
    4,949
    
    
    
    (164,879
    )
  F-71




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 7. INCOME TAXES  (continued)
  Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Statutory income tax rate
    
    
    30.5
    %
    
    
    32.3
    %
    
    
    33.0
    %Permanent differences
    
    
    (6.8
    %)
    
    
    (10.5
    %)
    
    
    (6.1
    %)Adjustment for tax rate changes
    
    
    (3.3
    %)
    
    
    (9.3
    %)
    
    
    (2.5
    %)Valuation allowance
    
    
    (7.1
    %)
    
    
    (12.9
    %)
    
    
    (6.7
    %)Other
    
    
    2.9
    %
    
    
    1.5
    %
    
    
    (1.1
    %)Effective income tax rate
    
    
    16.2
    %
    
    
    1.1
    %
    
    
    16.6
    %
  Year ended December 31,2010
    
    
    2009Future tax assetsCapital assets
    
    
    2,193
    
    
    
    924Intangible assets
    
    
    4,368
    
    
    
    6,180Unrealized foreign exchange loss
    
    
    14,276
    
    
    
    31,867Investments
    
    
    544
    
    
    
    541Loss carry forwards
    
    
    67,885
    
    
    
    98,024Other
    
    
    6,290
    
    
    
    8,437Less: valuation allowance
    
    
    (25,648
    )
    
    
    (45,040
    )Total future tax assets
    
    
    69,908
    
    
    
    100,933Future tax liabilitiesCapital assets
    
    
    (236,053
    )
    
    
    (215,162
    )Intangibles
    
    
    (120,096
    )
    
    
    (124,955
    )Derivative liabilities
    
    
    (14,935
    )
    
    
    (21,958
    )Other
    
    
    (7,476
    )
    
    
    (5,867
    )Total future tax liabilities
    
    
    (378,560
    )
    
    
    (367,942
    )Net future income tax liability
    
    
    (308,652
    )
    
    
    (267,009
    )Net future income tax liability is comprised of:Net future income tax asset  current portion
    
    
    1,900
    
    
    
    2,184Net future income tax liability  long-term portion
    
    
    (310,552
    )
    
    
    (269,193
    )Net future income tax liability
    
    
    (308,652
    )
    
    
    (267,009
    )
  F-72




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 7. INCOME TAXES  (continued)
 Losses
  Non-Capital
    
    
    CapitalLosses
    
    
    Losses2027
    
    
    5,668
    
    
    
    2028
    
    
    221,291
    
    
    
    2029
    
    
    5,933
    
    
    
    2030
    
    
    3,987
    
    
    
    Indefinite
    
    
    
    
    
    
    39,058
  8. ACCOUNTS AND NOTES RECEIVABLE
 At December 31,
    
    2010
    
    
    2009Trade receivables  net of allowance for doubtful accounts
    
    
    48,521
    
    
    
    74,018Less: long-term portion of trade receivables
    
    
    (4,412
    )
    
    
    (3,815
    )44,109
    
    
    
    70,203
   9. OTHER ASSETS
 December 31, 2010
    
    
    December 31, 2009Current
    
    
    Long term
    
    
    Current
    
    
    Long termIncome taxes recoverable
    
    
    3,027
    
    
    
    
    
    
    
    3,487
    
    
    
    Accrued pension benefit (note 20)
    
    
    
    
    
    
    20,197
    
    
    
    
    
    
    
    14,199Prepaid expenses and deposits (a)
    
    
    17,706
    
    
    
    10,913
    
    
    
    17,548
    
    
    
    14,423Deferred charges (b)
    
    
    1,996
    
    
    
    1,751
    
    
    
    2,108
    
    
    
    5,244Derivative assets (note 18)
    
    
    
    
    
    
    72,405
    
    
    
    
    
    
    
    15,914Inventories (c)
    
    
    2,985
    
    
    
    
    
    
    
    5,214
    
    
    
    Tax indemnification receivable from Loral
(note 21)
    
    
    
    
    
    
    2,332
    
    
    
    
    
    
    
    2,461Investments (d)
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    475Long term trade receivables
    
    
    
    
    
    
    4,412
    
    
    
    
    
    
    
    3,815Investment tax credit benefit
    
    
    556
    
    
    
    
    
    
    
    661
    
    
    
    Other assets
    
    
    206
    
    
    
    248
    
    
    
    
    
    
    
    39326,476
    
    
    
    112,816
    
    
    
    29,018
    
    
    
    56,924
 (a)
    
    Prepaid expense and deposits includes mainly prepaid insurance for
in-orbit satellites, deposits related to foreign taxes, prepaid
interest on long term debt, security deposits, and other prepaid
expenses.(b)
    
    Deferred charges include the deferred financing charges related to the
Revolving facility and the Canadian term loan facility (note 13).  F-73




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 9. OTHER ASSETS  (continued)
 (c)
    
    Inventories are valued at lower of cost and net realizable value and consist of $2.4 million
(2009  $2.9 million) of finished goods and $0.6 million (2009  $2.3 million) of work in
process. All of the inventories have been pledged as security pursuant to the terms of the
senior secured credit facilities.(d)
    
    Investments include an interest in Hellas-Sat Consortium Limited, a
satellite operator offering services in Europe, Middle East and
Southern Africa, and an interest in Information Systems Associates
Limited, a satellite service provider. 10. SATELLITES, PROPERTY AND OTHER EQUIPMENT
 Accumulated
    
    
    Net BookCost
    
    
    Amortization
    
    
    ValueDecember 31, 2010Satellites
    
    
    2,018,871
    
    
    
    (505,606
    )
    
    
    1,513,265Earth stations
    
    
    150,457
    
    
    
    (45,599
    )
    
    
    104,858Transponders under capital lease
    
    
    25,871
    
    
    
    (10,491
    )
    
    
    15,380Office buildings and other
    
    
    14,700
    
    
    
    (8,823
    )
    
    
    5,877Construction in progress
    
    
    354,742
    
    
    
    
    
    
    
    354,7422,564,641
    
    
    
    (570,519
    )
    
    
    1,994,122December 31, 2009Satellites
    
    
    2,018,871
    
    
    
    (323,734
    )
    
    
    1,695,137Earth stations
    
    
    149,085
    
    
    
    (30,083
    )
    
    
    119,002Transponders under capital lease
    
    
    28,048
    
    
    
    (8,550
    )
    
    
    19,498Office buildings and other
    
    
    31,735
    
    
    
    (11,548
    )
    
    
    20,187Construction in progress
    
    
    72,366
    
    
    
    
    
    
    
    72,3662,300,105
    
    
    
    (373,915
    )
    
    
    1,926,190
     F-74




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 11. GOODWILL AND INTANGIBLE ASSETS
 Accumulated
    
    
    Net BookDecember 31, 2010
    
    Cost
    
    
    Amortization
    
    
    ValueFinite life intangible assets:Revenue backlog
    
    
    268,123
    
    
    
    (110,162
    )
    
    
    157,961Customer relationships
    
    
    197,920
    
    
    
    (44,156
    )
    
    
    153,764Favourable leases
    
    
    
    
    
    
    
    
    
    
    Concession rights
    
    
    1,398
    
    
    
    (186
    )
    
    
    1,212Transponder rights
    
    
    28,497
    
    
    
    (10,842
    )
    
    
    17,655Patents
    
    
    59
    
    
    
    (10
    )
    
    
    49495,997
    
    
    
    (165,356
    )
    
    
    330,641Indefinite life intangible assets:Orbital slots
    
    
    113,419
    
    
    
    
    
    
    
    113,419Trade name
    
    
    17,000
    
    
    
    
    
    
    
    17,000Total intangible assets
    
    
    626,416
    
    
    
    (165,356
    )
    
    
    461,060Goodwill
    
    
    2,446,603
    
    
    
    
    
    
    
    2,446,603Goodwill and intangible assets
    
    
    3,073,019
    
    
    
    (165,356
    )
    
    
    2,907,663
 Accumulated
    
    
    Net BookDecember 31, 2009
    
    Cost
    
    
    Amortization
    
    
    ValueFinite life intangible assets:Revenue backlog
    
    
    268,123
    
    
    
    (77,210
    )
    
    
    190,913Customer relationships
    
    
    197,920
    
    
    
    (33,140
    )
    
    
    164,780Favourable leases
    
    
    2,990
    
    
    
    (1,774
    )
    
    
    1,216Concession rights
    
    
    1,404
    
    
    
    (94
    )
    
    
    1,310Transponder rights
    
    
    29,550
    
    
    
    (7,493
    )
    
    
    22,057Patents
    
    
    59
    
    
    
    (7
    )
    
    
    52500,046
    
    
    
    (119,718
    )
    
    
    380,328Indefinite life intangible assets:Orbital slots
    
    
    113,347
    
    
    
    
    
    
    
    113,347Trade name
    
    
    17,000
    
    
    
    
    
    
    
    17,000Total intangible assets
    
    
    630,393
    
    
    
    (119,718
    )
    
    
    510,675Goodwill
    
    
    2,446,603
    
    
    
    
    
    
    
    2,446,603Goodwill and intangible assets
    
    
    3,076,996
    
    
    
    (119,718
    )
    
    
    2,957,278
   At December 31,
    
    2010
    
    
    2009Discount rate
    
    
    10
    %
    
    
    9.5
    %Compounded annual growth rate (5 years)
    
    
    6.7
    %
    
    
    6.2
    %Terminal year growth rate
    
    
    3.0
    %
    
    
    3.0
    %
  F-75




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 11. GOODWILL AND INTANGIBLE ASSETS  (continued)
   12. OTHER LIABILITIES
 At December 31,
    
    2010
    
    
    2009Other current liabilities
    
    
    128,296
    
    
    
    127,704Other long-term liabilities
    
    
    676,217
    
    
    
    671,523804,513
    
    
    
    799,227
  2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalDeferred revenues and deposits
    
    
    63,109
    
    
    
    35,870
    
    
    
    36,421
    
    
    
    34,971
    
    
    
    31,218
    
    
    
    179,847
    
    
    
    381,436Derivative liabilities (note 18)
    
    
    20,475
    
    
    
    
    
    
    
    
    
    
    
    223,979
    
    
    
    
    
    
    
    
    
    
    
    244,454Capital lease liabilities
(a)
    
    
    3,656
    
    
    
    3,975
    
    
    
    4,368
    
    
    
    4,154
    
    
    
    751
    
    
    
    
    
    
    
    16,904Deferred satellites performance
incentive payments
    
    
    10,321
    
    
    
    3,863
    
    
    
    4,098
    
    
    
    4,423
    
    
    
    4,776
    
    
    
    39,996
    
    
    
    67,477Interest payable
    
    
    23,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,171Dividends payable on senior
preferred shares (note 14)
    
    
    2,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,075Pension and other post
retirement liabilities (note
20)
    
    
    491
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,703
    
    
    
    24,194Promissory note payable to
Loral (note 22)
    
    
    
    
    
    
    17,525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,525Tax indemnification payable to
Loral
    
    
    
    
    
    
    6,949
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,949Potential tax liability
    
    
    636
    
    
    
    6,949
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,585Asset retirement obligations
    
    
    165
    
    
    
    541
    
    
    
    176
    
    
    
    224
    
    
    
    
    
    
    
    426
    
    
    
    1,532Unfavourable backlog
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,922
    
    
    
    3,922Unfavourable leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    926
    
    
    
    926Other liabilities (b)
    
    
    4,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,166
    
    
    
    6,363128,296
    
    
    
    75,672
    
    
    
    45,063
    
    
    
    267,751
    
    
    
    36,745
    
    
    
    250,986
    
    
    
    804,513
 (a)
    
    At December 31, 2010, interest payable related to the capital lease liabilities was $3.4 million (2009  $5.3 million).(b)
    
    Other liabilities include items that are both current and long-term in
nature. The long-term items are estimated to mature after 2015 due to
uncertainty in settlement dates.  F-76




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 13. DEBT FINANCING
 At December 31,
    
    2010
    
    
    2009Senior secured credit facilities (a):Revolving facility
    
    
    
    
    
    
    The Canadian term loan facility
    
    
    170,000
    
    
    
    185,000The U.S. term loan facility (2010  USD $1,702,350, 2009  USD
$1,719,900)
    
    
    1,698,945
    
    
    
    1,811,399The U.S. term loan II facility (2010  USD $146,225, 2010  USD
$147,725)
    
    
    145,933
    
    
    
    155,584Senior Notes (USD $692,825) (b)
    
    
    691,439
    
    
    
    729,683Senior Subordinated Notes (USD $217,175) (c) )
    
    
    216,741
    
    
    
    228,7292,923,058
    
    
    
    3,110,395Less: deferred financing costs and prepayment options (d)
    
    
    (54,408
    )
    
    
    (64,973
    )2,868,650
    
    
    
    3,045,422Less: current portion (net of deferred financing costs)
    
    
    (96,848
    )
    
    
    (23,602
    )Long-term portion
    
    
    2,771,802
    
    
    
    3,021,820
 (a)
    
    The senior secured credit facilities are secured by substantially all
of Telesats assets. Under the terms of these facilities, Telesat is
required to comply with certain covenants including financial
reporting, maintenance of certain financial covenant ratios for
leverage and interest coverage, a requirement to maintain minimum
levels of satellite insurance, restrictions on capital expenditures, a
restriction on fundamental business changes or the creation of
subsidiaries, restrictions on investments, restrictions on dividend
payments, restrictions on the incurrence of additional debt,
restrictions on asset dispositions, and restrictions on transactions
with affiliates. The financial covenant ratios include total debt to
EBITDA for covenant purposes (earnings before interest, taxes,
depreciation, amortization and other charges) and EBITDA for covenant
purposes to interest expense. Both financial covenant ratios tighten
over the term of the credit facility. At December 31, 2010 Telesat was
in compliance with all of the required covenants.Telesat was required to hedge, at fixed rates, prior to February of 2008, 50% of its
floating interest rate debt for a three year period ending October 31, 2010. The Company
has complied with this obligation and has no additional hedging requirements. These
derivative instruments have not been designated as hedging instruments for accounting
purposes.Each tranche of the credit facility is subject to mandatory principal repayment
requirements, which, in the initial years, are generally an annual amount representing
1% of the initial aggregate principal amount, payable quarterly. The senior secured
credit facility has several tranches which are described below:(i)
    
    A revolving Canadian dollar denominated credit facility (the
revolving facility) of up to $153 million is available to Telesat.
This revolving facility matures on October 31, 2012 and is available
to be drawn at any time. The drawn loans bear interest at the prime
rate or LIBOR or Bankers Acceptance plus an applicable margin of 150
to 250 basis points per annum. Undrawn amounts under the facility are
subject to a commitment fee. As of December 31, 2010, other than
approximately $0.2 million in drawings related to letters of credit,
there were no borrowings under this facility.(ii)
    
    The Canadian term loan facility was initially a $200 million facility
denominated in Canadian dollars, with a maturity date of October 31,
2012. Loans under this facility bear interest at a floating rate of
the Bankers Acceptance rate plus an applicable margin of 275 basis
points per annum. The required repayments on the Canadian term loan
facility are as follows: AnnualRepayments2011
    
    
    90,0002012
    
    
    80,000Total repayments
    
    
    170,000
  F-77




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 13. DEBT FINANCING  (continued)
 The payments are generally made quarterly in varying amounts. The average interest
rate was 3.63% for the year ended December 31, 2010 (2009  3.61%, 2008  6.57%).
This facility had $170 million outstanding at December 31, 2010, which represents the
full amount available, with principal repayments being made as required.(iii)
    
    The U.S. term loan was initially a $1,755 million facility
denominated in U.S. dollars, bears interest at LIBOR plus an
applicable margin of 300 basis points per annum, and has a maturity
of October 31, 2014. The average interest rate was 3.28% for the
year ended December 31, 2010 (2009  3.80%, 2008  6.35%).
Principal repayments of U.S. $4.4 million are made on a quarterly
basis, with a lump sum repayment of the remaining balance payable on
the maturity date.(iv)
    
    The U.S. term loan II was initially a $150 million delayed draw
facility denominated in U.S. dollars, bears interest at LIBOR plus an
applicable margin of 300 basis points per annum, and has a maturity
of October 31, 2014. The average interest rate was 3.28% for the year
ended December 31, 2010 (2009  3.80%, 2008  6.17%). The U.S. term
loan II facility was available to be drawn for 12 months after the
closing of the Telesat Canada acquisition to fund capital
expenditures. The undrawn amount of the U.S. term loan II was subject
to a commitment fee. The facility was fully drawn at December 31,
2010. Principal repayments of U.S. $0.4 million are made on a
quarterly basis, with a lump sum repayment of the remaining balance
payable on the maturity date.(b)
    
    The Senior Notes bear interest at an annual rate of 11.0% and are due
November 1, 2015. The Senior Notes include covenants or terms that
restrict Telesats ability to, among other things, (i) incur
additional indebtedness, (ii) incur liens, (iii) pay dividends or make
certain other restricted payments, investments or acquisitions, (iv)
enter into certain transactions with affiliates, (v) modify or cancel
the Companys satellite insurance, (vi) effect mergers with another
entity, and (vii) redeem the Senior Notes prior to May 1, 2012, in
each case subject to exceptions provided in the Senior Notes
indenture.(c)
    
    The Senior Subordinated Notes bear interest at a rate of 12.5% and are
due November 1, 2017. The Senior Subordinated Notes include covenants
or terms that restrict Telesats ability to, among other things, (i)
incur additional indebtedness, (ii) incur liens, (iii) pay dividends
or make certain other restricted payments, investments or
acquisitions, (iv) enter into certain transactions with affiliates,
(v) modify or cancel the Companys satellite insurance, (vi) effect
mergers with another entity, and (vii) redeem the Senior Subordinated
Notes prior to May 1, 2013, in each case subject to exceptions
provided in the Senior Subordinated Notes indenture.(d)
    
    The U.S. term loan facilities, Senior Notes and Senior Subordinated
Notes are presented on the balance sheet net of related deferred
financing costs of $61.6 million (2009  $73.1 million). The
indenture agreements for the Senior Notes and Senior Subordinated
Notes contain provisions for certain prepayment options which were
fair valued at the time of debt issuance (note 18). The initial fair
value impact of the prepayment options on the Senior Notes and Senior
Subordinated Notes was an increase to the liabilities of $6.5 million
and $2.7 million, respectively. These liability amounts are
subsequently amortized using the effective interest rate method with
carrying amounts of $4.9 million and $2.3 million respectively, at
December 31, 2010 (2009  $5.6 million and $2.5 million, 2008  $6.3
million and $2.6 million). The short-term and long-term portions of deferred financing costs and prepayment
options are as follows:
 At December 31,
    
    2010
    
    
    2009Short-term deferred financing costs
    
    
    12,165
    
    
    
    11,462Long-term deferred financing costs
    
    
    49,433
    
    
    
    61,59361,598
    
    
    
    73,055Long-term prepayment option  Senior notes
    
    
    (4,928
    )
    
    
    (5,631
    )Long-term prepayment option  Senior subordination
notes
    
    
    (2,262
    )
    
    
    (2,451
    )(7,190
    )
    
    
    (8,082
    )Total deferred financing costs and prepayment options
    
    
    54,408
    
    
    
    64,973
  F-78




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 13. DEBT FINANCING  (continued)
  2011
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    Total109.0
    
    
    99.0
    
    
    
    19.0
    
    
    
    1,787.9
    
    
    
    691.4
    
    
    
    216.8
    
    
    
    2,923.1
 14. SENIOR PREFERRED SHARES
    15. CAPITAL STOCK
  Common Shares
   F-79




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 15. CAPITAL STOCK  (continued)
  Voting Participating Preferred Shares
  
    
    The holders of Voting Participating Preferred Shares are not entitled
to vote at meetings of the shareholders of the Company on resolutions
electing directors.
    
    For all other meetings of the shareholders of the Company, the holders
of Voting Participating Preferred Shares are entitled to a variable
number of votes per Voting Participating Preferred Share based on the
number of Voting Participating Preferred Shares, Non-Voting
Participating Preferred Shares and Redeemable Non-Voting Participating
Preferred Shares outstanding on the record date of the given meeting
of the shareholders of the Company.
    
    The Voting Participating Preferred Shares are convertible, at any
time, at the holders option into Common Shares or Non-Voting
Participating Preferred Shares on a one-for-one basis as long as the
result of such conversion does not cause the Company to cease to be a
qualified corporation within the meaning of the Canadian
Telecommunication Common Carrier Ownership and Control Regulations
pursuant to the Telecommunications Act (Canada).
  Non-Voting Participating Preferred Shares
  
    
    The holders of Non-Voting Participating Preferred Shares are not
entitled to vote on any matter at meetings of the shareholders of the
Company, except in respect of a class vote applicable only to the
Non-Voting Participating Preferred Shares.
    
    The Non-Voting Participating Preferred Shares are convertible, at any
time, at the holders option into Common Shares or Voting
Participating Preferred Shares on a one-for-one basis as long as the
result of such conversion does not cause the Company to cease to be a
qualified corporation within the meaning of the Canadian
Telecommunication Common Carrier Ownership and Control Regulations
pursuant to the Telecommunications Act (Canada).
   F-80




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 15. CAPITAL STOCK  (continued)
 Director Voting Preferred Shares
  
    
    The holders of Director Voting Preferred Shares are entitled to
receive notice of and to attend all meetings of the shareholders of
the Company at which directors of the Company are to be elected. The
holders of the Director Voting Preferred Shares are not entitled to
attend meetings of the shareholders of the Company and have no right
to vote on any matter other than the election of directors of the
Company.
    
    The holders of Director Voting Preferred Shares are entitled to
receive annual non-cumulative dividends of $10 per share if declared
by the Board of Directors of the Company, in priority to the payment
of dividends on the Common Shares, Voting Participating Preferred
Shares, Non-Voting Participating Preferred Shares, Redeemable Common
Shares, and Redeemable Non-Voting Participating Preferred Shares, but
after payment of any accrued dividends on the Senior Preferred Shares.
    
    In the event of liquidation, wind-up or dissolution, the holders of
Director Voting Preferred Shares are entitled to receive $10 per share
in priority to the payment of dividends on the Common Shares, Voting
Participating Preferred Shares, Non-Voting Participating Preferred
Shares, Redeemable Common Shares, and Redeemable Non-Voting
Participating Preferred Shares, but after payment of any accrued
dividends on the Senior Preferred Shares.
    
    The Director Voting Preferred Shares are redeemable at the option of
the Company, at any time, at a redemption price of $10 per share.
  16. CASH FLOW INFORMATION
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Cash and cash equivalents is comprised of:Cash
    
    
    129,217
    
    
    
    89,679
    
    
    
    26,584Short term investments, original maturity 90
days or less
    
    
    91,078
    
    
    
    64,510
    
    
    
    71,955220,295
    
    
    
    154,189
    
    
    
    98,539Changes in operating assets and liabilities
are comprised of:Accounts and notes receivable
    
    
    21,884
    
    
    
    (2,021
    )
    
    
    (3,303
    )Other assets
    
    
    (1,836
    )
    
    
    15,693
    
    
    
    (34,885
    )Accounts payable and accrued liabilities
    
    
    (22,484
    )
    
    
    7,270
    
    
    
    (12,947
    )Other liabilities
    
    
    (27,570
    )
    
    
    (13,739
    )
    
    
    99,994(30,006
    )
    
    
    7,203
    
    
    
    48,859
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Non-cash investing and financing activities are
comprised of:Purchase of satellites, property and other equipment
    
    
    24,775
    
    
    
    5,026
    
    
    
    3,595Purchase of concession rights
    
    
    
    
    
    
    
    
    
    
    1,230
  F-81




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 17. CAPITAL DISCLOSURES
   At December 31,
    
    2010
    
    
    2009Shareholders
equity, excluding
accumulated other
comprehensive loss
    
    
    1,138,532
    
    
    
    904,718Debt financing,
excluding deferred
financing costs and
prepayment options
    
    
    2,923,058
    
    
    
    3,110,395
     18. FINANCIAL INSTRUMENTS
 Fair Value
   F-82




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
  Current
    
    
    Long-term
    
    
    Current
    
    
    Long-termDecember 31, 2010
    
    assets
    
    
    assets
    
    
    liabilities
    
    
    liabilities
    
    
    TotalCross currency
basis swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192,456
    )
    
    
    (192,456
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (17,904
    )
    
    
    (31,523
    )
    
    
    (49,427
    )Forward foreign
exchange contracts
    
    
    
    
    
    
    
    
    
    
    (2,571
    )
    
    
    
    
    
    
    (2,571
    )Prepayment option
embedded derivatives
    
    
    
    
    
    
    72,405
    
    
    
    
    
    
    
    
    
    
    
    72,405
    
    
    
    72,405
    
    
    
    (20,475
    )
    
    
    (223,979
    )
    
    
    (172,049
    )
 Current
    
    
    Long-term
    
    
    Current
    
    
    Long-termDecember 31, 2009
    
    assets
    
    
    assets
    
    
    liabilities
    
    
    liabilities
    
    
    TotalCross currency
basis swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137,106
    )
    
    
    (137,106
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (6,020
    )
    
    
    (41,724
    )
    
    
    (47,744
    )Forward foreign
exchange contracts
    
    
    
    
    
    
    
    
    
    
    (436
    )
    
    
    
    
    
    
    (436
    )Prepayment option
embedded derivatives
    
    
    
    
    
    
    15,914
    
    
    
    
    
    
    
    
    
    
    
    15,914
    
    
    
    15,914
    
    
    
    (6,456
    )
    
    
    (178,830
    )
    
    
    (169,372
    )
 Reconciliation of fair value of derivative assets and liabilitiesOpening fair value, December 31, 2009
    
    
    (169,372
    )Unrealized derivative losses
    
    
    (13,955
    )Realized derivative gains (losses) on:Cross currency basis swap
    
    
    1,183Interest rate swaps
    
    
    Forward foreign exchange contracts
    
    
    1,604Impact of foreign exchange
    
    
    8,491Fair value, December 31, 2010
    
    
    (172,049
    )
 At December 31,
    
    2010
    
    
    2009Fair value methodology:Net position determined using actively quoted prices (level 1)
    
    
    
    
    
    
    Net position determined using observable data or market
corroboration (level 2)
    
    
    (172,049
    )
    
    
    (169,372
    )Net position determined using extrapolated data (level 3)
    
    
    
    
    
    
    (172,049
    )
    
    
    (169,372
    )
    F-83




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
     Carrying valueLoans &December 31, 2010
    
    HFT
    
    
    AFS
    
    
    Receivables
    
    
    Total
    
    
    Fair valueFinancial assetsCash and cash
equivalents
    
    
    220,295
    
    
    
    
    
    
    
    
    
    
    
    220,295
    
    
    
    220,295Accounts and notes
receivable
    
    
    
    
    
    
    
    
    
    
    44,109
    
    
    
    44,109
    
    
    
    44,109Derivative financial
instruments
    
    
    72,405
    
    
    
    
    
    
    
    
    
    
    
    72,405
    
    
    
    72,405Other assets
    
    
    
    
    
    
    315
    
    
    
    14,817
    
    
    
    15,132
    
    
    
    15,132292,700
    
    
    
    315
    
    
    
    58,926
    
    
    
    351,941
    
    
    
    351,941
 Carrying valueDecember 31, 2010
    
    HFT
    
    
    Other
    
    
    Total
    
    
    Fair valueFinancial liabilitiesAccounts payable and
accrued liabilities
    
    
    
    
    
    
    49,906
    
    
    
    49,906
    
    
    
    49,906Debt financing (excluding
deferred financing costs)
    
    
    
    
    
    
    2,930,248
    
    
    
    2,930,248
    
    
    
    3,067,412Derivative financial
instruments
    
    
    244,454
    
    
    
    
    
    
    
    244,454
    
    
    
    244,454Other liabilities
    
    
    
    
    
    
    266,692
    
    
    
    266,692
    
    
    
    276,990244,454
    
    
    
    3,246,846
    
    
    
    3,491,300
    
    
    
    3,638,762
  F-84




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
 Carrying valueLoans &December 31, 2009
    
    HFT
    
    
    AFS
    
    
    Receivables
    
    
    Total
    
    
    Fair valueFinancial assetsCash and cash
equivalents
    
    
    154,189
    
    
    
    
    
    
    
    
    
    
    
    154,189
    
    
    
    154,189Accounts and notes
receivable
    
    
    
    
    
    
    
    
    
    
    70,203
    
    
    
    70,203
    
    
    
    70,203Derivative financial
instruments
    
    
    15,914
    
    
    
    
    
    
    
    
    
    
    
    15,914
    
    
    
    15,914Other assets
    
    
    6,970
    
    
    
    474
    
    
    
    5,351
    
    
    
    12,795
    
    
    
    12,795177,073
    
    
    
    474
    
    
    
    75,554
    
    
    
    253,101
    
    
    
    253,101
 Carrying valueDecember 31, 2009
    
    HFT
    
    
    Other
    
    
    Total
    
    
    Fair valueFinancial liabilitiesAccounts payable and
accrued liabilities
    
    
    
    
    
    
    43,413
    
    
    
    43,413
    
    
    
    43,413Debt financing (excluding
deferred financing costs)
    
    
    
    
    
    
    3,118,477
    
    
    
    3,118,477
    
    
    
    3,104,151Derivative financial
instruments
    
    
    185,286
    
    
    
    
    
    
    
    185,286
    
    
    
    185,286Other liabilities
    
    
    
    
    
    
    291,412
    
    
    
    291,412
    
    
    
    322,187185,286
    
    
    
    3,453,302
    
    
    
    3,638,588
    
    
    
    3,655,037
   Measurement of Risks
 Credit Risk
     F-85




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
  Allowance for doubtful accounts
    
    2010
    
    
    2009Balance at January 1
    
    
    8,708
    
    
    
    5,410Provision for receivables impairment
    
    
    (1,324
    )
    
    
    4,067Receivables written off during the period as uncollectible
    
    
    (256
    )
    
    
    (769
    )Balance at December 31
    
    
    7,128
    
    
    
    8,708
 Foreign Exchange Risk
      Interest Rate Risk
    F-86




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
   Liquidity Risk
  ContractualIn millions of
    
    Carrying
    
    
    cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AfterCanadian dollars
    
    amount
    
    
    (undiscounted)
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    2015Accounts payable
and accrued liabilities
    
    
    49,906
    
    
    
    49,906
    
    
    
    49,906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Customer and other
deposits
    
    
    4,121
    
    
    
    4,121
    
    
    
    1,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,744Deferred satellites
performance incentive
payments
    
    
    70,808
    
    
    
    100,357
    
    
    
    17,898
    
    
    
    7,985
    
    
    
    7,910
    
    
    
    7,909
    
    
    
    7,908
    
    
    
    50,747Capital lease liabilities
    
    
    16,904
    
    
    
    20,273
    
    
    
    5,030
    
    
    
    5,030
    
    
    
    5,030
    
    
    
    4,408
    
    
    
    775
    
    
    
    Dividends payable on
senior preferred shares
(note 14)
    
    
    2,075
    
    
    
    2,075
    
    
    
    2,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Promissory note payable
to Loral (note 22)
    
    
    17,525
    
    
    
    17,525
    
    
    
    
    
    
    
    17,525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax indemnification
payable to Loral
    
    
    6,949
    
    
    
    6,949
    
    
    
    
    
    
    
    6,949
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other liabilities
    
    
    3,940
    
    
    
    3,940
    
    
    
    3,940
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long term debt
    
    
    2,942,899
    
    
    
    3,733,469
    
    
    
    298,973
    
    
    
    264,140
    
    
    
    181,830
    
    
    
    1,940,202
    
    
    
    781,914
    
    
    
    266,410Forward foreign exchange
contacts
    
    
    2,571
    
    
    
    2,571
    
    
    
    2,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest rate swaps
    
    
    49,427
    
    
    
    87,474
    
    
    
    34,805
    
    
    
    18,625
    
    
    
    18,574
    
    
    
    15,470
    
    
    
    
    
    
    
    Basis swap
    
    
    192,456
    
    
    
    108,556
    
    
    
    28,623
    
    
    
    28,418
    
    
    
    28,066
    
    
    
    23,449
    
    
    
    
    
    
    
    3,359,581
    
    
    
    4,137,216
    
    
    
    445,198
    
    
    
    348,672
    
    
    
    241,410
    
    
    
    1,991,438
    
    
    
    790,597
    
    
    
    319,901
  Correction of an immaterial error
   F-87




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 18. FINANCIAL INSTRUMENTS  (continued)
   Adjustments to the consolidated financial statements: debit (credit)
    
    2009
    
    
    2008Impact on consolidated balance sheet:Other long-term assets
    
    
    15,915
    
    
    
    Debt financing
    
    
    788
    
    
    
    (8,870
    )Accumulated deficit
    
    
    (16,703
    )
    
    
    8,870Impact on consolidated statement of earnings:Interest expense
    
    
    (788
    )
    
    
    (328
    )(Loss) gain on changes in fair value of financial instruments
    
    
    (17,411
    )
    
    
    9,966Gain (loss) on foreign exchange
    
    
    1,496
    
    
    
    (768
    )Impact on net earnings
    
    
    (16,703
    )
    
    
    8,870
   F-88




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 19. STOCK-BASED COMPENSATION PLANS
 Telesat Holdings Stock Options
    Time Vesting Option Plans
    
    
    Performance Vesting Option PlanWeighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber
    
    
    Exercise
    
    
    Number
    
    
    Exerciseof Options
    
    
    Price ($)
    
    
    of Options
    
    
    Price ($)Outstanding, January 1, 2010
    
    
    7,303,705
    
    
    
    11.07
    
    
    
    1,453,814
    
    
    
    11.07Granted
    
    
    10,067
    
    
    
    16.50
    
    
    
    12,305
    
    
    
    16.50Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (47,820
    )
    
    
    11.07
    
    
    
    (58,447
    )
    
    
    11.07Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding December 31, 2010
    
    
    7,265,952
    
    
    
    11.08
    
    
    
    1,407,672
    
    
    
    11.12Options exercisable at December
31, 2010
    
    
    4,173,018
    
    
    
    
    
    
    
    526,252
 Options Outstanding
    
    
    Options ExercisableWeighted-AverageRemainingAt December 31, 2009
    
    Number
    
    
    Life
    
    
    NumberExercise price $11.07
    
    
    8,757,519
    
    
    8 years
    
    
    2,903,060
  December 31,
    
    
    December 31,2010
    
    
    2009Compensation cost (credited to contributed surplus)
    
    
    5,653
    
    
    
    5,649Number of stock options granted
    
    
    22,372
    
    
    
    1,351,740Weighted-average fair value per option granted ($)
    
    
    16.50
    
    
    
    4.76Weighted average assumptions:Dividend yield
    
    
    
    %
    
    
    
    %Expected volatility
    
    
    31.1
    %
    
    
    30.0
    %Risk-free interest rate
    
    
    3.85
    %
    
    
    2.98
    %Expected life (years)
    
    
    10
    
    
    
    10
  F-89




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 20. EMPLOYEE BENEFIT PLANS
    December 31, 2010Pension and other benefits
    
    Pension
    
    
    Other
    
    
    TotalChange in benefit obligationsBenefit obligation, January 1, 2010
    
    
    151,977
    
    
    
    22,433
    
    
    
    174,410Current service cost
    
    
    2,630
    
    
    
    232
    
    
    
    2,862Interest cost
    
    
    9,665
    
    
    
    1,237
    
    
    
    10,902Actuarial (gains) losses
    
    
    19,165
    
    
    
    (1,250
    )
    
    
    17,915Benefit payments
    
    
    (9,379
    )
    
    
    (856
    )
    
    
    (10,235
    )Employee contributions
    
    
    1,386
    
    
    
    32
    
    
    
    1,418Plan amendments
    
    
    
    
    
    
    (236
    )
    
    
    (236
    )Benefit obligation, December 31, 2010
    
    
    175,444
    
    
    
    21,592
    
    
    
    197,036
 December 31, 2010Pension and other benefits
    
    Pension
    
    
    Other
    
    
    TotalChange in fair value of plan assetsFair value of plan assets, January 1,
2010
    
    
    150,746
    
    
    
    
    
    
    
    150,746Return on plan assets
    
    
    15,339
    
    
    
    
    
    
    
    15,339Benefit payments
    
    
    (9,379
    )
    
    
    (856
    )
    
    
    (10,235
    )Employee contributions
    
    
    1,386
    
    
    
    32
    
    
    
    1,418Employer contributions
    
    
    8,143
    
    
    
    824
    
    
    
    8,967Fair value of plan assets, December 31,
2010
    
    
    166,235
    
    
    
    
    
    
    
    166,235Funded statusPlan surplus (deficit)
    
    
    (9,209
    )
    
    
    (21,592
    )
    
    
    (30,801
    )Unamortized net actuarial (gain) loss
    
    
    29,406
    
    
    
    (2,602
    )
    
    
    26,804Accrued benefit asset (liability)
    
    
    20,197
    
    
    
    (24,194
    )
    
    
    (3,997
    )
  F-90




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 20. EMPLOYEE BENEFIT PLANS  (continued)
 December 31, 2009Pension and other benefits
    
    Pension
    
    
    Other
    
    
    TotalChange in benefit obligationsBenefit obligation, January 1, 2009
    
    
    126,754
    
    
    
    21,252
    
    
    
    148,006Current service cost
    
    
    1,963
    
    
    
    260
    
    
    
    2,223Interest cost
    
    
    9,470
    
    
    
    1,444
    
    
    
    10,914Actuarial (gains) losses
    
    
    23,975
    
    
    
    408
    
    
    
    24,383Benefit payments
    
    
    (11,899
    )
    
    
    (953
    )
    
    
    (12,852
    )Employee contributions
    
    
    1,714
    
    
    
    22
    
    
    
    1,736Benefit obligation, December 31, 2009
    
    
    151,977
    
    
    
    22,433
    
    
    
    174,410
 December 31, 2009Pension and other benefits
    
    Pension
    
    
    Other
    
    
    TotalChange in fair value of plan assetsFair value of plan assets, January 1,
2009
    
    
    138,293
    
    
    
    
    
    
    
    138,293Return on plan assets
    
    
    20,692
    
    
    
    
    
    
    
    20,692Benefit payments
    
    
    (11,899
    )
    
    
    (953
    )
    
    
    (12,852
    )Employee contributions
    
    
    1,714
    
    
    
    22
    
    
    
    1,736Employer contributions
    
    
    1,946
    
    
    
    931
    
    
    
    2,877Fair value of plan assets, December 31,
2009
    
    
    150,746
    
    
    
    
    
    
    
    150,746Funded statusPlan surplus (deficit)
    
    
    (1,231
    )
    
    
    (22,433
    )
    
    
    (23,664
    )Unamortized net actuarial (gain) loss
    
    
    15,430
    
    
    
    (1,394
    )
    
    
    14,036Accrued benefit asset (liability)
    
    
    14,199
    
    
    
    (23,827
    )
    
    
    (9,628
    )
  At December 31,
    
    2010
    
    
    2009Equity securities
    
    
    61
    %
    
    
    60
    %Fixed income instruments
    
    
    36
    %
    
    
    37
    %Short-term investments
    
    
    2
    %
    
    
    3
    %Other
    
    
    1
    %
    
    
    Total
    
    
    100
    %
    
    
    100
    %
   F-91




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 20. EMPLOYEE BENEFIT PLANS  (continued)
  Pension
    
    
    Other
    
    
    Pension
    
    
    OtherDecember 31, 2010
    
    
    December 31, 2009Accrued benefit obligationDiscount rate
    
    
    5.5
    %
    
    
    5.5
    %
    
    
    7.5
    %
    
    
    7.5
    %Rate of compensation increase
    
    
    3.0
    %
    
    
    
    
    
    
    3.5
    %
    
    
    3.5
    %Benefit costs for the periods endedDiscount rate
    
    
    6.4
    %
    
    
    6.4
    %
    
    
    6.4
    %
    
    
    6.4
    %Expected long-term rate of
return on plan assets
    
    
    7.0
    %
    
    
    
    
    
    
    7.5
    %
    
    
    Rate of compensation increase
    
    
    3.5
    %
    
    
    
    
    
    
    3.5
    %
    
    
    3.5
    %
   Pension
    
    
    Other
    
    
    Total
    
    
    Pension
    
    
    Other
    
    
    Total
    
    
    Pension
    
    
    Other
    
    
    TotalYear EndedDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Current
service cost
    
    
    2,630
    
    
    
    232
    
    
    
    2,862
    
    
    
    1,963
    
    
    
    260
    
    
    
    2,223
    
    
    
    3,926
    
    
    
    433
    
    
    
    4,359Interest cost
    
    
    9,665
    
    
    
    1,237
    
    
    
    10,902
    
    
    
    9,470
    
    
    
    1,444
    
    
    
    10,914
    
    
    
    9,271
    
    
    
    1,745
    
    
    
    11,016Expected return on
plan assets
    
    
    (10,231
    )
    
    
    
    
    
    
    (10,231
    )
    
    
    (10,011
    )
    
    
    
    
    
    
    (10,011
    )
    
    
    (12,686
    )
    
    
    
    
    
    
    (12,686
    )Amortization
    
    
    81
    
    
    
    (284
    )
    
    
    (203
    )
    
    
    (65
    )
    
    
    (144
    )
    
    
    (209
    )
    
    
    
    
    
    
    
    
    
    
    Net benefit expense
    
    
    2,145
    
    
    
    1,185
    
    
    
    3,330
    
    
    
    1,357
    
    
    
    1,560
    
    
    
    2,917
    
    
    
    511
    
    
    
    2,178
    
    
    
    2,689
 Sensitivity of assumptions
  Aggregate ofBenefit
    
    
    service andobligation
    
    
    interest costAs reported
    
    
    21,592
    
    
    
    1,469Impact of increase of 1% point
    
    
    1,746
    
    
    
    137Impact of decrease of 1% point
    
    
    (1,483
    )
    
    
    (114
    )
   F-92




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 21. COMMITMENTS AND CONTINGENT LIABILITIES
  Off balance sheet commitments
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalOperating leases
    
    
    26,720
    
    
    
    21,180
    
    
    
    19,115
    
    
    
    16,257
    
    
    
    11,350
    
    
    
    39,234
    
    
    
    133,856Purchase commitments 
Satellite programs
    
    
    257,359
    
    
    
    164,352
    
    
    
    365
    
    
    
    394
    
    
    
    425
    
    
    
    7,090
    
    
    
    429,985Total off balance sheet
commitments
    
    
    284,079
    
    
    
    185,532
    
    
    
    19,480
    
    
    
    16,651
    
    
    
    11,775
    
    
    
    46,324
    
    
    
    563,841
        F-93




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 21. COMMITMENTS AND CONTINGENT LIABILITIES  (continued)
   22. RELATED PARTY TRANSACTIONS
  Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Service revenues
    
    
    3,998
    
    
    
    6,360
    
    
    
    3,560Operations and administration
    
    
    5,618
    
    
    
    7,820
    
    
    
    6,100Capital expenditures  Satellites, property
and other equipment
    
    
    168,040
    
    
    
    97,815
    
    
    
    83,203Dividends on senior preferred shares (note 14)
    
    
    12,339
    
    
    
    13,540
    
    
    
    9,855Interest expense
    
    
    1,004
    
    
    
    660
    
    
    
    195
  F-94




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 22. RELATED PARTY TRANSACTIONS  (continued)
  At December 31,
    
    2010
    
    
    2009Accounts receivable
    
    
    428
    
    
    
    1,019Other long-term assets
    
    
    2,332
    
    
    
    2,461Accounts payable and accrued liabilities
    
    
    51
    
    
    
    1,234Other current liabilities
    
    
    1,003
    
    
    
    Other long-term liabilities
    
    
    22,418
    
    
    
    15,401Note and interest payable at end of period
    
    
    17,525
    
    
    
    12,210Dividends payable on senior preferred shares (note 14)
    
    
    2,075
    
    
    
    25,090Senior preferred shares (note 14)
    
    
    141,435
    
    
    
    141,435
   23. RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP
  Reconciliation of Net Earnings (Loss)
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Canadian GAAP  Net earnings (loss)
    
    
    228,191
    
    
    
    430,765
    
    
    
    (831,271
    )(Losses) gains on embedded derivatives (a)
    
    
    (11,601
    )
    
    
    (35,480
    )
    
    
    20,118(Losses) gains on prepayment option embedded derivatives
(a)
    
    
    (57,384
    )
    
    
    (16,702
    )
    
    
    8,870Sales type lease  operating lease for U.S. GAAP
(b)
    
    
    
    
    
    
    1,514
    
    
    
    18,808Capital lease  operating lease for U.S. GAAP
(b)
    
    
    
    
    
    
    (1,567
    )
    
    
    (7,584
    )Lease amendments (c)
    
    
    125
    
    
    
    719
    
    
    
    (1,233
    )Dividends on senior preferred shares (d)
    
    
    12,339
    
    
    
    13,540
    
    
    
    9,855Tax effect of above adjustments (e)
    
    
    2,851
    
    
    
    10,510
    
    
    
    (8,761
    )Uncertainty in income taxes (f)
    
    
    (1,255
    )
    
    
    (8,053
    )
    
    
    (6,875
    )U.S. GAAP  Net earnings (loss)
    
    
    173,266
    
    
    
    395,246
    
    
    
    (798,073
    )Other comprehensive (loss) earnings items:Change in currency translation adjustment
    
    
    1,312
    
    
    
    214
    
    
    
    (7,143
    )Net actuarial plans cost (g)Net actuarial losses
    
    
    (9,524
    )
    
    
    (9,373
    )
    
    
    (1,169
    )Net transitional assets
    
    
    
    
    
    
    
    
    
    
    U.S. GAAP  Comprehensive earnings (loss)
    
    
    165,054
    
    
    
    386,087
    
    
    
    (806,385
    )
  F-95




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 23. RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP  (continued)
 Accumulated Other Comprehensive Loss
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008Cumulative translation adjustment, net of tax
    
    
    (6,216
    )
    
    
    (7,528
    )
    
    
    (7,742
    )Net benefit plans cost (g)Net actuarial losses
    
    
    (20,065
    )
    
    
    (10,541
    )
    
    
    (1,169
    )Accumulated other comprehensive loss
    
    
    (26,281
    )
    
    
    (18,069
    )
    
    
    (8,911
    )
 Reconciliation of Total Shareholders Equity
 Year ended December 31,
    
    2010
    
    
    2009Canadian GAAP
    
    
    1,132,325
    
    
    
    897,296AdjustmentsGains on embedded derivatives (a)
    
    
    (26,189
    )
    
    
    (14,588
    )Gains on prepayment option embedded derivatives (a)
    
    
    (65,216
    )
    
    
    (7,832
    )Net actuarial losses (g)
    
    
    (20,065
    )
    
    
    (10,541
    )Sales type lease  operating lease for U.S. GAAP (b)
    
    
    23,070
    
    
    
    23,070Capital lease  operating lease for U.S. GAAP (b)
    
    
    (9,229
    )
    
    
    (9,229
    )Lease amendment (c)
    
    
    (398
    )
    
    
    (619
    )Tax effect of above adjustments (e)
    
    
    4,875
    
    
    
    2,024Uncertainty in income taxes (f)
    
    
    (18,831
    )
    
    
    (17,576
    )U.S. GAAP
    
    
    1,020,342
    
    
    
    862,005
  (a)
    
    Derivatives and embedded derivativesEmbedded derivativesThe accounting for derivative instruments and hedging activities under Canadian GAAP
is now substantially harmonized with U.S. GAAP, with the exception of the accounting
for certain embedded derivatives. Under U.S. GAAP an embedded foreign currency
derivative in a host contract that is not a financial instrument must be separated and
recorded on the balance sheet unless the currency in which payments are to be paid or
received is: i) either the functional currency of either party to the contract or ii)
the currency that the price of the related good or service is routinely denominated in
commercial transactions around the world (typically referring to a traded commodity).
The same applies to an embedded foreign currency derivative in a host contract under
Canadian GAAP except that the entity has the option, as a matter of accounting policy,
to account for the embedded foreign currency derivative in a host contract as a single
instrument providing certain criteria are met. One of these criteria is that the
payments to be paid or received are in a currency that is commonly used in contracts
to purchase or sell such non-financial items in the economic environment in which the
transaction takes place. This option under Canadian GAAP results in embedded
derivatives that must be recorded separately under U.S. GAAP to not have to be
separately recorded and disclosed under Canadian GAAP. The additional option loosens
the more stringent U.S. GAAP requirement that the currency be one in which such
commercial transactions are denominated around the world to be one that is commonly
used in the economic environment in which the transaction takes place.
  F-96




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 23. RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP  (continued)
 In accordance with U.S. GAAP, all derivative instruments embedded in contracts are
recorded on the balance sheet at fair value. The Company denominates many of its
long-term international purchase contracts in U.S. dollars resulting in embedded
derivatives. This exposure to the U.S. dollar is partially offset by revenue contracts
that are also denominated in U.S. dollars. For Canadian GAAP, the Company has elected
to account for such contracts as single instruments, resulting in a U.S. GAAP
reconciling item. At December 31, 2010, the fair value of assets resulting from
embedded derivatives was $8.4 million (2009  $20.0 million), while the year to date
loss was $11.6 million (2009  loss of $35.5 million, 2008  gain of $20.1 million).Prepayment option embedded derivativesUnder Canadian GAAP prepayment options on the Companys senior notes and senior
subordinated notes are considered embedded derivatives that should be separately
accounted for as derivatives and recorded at fair value at inception and marked to
market each reporting period thereafter. Under U.S. GAAP, these embedded prepayment
options were considered to be clearly and closely related to the host debt instruments
and as a result were not accounted for as embedded derivatives (see Note 18).(b)
    
    Sales-type and capital leasesUnder U.S. GAAP, if the beginning of a lease term falls within the last 25% of a
leased assets total estimated economic life; then it can only be classified as a
capital lease if the lease transfers ownership at the end of the lease term or there
is a bargain purchase option. This exception does not exist under Canadian GAAP,
therefore certain leases are reported as a capital lease and sales-type lease
respectively under Canadian GAAP, and as operating leases for U.S. GAAP as the limited
capital lease criteria were not met.(c)
    
    Lease amendmentsUnder Canadian GAAP, when amendments to the provisions of a capital lease agreement
result in a change in lease classification from a capital lease to an operating lease,
the gain or loss that results from removing the capital lease from the balance sheet
is immediately recognized in the statement of earnings. Under U.S. GAAP, if removing
the capital lease from the balance sheet results in a gain or loss it is recognized
over the remaining term of the lease. Therefore, an adjustment has been made to defer
the gain that has been recognized under Canadian GAAP.(d)
    
    Senior preferred sharesIn accordance with U.S. GAAP, the senior preferred shares are classified outside of
permanent equity as they are redeemable at the option of the holder. These senior
preferred shares are classified as liabilities under Canadian GAAP. This results in a
U.S. GAAP reconciling item to reflect the different classification. As a result of
this change in classification, the amounts are treated as dividends for U.S. GAAP and
interest expense for Canadian GAAP.(e)
    
    Income taxesThe income tax adjustment reflects the impact the U.S. GAAP adjustments described
above have on income taxes. Included in the figures presented in the table above is
the effect of tax rate changes applied to the accumulated gains and losses on embedded
derivatives and to certain lease transactions classified as operating leases as
discussed above. The impact on the statement of operations of the tax rate changes for
the year ended December 31, 2010 was a nominal amount (2009  recovery of $1.8
million, 2008  expense of $0.6 million).
  F-97




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 23. RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP  (continued)
 (f)
    
    Uncertainty in income taxesEffective January 1, 2007 the Company adopted the recognition requirements of the
Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109. FIN 48,
which has been primarily codified into FASB Accounting Standards Codification (ASC)
Topic 740, Income Taxes, provides specific guidance on the recognition,
derecognition and measurement of income tax positions in financial statements,
including the accrual of related interest and penalties recorded in interest expense.
An income tax position is recognized when it is more likely than not that it will be
sustained upon examination based on its technical merits, and is measured as the
largest amount that is greater than 50% likely of being realized upon ultimate
settlement. Under Canadian GAAP, significant differences exist as Telesat recognizes
and measures income tax positions, based on the best estimate of the amount that is
more likely than not of being realized.(g)
    
    Net benefit plans costEffective December 31, 2006, the Company adopted the recognition requirements of
Statement of Financial Accounting Standards (SFAS) No. 158, Employers Accounting for
Defined Benefit Pension and Other Post Retirement Plans, on a prospective basis. SFAS
No. 158 has been primarily codified into ASC 715, Compensation.This standard requires that the Company recognize the funded status of benefit plans
on the balance sheet as well as recognize as a component of other comprehensive
income, net of tax, the actuarial losses and transitional asset and obligation.
Amounts recognized in accumulated other comprehensive income are adjusted as they are
subsequently recognized as components of net periodic benefit cost.At December 31, 2010, the balance sheet was adjusted such that actuarial losses and
the transitional asset and obligation that have not yet been included in net benefit
plans cost at December 31, 2010 were recognized as components of accumulated other
comprehensive loss, net of tax. The adjustment at December 31, 2010 resulted in an
increase of $9.5 million in accumulated other comprehensive loss, net of tax of $3.2
million (2009  an increase of $9.4 million in accumulated other comprehensive loss,
net of tax of $3.0 million, 2008  an increase of $1.2 million in accumulated other
comprehensive loss, net of tax of $0.3 million).
 Transaction costs on long-term debt
  Reporting disposal gains or losses of long-lived assets
  Statement of cash flows
   F-98




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 23. RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP  (continued)
 Recent Accounting Pronouncements
 Multiple-Deliverable Revenue
Arrangements
 Fair Value Measurements and Disclosures
 Revenue Recognition  Milestone Method
 24. SUBSEQUENT EVENT
   F-99




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
    Condensed Consolidating Balance Sheet
As at December 31, 2010
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    196,682
    
    
    
    21,135
    
    
    
    2,478
    
    
    
    
    
    
    
    220,295Accounts receivable
    
    
    
    
    
    
    
    
    
    
    28,744
    
    
    
    13,593
    
    
    
    1,772
    
    
    
    
    
    
    
    44,109Current future tax asset
    
    
    
    
    
    
    
    
    
    
    1,582
    
    
    
    175
    
    
    
    143
    
    
    
    
    
    
    
    1,900Intercompany receivable
    
    
    
    
    
    
    
    
    
    
    219,035
    
    
    
    202,459
    
    
    
    112,436
    
    
    
    (533,930
    )
    
    
    Other current assets
    
    
    
    
    
    
    
    
    
    
    12,291
    
    
    
    7,482
    
    
    
    6,703
    
    
    
    
    
    
    
    26,476Total current assets
    
    
    
    
    
    
    
    
    
    
    458,334
    
    
    
    244,844
    
    
    
    123,532
    
    
    
    (533,930
    )
    
    
    292,780Satellites, property and other equipment, net
    
    
    
    
    
    
    
    
    
    
    1,643,419
    
    
    
    333,126
    
    
    
    17,577
    
    
    
    
    
    
    
    1,994,122Other long-term assets
    
    
    
    
    
    
    
    
    
    
    107,568
    
    
    
    4,622
    
    
    
    626
    
    
    
    
    
    
    
    112,816Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    443,945
    
    
    
    16,929
    
    
    
    186
    
    
    
    
    
    
    
    461,060Investment in affiliates
    
    
    1,311,220
    
    
    
    
    
    
    
    1,295,517
    
    
    
    1,484,866
    
    
    
    261
    
    
    
    (4,091,864
    )
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    2,078,056
    
    
    
    343,876
    
    
    
    24,671
    
    
    
    
    
    
    
    2,446,603Total assets
    
    
    1,311,220
    
    
    
    
    
    
    
    6,026,839
    
    
    
    2,428,263
    
    
    
    166,853
    
    
    
    (4,625,794
    )
    
    
    5,307,381LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    31,667
    
    
    
    15,096
    
    
    
    3,143
    
    
    
    
    
    
    
    49,906Intercompany payable
    
    
    35,385
    
    
    
    
    
    
    
    124,484
    
    
    
    374,061
    
    
    
    
    
    
    
    (533,930
    )
    
    
    Other current liabilities
    
    
    2,075
    
    
    
    
    
    
    
    120,165
    
    
    
    1,534
    
    
    
    4,522
    
    
    
    
    
    
    
    128,296Debt due within one year
    
    
    
    
    
    
    
    
    
    
    96,847
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    96,848Total current liabilities
    
    
    37,460
    
    
    
    
    
    
    
    373,163
    
    
    
    390,692
    
    
    
    7,665
    
    
    
    (533,930
    )
    
    
    275,050Debt financing
    
    
    
    
    
    
    
    
    
    
    2,771,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,771,802Future tax liability
    
    
    
    
    
    
    
    
    
    
    305,548
    
    
    
    (88
    )
    
    
    5,092
    
    
    
    
    
    
    
    310,552Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    649,904
    
    
    
    12,546
    
    
    
    13,767
    
    
    
    
    
    
    
    676,217Senior preferred shares
    
    
    141,435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,435Total liabilities
    
    
    178,895
    
    
    
    
    
    
    
    4,100,417
    
    
    
    403,150
    
    
    
    26,524
    
    
    
    (533,930
    )
    
    
    4,175,056
  F-100




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorTelesat Holdings
    
    
    LLC
    
    
    Telesat Canada
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedShareholders equityCommon shares
    
    
    756,414
    
    
    
    
    
    
    
    2,320,730
    
    
    
    1,896,596
    
    
    
    104,434
    
    
    
    (4,321,760
    )
    
    
    756,414Preferred shares
    
    
    541,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541,764Accumulated deficit
    
    
    (176,396
    )
    
    
    
    
    
    
    (471,353
    )
    
    
    199,084
    
    
    
    31,828
    
    
    
    240,441
    
    
    
    (176,396
    )Accumulated other comprehensive loss
    
    
    (6,207
    )
    
    
    
    
    
    
    63
    
    
    
    (10,045
    )
    
    
    3,777
    
    
    
    6,205
    
    
    
    (6,207
    )Contributed surplus
    
    
    16,750
    
    
    
    
    
    
    
    76,982
    
    
    
    (60,522
    )
    
    
    290
    
    
    
    (16,750
    )
    
    
    16,750Total shareholders equity
    
    
    1,132,325
    
    
    
    
    
    
    
    1,926,422
    
    
    
    2,025,113
    
    
    
    140,329
    
    
    
    (4,091,864
    )
    
    
    1,132,325Total liabilities and shareholders equity
    
    
    1,311,220
    
    
    
    
    
    
    
    6,026,839
    
    
    
    2,428,263
    
    
    
    166,853
    
    
    
    (4,625,794
    )
    
    
    5,307,381Reconciliation to U.S. GAAP of total shareholders equity is as follows:Canadian GAAP
    
    
    1,132,325
    
    
    
    
    
    
    
    1,926,422
    
    
    
    2,025,113
    
    
    
    140,329
    
    
    
    (4,091,864
    )
    
    
    1,132,325Underlying differences in the income (loss) from equity investments
    
    
    (111,983
    )
    
    
    
    
    
    
    (239
    )
    
    
    (239
    )
    
    
    
    
    
    
    112,461
    
    
    
    Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (91,405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,405
    )Net actuarial gains (losses)
    
    
    
    
    
    
    
    
    
    
    (20,065
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,065
    )Sales type lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    23,070
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,070Capital lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    (9,229
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,229
    )Lease amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (398
    )
    
    
    
    
    
    
    (398
    )Tax effect of above adjustments
    
    
    
    
    
    
    
    
    
    
    4,716
    
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    4,875Uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    (18,831
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,831
    )U.S. GAAP
    
    
    1,020,342
    
    
    
    
    
    
    
    1,814,439
    
    
    
    2,024,874
    
    
    
    140,090
    
    
    
    (3,979,403
    )
    
    
    1,020,342
  F-101




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Earnings (Loss)
For the year ended December 31, 2010
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedOperating revenuesService revenues
    
    
    
    
    
    
    
    
    
    
    736,980
    
    
    
    86,413
    
    
    
    23,839
    
    
    
    (46,088
    )
    
    
    801,144Equipment sales revenues
    
    
    
    
    
    
    
    
    
    
    8,709
    
    
    
    11,636
    
    
    
    
    
    
    
    (128
    )
    
    
    20,217Total operating revenues
    
    
    
    
    
    
    
    
    
    
    745,689
    
    
    
    98,049
    
    
    
    23,839
    
    
    
    (46,216
    )
    
    
    821,361Amortization
    
    
    
    
    
    
    
    
    
    
    195,287
    
    
    
    51,823
    
    
    
    4,084
    
    
    
    
    
    
    
    251,194Operations and administration
    
    
    
    
    
    
    
    
    
    
    138,483
    
    
    
    74,363
    
    
    
    19,758
    
    
    
    (46,137
    )
    
    
    186,467Cost of equipment sales
    
    
    
    
    
    
    
    
    
    
    6,791
    
    
    
    8,863
    
    
    
    
    
    
    
    (79
    )
    
    
    15,575Total operating expenses
    
    
    
    
    
    
    
    
    
    
    340,561
    
    
    
    135,049
    
    
    
    23,842
    
    
    
    (46,216
    )
    
    
    453,236Earnings (loss) from operations
    
    
    
    
    
    
    
    
    
    
    405,128
    
    
    
    (37,000
    )
    
    
    (3
    )
    
    
    
    
    
    
    368,125Income (loss) from equity investments
    
    
    240,530
    
    
    
    
    
    
    
    (36,162
    )
    
    
    (31,196
    )
    
    
    
    
    
    
    (173,172
    )
    
    
    Interest expense
    
    
    (12,339
    )
    
    
    
    
    
    
    (239,059
    )
    
    
    52
    
    
    
    (1,740
    )
    
    
    
    
    
    
    (253,086
    )(Loss) gain on changes in fair value of financial instruments
    
    
    
    
    
    
    
    
    
    
    (11,168
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,168
    )Gain (loss) on foreign exchange
    
    
    
    
    
    
    
    
    
    
    162,921
    
    
    
    7,365
    
    
    
    (6,288
    )
    
    
    
    
    
    
    163,998Other income (expense)
    
    
    
    
    
    
    
    
    
    
    2,757
    
    
    
    1,663
    
    
    
    (81
    )
    
    
    
    
    
    
    4,339Earnings (loss) before income taxes
    
    
    228,191
    
    
    
    
    
    
    
    284,417
    
    
    
    (59,116
    )
    
    
    (8,112
    )
    
    
    (173,172
    )
    
    
    272,208Income tax recovery (expense)
    
    
    
    
    
    
    
    
    
    
    (43,887
    )
    
    
    (906
    )
    
    
    776
    
    
    
    
    
    
    
    (44,017
    )Net earnings (loss)
    
    
    228,191
    
    
    
    
    
    
    
    240,530
    
    
    
    (60,022
    )
    
    
    (7,336
    )
    
    
    (173,172
    )
    
    
    228,191Reconciliation to U.S. GAAP is as follows:Income (loss) from equity investments
    
    
    (67,264
    )
    
    
    
    
    
    
    37
    
    
    
    37
    
    
    
    
    
    
    
    67,190
    
    
    
    Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (68,985
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,985
    )Lease amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    125Dividends on senior preferred shares
    
    
    12,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,339Tax effect of above adjustments
    
    
    
    
    
    
    
    
    
    
    2,939
    
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    2,851Uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    (1,255
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,255
    )U.S. GAAP net earnings (loss)
    
    
    173,266
    
    
    
    
    
    
    
    173,266
    
    
    
    (59,985
    )
    
    
    (7,299
    )
    
    
    (105,982
    )
    
    
    173,266
  F-102




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Cash Flow
For the year ended December 31, 2010
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedCash flows from (used in) operating activitiesNet earnings (loss)
    
    
    228,191
    
    
    
    
    
    
    
    240,530
    
    
    
    (60,022
    )
    
    
    (7,336
    )
    
    
    (173,172
    )
    
    
    228,191Adjustments to reconcile net earnings (loss) to cash flows from operating activities:Amortization
    
    
    
    
    
    
    
    
    
    
    195,287
    
    
    
    51,823
    
    
    
    4,084
    
    
    
    
    
    
    
    251,194Future income taxes
    
    
    
    
    
    
    
    
    
    
    42,757
    
    
    
    (117
    )
    
    
    (902
    )
    
    
    
    
    
    
    41,738Unrealized foreign exchange (gain) loss
    
    
    
    
    
    
    
    
    
    
    (168,787
    )
    
    
    (7,534
    )
    
    
    6,273
    
    
    
    
    
    
    
    (170,048
    )Unrealized (gain) loss on derivatives
    
    
    
    
    
    
    
    
    
    
    13,955
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,955Dividends on senior preferred shares
    
    
    2,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,075Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,908
    
    
    
    554
    
    
    
    191
    
    
    
    
    
    
    
    5,653(Income) loss from equity investments
    
    
    (240,530
    )
    
    
    
    
    
    
    36,162
    
    
    
    31,196
    
    
    
    
    
    
    
    173,172
    
    
    
    (Gain) loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    (3,754
    )
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    (3,826
    )Other
    
    
    
    
    
    
    
    
    
    
    (24,600
    )
    
    
    (315
    )
    
    
    (183
    )
    
    
    
    
    
    
    (25,098
    )Customer prepayments on future satellite services
    
    
    
    
    
    
    
    
    
    
    30,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,982Operating assets and liabilities
    
    
    10,294
    
    
    
    
    
    
    
    (45,094
    )
    
    
    2,798
    
    
    
    1,996
    
    
    
    
    
    
    
    (30,006
    )30
    
    
    
    
    
    
    
    322,346
    
    
    
    18,311
    
    
    
    4,123
    
    
    
    
    
    
    
    344,810Cash flows from (used in) investing activitiesSatellite programs
    
    
    
    
    
    
    
    
    
    
    (257,725
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (257,725
    )Property additions
    
    
    
    
    
    
    
    
    
    
    (2,299
    )
    
    
    (1,556
    )
    
    
    (111
    )
    
    
    
    
    
    
    (3,966
    )Proceeds on disposal of assets
    
    
    
    
    
    
    
    
    
    
    26,782
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    26,926Dividends received
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    (223,242
    )
    
    
    (1,412
    )
    
    
    (111
    )
    
    
    (10,000
    )
    
    
    (234,765
    )Cash flows from (used in) financing activitiesRepayment of debt financing
    
    
    
    
    
    
    
    
    
    
    (34,946
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,946
    )Dividends paid on preferred shares
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Capital lease payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,306
    )
    
    
    
    
    
    
    (3,306
    )Satellite performance incentive payments
    
    
    
    
    
    
    
    
    
    
    (5,099
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,099
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    10,000
    
    
    
    (30
    )
    
    
    
    
    
    
    (40,045
    )
    
    
    (10,000
    )
    
    
    (3,306
    )
    
    
    10,000
    
    
    
    (43,381
    )Effect of changes in exchange rates on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    (562
    )
    
    
    
    
    
    
    (558
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    59,059
    
    
    
    6,903
    
    
    
    144
    
    
    
    
    
    
    
    66,106Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    137,623
    
    
    
    14,232
    
    
    
    2,334
    
    
    
    
    
    
    
    154,189Cash and cash equivalents, end of period
    
    
    
    
    
    
    
    
    
    
    196,682
    
    
    
    21,135
    
    
    
    2,478
    
    
    
    
    
    
    
    220,295
  F-103




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Balance Sheet
As at December 31, 2009
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    137,623
    
    
    
    14,232
    
    
    
    2,334
    
    
    
    
    
    
    
    154,189Accounts receivable
    
    
    
    
    
    
    
    
    
    
    51,447
    
    
    
    15,591
    
    
    
    3,165
    
    
    
    
    
    
    
    70,203Current future tax asset
    
    
    
    
    
    
    
    
    
    
    1,703
    
    
    
    350
    
    
    
    131
    
    
    
    
    
    
    
    2,184Intercompany receivable
    
    
    
    
    
    
    
    
    
    
    249,103
    
    
    
    150,490
    
    
    
    120,038
    
    
    
    (519,631
    )
    
    
    Other current assets
    
    
    
    
    
    
    
    
    
    
    13,758
    
    
    
    8,234
    
    
    
    7,026
    
    
    
    
    
    
    
    29,018Total current assets
    
    
    
    
    
    
    
    
    
    
    453,634
    
    
    
    188,897
    
    
    
    132,694
    
    
    
    (519,631
    )
    
    
    255,594Satellites, property and other equipment, net
    
    
    
    
    
    
    
    
    
    
    1,446,613
    
    
    
    457,595
    
    
    
    21,982
    
    
    
    
    
    
    
    1,926,190Other long-term assets
    
    
    
    
    
    
    
    
    
    
    50,015
    
    
    
    6,249
    
    
    
    660
    
    
    
    
    
    
    
    56,924Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    492,435
    
    
    
    17,854
    
    
    
    386
    
    
    
    
    
    
    
    510,675Investment in affiliates
    
    
    1,063,821
    
    
    
    
    
    
    
    1,339,307
    
    
    
    1,477,582
    
    
    
    261
    
    
    
    (3,880,971
    )
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    2,078,057
    
    
    
    343,876
    
    
    
    24,670
    
    
    
    
    
    
    
    2,446,603Total assets
    
    
    1,063,821
    
    
    
    
    
    
    
    5,860,061
    
    
    
    2,492,053
    
    
    
    180,653
    
    
    
    (4,400,602
    )
    
    
    5,195,986LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    32,059
    
    
    
    6,798
    
    
    
    4,556
    
    
    
    
    
    
    
    43,413Intercompany payable
    
    
    
    
    
    
    
    
    
    
    108,346
    
    
    
    411,285
    
    
    
    
    
    
    
    (519,631
    )
    
    
    Other current liabilities
    
    
    
    
    
    
    
    
    
    
    121,140
    
    
    
    2,397
    
    
    
    4,167
    
    
    
    
    
    
    
    127,704Debt due within one year
    
    
    
    
    
    
    
    
    
    
    23,601
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    23,602Total current liabilities
    
    
    
    
    
    
    
    
    
    
    285,146
    
    
    
    420,481
    
    
    
    8,723
    
    
    
    (519,631
    )
    
    
    194,719Debt financing
    
    
    
    
    
    
    
    
    
    
    3,021,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,021,820Future tax liability
    
    
    
    
    
    
    
    
    
    
    262,913
    
    
    
    86
    
    
    
    6,194
    
    
    
    
    
    
    
    269,193Other long-term liabilities
    
    
    25,090
    
    
    
    
    
    
    
    611,568
    
    
    
    16,370
    
    
    
    18,495
    
    
    
    
    
    
    
    671,523Senior preferred shares
    
    
    141,435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,435Total liabilities
    
    
    166,525
    
    
    
    
    
    
    
    4,181,447
    
    
    
    436,937
    
    
    
    33,412
    
    
    
    (519,631
    )
    
    
    4,298,690Shareholders equityCommon shares
    
    
    756,414
    
    
    
    
    
    
    
    2,320,730
    
    
    
    1,896,596
    
    
    
    104,434
    
    
    
    (4,321,760
    )
    
    
    756,414Preferred shares
    
    
    541,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541,764Accumulated deficit
    
    
    (404,557
    )
    
    
    
    
    
    
    (714,253
    )
    
    
    230,623
    
    
    
    39,165
    
    
    
    444,465
    
    
    
    (404,557
    )Accumulated other comprehensive loss
    
    
    (7,422
    )
    
    
    
    
    
    
    63
    
    
    
    (11,028
    )
    
    
    3,544
    
    
    
    7,421
    
    
    
    (7,422
    )Contributed surplus
    
    
    11,097
    
    
    
    
    
    
    
    72,074
    
    
    
    (61,075
    )
    
    
    98
    
    
    
    (11,097
    )
    
    
    11,097Total shareholders equity
    
    
    897,296
    
    
    
    
    
    
    
    1,678,614
    
    
    
    2,055,116
    
    
    
    147,241
    
    
    
    (3,880,971
    )
    
    
    897,296Total liabilities and shareholders equity
    
    
    1,063,821
    
    
    
    
    
    
    
    5,860,061
    
    
    
    2,492,053
    
    
    
    180,653
    
    
    
    (4,400,602
    )
    
    
    5,195,986Reconciliation to U.S. GAAP of total shareholders equity is as follows:Canadian GAAP
    
    
    897,296
    
    
    
    
    
    
    
    1,678,614
    
    
    
    2,055,116
    
    
    
    147,241
    
    
    
    (3,880,971
    )
    
    
    897,296Underlying differences in the income (loss) from equity investments
    
    
    (35,291
    )
    
    
    
    
    
    
    (372
    )
    
    
    (372
    )
    
    
    
    
    
    
    36,035
    
    
    
    Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (22,420
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,420
    )Net actuarial losses
    
    
    
    
    
    
    
    
    
    
    (10,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,541
    )Sales type lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    23,070
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,070Capital lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    (9,229
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,229
    )Lease amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (619
    )
    
    
    
    
    
    
    (619
    )Tax effect of above adjustments
    
    
    
    
    
    
    
    
    
    
    1,777
    
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    2,024Uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    (17,576
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,576
    )U.S. GAAP
    
    
    862,005
    
    
    
    
    
    
    
    1,643,323
    
    
    
    2,054,744
    
    
    
    146,869
    
    
    
    (3,844,936
    )
    
    
    862,005
  F-104




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Earnings (Loss)
For the year ended December 31, 2009
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    subsidiaries
    
    
    subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedOperating revenuesService revenues
    
    
    
    
    
    
    
    
    
    
    704,397
    
    
    
    78,559
    
    
    
    46,216
    
    
    
    (62,034
    )
    
    
    767,138Equipment sales revenues
    
    
    
    
    
    
    
    
    
    
    6,696
    
    
    
    13,570
    
    
    
    
    
    
    
    (206
    )
    
    
    20,060Operating revenues
    
    
    
    
    
    
    
    
    
    
    711,093
    
    
    
    92,129
    
    
    
    46,216
    
    
    
    (62,240
    )
    
    
    787,198Amortization
    
    
    
    
    
    
    
    
    
    
    198,676
    
    
    
    47,055
    
    
    
    11,136
    
    
    
    
    
    
    
    256,867Operations and administration
    
    
    
    
    
    
    
    
    
    
    173,371
    
    
    
    80,554
    
    
    
    28,004
    
    
    
    (62,239
    )
    
    
    219,690Cost of equipment sales
    
    
    
    
    
    
    
    
    
    
    5,829
    
    
    
    10,552
    
    
    
    
    
    
    
    (1
    )
    
    
    16,380Total operating expenses
    
    
    
    
    
    
    
    
    
    
    377,876
    
    
    
    138,161
    
    
    
    39,140
    
    
    
    (62,240
    )
    
    
    492,937Earnings from operations
    
    
    
    
    
    
    
    
    
    
    333,217
    
    
    
    (46,032
    )
    
    
    7,076
    
    
    
    
    
    
    
    294,261Income (loss) from equity investments
    
    
    444,305
    
    
    
    
    
    
    
    (3,153
    )
    
    
    (5,047
    )
    
    
    
    
    
    
    (436,105
    )
    
    
    Interest expense
    
    
    (13,540
    )
    
    
    
    
    
    
    (255,670
    )
    
    
    (1,318
    )
    
    
    (2,252
    )
    
    
    
    
    
    
    (272,780
    )(Loss) gain on financial instruments
    
    
    
    
    
    
    
    
    
    
    (116,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,992
    )Gain (loss) on foreign exchange
    
    
    
    
    
    
    
    
    
    
    486,507
    
    
    
    29,869
    
    
    
    (17,010
    )
    
    
    
    
    
    
    499,366Other (expense) income
    
    
    
    
    
    
    
    
    
    
    5,479
    
    
    
    1,321
    
    
    
    25,059
    
    
    
    
    
    
    
    31,859(Loss) earnings before income taxes
    
    
    430,765
    
    
    
    
    
    
    
    449,388
    
    
    
    (21,207
    )
    
    
    12,873
    
    
    
    (436,105
    )
    
    
    435,714Income tax (expense) recovery
    
    
    
    
    
    
    
    
    
    
    (5,083
    )
    
    
    (1,458
    )
    
    
    1,592
    
    
    
    
    
    
    
    (4,949
    )Net (loss) earnings
    
    
    430,765
    
    
    
    
    
    
    
    444,305
    
    
    
    (22,665
    )
    
    
    14,465
    
    
    
    (436,105
    )
    
    
    430,765Reconciliation to US GAAP is as follows:Income (loss) from equity investments
    
    
    (49,059
    )
    
    
    
    
    
    
    475
    
    
    
    475
    
    
    
    
    
    
    
    48,109
    
    
    
    Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (52,182
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,182
    )Sales type lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    1,514
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,514Capital lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    (1,567
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,567
    )Lease amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    719
    
    
    
    
    
    
    
    719Dividends on senior preferred shares
    
    
    13,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,540Tax effect of above adjustments
    
    
    
    
    
    
    
    
    
    
    10,754
    
    
    
    
    
    
    
    (244
    )
    
    
    
    
    
    
    10,510Uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    (8,053
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,053
    )US GAAP net (loss) earnings
    
    
    395,246
    
    
    
    
    
    
    
    395,246
    
    
    
    (22,190
    )
    
    
    14,940
    
    
    
    (387,996
    )
    
    
    395,246
  F-105




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2009
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    subsidiaries
    
    
    subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    
    430,765
    
    
    
    
    
    
    
    444,305
    
    
    
    (22,665
    )
    
    
    14,465
    
    
    
    (436,105
    )
    
    
    430,765Adjustments to reconcile net earnings (loss) to cash flows from operating activities:Amortization
    
    
    
    
    
    
    
    
    
    
    198,676
    
    
    
    47,055
    
    
    
    11,136
    
    
    
    
    
    
    
    256,867Future income taxes
    
    
    
    
    
    
    
    
    
    
    6,245
    
    
    
    271
    
    
    
    (1,918
    )
    
    
    
    
    
    
    4,598Unrealized foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (508,499
    )
    
    
    (12,769
    )
    
    
    (1,368
    )
    
    
    
    
    
    
    (522,636
    )Unrealized gain on derivatives
    
    
    
    
    
    
    
    
    
    
    116,992
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,992Dividends on preferred shares
    
    
    13,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,540Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,696
    
    
    
    854
    
    
    
    99
    
    
    
    
    
    
    
    5,649Loss (income) from equity investments
    
    
    (444,305
    )
    
    
    
    
    
    
    3,153
    
    
    
    5,047
    
    
    
    
    
    
    
    436,105
    
    
    
    (Gain) loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    (8,013
    )
    
    
    590
    
    
    
    (26,007
    )
    
    
    
    
    
    
    (33,430
    )Other
    
    
    
    
    
    
    
    
    
    
    (49,760
    )
    
    
    3,267
    
    
    
    (310
    )
    
    
    
    
    
    
    (46,803
    )Customer prepayments on future satellite services
    
    
    
    
    
    
    
    
    
    
    82,066
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    82,966Customer refunds
    
    
    
    
    
    
    
    
    
    
    (17,459
    )
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    (17,566
    )Operating assets and liabilities
    
    
    
    
    
    
    
    
    
    
    21,144
    
    
    
    (20,756
    )
    
    
    6,815
    
    
    
    
    
    
    
    7,203
    
    
    
    
    
    
    
    293,546
    
    
    
    1,687
    
    
    
    2,912
    
    
    
    
    
    
    
    298,145Cash flows from investing activitiesSatellite programs
    
    
    
    
    
    
    
    
    
    
    (258,083
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258,083
    )Property additions
    
    
    
    
    
    
    
    
    
    
    (5,130
    )
    
    
    (722
    )
    
    
    (266
    )
    
    
    
    
    
    
    (6,118
    )Proceeds on disposal of assets
    
    
    
    
    
    
    
    
    
    
    70,942
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    71,400
    
    
    
    
    
    
    
    (192,271
    )
    
    
    (264
    )
    
    
    (266
    )
    
    
    
    
    
    
    (192,801
    )Cash flows from financing activitiesDebt financing
    
    
    
    
    
    
    
    
    
    
    23,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,880Repayment of debt financing
    
    
    
    
    
    
    
    
    
    
    (53,844
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (53,855
    )Capitalized debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital lease payments
    
    
    
    
    
    
    
    
    
    
    (11,359
    )
    
    
    
    
    
    
    (3,261
    )
    
    
    
    
    
    
    (14,620
    )Satellite performance incentive payments
    
    
    
    
    
    
    
    
    
    
    (5,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,418
    )
    
    
    
    
    
    
    
    (46,741
    )
    
    
    (11
    )
    
    
    (3,261
    )
    
    
    
    
    
    
    (50,013
    )Effect of changes in exchange rates on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764
    
    
    
    (445
    )
    
    
    
    
    
    
    319Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    54,534
    
    
    
    2,176
    
    
    
    (1,060
    )
    
    
    
    
    
    
    55,650Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    83,089
    
    
    
    12,056
    
    
    
    3,394
    
    
    
    
    
    
    
    98,539Cash and cash equivalents, end of period
    
    
    
    
    
    
    
    
    
    
    137,623
    
    
    
    14,232
    
    
    
    2,334
    
    
    
    
    
    
    
    154,189
  F-106




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
  December 31, 2010
 Telesat Canada
 Canadian GAAP
    
    
    Adjustments
    
    
    US GAAPCurrent assets
    
    
    458,334
    
    
    
    (1,996
    )
    
    
    456,338Other assets
    
    
    107,568
    
    
    
    6,129
    
    
    
    113,697Goodwill
    
    
    2,078,056
    
    
    
    (12,692
    )
    
    
    2,065,364Current liabilities
    
    
    373,163
    
    
    
    18,740
    
    
    
    391,903Debt financing
    
    
    2,771,802
    
    
    
    42,244
    
    
    
    2,814,046Future tax liability
    
    
    305,548
    
    
    
    (4,947
    )
    
    
    300,601Other long-term liabilities
    
    
    649,904
    
    
    
    46,830
    
    
    
    696,734Accumulated deficit
    
    
    (471,353
    )
    
    
    (91,361
    )
    
    
    (562,714
    )Accumulated other comprehensive income (loss)
    
    
    63
    
    
    
    (20,065
    )
    
    
    (20,002
    )
 Non-guarantor subsidiaries
 Canadian GAAP
    
    
    Adjustments
    
    
    US GAAPCurrent liabilities
    
    
    7,665
    
    
    
    106
    
    
    
    7,771Future tax liability
    
    
    5,092
    
    
    
    159
    
    
    
    5,251Other long-term liabilities
    
    
    13,767
    
    
    
    292
    
    
    
    14,059Accumulated earnings
    
    
    31,828
    
    
    
    (548
    )
    
    
    31,280Accumulated other comprehensive income
    
    
    3,777
    
    
    
    (9
    )
    
    
    3,768
 December 31, 2009
 Telesat Canada
 Canadian GAAP
    
    
    Adjustments
    
    
    US GAAPCurrent assets
    
    
    453,634
    
    
    
    9,363
    
    
    
    462,997Other assets
    
    
    50,015
    
    
    
    67,743
    
    
    
    117,758Goodwill
    
    
    2,078,057
    
    
    
    (12,692
    )
    
    
    2,065,365Current liabilities
    
    
    285,146
    
    
    
    11,462
    
    
    
    296,608Debt financing
    
    
    3,021,820
    
    
    
    53,511
    
    
    
    3,075,331Future tax liability
    
    
    262,913
    
    
    
    1,060
    
    
    
    263,973Other long-term liabilities
    
    
    611,568
    
    
    
    32,807
    
    
    
    644,375Accumulated deficit
    
    
    (714,253
    )
    
    
    (23,884
    )
    
    
    (738,137
    )Accumulated other comprehensive income (loss)
    
    
    63
    
    
    
    (10,541
    )
    
    
    (10,478
    )
 Non-guarantor subsidiaries
 Canadian GAAP
    
    
    Adjustments
    
    
    US GAAPCurrent liabilities
    
    
    8,723
    
    
    
    130
    
    
    
    8,853Future tax liability
    
    
    6,194
    
    
    
    247
    
    
    
    6,441Other long-term liabilities
    
    
    18,495
    
    
    
    489
    
    
    
    18,984Accumulated earnings
    
    
    39,165
    
    
    
    (760
    )
    
    
    38,405Accumulated other comprehensive income
    
    
    3,544
    
    
    
    (106
    )
    
    
    3,438
  F-107




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Earnings (Loss)
For the year ended December 31, 2008
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    subsidiaries
    
    
    subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedOperating revenuesService revenues
    
    
    
    
    
    
    
    
    
    
    613,419
    
    
    
    98,342
    
    
    
    26,700
    
    
    
    (57,670
    )
    
    
    680,791Equipment sales revenues
    
    
    
    
    
    
    
    
    
    
    12,459
    
    
    
    18,296
    
    
    
    
    
    
    
    (171
    )
    
    
    30,584Operating revenues
    
    
    
    
    
    
    
    
    
    
    625,878
    
    
    
    116,638
    
    
    
    26,700
    
    
    
    (57,841
    )
    
    
    711,375Amortization
    
    
    
    
    
    
    
    
    
    
    179,100
    
    
    
    36,218
    
    
    
    20,322
    
    
    
    
    
    
    
    235,640Operations and administration
    
    
    
    
    
    
    
    
    
    
    197,506
    
    
    
    99,267
    
    
    
    8,438
    
    
    
    (57,661
    )
    
    
    247,550Cost of equipment sales
    
    
    
    
    
    
    
    
    
    
    9,944
    
    
    
    14,500
    
    
    
    104
    
    
    
    (180
    )
    
    
    24,368Impairment loss on long-lived assets
    
    
    
    
    
    
    
    
    
    
    2,373
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,373Impairment loss on intangible assets
    
    
    
    
    
    
    
    
    
    
    465,900
    
    
    
    17,100
    
    
    
    
    
    
    
    
    
    
    
    483,000Total operating expenses
    
    
    
    
    
    
    
    
    
    
    854,823
    
    
    
    167,085
    
    
    
    28,864
    
    
    
    (57,841
    )
    
    
    992,931Earnings from operations
    
    
    
    
    
    
    
    
    
    
    (228,945
    )
    
    
    (50,447
    )
    
    
    (2,164
    )
    
    
    
    
    
    
    (281,556
    )Income (loss) from equity investments
    
    
    (821,416
    )
    
    
    
    
    
    
    (60,472
    )
    
    
    (5,130
    )
    
    
    
    
    
    
    887,018
    
    
    
    Interest expense
    
    
    (9,855
    )
    
    
    
    
    
    
    (245,355
    )
    
    
    25
    
    
    
    (2,128
    )
    
    
    
    
    
    
    (257,313
    )(Loss) gain on financial instruments
    
    
    
    
    
    
    
    
    
    
    241,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241,720Gain (loss) on foreign exchange
    
    
    
    
    
    
    
    
    
    
    (692,951
    )
    
    
    (17,106
    )
    
    
    12,769
    
    
    
    
    
    
    
    (697,288
    )Other (expense) income
    
    
    
    
    
    
    
    
    
    
    (3,868
    )
    
    
    913
    
    
    
    1,242
    
    
    
    
    
    
    
    (1,713
    )(Loss) earnings before income taxes
    
    
    (831,271
    )
    
    
    
    
    
    
    (989,871
    )
    
    
    (71,745
    )
    
    
    9,719
    
    
    
    887,018
    
    
    
    (996,150
    )Income tax recovery (expense)
    
    
    
    
    
    
    
    
    
    
    168,455
    
    
    
    (2,730
    )
    
    
    (846
    )
    
    
    
    
    
    
    164,879Net (loss) earnings
    
    
    (831,271
    )
    
    
    
    
    
    
    (821,416
    )
    
    
    (74,475
    )
    
    
    8,873
    
    
    
    887,018
    
    
    
    (831,271
    )Reconciliation to US GAAP is as follows:Income (loss) from equity investments
    
    
    23,343
    
    
    
    
    
    
    
    (742
    )
    
    
    
    
    
    
    
    
    
    
    (22,601
    )
    
    
    Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    28,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,988Sales type lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    18,808
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,808Capital lease  operating lease for U.S. GAAP
    
    
    
    
    
    
    
    
    
    
    (7,584
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,584
    )Lease amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,233
    )
    
    
    
    
    
    
    (1,233
    )Dividends on senior preferred shares
    
    
    9,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,855Tax effect of above adjustments
    
    
    
    
    
    
    
    
    
    
    (9,252
    )
    
    
    
    
    
    
    491
    
    
    
    
    
    
    
    (8,761
    )Uncertainty in income taxes
    
    
    
    
    
    
    
    
    
    
    (6,875
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,875
    )US GAAP net (loss) earnings
    
    
    (798,073
    )
    
    
    
    
    
    
    (798,073
    )
    
    
    (74,475
    )
    
    
    8,131
    
    
    
    864,417
    
    
    
    (798,073
    )
  F-108




---



##### Table of Contents



Telesat Holdings Inc.
 Notes to the 2010 Consolidated Financial Statements
(all amounts in thousands of Canadian dollars, except for per share
amounts and where otherwise noted)
 25. CONDENSED CONSOLIDATING FINANCIAL INFORMATION  (continued)
 Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2008
 Telesat
    
    
    Telesat
    
    
    
    
    
    
    Guarantor
    
    
    Non-guarantorHoldings
    
    
    LLC
    
    
    Telesat Canada
    
    
    subsidiaries
    
    
    subsidiaries
    
    
    Adjustments
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    
    (831,271
    )
    
    
    
    
    
    
    (821,416
    )
    
    
    (74,475
    )
    
    
    8,873
    
    
    
    887,018
    
    
    
    (831,271
    )Adjustments to reconcile net earnings (loss) to cash flows from operating activities:Amortization
    
    
    
    
    
    
    
    
    
    
    179,100
    
    
    
    36,218
    
    
    
    20,322
    
    
    
    
    
    
    
    235,640Future income taxes
    
    
    
    
    
    
    
    
    
    
    (175,744
    )
    
    
    84
    
    
    
    (291
    )
    
    
    
    
    
    
    (175,951
    )Unrealized foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    697,907
    
    
    
    6,172
    
    
    
    (9,402
    )
    
    
    
    
    
    
    694,677Unrealized gain on derivatives
    
    
    
    
    
    
    
    
    
    
    (237,965
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237,965
    )Dividends on preferred shares
    
    
    9,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,855Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,246
    
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    5,448(Gain) Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    827
    
    
    
    (575
    )
    
    
    
    
    
    
    
    
    
    
    252Impairment losses
    
    
    
    
    
    
    
    
    
    
    468,273
    
    
    
    17,100
    
    
    
    
    
    
    
    
    
    
    
    485,373Loss (income) from equity investments
    
    
    821,416
    
    
    
    
    
    
    
    60,472
    
    
    
    5,130
    
    
    
    
    
    
    
    (887,018
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (41,820
    )
    
    
    (742
    )
    
    
    (841
    )
    
    
    (1,044
    )
    
    
    (44,447
    )Customer prepayments on future satellite services
    
    
    
    
    
    
    
    
    
    
    88,473
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    88,587Operating assets and liabilities
    
    
    
    
    
    
    
    
    
    
    (42,880
    )
    
    
    107,584
    
    
    
    (16,889
    )
    
    
    1,044
    
    
    
    48,859
    
    
    
    
    
    
    
    180,473
    
    
    
    96,812
    
    
    
    1,772
    
    
    
    
    
    
    
    279,057Cash flows from investing activitiesSatellite programs
    
    
    
    
    
    
    
    
    
    
    (194,542
    )
    
    
    (69,221
    )
    
    
    
    
    
    
    
    
    
    
    (263,763
    )Property additions
    
    
    
    
    
    
    
    
    
    
    (6,505
    )
    
    
    (2,304
    )
    
    
    (53
    )
    
    
    
    
    
    
    (8,862
    )Proceeds on disposal of assets
    
    
    
    
    
    
    
    
    
    
    566
    
    
    
    4,554
    
    
    
    
    
    
    
    
    
    
    
    5,120Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    4,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,006Dividends received
    
    
    
    
    
    
    
    
    
    
    7,477
    
    
    
    
    
    
    
    
    
    
    
    (7,477
    )
    
    
    
    
    
    
    
    
    
    
    (188,998
    )
    
    
    (66,971
    )
    
    
    (53
    )
    
    
    (7,477
    )
    
    
    (263,499
    )Cash flows from financing activitiesDebt financing and bank loans
    
    
    
    
    
    
    
    
    
    
    186,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186,687Repayment of bank loans and debt financing
    
    
    
    
    
    
    
    
    
    
    (91,528
    )
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (91,560
    )Capitalized debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (19,131
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,131
    )Capital lease payments
    
    
    
    
    
    
    
    
    
    
    (8,197
    )
    
    
    (19,816
    )
    
    
    (2,941
    )
    
    
    
    
    
    
    (30,954
    )Satellite performance incentive payments
    
    
    
    
    
    
    
    
    
    
    (3,524
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,524
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,477
    )
    
    
    
    
    
    
    7,477
    
    
    
    
    
    
    
    
    
    
    
    64,307
    
    
    
    (27,325
    )
    
    
    (2,941
    )
    
    
    7,477
    
    
    
    41,518Effect of changes in exchange rates on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,660
    )
    
    
    920
    
    
    
    
    
    
    
    (740
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    55,782
    
    
    
    856
    
    
    
    (302
    )
    
    
    
    
    
    
    56,336Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    27,308
    
    
    
    11,200
    
    
    
    3,695
    
    
    
    
    
    
    
    42,203Cash and cash equivalents, end of period
    
    
    
    
    
    
    
    
    
    
    83,090
    
    
    
    12,056
    
    
    
    3,393
    
    
    
    
    
    
    
    98,539
  F-109