##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 Commission file number 1-14180
 Loral Space & Communications Inc.
 600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
 Jurisdiction of incorporation: Delaware
 IRS identification number: 87-0748324
 Yes þ No o
 Yes o No 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 þ No o
 Yes o No þ




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##### 



LORAL SPACE AND COMMUNICATIONS INC.
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
 For the quarterly period ended September 30, 2009
 Page No.PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 2009 and
September 30, 2008
    
    4Condensed Consolidated Statements of Equity for the nine months ended September 30,
2009 and the year ended December 31, 2008
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2009 and September 30, 2008
    
    6Notes to Condensed Consolidated Financial Statements
    
    7Item 2:Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    38Item 3:Quantitative and Qualitative Disclosures About Market Risk
    
    58Item 4:Disclosure Controls and Procedures
    
    59PART II  OTHER INFORMATIONItem 1:Legal Proceedings
    
    59Item 1A:Risk Factors
    
    59Item 6:Exhibits
    
    60Signatures
    
    61Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART 1.
 FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 (Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    173,417
    
    
    $
    117,548Contracts-in-process
    
    
    214,894
    
    
    
    213,651Inventories
    
    
    92,749
    
    
    
    109,755Other current assets
    
    
    29,291
    
    
    
    54,286Total current assets
    
    
    510,351
    
    
    
    495,240Property, plant and equipment, net
    
    
    202,243
    
    
    
    188,270Long-term receivables
    
    
    231,827
    
    
    
    184,701Investments in affiliates
    
    
    251,784
    
    
    
    72,642Intangible assets, net
    
    
    23,120
    
    
    
    31,578Other assets
    
    
    19,439
    
    
    
    23,436Total assets
    
    $
    1,238,764
    
    
    $
    995,867LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    99,599
    
    
    $
    91,052Accrued employment costs
    
    
    45,267
    
    
    
    41,819Customer advances and billings in excess of costs and profits
    
    
    309,170
    
    
    
    184,592Other current liabilities
    
    
    17,567
    
    
    
    31,911Total current liabilities
    
    
    471,603
    
    
    
    349,374Borrowings under revolving credit facility
    
    
    
    
    
    
    55,000Pension and other post retirement liabilities
    
    
    228,411
    
    
    
    230,660Long-term liabilities
    
    
    159,995
    
    
    
    151,176Total liabilities
    
    
    860,009
    
    
    
    786,210Commitments and contingenciesEquity: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, 20,313,797 and
20,286,992 shares issued and outstanding
    
    
    203
    
    
    
    203Non-voting common stock, $.01 par value; 20,000,000 shares authorized, 9,505,673 shares issued
and outstanding
    
    
    95
    
    
    
    95Paid-in capital
    
    
    1,011,952
    
    
    
    1,007,011Accumulated deficit
    
    
    (579,031
    )
    
    
    (750,922
    )Accumulated other comprehensive loss
    
    
    (54,464
    )
    
    
    (46,730
    )Total equity
    
    
    378,755
    
    
    
    209,657Total liabilities and equity
    
    $
    1,238,764
    
    
    $
    995,867
   3




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LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    249,237
    
    
    $
    212,519
    
    
    $
    733,175
    
    
    $
    639,117Cost of revenues
    
    
    212,009
    
    
    
    194,715
    
    
    
    663,425
    
    
    
    585,830Selling, general and administrative expenses
    
    
    22,379
    
    
    
    23,599
    
    
    
    68,076
    
    
    
    71,496Gain on recovery from customer bankruptcy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,140
    )Operating income (loss)
    
    
    14,849
    
    
    
    (5,795
    )
    
    
    1,674
    
    
    
    (12,069
    )Interest and investment income
    
    
    1,877
    
    
    
    1,949
    
    
    
    5,455
    
    
    
    10,231Interest expense
    
    
    (707
    )
    
    
    (523
    )
    
    
    (754
    )
    
    
    (1,179
    )Gain on litigation recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,295Impairment of available for sale securities
    
    
    
    
    
    
    (998
    )
    
    
    
    
    
    
    (4,498
    )Other expense
    
    
    (7
    )
    
    
    (66
    )
    
    
    (106
    )
    
    
    (362
    )Income (loss) before income taxes and equity in net income (losses) of affiliates
    
    
    16,012
    
    
    
    (5,433
    )
    
    
    6,269
    
    
    
    50,418Income tax (provision) benefit
    
    
    (659
    )
    
    
    561
    
    
    
    (7,057
    )
    
    
    (12,858
    )Income (loss) before equity in net income (losses) of affiliates
    
    
    15,353
    
    
    
    (4,872
    )
    
    
    (788
    )
    
    
    37,560Equity in net income (losses) of affiliates
    
    
    93,071
    
    
    
    (39,353
    )
    
    
    172,679
    
    
    
    (101,052
    )Net income (loss) attributable to Loral Space & Communications Inc.
    
    
    108,424
    
    
    
    (44,225
    )
    
    
    171,891
    
    
    
    (63,492
    )Preferred dividends
    
    
    
    
    
    
    (6,214
    )
    
    
    
    
    
    
    (18,301
    )Net income (loss) applicable to Loral Space & Communications Inc. common
shareholders
    
    $
    108,424
    
    
    $
    (50,439
    )
    
    $
    171,891
    
    
    $
    (81,793
    )Basic and diluted income (loss) per share:Basic income (loss) per share
    
    $
    3.64
    
    
    $
    (2.50
    )
    
    $
    5.78
    
    
    $
    (4.06
    )Diluted income (loss) per share
    
    $
    3.61
    
    
    $
    (2.50
    )
    
    $
    5.75
    
    
    $
    (4.06
    )Weighted average shares outstanding:Basic
    
    
    29,771
    
    
    
    20,184
    
    
    
    29,742
    
    
    
    20,169Diluted
    
    
    30,004
    
    
    
    20,184
    
    
    
    29,870
    
    
    
    20,169
   4




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 (In thousands)
 (Unaudited)
 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
    
    
    TotalIssued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss)
    
    
    EquityBalance, January 1, 2008
    
    
    142
    
    
    $
    41,873
    
    
    
    901
    
    
    $
    265,777
    
    
    
    20,293
    
    
    $
    203
    
    
    
    
    
    
    
    
    
    
    $
    663,127
    
    
    $
    (33,939
    )
    
    $
    36,517
    
    
    $
    973,558Net loss attributable to
Loral Space &
Communications Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,249Restricted shares
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 attributable to Loral Space & Communications Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171,891Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,734
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,157Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35Common stock repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (889
    )
    
    
    
    
    
    
    
    
    
    
    (889
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,795
    
    
    
    
    
    
    
    
    
    
    
    5,795Balance, September 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    20,314
    
    
    $
    203
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,011,952
    
    
    $
    (579,031
    )
    
    $
    (54,464
    )
    
    $
    378,755
   5




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine MonthsEnded September 30,2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    171,891
    
    
    $
    (63,492
    )Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Non-cash operating items (Note 3)
    
    
    (136,111
    )
    
    
    159,354Changes in operating assets and liabilities:Contracts-in-process
    
    
    (8,492
    )
    
    
    (186,857
    )Inventories
    
    
    17,006
    
    
    
    (8,309
    )Long-term receivables
    
    
    (4,136
    )
    
    
    19,140Other current assets and other assets
    
    
    2,359
    
    
    
    (14,665
    )Accounts payable
    
    
    8,137
    
    
    
    (979
    )Accrued expenses and other current liabilities
    
    
    (11,284
    )
    
    
    (8,025
    )Customer advances
    
    
    85,407
    
    
    
    4,595Income taxes payable
    
    
    18,266
    
    
    
    (45,791
    )Pension and other postretirement liabilities
    
    
    (2,249
    )
    
    
    (21,258
    )Long-term liabilities
    
    
    7,322
    
    
    
    (4,360
    )Net cash provided by (used in) operating activities
    
    
    148,116
    
    
    
    (170,647
    )Investing activities:Capital expenditures
    
    
    (32,200
    )
    
    
    (44,459
    )Decrease in restricted cash
    
    
    10
    
    
    
    561Proceeds from the sale of short-term investments and available-for-sale securities
    
    
    
    
    
    
    162Distribution from equity investment
    
    
    277
    
    
    
    Investment in affiliates
    
    
    (4,480
    )
    
    
    Purchase of short-term investments
    
    
    
    
    
    
    (500
    )Net cash used in investing activities
    
    
    (36,393
    )
    
    
    (44,236
    )Financing activities:Proceeds from the exercise of stock options
    
    
    35
    
    
    
    Common stock repurchased to fund withholding taxes
    
    
    (889
    )
    
    
    Repayment of borrowings under SS/L revolving credit facility
    
    
    (55,000
    )
    
    
    Net cash used in financing activities
    
    
    (55,854
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    55,869
    
    
    
    (214,883
    )Cash and cash equivalents  beginning of period
    
    
    117,548
    
    
    
    314,694Cash and cash equivalents  end of period
    
    $
    173,417
    
    
    $
    99,811
   6




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Organization and Principal Business
    Satellite Manufacturing:
 Satellite Services:
   2. Basis of Presentation
    7




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##### Table of Contents



Reorganizations
  Use of Estimates in Preparation of Financial Statements
   Concentration of Credit Risk
  Fair Value Measurements
  Level 1:
 Level 2:
 Level 3:
   8




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##### Table of Contents



Assets and liabilities measured at Fair Value on Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Marketable securities
    
    $
    748
    
    
    $
    
    
    
    $
    Derivatives, net
    
    $
    
    
    
    $
    3,489
    
    
    $
    
  Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
  Subsequent Events
  Recent Accounting Pronouncements
 Business Combinations
 General Intangibles Other than Goodwill
 Consolidation
  9




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##### Table of Contents



Derivatives and Hedging Financial Instruments
 Subsequent Events
 Amendments to FASB Interpretation No.
46(R)
 Compensation  Retirement Benefits .
 Investments  Equity Method and Joint
Ventures .
 Fair Value
Measurements and Disclosures (Topic 820)   Measuring Liabilities at Fair Value Fair Value Measurements and Disclosures  Overall.
 Revenue Recognition (Topic 605) 
Multiple-Deliverable Revenue Arrangements Multiple-Element
Arrangements
  10




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##### Table of Contents



3. Additional Cash Flow Information
  Nine MonthsEnded September 30,2009
    
    
    2008Non-cash operating items:Equity in net (income) losses of affiliates
    
    $
    (172,679
    )
    
    $
    101,052Deferred taxes
    
    
    (1,254
    )
    
    
    22,032Depreciation and amortization
    
    
    29,550
    
    
    
    26,327Stock based compensation
    
    
    6,366
    
    
    
    5,925Warranty expense accruals (reversals)
    
    
    2,102
    
    
    
    (414
    )Increase in allowance for billed receivables
    
    
    2,759
    
    
    
    Amortization of prior service credits and net actuarial gain
    
    
    281
    
    
    
    (2,487
    )Gain on disposition of available-for-sale securities
    
    
    
    
    
    
    (162
    )Unrealized
(gain) loss on non-qualified pension plan assets
    
    
    (717
    )
    
    
    851Non-cash net interest (income) expense
    
    
    (1,190
    )
    
    
    649(Gain) loss on foreign currency transactions and contracts
    
    
    (898
    )
    
    
    3,973Amortization of fair value adjustments related to orbital incentives
    
    
    (431
    )
    
    
    (2,953
    )Loss on disposition of assets
    
    
    
    
    
    
    63Impairment of available for sale securities
    
    
    
    
    
    
    4,498Net non-cash operating items
    
    $
    (136,111
    )
    
    $
    159,354Non-cash investing activities:Available for sale securities received in connection with the sale of Globalstar do Brazil
    
    $
    
    
    
    $
    6,000Capital expenditures incurred not yet paid
    
    $
    2,116
    
    
    $
    1,810Non-cash financing activities:Issuance of restricted stock
    
    $
    1,591
    
    
    $
    Issuance of Loral Series-1 Preferred Stock as payment for dividend
    
    $
    
    
    
    $
    18,016Accrued dividends on Series A-1 and Series B-1 preferred stock
    
    $
    
    
    
    $
    5,263Supplemental information:Interest paid
    
    $
    1,700
    
    
    $
    998Tax (refunds) payments
    
    $
    (17,987
    )
    
    $
    34,156
   11




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##### Table of Contents



4. Comprehensive Income (Loss)
  Three MonthsEnded September 30,2009
    
    
    2008Net income (loss)
    
    $
    108,424
    
    
    $
    (44,225
    )Amortization of prior service credits and net actuarial gains, net of tax benefit of $335 in 2008
    
    
    95
    
    
    
    (494
    )Proportionate share of Telesat Holdco other comprehensive loss
    
    
    (613
    )
    
    
    (1,049
    )Unrealized (loss) gain on foreign currency hedges:Unrealized (loss) gain on foreign currency hedges, net of tax provision of $4,623 in 2008
    
    
    (2,340
    )
    
    
    6,816Less: reclassification adjustment for gains included in net income
    
    
    (2,865
    )
    
    
    Net unrealized (loss) gain
    
    
    (5,205
    )
    
    
    6,816Unrealized (loss) gain on securities:Unrealized (loss) gain on available-for-sale securities, net of tax benefit of $413 in 2008
    
    
    (285
    )
    
    
    (609
    )Less: reclassification adjustment for losses included in net income, net of tax provision of $412 in 2008
    
    
    
    
    
    
    585Net unrealized loss
    
    
    (285
    )
    
    
    (24
    )Comprehensive income (loss)
    
    $
    102,416
    
    
    $
    (38,976
    )
 Nine MonthsEnded September 30,2009
    
    
    2008Net income (loss)
    
    $
    171,891
    
    
    $
    (63,492
    )Amortization of prior service credits and net actuarial gains, net of tax benefit of $1,005 in 2008
    
    
    281
    
    
    
    (1,482
    )Cumulative translation adjustment
    
    
    
    
    
    
    (498
    )Proportionate share of Telesat Holdco other comprehensive income (loss)
    
    
    2,231
    
    
    
    (1,416
    )Unrealized gain on foreign currency hedges:Unrealized (loss) gain on foreign currency hedges, net of tax provision of $4,623 in 2008
    
    
    (626
    )
    
    
    6,816Less: reclassification adjustment for gains included in net income
    
    
    (10,171
    )
    
    
    Net unrealized (loss) gain
    
    
    (10,797
    )
    
    
    6,816Unrealized gain (loss) on securities:Unrealized gain (loss) on available-for-sale securities, net of tax benefit of $1,879 in 2008
    
    
    551
    
    
    
    (2,768
    )Less: reclassification adjustment for losses included in net income, net of tax provision of $1,752
    
    
    
    
    
    
    2,584Net unrealized gain (loss)
    
    
    551
    
    
    
    (184
    )Comprehensive income (loss)
    
    $
    164,157
    
    
    $
    (60,256
    )
  12




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##### Table of Contents



5. Contracts-in-Process and Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008Contracts-in-Process:Amounts
billed (net of allowance for doubtful accounts of $3,682 and $923)
    
    $
    154,481
    
    
    $
    122,455Unbilled receivables
    
    
    60,413
    
    
    
    91,196$
    214,894
    
    
    $
    213,651Inventories:Inventories-gross
    
    $
    119,837
    
    
    $
    136,955Allowance for obsolescence
    
    
    (27,088
    )
    
    
    (27,200
    )$
    92,749
    
    
    $
    109,755
  6. Financial Instruments, Derivatives and Hedging Transactions
 Financial Instruments
  Foreign Currency
   Foreign Currency
    
    
    U.S.$(In thousands)Future revenues  Japanese Yen
    
    ¥
    106,360
    
    
    $
    1,182Future expenditures  Japanese Yen
    
    ¥
    4,605,723
    
    
    $
    51,187Contracts-in-process, unbilled receivables  Japanese Yen
    
    ¥
    4,383
    
    
    $
    49Future expenditures  EUROs
    
    
    3,420
    
    
    $
    4,990
 Derivatives and Hedging Transactions
 Derivatives and Hedging
  13




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##### Table of Contents



Cash Flow Hedges
    To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2009
    
    
    21,470
    
    
    $
    32,119
    
    
    $
    31,3292010
    
    
    19,210
    
    
    
    29,389
    
    
    
    28,0312011
    
    
    23,493
    
    
    
    35,663
    
    
    
    34,322
    64,173
    
    
    $
    97,171
    
    
    $
    93,682
 Balance Sheet Classification
  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet Location
    
    Fair Value
    
    
    Balance Sheet Location
    
    Fair Value(In thousands)
    
    
    
    
    (In thousands)Derivatives designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    2,199
    
    
    
    
    $
    Foreign exchange contracts
    
    Other assets
    
    
    1,338
    
    
    
    
    
    3,537
    
    
    
    
    
    Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other assets
    
    
    111
    
    
    Other current liabilities
    
    
    159Total Derivatives
    
    
    
    $
    3,648
    
    
    
    
    $
    159
  14




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##### Table of Contents



Cash Flow Hedge Gains (Losses) Recognition
  Amount of Gain(Loss)
    
    
    Gain Reclassified from
    
    
    Loss on DerivativeRecognized
    
    
    Accumulated
    
    
    Ineffectiveness andin OCI on
    
    
    OCI into Income
    
    
    amounts excluded fromDerivatives in Cash Flow
    
    Derivative
    
    
    (Effective Portion)
    
    
    Effectiveness TestingHedging Relationships
    
    (Effective Portion)
    
    
    Location
    
    
    Amount
    
    
    Location
    
    
    Amount(In thousands)
    
    
    
    
    
    
    (In thousands)
    
    
    
    
    
    
    (In thousands)Foreign exchange contracts
    
    $
    (890
    )
    
    Revenue
    
    $
    10,171
    
    
    Revenue
    
    $
    (943
    )Foreign exchange contracts
    
    $
    264

      
    
    
    
    
    
    
    
    
    Interest income
    
    $
    (70
    )
 GainRecognized in IncomeCash Flow Derivatives Not Designated as
    
    on DerivativeHedging Instruments
    
    Location
    
    
    Amount(In thousands)Foreign exchange contracts
    
    Revenue
    
    $
    120
  7. Property, Plant and Equipment
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Land and land improvements
    
    $
    26,852
    
    
    $
    26,913Buildings
    
    
    68,703
    
    
    
    59,038Leasehold improvements
    
    
    11,093
    
    
    
    10,870Equipment, furniture and fixtures
    
    
    150,307
    
    
    
    133,916Satellite capacity under construction (see Note 17)
    
    
    22,625
    
    
    
    10,478Other construction in progress
    
    
    16,100
    
    
    
    21,863295,680
    
    
    
    263,078Accumulated depreciation and amortization
    
    
    (93,437
    )
    
    
    (74,808
    )$
    202,243
    
    
    $
    188,270
   15




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##### Table of Contents



8. Investments in Affiliates
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Telesat Holdings Inc.
    
    $
    175,472
    
    
    $
    XTAR, LLC
    
    
    74,188
    
    
    
    70,547Other
    
    
    2,124
    
    
    
    2,095$
    251,784
    
    
    $
    72,642
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Telesat Holdings Inc.
    
    $
    94,948
    
    
    $
    (35,318
    )
    
    $
    173,240
    
    
    $
    (88,661
    )XTAR, LLC
    
    
    (2,154
    )
    
    
    (4,035
    )
    
    
    (838
    )
    
    
    (12,391
    )Other
    
    
    277
    
    
    
    
    
    
    
    277
    
    
    
    $
    93,071
    
    
    $
    (39,353
    )
    
    $
    172,679
    
    
    $
    (101,052
    )
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Revenues
    
    $
    21,336
    
    
    $
    20,856
    
    
    $
    62,179
    
    
    $
    69,290Elimination of Lorals proportionate share of profits
relating to affiliate transactions
    
    
    (6,804
    )
    
    
    (1,050
    )
    
    
    (7,047
    )
    
    
    (4,864
    )Profits relating to affiliate transactions not eliminated
    
    
    3,817
    
    
    
    591
    
    
    
    3,969
    
    
    
    2,731
     16




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##### Table of Contents



Telesat
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Revenues
    
    $
    170,510
    
    
    $
    169,744
    
    
    $
    507,907
    
    
    $
    508,631Operating expenses
    
    
    (52,722
    )
    
    
    (61,586
    )
    
    
    (155,926
    )
    
    
    (195,449
    )Depreciation, amortization and stock-based compensation
    
    
    (54,660
    )
    
    
    (55,028
    )
    
    
    (160,783
    )
    
    
    (170,249
    )Gain on disposition of long-lived assets
    
    
    29,648
    
    
    
    
    
    
    
    29,648
    
    
    
    Operating income
    
    
    92,775
    
    
    
    53,129
    
    
    
    220,846
    
    
    
    142,932Interest expense
    
    
    (58,076
    )
    
    
    (58,917
    )
    
    
    (166,623
    )
    
    
    (174,401
    )Other income (expense)
    
    
    142,863
    
    
    
    (52,266
    )
    
    
    249,498
    
    
    
    (100,790
    )Income tax (provision) benefit
    
    
    (9,584
    )
    
    
    4,561
    
    
    
    (25,006
    )
    
    
    1,233Net income (loss)
    
    
    167,978
    
    
    
    (53,492
    )
    
    
    278,715
    
    
    
    (131,025
    )
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Current assets
    
    $
    203,399
    
    
    $
    179,769Total assets
    
    
    4,901,031
    
    
    
    4,273,162Current liabilities
    
    
    191,479
    
    
    
    171,423Long-term debt, including current portion
    
    
    2,957,703
    
    
    
    2,901,620Total liabilities
    
    
    4,013,186
    
    
    
    3,760,164Redeemable preferred stock
    
    
    132,244
    
    
    
    116,044Shareholders equity
    
    
    755,601
    
    
    
    396,954
   17




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##### Table of Contents



XTAR
  o o
      18




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Revenues
    
    $
    8,382
    
    
    $
    4,979
    
    
    $
    22,973
    
    
    $
    14,427Operating expenses
    
    
    (8,681
    )
    
    
    (8,604
    )
    
    
    (25,826
    )
    
    
    (25,856
    )Depreciation and amortization
    
    
    (2,404
    )
    
    
    (2,405
    )
    
    
    (7,214
    )
    
    
    (7,246
    )Operating loss
    
    
    (2,704
    )
    
    
    (6,030
    )
    
    
    (10,067
    )
    
    
    (18,675
    )Net loss
    
    
    (3,832
    )
    
    
    (7,206
    )
    
    
    (1,458
    )
    
    
    (22,168
    )
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Current assets
    
    $
    7,664
    
    
    $
    9,107Total assets
    
    
    106,781
    
    
    
    115,437Current liabilities
    
    
    42,745
    
    
    
    41,314Total liabilities
    
    
    64,189
    
    
    
    79,386Members equity
    
    
    42,592
    
    
    
    36,051
 Other
    19




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##### Table of Contents



9. Intangible Assets and Amortization of Fair Value Adjustments
  Weighted AverageRemaining
    
    
    September 30, 2009
    
    
    December 31, 2008Amortization Period
    
    
    Gross
    
    
    Accumulated
    
    
    Gross
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(In thousands)
    
    
    (In thousands)Internally developed software and technology
    
    
    2
    
    
    $
    59,027
    
    
    $
    (43,267
    )
    
    $
    59,027
    
    
    $
    (35,154
    )Trade names
    
    
    16
    
    
    
    9,200
    
    
    
    (1,840
    )
    
    
    9,200
    
    
    
    (1,495
    )$
    68,227
    
    
    $
    (45,107
    )
    
    $
    68,227
    
    
    $
    (36,649
    )
  2009
    
    $
    11,2762010
    
    
    9,1922011
    
    
    2,9312012
    
    
    2,3152013
    
    
    460
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Gross fair value adjustments
    
    $
    (36,896
    )
    
    $
    (36,896
    )Accumulated amortization
    
    
    17,059
    
    
    
    19,084$
    (19,837
    )
    
    $
    (17,812
    )
   20




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##### Table of Contents



10. Debt
 SS/L Credit Agreement
   September 30,
    
    
    December 31,2009
    
    
    2008Letters of credit outstanding
    
    $
    7,921
    
    
    $
    4,927Borrowings
    
    
    
    
    
    $
    55,000Interest rate on revolver borrowings
    
    
    
    
    
    
    4.2575
    %
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest expense (including commitment and letter of credit fees)
    
    $
    248
    
    
    $
    
    
    
    $
    959
    
    
    $
    Amortization of issuance costs
    
    $
    219
    
    
    $
    
    
    
    $
    657
    
    
    $
    
 11. Income Taxes
      21




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##### Table of Contents



12. Equity
 Common Stock
 In re: Loral Space and Communications
Consolidated Litigation
     Preferred Stock
   22




---



##### Table of Contents



Stock Plans
         23




---



##### Table of Contents



24




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##### Table of Contents



13. Pensions and Other Employee Benefit Plans
  Pension Benefits
    
    
    Other BenefitsThree Months
    
    
    Three MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Service cost
    
    $
    2,261
    
    
    $
    2,039
    
    
    $
    264
    
    
    $
    335Interest cost
    
    
    5,996
    
    
    
    5,787
    
    
    
    1,050
    
    
    
    1,164Expected return on plan assets
    
    
    (4,273
    )
    
    
    (6,157
    )
    
    
    (13
    )
    
    
    (20
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    226
    
    
    
    (707
    )
    
    
    (133
    )
    
    
    (122
    )$
    4,210
    
    
    $
    962
    
    
    $
    1,168
    
    
    $
    1,357
 Pension Benefits
    
    
    Other BenefitsNine Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Service cost
    
    $
    6,783
    
    
    $
    6,117
    
    
    $
    792
    
    
    $
    1,005Interest cost
    
    
    17,988
    
    
    
    17,361
    
    
    
    3,150
    
    
    
    3,492Expected return on plan assets
    
    
    (12,819
    )
    
    
    (18,471
    )
    
    
    (39
    )
    
    
    (60
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    678
    
    
    
    (2,121
    )
    
    
    (399
    )
    
    
    (366
    )$
    12,630
    
    
    $
    2,886
    
    
    $
    3,504
    
    
    $
    4,071
 14. Commitments and Contingencies
 Financial Matters
  Balance of deferred amounts at January 1, 2009
    
    $
    36,255Warranty costs incurred including payments
    
    
    (916
    )Accruals relating to pre-existing contracts (including changes in estimates)
    
    
    3,993Balance of deferred amounts at September 30, 2009
    
    $
    39,332
   25




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##### Table of Contents



Transactions with Affiliates  Telesat
  26




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##### Table of Contents



Satellite Matters
       27




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##### Table of Contents



Transactions with Affiliates  Telesat
 Regulatory Matters
  Legal Proceedings
 Delaware Shareholder Litigation
 In re: Loral Space and Communications Inc. Consolidated Litigation
 Insurance Coverage Litigation
 Babus
   28




---



##### Table of Contents



In re: Loral
Space and Communications Inc. Consolidated Litigation Babus
   Informal SEC Inquiry
  Reorganization Matters
  Disputed Claims.
  29




---



##### Table of Contents



Indemnification Claims of Directors and Officers of Old Loral. Old Loral Class Action Securities Litigations
 Old Loral Class Action Securities Litigations
 Beleson. Beleson Reorganization Matters  Indemnification Claims.
 Christ. Beleson Beleson Christ Christ Beleson Reorganization Matters  Indemnification Claims.
  30




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##### Table of Contents



Other and Routine Litigation
  15. Earnings (Loss) Per Share
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Common and potential common shares:Weighted average common shares outstanding
    
    
    29,771
    
    
    
    20,184
    
    
    
    29,742
    
    
    
    20,169Unvested restricted stock units
    
    
    145
    
    
    
    
    
    
    
    96
    
    
    
    Unvested restricted stock
    
    
    2
    
    
    
    
    
    
    
    4
    
    
    
    Unvested SARS
    
    
    86
    
    
    
    
    
    
    
    28
    
    
    
    Common and potential common shares
    
    
    30,004
    
    
    
    20,184
    
    
    
    29,870
    
    
    
    20,169
  September 30,2009
    
    
    2008Stock options outstanding
    
    
    2,157,952
    
    
    
    2,034,202Shares of non-vested restricted stock
    
    
    40,577
    
    
    
    107,731Non-vested restricted stock units
    
    
    23,250
    
    
    
    
  31




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16. Segments
      32




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)RevenuesSatellite manufacturing:External revenues
    
    $
    227,908
    
    
    $
    191,663
    
    
    $
    671,016
    
    
    $
    569,827Intersegment revenues(1)
    
    
    25,611
    
    
    
    24,637
    
    
    
    74,809
    
    
    
    76,504Satellite manufacturing revenues
    
    
    253,519
    
    
    
    216,300
    
    
    
    745,825
    
    
    
    646,331Satellite services revenues(2)
    
    
    170,510
    
    
    
    169,744
    
    
    
    507,907
    
    
    
    508,631Operating segment revenues before eliminations
    
    
    424,029
    
    
    
    386,044
    
    
    
    1,253,732
    
    
    
    1,154,962Intercompany eliminations(3)
    
    
    (4,282
    )
    
    
    (3,781
    )
    
    
    (12,650
    )
    
    
    (7,214
    )Affiliate eliminations(2)
    
    
    (170,510
    )
    
    
    (169,744
    )
    
    
    (507,907
    )
    
    
    (508,631
    )Total revenues as reported
    
    $
    249,237
    
    
    $
    212,519
    
    
    $
    733,175
    
    
    $
    639,117Segment Adjusted EBITDASatellite manufacturing
    
    $
    31,620
    
    
    $
    9,618
    
    
    $
    54,166
    
    
    $
    24,483Satellite services(2)
    
    
    117,788
    
    
    
    108,158
    
    
    
    351,981
    
    
    
    319,322Corporate(4)
    
    
    (4,440
    )
    
    
    (3,424
    )
    
    
    (15,192
    )
    
    
    (9,664
    )Adjusted EBITDA before eliminations
    
    
    144,968
    
    
    
    114,352
    
    
    
    390,955
    
    
    
    334,141Intercompany eliminations(3)
    
    
    (291
    )
    
    
    (267
    )
    
    
    (1,383
    )
    
    
    (776
    )Affiliate eliminations(2)
    
    
    (117,788
    )
    
    
    (108,158
    )
    
    
    (351,981
    )
    
    
    (313,182
    )Adjusted EBITDA
    
    $
    26,889
    
    
    $
    5,927
    
    
    $
    37,591
    
    
    $
    20,183Depreciation, Amortization and Stock-Based CompensationSatellite manufacturing
    
    $
    (10,950
    )
    
    $
    (10,601
    )
    
    $
    (33,082
    )
    
    $
    (27,983
    )Satellite services(2)
    
    
    (54,661
    )
    
    
    (55,028
    )
    
    
    (160,783
    )
    
    
    (170,249
    )Corporate
    
    
    (1,090
    )
    
    
    (1,121
    )
    
    
    (2,835
    )
    
    
    (4,269
    )Segment depreciation before affiliate eliminations
    
    
    (66,701
    )
    
    
    (66,750
    )
    
    
    (196,700
    )
    
    
    (202,501
    )Affiliate eliminations(2)
    
    
    54,661
    
    
    
    55,028
    
    
    
    160,783
    
    
    
    170,249Depreciation, amortization and stock-based compensation as reported
    
    $
    (12,040
    )
    
    $
    (11,722
    )
    
    $
    (35,917
    )
    
    $
    (32,252
    )Operating income (loss) as reported
    
    $
    14,849
    
    
    $
    (5,795
    )
    
    $
    1,674
    
    
    $
    (12,069
    )
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Total AssetsSatellite manufacturing
    
    $
    878,839
    
    
    $
    799,476Satellite services (includes goodwill of $2.3 billion and $2.5 billion)(2)
    
    
    4,901,031
    
    
    
    4,273,162Corporate
    
    
    359,925
    
    
    
    196,391Total Assets before affiliate eliminations
    
    
    6,139,795
    
    
    
    5,269,029Affiliate eliminations(2)
    
    
    (4,901,031
    )
    
    
    (4,273,162
    )Total assets as reported(5)
    
    $
    1,238,764
    
    
    $
    995,867
 (1)
    
    Intersegment revenues for satellite manufacturing includes
affiliate revenue of $21.3 million and $20.9 million for the three
months ended September 30, 2009 and 2008, respectively and
$62.2 million and $69.3 million for the nine months ended
September 30, 2009 and 2008, respectively.(2)
    
    Satellite services represents Telesat. Satellite services Adjusted
EBITDA also includes approximately $6 million for the nine months
ended September 30 2008, related to the distribution from a
bankruptcy claim against a former customer of Loral Skynet.
Affiliate eliminations represent the elimination of amounts
attributable to Telesat whose results are reported under the equity
method of accounting in our condensed consolidated statements of
operations (see Note 8).(3)
    
    Represents the elimination of intercompany sales and intercompany
Adjusted EBITDA for satellites under construction by SS/L for
Loral.(4)
    
    Represents corporate expenses incurred in support of our operations.(5)
    
    Amounts are presented after the elimination of intercompany profit.  33




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##### Table of Contents



17. Related Party Transactions
 Transactions with Affiliates
 Telesat
      34




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Revenues from Telesat satellite construction contracts
    
    $
    21,323
    
    
    $
    20,856
    
    
    $
    62,142
    
    
    $
    69,260Milestone payments received from Telesat
    
    
    36,227
    
    
    
    11,140
    
    
    
    67,845
    
    
    
    62,401
       35




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##### Table of Contents



XTAR
   36




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##### Table of Contents



MHR Fund Management LLC
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2008Dividends paid in the form of additional shares:Number of shares
    
    
    20,289
    
    
    
    59,754Amount
    
    $
    6.1
    
    
    $
    18.0
    Other Relationships
   37




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with our unaudited
condensed consolidated financial statements (the financial statements) included in Item 1 and our
latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.
 INDEX
 Topic
    
    LocationOverview
    
    
    Page 38Future Outlook
    
    
    Page 39Consolidated Operating Results
    
    
    Page 41Liquidity and Capital Resources:Loral
    
    
    Page 51Space Systems/Loral
    
    
    Page 52Telesat
    
    
    Page 54Contractual Obligations
    
    
    Page 56Statement of Cash Flows
    
    
    Page 56Affiliate Matters
    
    
    Page 57Commitments and Contingencies
    
    
    Page 57Other Matters
    
    
    Page 57
   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
   38




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##### Table of Contents



Satellite Manufacturing
      Satellite Services
    
 Future Outlook
   39




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##### Table of Contents



40




---



##### Table of Contents



Consolidated Operating Results
 Critical Accounting Matters
 Changes in Critical Accounting Policies
 Consolidated Operating Results 
     41




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##### Table of Contents



Revenues:
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Satellite Manufacturing
    
    $
    253.5
    
    
    $
    216.3
    
    
    $
    745.8
    
    
    $
    646.3Satellite Services
    
    
    170.5
    
    
    
    169.7
    
    
    
    507.9
    
    
    
    508.6Segment revenues
    
    
    424.0
    
    
    
    386.0
    
    
    
    1,253.7
    
    
    
    1,154.9Eliminations(1)
    
    
    (4.3
    )
    
    
    (3.8
    )
    
    
    (12.6
    )
    
    
    (7.2
    )Affiliate eliminations(2)
    
    
    (170.5
    )
    
    
    (169.7
    )
    
    
    (507.9
    )
    
    
    (508.6
    )Revenues as reported(3)
    
    $
    249.2
    
    
    $
    212.5
    
    
    $
    733.2
    
    
    $
    639.1
   Adjusted EBITDA:
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Satellite Manufacturing
    
    $
    31.6
    
    
    $
    9.6
    
    
    $
    54.2
    
    
    $
    24.5Satellite Services
    
    
    117.8
    
    
    
    108.2
    
    
    
    352.0
    
    
    
    319.4Corporate expenses(4)
    
    
    (4.4
    )
    
    
    (3.4
    )
    
    
    (15.2
    )
    
    
    (9.7
    )Segment Adjusted EBITDA before eliminations
    
    
    145.0
    
    
    
    114.4
    
    
    
    391.0
    
    
    
    334.2Eliminations(1)
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    (1.4
    )
    
    
    (0.8
    )Affiliate eliminations(2)
    
    
    (117.8
    )
    
    
    (108.2
    )
    
    
    (352.0
    )
    
    
    (313.2
    )Adjusted EBITDA
    
    $
    26.9
    
    
    $
    5.9
    
    
    $
    37.6
    
    
    $
    20.2
  42




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Reconciliation of Adjusted EBITDA to Net Income (Loss):
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)
    
    
    (In thousands)Adjusted EBITDA
    
    $
    26.9
    
    
    $
    5.9
    
    
    $
    37.6
    
    
    $
    20.2Depreciation, amortization and stock-based compensation
    
    
    (12.1
    )
    
    
    (11.7
    )
    
    
    (35.9
    )
    
    
    (32.3
    )Operating (loss) income
    
    
    14.8
    
    
    
    (5.8
    )
    
    
    1.7
    
    
    
    (12.1
    )Interest and investment income
    
    
    1.9
    
    
    
    1.9
    
    
    
    5.5
    
    
    
    10.2Interest expense
    
    
    (0.7
    )
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    (1.2
    )Gain on litigation recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58.3Impairment of available for sale securities
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (4.5
    )Other expense
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.3
    )Income tax (provision) benefit
    
    
    (0.7
    )
    
    
    0.6
    
    
    
    (7.1
    )
    
    
    (12.9
    )Equity in net income (losses) of affiliates
    
    
    93.1
    
    
    
    (39.3
    )
    
    
    172.6
    
    
    
    (101.0
    )Net income (loss)
    
    $
    108.4
    
    
    $
    (44.2
    )
    
    $
    171.9
    
    
    $
    (63.5
    )
 (1)
    
    Represents the elimination of intercompany sales and intercompany
Adjusted EBITDA for satellites under construction by SS/L for
Loral.(2)
    
    Represents the elimination of amounts attributed to Telesat whose
results are reported under the equity method of accounting in our
consolidated statements of operations (see Note 8 to the financial
statements).(3)
    
    Includes revenues from affiliates of $21.3 million and
$20.9 million for the three months ended September 30, 2009 and
2008, respectively and $62.2 million and $69.3 million for the nine
months ended September 30, 2009 and 2008, respectively.(4)
    
    Represents corporate expenses incurred in support of our operations.  43




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Three Months Ended September 30, 2009 Compared With Three Months Ended September 30, 2008
  Revenues from Satellite Manufacturing
 Three MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    253.5
    
    
    $
    216.3
    
    
    
    17
    %Eliminations
    
    
    (4.3
    )
    
    
    (3.8
    )
    
    
    13
    %Revenues from Satellite Manufacturing as reported
    
    $
    249.2
    
    
    $
    212.5
    
    
    
    17
    %
  Cost of Satellite Manufacturing
 Three MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing includes:Cost of Satellite Manufacturing before the following specific identified charges
    
    $
    201.0
    
    
    $
    184.1
    
    
    
    9
    %Depreciation, amortization and stock-based compensation
    
    
    11.0
    
    
    
    10.6
    
    
    
    4
    %Total cost of Satellite Manufacturing as reported
    
    $
    212.0
    
    
    $
    194.7
    
    
    
    9
    %Cost of Satellite Manufacturing as a% of Satellite Manufacturing revenues as reported
    
    
    85
    %
    
    
    92
    %
   44




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##### Table of Contents



Selling, General and Administrative Expenses
 Three MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    22.4
    
    
    $
    23.6
    
    
    
    (5
    )%% of revenues as reported
    
    
    9
    %
    
    
    11
    %
  Interest and Investment Income
 Three MonthsEnded September 30,2009
    
    
    2008(In millions)Interest and investment income
    
    $
    1.9
    
    
    $
    1.9
  Interest Expense
 Three MonthsEnded September 30,2009
    
    
    2008(In millions)Interest expense
    
    $
    0.7
    
    
    $
    0.5
  Impairment of Available for Sale Securities
  Other Expense
  Income Tax Provision
 Business Combinations
  45




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##### Table of Contents



Equity in Net Income (Losses) of Affiliates
  Three MonthsEnded September 30,2009
    
    
    2008(In millions)Telesat
    
    $
    95.0
    
    
    $
    (35.4
    )XTAR
    
    
    (2.2
    )
    
    
    (4.0
    )Other
    
    
    0.3
    
    
    
    $
    93.1
    
    
    $
    (39.4
    )
   Three Months
    
    
    Three MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    $
    187.0
    
    
    $
    176.8
    
    
    $
    170.5
    
    
    $
    169.7Operating expenses
    
    
    (57.9
    )
    
    
    (64.3
    )
    
    
    (52.7
    )
    
    
    (61.5
    )Depreciation, amortization and stock-based compensation
    
    
    (60.0
    )
    
    
    (57.4
    )
    
    
    (54.7
    )
    
    
    (55.1
    )Gain on disposition of long-lived assets
    
    
    34.7
    
    
    
    
    
    
    
    29.6
    
    
    
    Operating income
    
    
    103.8
    
    
    
    55.1
    
    
    
    92.8
    
    
    
    53.1Interest expense
    
    
    (63.9
    )
    
    
    (61.3
    )
    
    
    (58.1
    )
    
    
    (58.9
    )Other income (expense)
    
    
    163.1
    
    
    
    (53.8
    )
    
    
    142.9
    
    
    
    (52.3
    )Income tax (provision) benefit
    
    
    (10.6
    )
    
    
    4.6
    
    
    
    (9.6
    )
    
    
    4.6Net income
    
    
    192.3
    
    
    
    (55.4
    )
    
    
    168.0
    
    
    
    (53.5
    )Average exchange rate for translating Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.098
    
    
    
    1.041
   46




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December 31, 2008
    
    
    1.225June 30, 2009
    
    
    1.162September 30, 2009
    
    
    1.070
   Nine months Ended September 30, 2009 Compared With Nine months Ended September 30, 2008
  Revenues from Satellite Manufacturing
 Nine MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    745.8
    
    
    $
    646.3
    
    
    
    15
    %Eliminations
    
    
    (12.6
    )
    
    
    (7.2
    )
    
    
    75
    %Revenues from Satellite Manufacturing as reported
    
    $
    733.2
    
    
    $
    639.1
    
    
    
    15
    %
  Cost of Satellite Manufacturing
 Nine MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing includes:Cost of Satellite Manufacturing before the following specific identified charges
    
    $
    630.3
    
    
    $
    557.8
    
    
    
    13
    %Depreciation, amortization and stock-based compensation
    
    
    33.1
    
    
    
    28.0
    
    
    
    18
    %Total cost of Satellite Manufacturing as reported
    
    $
    663.4
    
    
    $
    585.8
    
    
    
    13
    %Cost of Satellite Manufacturing as a % of Satellite Manufacturing revenues as reported
    
    
    90
    %
    
    
    92
    %
  47




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##### Table of Contents



Selling, General and Administrative Expenses
 Nine MonthsEnded September 30,
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    68.1
    
    
    $
    71.5
    
    
    
    (5
    )%% of revenues as reported
    
    
    9
    %
    
    
    11
    %
  Gain on Recovery from Customer Bankruptcy
  Interest and Investment Income
 Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Interest and investment income
    
    $
    5.5
    
    
    $
    10.2
  Interest Expense
 Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Interest expense
    
    $
    0.7
    
    
    $
    1.2
   48




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##### Table of Contents



Gain on Litigation Recovery
  Impairment of Available for Sale Securities
  Other Expense
  Income Tax Provision
   Equity in Net Income (Losses) of Affiliates
  Nine MonthsEnded September 30,2009
    
    
    2008(In millions)Telesat
    
    $
    173.2
    
    
    $
    (88.6
    )XTAR
    
    
    (0.8
    )
    
    
    (12.4
    )Other
    
    
    0.2
    
    
    
    $
    172.6
    
    
    $
    (101.0
    )
   49




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##### Table of Contents



Nine Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    $
    593.7
    
    
    $
    518.1
    
    
    $
    507.9
    
    
    $
    508.6Operating expenses
    
    
    (182.3
    )
    
    
    (199.1
    )
    
    
    (155.9
    )
    
    
    (195.4
    )Depreciation, amortization and stock-based compensation
    
    
    (187.9
    )
    
    
    (173.4
    )
    
    
    (160.8
    )
    
    
    (170.3
    )Gain on disposition of long-lived assets
    
    
    34.7
    
    
    
    
    
    
    
    29.6
    
    
    
    Operating income
    
    
    258.2
    
    
    
    145.6
    
    
    
    220.8
    
    
    
    142.9Interest expense
    
    
    (194.8
    )
    
    
    (177.7
    )
    
    
    (166.6
    )
    
    
    (174.4
    )Other income (expense)
    
    
    291.7
    
    
    
    (102.7
    )
    
    
    249.5
    
    
    
    (100.8
    )Income tax (provision) benefit
    
    
    (29.2
    )
    
    
    1.3
    
    
    
    (25.0
    )
    
    
    1.3Net income
    
    
    325.8
    
    
    
    (133.5
    )
    
    
    278.7
    
    
    
    (131.0
    )Average exchange rate for translating Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.169
    
    
    
    1.019
     December 31, 2008
    
    
    1.225September 30, 2009
    
    
    1.070
    50




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##### Table of Contents



Backlog
  September 30,
    
    
    December 31,2009
    
    
    2008Satellite Manufacturing
    
    $
    1,560
    
    
    $
    1,381Satellite Services
    
    
    4,442
    
    
    
    4,207Total backlog before eliminations
    
    
    6,002
    
    
    
    5,588Satellite Manufacturing eliminations
    
    
    (12
    )
    
    
    (25
    )Satellite Services eliminations
    
    
    (4,442
    )
    
    
    (4,207
    )Total backlog
    
    $
    1,548
    
    
    $
    1,356
  
 Liquidity and Capital Resources
 
 Loral
  Cash and Available Credit
  Liquidity
   51




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Space Systems/Loral
 Cash
  Available Credit and Liquidity
       52




---



##### Table of Contents



53




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##### Table of Contents



Telesat
 Cash and Available Credit
   Liquidity
    54




---



##### Table of Contents



Debt
  September 30,
    
    
    December 31,Maturity
    
    Currency
    
    2009
    
    
    2008(In CAD millions)Senior Secured Credit Facilities:Revolving facility
    
    October 31, 2012
    
    CAD or USD equivalent
    
    
    
    
    
    
    Canadian term loan facility
    
    October 31, 2012
    
    CAD
    
    
    188
    
    
    
    195U.S. term loan facility
    
    October 31, 2014
    
    USD
    
    
    1,808
    
    
    
    2,087U.S. term loan II facility
    
    October 31, 2014
    
    USD
    
    
    155
    
    
    
    179Senior notes
    
    November 1, 2015
    
    USD
    
    
    714
    
    
    
    819Senior subordinated notes
    
    November 1, 2017
    
    USD
    
    
    223
    
    
    
    256CAD
    
    
    3,088
    
    
    
    3,536Current portion
    
    
    
    CAD
    
    
    (22
    )
    
    
    (23
    )Long term portion
    
    
    
    CAD
    
    
    3,066
    
    
    
    3,513
      55




---



##### Table of Contents



Interest Expense
  Derivatives
    Interest rate risk
  Capital Expenditures
  
 Contractual Obligations
  
 Statement of Cash Flows
 Net Cash Provided by (Used In) Operating Activities
   56




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##### Table of Contents



Net Cash Used in Investing Activities
   Net Cash Used in Financing Activities
  
 Affiliate Matters
  
 Commitments and Contingencies
  
 Other Matters
 Recent Accounting Pronouncements
   57




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency
 Loral
   Foreign Currency
    
    
    U.S.$(In thousands)Future revenues  Japanese Yen
    
    ¥
    106,360
    
    
    $
    1,182Future expenditures  Japanese Yen
    
    ¥
    4,605,723
    
    
    $
    51,187Contracts-in-process, unbilled receivables  Japanese Yen
    
    ¥
    4,383
    
    
    $
    49Future expenditures  EUROs
    
    
    3,420
    
    
    $
    4,990
 Derivatives
   To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2009
    
    
    21,470
    
    
    $
    32,119
    
    
    $
    31,3292010
    
    
    19,210
    
    
    
    29,389
    
    
    
    28,0312011
    
    
    23,493
    
    
    
    35,663
    
    
    
    34,322
    64,173
    
    
    $
    97,171
    
    
    $
    93,682
   Telesat
   58




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources  Telesat  Derivatives
 Interest
   Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity and Capital Resources  Telesat  Derivatives
 
 Item 4.
    
    Disclosure Controls and Procedures
 Disclosure controls and procedures.
 Internal control over financial reporting.
 
 PART II.
 OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
   59




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##### Table of Contents



Item 6.
    
    Exhibits
  Exhibit 10.1
    
    
    
    Option Agreement dated October 27, 2009, between Loral Space & Communications
Inc. and Michael B. TargoffExhibit 10.2
    
    
    
    Form of Restricted Stock Unit Agreement dated October 27, 2009 between Loral
Space & Communications Inc. and Loral executivesExhibit 10.3
    
    
    
    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Exhibit 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.Exhibit 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.Exhibit 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.Exhibit 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.
 
    
    Management compensation plan  60




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##### Table of Contents



SIGNATURES
  RegistrantLoral Space & Communications Inc./s/  Harvey B. ReinHarvey B. ReinSenior Vice President and
Chief Financial Officer
(Principal Financial Officer)
and Registrants Authorized Officer   61




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 10.1
    
    
    
    Option Agreement dated October 27, 2009, between Loral Space & Communications
Inc. and Michael B. TargoffExhibit 10.2
    
    
    
    Form of Restricted Stock Unit Agreement dated October 27, 2009 between Loral
Space & Communications Inc. and Loral executivesExhibit 10.3
    
    
    
    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Exhibit 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.Exhibit 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.Exhibit 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.Exhibit 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.
 
    
    Management compensation plan  62