##### 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 June 30, 2010
 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




---



##### 



LORAL SPACE & COMMUNICATIONS INC.
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended June 30, 2010
 Page No.PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 and
June 30, 2009
    
    
    4Condensed Consolidated Statements of Equity for the six months ended June 30, 2010 and the year ended
December 31, 2009
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and June 30, 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2:Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 3:Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 4:Disclosure Controls and Procedures
    
    
    53PART II  OTHER INFORMATIONItem 1:Legal Proceedings
    
    
    54Item 1A:Risk Factors
    
    
    54Item 6:Exhibits
    
    
    54Signatures
    
    
    55EX-31.1EX-31.2EX-32.1EX-32.2
   2




---



##### 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)
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    141,665
    
    
    $
    168,205Contracts-in-process
    
    
    242,862
    
    
    
    190,809Inventories
    
    
    74,109
    
    
    
    83,671Other current assets
    
    
    29,972
    
    
    
    24,343Total current assets
    
    
    488,608
    
    
    
    467,028Property, plant and equipment, net
    
    
    223,168
    
    
    
    207,996Long-term receivables
    
    
    281,855
    
    
    
    248,097Investments in affiliates
    
    
    282,009
    
    
    
    282,033Intangible assets, net
    
    
    14,662
    
    
    
    20,300Other assets
    
    
    26,359
    
    
    
    27,998Total assets
    
    $
    1,316,661
    
    
    $
    1,253,452LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    95,486
    
    
    $
    86,809Accrued employment costs
    
    
    39,510
    
    
    
    44,341Customer advances and billings in excess of costs and profits
    
    
    329,409
    
    
    
    291,021Other current liabilities
    
    
    19,058
    
    
    
    19,147Total current liabilities
    
    
    483,463
    
    
    
    441,318Pension and other post retirement liabilities
    
    
    224,354
    
    
    
    226,190Long-term liabilities
    
    
    156,816
    
    
    
    153,953Total liabilities
    
    
    864,633
    
    
    
    821,461Commitments 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, 20,695,154 and
20,390,752 shares issued and outstanding
    
    
    207
    
    
    
    204Non-voting common stock, $.01 par value; 20,000,000 shares authorized, 9,505,673 shares
issued and outstanding
    
    
    95
    
    
    
    95Paid-in capital
    
    
    1,023,651
    
    
    
    1,013,790Accumulated deficit
    
    
    (509,512
    )
    
    
    (519,220
    )Accumulated other comprehensive loss
    
    
    (62,413
    )
    
    
    (62,878
    )Total equity
    
    
    452,028
    
    
    
    431,991Total liabilities and equity
    
    $
    1,316,661
    
    
    $
    1,253,452
   3




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    279,962
    
    
    $
    271,447
    
    
    $
    508,876
    
    
    $
    483,938Cost of revenues
    
    
    236,653
    
    
    
    254,215
    
    
    
    447,078
    
    
    
    451,416Selling, general and administrative expenses
    
    
    20,211
    
    
    
    24,927
    
    
    
    40,610
    
    
    
    45,697Directors indemnification expense
    
    
    
    
    
    
    
    
    
    
    14,357
    
    
    
    Operating income (loss)
    
    
    23,098
    
    
    
    (7,695
    )
    
    
    6,831
    
    
    
    (13,175
    )Interest and investment income
    
    
    2,833
    
    
    
    1,925
    
    
    
    6,112
    
    
    
    3,578Interest expense
    
    
    (581
    )
    
    
    1,219
    
    
    
    (1,204
    )
    
    
    (47
    )Other income (expense)
    
    
    1,005
    
    
    
    (12
    )
    
    
    912
    
    
    
    (99
    )Income (loss) before income taxes and equity in net (losses)
income of affiliates
    
    
    26,355
    
    
    
    (4,563
    )
    
    
    12,651
    
    
    
    (9,743
    )Income tax provision
    
    
    (1,646
    )
    
    
    (6,418
    )
    
    
    (3,161
    )
    
    
    (6,398
    )Income (loss) before equity in net (losses) income of affiliates
    
    
    24,709
    
    
    
    (10,981
    )
    
    
    9,490
    
    
    
    (16,141
    )Equity in net (losses) income of affiliates
    
    
    (44,374
    )
    
    
    85,276
    
    
    
    218
    
    
    
    79,608Net (loss) income
    
    $
    (19,665
    )
    
    $
    74,295
    
    
    $
    9,708
    
    
    $
    63,467Basic and diluted (loss) income per share:Basic (loss) income per share
    
    $
    (0.66
    )
    
    $
    2.50
    
    
    $
    0.32
    
    
    $
    2.13Diluted (loss) income per share
    
    $
    (0.66
    )
    
    $
    2.48
    
    
    $
    0.32
    
    
    $
    2.13Weighted average shares outstanding:Basic
    
    
    29,984
    
    
    
    29,753
    
    
    
    29,923
    
    
    
    29,727Diluted
    
    
    29,984
    
    
    
    29,904
    
    
    
    30,564
    
    
    
    29,803
   4




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 (In thousands)
(Unaudited)
 Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedVoting
    
    
    Non-Voting
    
    
    
    
    
    
    
    
    
    
    OtherShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    TotalIssued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalance, January 1, 2009
    
    
    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 repurchased 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,708Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,173Exercise of stock options
    
    
    313
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    8,331
    
    
    
    
    
    
    
    
    
    
    
    8,334Shares repurchased to
fund withholding taxes
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (443
    )
    
    
    
    
    
    
    
    
    
    
    (443
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,973
    
    
    
    
    
    
    
    
    
    
    
    1,973Balance, June 30, 2010
    
    
    20,695
    
    
    $
    207
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,023,651
    
    
    $
    (509,512
    )
    
    $
    (62,413
    )
    
    $
    452,028
   5




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Six MonthsEnded June 30,2010
    
    
    2009Operating activities:Net income
    
    $
    9,708
    
    
    $
    63,467Adjustments to reconcile net income to net cash (used in) provided by operating activities:Non-cash operating items (Note 3)
    
    
    17,662
    
    
    
    (60,547
    )Changes in operating assets and liabilities:Contracts-in-process
    
    
    (55,861
    )
    
    
    2,409Inventories
    
    
    9,562
    
    
    
    11,086Long-term receivables
    
    
    (2,927
    )
    
    
    (2,733
    )Other current assets and other assets
    
    
    (1,245
    )
    
    
    3,146Accounts payable
    
    
    8,206
    
    
    
    14,846Accrued expenses and other current liabilities
    
    
    (5,161
    )
    
    
    (17,944
    )Customer advances and billings in excess of costs and profits
    
    
    13,341
    
    
    
    32,554Income taxes payable
    
    
    888
    
    
    
    16,860Pension and other postretirement liabilities
    
    
    (1,835
    )
    
    
    (1,192
    )Long-term liabilities
    
    
    214
    
    
    
    5,288Net cash (used in) provided by operating activities
    
    
    (7,448
    )
    
    
    67,240Investing activities:Capital expenditures
    
    
    (26,983
    )
    
    
    (21,778
    )Decrease in restricted cash in escrow
    
    
    
    
    
    
    9Investments in and advances to affiliates
    
    
    
    
    
    
    (4,480
    )Net cash used in investing activities
    
    
    (26,983
    )
    
    
    (26,249
    )Financing activities:Proceeds from the exercise of stock options
    
    
    8,334
    
    
    
    35Common stock repurchased to fund withholding taxes
    
    
    (443
    )
    
    
    Repayment of borrowings under SS/L revolving credit facility
    
    
    
    
    
    
    (55,000
    )Net cash provided by (used in) financing activities
    
    
    7,891
    
    
    
    (54,965
    )Decrease in cash and cash equivalents
    
    
    (26,540
    )
    
    
    (13,974
    )Cash and cash equivalents  beginning of period
    
    
    168,205
    
    
    
    117,548Cash and cash equivalents  end of period
    
    $
    141,665
    
    
    $
    103,574
   6




---



##### 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




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Use of Estimates in Preparation of Financial Statements
   Concentration of Credit Risk
  Fair Value Measurements
  Level 1:
 Level 2:
  8




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Level 3:
 Assets and Liabilities Measured at Fair Value on Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Marketable securities
    
    $
    1,516
    
    
    $
    
    
    
    $
    Derivatives, net
    
    $
    
    
    
    $
    5,382
    
    
    $
    Non-qualified pension plan assets
    
    $
    2,454
    
    
    $
    
    
    
    $
    65
  Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
  Recent Accounting Pronouncements
 Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities, Consolidations Amendments to FASB Interpretation No. 46(R),
 Revenue Recognition (Topic 605) 
Multiple-Deliverable Revenue Arrangements Multiple-Element
Arrangements
   9




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 3. Additional Cash Flow Information
  Six MonthsEnded June 30,2010
    
    
    2009Non-cash operating items:Equity in net income of affiliates
    
    $
    (218
    )
    
    $
    (79,608
    )Deferred taxes
    
    
    (347
    )
    
    
    (655
    )Depreciation and amortization
    
    
    17,576
    
    
    
    19,262Stock based compensation
    
    
    3,723
    
    
    
    4,615Warranty expense reversals
    
    
    (520
    )
    
    
    (185
    )Amortization of prior service credits and net actuarial gains
    
    
    (70
    )
    
    
    186Unrealized loss (gain) on non-qualified pension plan assets
    
    
    58
    
    
    
    (307
    )Non-cash net interest income
    
    
    (1,633
    )
    
    
    (2,994
    )Loss (gain) on foreign currency transactions and contracts
    
    
    67
    
    
    
    (572
    )Amortization of fair value adjustments related to orbital incentives
    
    
    (974
    )
    
    
    (289
    )Net non-cash operating items
    
    $
    17,662
    
    
    $
    (60,547
    )Non-cash investing activities:Capital expenditures incurred not yet paid
    
    $
    3,562
    
    
    $
    2,559Supplemental information:Interest paid
    
    $
    984
    
    
    $
    1,379Tax (refunds) payments, net
    
    $
    (1,244
    )
    
    $
    (15,178
    )
   10




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 4. Comprehensive Income (Loss)
  Three MonthsEnded June 30,2010
    
    
    2009Net (loss) income
    
    $
    (19,665
    )
    
    $
    74,295Amortization of prior service credits and net actuarial gains
    
    
    (35
    )
    
    
    93Proportionate
share of Telesat Holdco other comprehensive income
    
    
    86
    
    
    
    2,844Unrealized loss on foreign currency hedges:Unrealized loss on foreign currency hedges
    
    
    (259
    )
    
    
    (5,220
    )Less: reclassification adjustment for gains included in net income
    
    
    (952
    )
    
    
    (4,300
    )Net unrealized loss
    
    
    (1,211
    )
    
    
    (9,520
    )Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    
    177
    
    
    
    688Comprehensive (loss) income
    
    $
    (20,648
    )
    
    $
    68,400
 Six MonthsEnded June 30,2010
    
    
    2009Net income
    
    $
    9,708
    
    
    $
    63,467Amortization of prior service credits and net actuarial gains
    
    
    (70
    )
    
    
    186Proportionate share of Telesat Holdco other comprehensive (loss) income
    
    
    (242
    )
    
    
    2,844Unrealized gain on foreign currency hedges:Unrealized gain on foreign currency hedges
    
    
    2,101
    
    
    
    1,714Less: reclassification adjustment for gains included in net income
    
    
    (1,983
    )
    
    
    (7,306
    )Net unrealized gain (loss)
    
    
    118
    
    
    
    (5,592
    )Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    
    659
    
    
    
    836Comprehensive income
    
    $
    10,173
    
    
    $
    61,741
 5. Contracts-in-Process and Inventories
  June 30,
    
    
    December 31,2010
    
    
    2009Contracts-in-Process:Amounts billed
    
    $
    174,918
    
    
    $
    124,034Unbilled receivables
    
    
    67,944
    
    
    
    66,775$
    242,862
    
    
    $
    190,809Inventories:Inventories-gross
    
    $
    108,740
    
    
    $
    119,528Allowance for obsolescence
    
    
    (27,071
    )
    
    
    (28,297
    )81,669
    
    
    
    91,231Inventories included in other assets
    
    
    (7,560
    )
    
    
    (7,560
    )$
    74,109
    
    
    $
    83,671
   11




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 6. Financial Instruments, Derivatives and Hedging Transactions
 Financial Instruments
  Foreign Currency
   ForeignCurrency
    
    
    U.S.$(In thousands)Future revenues  Japanese yen
    
    ¥
    348,974
    
    
    $
    3,936Future expenditures  Japanese yen
    
    ¥
    4,483,341
    
    
    $
    50,567Future revenues  euros
    
    
    10,995
    
    
    $
    13,422
 Derivatives and Hedging Transactions
    Cash Flow Hedges
   12




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
    To SellHedge
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2010
    
    
    44,591
    
    
    $
    55,360
    
    
    $
    54,4582011
    
    
    102,805
    
    
    
    131,042
    
    
    
    125,7572012
    
    
    27,000
    
    
    
    32,649
    
    
    
    33,1012013
    
    
    27,000
    
    
    
    32,894
    
    
    
    33,247
    201,396
    
    
    $
    251,945
    
    
    $
    246,563
 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
    
    $
    7,834
    
    
    Other current liabilities
    
    $
    1,679Foreign exchange contracts
    
    Other assets
    
    
    
    
    
    Other liabilities
    
    
    1,4627,834
    
    
    
    
    
    3,141Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    
    699
    
    
    Other liabilities
    
    
    10Total Derivatives
    
    
    
    $
    8,533
    
    
    
    
    $
    3,151
  Asset DerivativesBalance Sheet Location
    
    Fair Value(In thousands)Derivatives 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
  13




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 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
    
    AmountThree months ended June 30, 2010:Foreign exchange contracts
    
    $
    (259
    )
    
    Revenue
    
    $
    952
    
    
    Revenue
    
    $
    (34
    )Interest income
    
    $
    (8
    )Six months ended June 30, 2010:Foreign exchange contracts
    
    $
    2,101
    
    
    Revenue
    
    $
    1,983
    
    
    Revenue
    
    $
    (339
    )Interest income
    
    $
    (19
    )
 GainRecognized in IncomeCash Flow Derivatives Not Designated as
    
    on DerivativeHedging Instruments
    
    Location
    
    AmountThree months ended June 30, 2010:Foreign exchange contracts
    
    Revenue
    
    $
    262Six months ended June 30, 2010:Foreign exchange contracts
    
    Revenue
    
    $
    522
  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
    
    AmountThree months ended June 30, 2009:Foreign exchange contracts
    
    $
    (5,219
    )
    
    Revenue
    
    $
    4,301
    
    
    Revenue
    
    $
    (390
    )Interest income
    
    $
    56Six months ended June 30, 2009:Foreign exchange contracts
    
    $
    1,782
    
    
    Revenue
    
    $
    7,306
    
    
    Revenue
    
    $
    (1,243
    )Foreign exchange contracts
    
    $
    (68
    )
    
    
    
    
    
    
    
    Interest income
    
    $
    (46
    )
 GainRecognized in IncomeCash Flow Derivatives Not Designated as
    
    on DerivativeHedging Instruments
    
    Location
    
    
    AmountThree months ended June 30, 2009:Foreign exchange contracts
    
    Revenue
    
    $
    307Six months ended June 30, 2009:Foreign exchange contracts
    
    Revenue
    
    $
    430
   14




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 7. Property, Plant and Equipment
 June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Land and land improvements
    
    $
    26,852
    
    
    $
    26,852Buildings
    
    
    68,843
    
    
    
    68,698Leasehold improvements
    
    
    11,209
    
    
    
    11,133Equipment, furniture and fixtures
    
    
    168,047
    
    
    
    156,669Satellite capacity under construction (see Note 17)
    
    
    34,116
    
    
    
    27,412Other construction in progress
    
    
    26,395
    
    
    
    17,243335,462
    
    
    
    308,007Accumulated depreciation and amortization
    
    
    (112,294
    )
    
    
    (100,011
    )$
    223,168
    
    
    $
    207,996
  8. Investments in Affiliates
  June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Telesat Holdings Inc.
    
    $
    212,562
    
    
    $
    208,101XTAR, LLC
    
    
    67,926
    
    
    
    72,284Other
    
    
    1,521
    
    
    
    1,648$
    282,009
    
    
    $
    282,033
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Telesat Holdings Inc.
    
    $
    (42,360
    )
    
    $
    80,583
    
    
    $
    4,703
    
    
    $
    78,292XTAR, LLC
    
    
    (1,951
    )
    
    
    4,693
    
    
    
    (4,358
    )
    
    
    1,316Other
    
    
    (63
    )
    
    
    
    
    
    
    (127
    )
    
    
    $
    (44,374
    )
    
    $
    85,276
    
    
    $
    218
    
    
    $
    79,608
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    23,269
    
    
    $
    16,595
    
    
    $
    45,451
    
    
    $
    40,843Elimination
of Lorals proportionate share of (profits) losses relating to
affiliate transactions
    
    
    (2,347
    )
    
    
    2,005
    
    
    
    (3,710
    )
    
    
    (243
    )Profits (losses) relating to affiliate transactions not eliminated
    
    
    1,320
    
    
    
    (1,143
    )
    
    
    2,088
    
    
    
    152
  15




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Telesat
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    199,593
    
    
    $
    172,150
    
    
    $
    391,112
    
    
    $
    337,397Operating expenses
    
    
    (46,367
    )
    
    
    (52,870
    )
    
    
    (95,080
    )
    
    
    (103,204
    )Depreciation, amortization and stock-based compensation
    
    
    (62,225
    )
    
    
    (55,604
    )
    
    
    (123,533
    )
    
    
    (106,122
    )Operating income
    
    
    91,001
    
    
    
    63,676
    
    
    
    172,499
    
    
    
    128,071Interest expense
    
    
    (58,869
    )
    
    
    (54,410
    )
    
    
    (118,805
    )
    
    
    (108,546
    )Financial instruments gains (losses)
    
    
    49,679
    
    
    
    (93,265
    )
    
    
    6,626
    
    
    
    (47,265
    )Foreign exchange (losses) gains
    
    
    (142,351
    )
    
    
    236,678
    
    
    
    (33,355
    )
    
    
    155,678Other expense
    
    
    (901
    )
    
    
    (2,234
    )
    
    
    (1,177
    )
    
    
    (1,778
    )Income tax benefit (provision)
    
    
    135
    
    
    
    (8,400
    )
    
    
    (10,173
    )
    
    
    (15,423
    )Net (loss) income
    
    
    (61,306
    )
    
    
    141,954
    
    
    
    15,615
    
    
    
    110,736
  June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Current assets
    
    $
    276,209
    
    
    $
    251,573Total assets
    
    
    4,975,765
    
    
    
    4,994,684Current liabilities
    
    
    231,016
    
    
    
    195,890Long-term debt, including current portion
    
    
    2,937,288
    
    
    
    2,953,281Total liabilities
    
    
    4,021,673
    
    
    
    4,041,932Redeemable preferred stock
    
    
    132,940
    
    
    
    134,291Shareholders equity
    
    
    821,152
    
    
    
    818,461
 XTAR
  o o
  16




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
       Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    8,903
    
    
    $
    8,230
    
    
    $
    16,844
    
    
    $
    14,591Operating expenses
    
    
    (8,876
    )
    
    
    (8,684
    )
    
    
    (17,394
    )
    
    
    (17,145
    )Depreciation and amortization
    
    
    (2,404
    )
    
    
    (2,404
    )
    
    
    (4,809
    )
    
    
    (4,809
    )Operating loss
    
    
    (2,377
    )
    
    
    (2,858
    )
    
    
    (5,359
    )
    
    
    (7,363
    )Net (loss) income
    
    
    (3,491
    )
    
    
    8,390
    
    
    
    (7,777
    )
    
    
    2,374
  June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Current assets
    
    $
    6,441
    
    
    $
    10,372Total assets
    
    
    98,341
    
    
    
    107,084Current liabilities
    
    
    59,886
    
    
    
    45,672Total liabilities
    
    
    66,916
    
    
    
    67,882Members equity
    
    
    31,425
    
    
    
    39,202
  17




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Other
  9. Intangible Assets and Amortization of Fair Value Adjustments
  Weighted AverageRemaining
    
    
    June 30, 2010
    
    
    December 31, 2009Amortization Period
    
    
    Gross
    
    
    Accumulated
    
    
    Gross
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(In thousands)
    
    
    (In thousands)Internally developed software and technology
    
    
    2
    
    
    $
    59,027
    
    
    $
    (51,380
    )
    
    $
    59,027
    
    
    $
    (45,972
    )Trade names
    
    
    16
    
    
    
    9,200
    
    
    
    (2,185
    )
    
    
    9,200
    
    
    
    (1,955
    )$
    68,227
    
    
    $
    (53,565
    )
    
    $
    68,227
    
    
    $
    (47,927
    )
  2010
    
    $
    9,1902011
    
    
    2,9312012
    
    
    2,3142013
    
    
    4602014
    
    
    460
  June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Gross fair value adjustments
    
    $
    (36,896
    )
    
    $
    (36,896
    )Accumulated amortization
    
    
    17,764
    
    
    
    16,446$
    (19,132
    )
    
    $
    (20,450
    )
   18




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 10. Debt
   June 30,
    
    
    December 31,2010
    
    
    2009Letters of credit outstanding
    
    $
    4,911
    
    
    $
    4,921Borrowings
    
    
    
    
    
    
    
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest expense (including commitment and letter of credit fees)
    
    $
    200
    
    
    $
    186
    
    
    $
    398
    
    
    $
    711Amortization of issuance costs
    
    $
    219
    
    
    $
    219
    
    
    $
    438
    
    
    $
    438
 11. Income Taxes
       19




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  12. Stock-Based Compensation
          20




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  13. Pensions and Other Employee Benefit Plans
  Pension Benefits
    
    
    Other BenefitsThree Months
    
    
    Three MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Service cost
    
    $
    2,596
    
    
    $
    2,261
    
    
    $
    234
    
    
    $
    264Interest cost
    
    
    6,117
    
    
    
    5.996
    
    
    
    981
    
    
    
    1,050Expected return on plan assets
    
    
    (5,157
    )
    
    
    (4,273
    )
    
    
    (8
    )
    
    
    (13
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    131
    
    
    
    226
    
    
    
    (166
    )
    
    
    (133
    )Net periodic cost
    
    $
    3,687
    
    
    $
    4,210
    
    
    $
    1,041
    
    
    $
    1,168
 Pension Benefits
    
    
    Other BenefitsSix Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Service cost
    
    $
    5,192
    
    
    $
    4,522
    
    
    $
    468
    
    
    $
    528Interest cost
    
    
    12,234
    
    
    
    11,992
    
    
    
    1,962
    
    
    
    2,100Expected return on plan assets
    
    
    (10,314
    )
    
    
    (8,546
    )
    
    
    (16
    )
    
    
    (26
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    262
    
    
    
    452
    
    
    
    (332
    )
    
    
    (266
    )Net periodic cost
    
    $
    7,374
    
    
    $
    8,420
    
    
    $
    2,082
    
    
    $
    2,336
 14. Commitments and Contingencies
 Financial Matters
  Balance of deferred amounts at January 1, 2010
    
    $
    37,167Warranty costs incurred including payments
    
    
    (610
    )Accruals relating to pre-existing contracts (including changes in estimates)
    
    
    90Balance of deferred amounts at June 30, 2010
    
    $
    36,647
  21




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Transactions with Affiliates  Telesat
 Satellite Matters
   22




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
     Transactions with Affiliates  Telesat
 Regulatory Matters
   23




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Legal Proceedings
 Insurance Coverage Litigation
 In re: Loral
Space and Communications Inc. Consolidated Litigation Babus
  In re: Loral Space and Communications
Inc. Consolidated Litigation Babus
   24




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Reorganization Matters
  Indemnification Claims of Directors and Officers of Old Loral. Old Loral Class Action Securities Litigations
 Old Loral Class Action Securities Litigations
 Beleson. Beleson Christ Christ Reorganization Matters  Indemnification Claims of Directors and Officers of Old Loral.
  25




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Christ. Beleson Beleson Christ Christ Beleson Beleson Beleson Beleson Reorganization Matters 
Indemnification Claims of Directors and Officers of Old Loral.
 Other and Routine Litigation
   26




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 15. Earnings Per Share
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Common and potential common shares:Weighted average common shares outstanding
    
    
    29,984
    
    
    
    29,753
    
    
    
    29,923
    
    
    
    29,727Stock options
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    Unvested restricted stock units
    
    
    
    
    
    
    143
    
    
    
    196
    
    
    
    72Unvested restricted stock
    
    
    
    
    
    
    8
    
    
    
    11
    
    
    
    4Unvested SS/L Phantom SARs
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    Common and potential common shares
    
    
    29,984
    
    
    
    29,904
    
    
    
    30,564
    
    
    
    29,803
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Stock options outstanding
    
    
    1,435
    
    
    
    2,158
    
    
    
    125
    
    
    
    2,158Shares of non-vested restricted stock
    
    
    16
    
    
    
    51
    
    
    
    
    
    
    
    51Non-vested restricted stock units
    
    
    238
    
    
    
    23
    
    
    
    8
    
    
    
    23Non-vested SS/L Phantom SARs
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
 16. Segments
    27




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)RevenuesSatellite manufacturing:External revenues
    
    $
    256,689
    
    
    $
    254,858
    
    
    $
    463,428
    
    
    $
    443,108Intersegment revenues(1)
    
    
    24,503
    
    
    
    21,001
    
    
    
    48,618
    
    
    
    49,198Satellite manufacturing revenues
    
    
    281,192
    
    
    
    275,859
    
    
    
    512,046
    
    
    
    492,306Satellite services revenues(2)
    
    
    199,593
    
    
    
    172,150
    
    
    
    391,112
    
    
    
    337,397Operating segment revenues before eliminations
    
    
    480,785
    
    
    
    448,009
    
    
    
    903,158
    
    
    
    829,703Intercompany eliminations(3)
    
    
    (1,230
    )
    
    
    (4,412
    )
    
    
    (3,170
    )
    
    
    (8,368
    )Affiliate eliminations(2)
    
    
    (199,593
    )
    
    
    (172,150
    )
    
    
    (391,112
    )
    
    
    (337,397
    )Total revenues as reported
    
    $
    279,962
    
    
    $
    271,447
    
    
    $
    508,876
    
    
    $
    483,938Segment Adjusted EBITDA(4)Satellite manufacturing
    
    $
    37,040
    
    
    $
    12,109
    
    
    $
    49,770
    
    
    $
    22,546Satellite services(2)
    
    
    153,225
    
    
    
    119,280
    
    
    
    296,058
    
    
    
    234,193Corporate(5)
    
    
    (2,870
    )
    
    
    (6,352
    )
    
    
    (6,771
    )
    
    
    (10,751
    )Adjusted EBITDA before eliminations
    
    
    187,395
    
    
    
    125,037
    
    
    
    339,057
    
    
    
    245,988Intercompany eliminations(3)
    
    
    (194
    )
    
    
    (525
    )
    
    
    (512
    )
    
    
    (1,092
    )Affiliate eliminations(2)
    
    
    (153,225
    )
    
    
    (119,280
    )
    
    
    (296,058
    )
    
    
    (234,193
    )Adjusted EBITDA
    
    
    33,976
    
    
    
    5,232
    
    
    
    42,487
    
    
    
    10,703Depreciation, Amortization and Stock-Based Compensation(4)Satellite manufacturing
    
    
    (9,998
    )
    
    
    (12,202
    )
    
    
    (19,503
    )
    
    
    (22,132
    )Satellite services(2)
    
    
    (62,225
    )
    
    
    (55,604
    )
    
    
    (123,533
    )
    
    
    (106,122
    )Corporate
    
    
    (880
    )
    
    
    (725
    )
    
    
    (1,796
    )
    
    
    (1,745
    )Segment depreciation before affiliate eliminations
    
    
    (73,103
    )
    
    
    (68,531
    )
    
    
    (144,832
    )
    
    
    (129,999
    )Affiliate eliminations(2)
    
    
    62,225
    
    
    
    55,604
    
    
    
    123,533
    
    
    
    106,122Depreciation, amortization and stock-based compensation as reported
    
    
    (10,878
    )
    
    
    (12,927
    )
    
    
    (21,299
    )
    
    
    (23,877
    )Directors indemnification expense (6)
    
    
    
    
    
    
    
    
    
    
    (14,357
    )
    
    
    Operating (loss) income as reported
    
    $
    23,098
    
    
    $
    (7,695
    )
    
    $
    6,831
    
    
    $
    (13,175
    )
  28




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Total AssetsSatellite manufacturing
    
    $
    931,878
    
    
    $
    863,866Satellite services (includes goodwill of $2.3 billion in 2010 and 2009)(2)
    
    
    5,188,327
    
    
    
    5,202,785Corporate(4)
    
    
    172,221
    
    
    
    181,485Total Assets before affiliate eliminations
    
    
    6,292,426
    
    
    
    6,248,136Affiliate eliminations(2)
    
    
    (4,975,765
    )
    
    
    (4,994,684
    )Total assets as reported(7)
    
    $
    1,316,661
    
    
    $
    1,253,452
 (1)
    
    Intersegment revenues for satellite manufacturing includes affiliate revenue of
$23.3 million and $16.6 million for the three months ended June 30, 2010 and 2009,
respectively, and $45.5 million and $40.8 million for the six months ended June 30, 2010 and
2009, respectively.(2)
    
    Satellite services represents Telesat. 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 a satellite under construction by SS/L for Loral.(4)
    
    Compensation expense related to SS/L Phantom SARs paid in cash or expected to be
paid in cash is included in Adjusted EBITDA. Compensation expense related to SS/L Phantom SARs
paid in Loral common stock or expected to be paid in Loral common stock is included in
depreciation, amortization and stock-based compensation.(5)
    
    Represents corporate expenses incurred in support of our operations and includes our
equity investments in XTAR and Globalstar service providers.(6)
    
    Represents the indemnification of legal expenses incurred by MHR affiliated
directors in defense of claims asserted against them in their capacity as directors of Loral.(7)
    
    Amounts are presented after the elimination of intercompany profit. 17. Related Party Transactions
 Transactions with Affiliates
 Telesat
     29




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues from Telesat satellite construction contracts
    
    $
    23,277
    
    
    $
    16,571
    
    
    $
    45,446
    
    
    $
    40,819Milestone payments received from Telesat
    
    
    33,718
    
    
    
    16,894
    
    
    
    52,987
    
    
    
    31,618
      30




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  o
     XTAR
   31




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 MHR Fund Management LLC
      18. Subsequent Event
   32




---



##### 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 33Consolidated Operating Results
    
    
    Page 36Liquidity and Capital Resources:Loral
    
    
    Page 45Telesat
    
    
    Page 48Contractual Obligations
    
    
    Page 50Statement of Cash Flows
    
    
    Page 50Affiliate Matters
    
    
    Page 51Commitments and Contingencies
    
    
    Page 51Other Matters
    
    
    Page 51
  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
  Satellite Manufacturing
   33




---



##### Table of Contents



34




---



##### Table of Contents



Satellite Services
            35




---



##### Table of Contents



General
    
 Consolidated Operating Results
 Critical Accounting Matters
 Changes in Critical Accounting Policies
 Consolidated Operating Results 
    36




---



##### Table of Contents



Revenues:
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Satellite Manufacturing
    
    $
    281.2
    
    
    $
    275.8
    
    
    $
    512.1
    
    
    $
    492.3Satellite Services
    
    
    199.6
    
    
    
    172.2
    
    
    
    391.1
    
    
    
    337.4Segment revenues
    
    
    480.8
    
    
    
    448.0
    
    
    
    903.2
    
    
    
    829.7Eliminations(1)
    
    
    (1.2
    )
    
    
    (4.4
    )
    
    
    (3.2
    )
    
    
    (8.4
    )Affiliate eliminations(2)
    
    
    (199.6
    )
    
    
    (172.2
    )
    
    
    (391.1
    )
    
    
    (337.4
    )Revenues as reported(3)
    
    $
    280.0
    
    
    $
    271.4
    
    
    $
    508.9
    
    
    $
    483.9
       37




---



##### Table of Contents



Adjusted EBITDA:
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Satellite Manufacturing
    
    $
    37.1
    
    
    $
    12.1
    
    
    $
    49.8
    
    
    $
    22.5Satellite Services
    
    
    153.2
    
    
    
    119.3
    
    
    
    296.0
    
    
    
    234.2Corporate expenses
    
    
    (2.9
    )
    
    
    (6.3
    )
    
    
    (6.8
    )
    
    
    (10.7
    )Segment Adjusted EBITDA before eliminations
    
    
    187.4
    
    
    
    125.1
    
    
    
    339.0
    
    
    
    246.0Eliminations(1)
    
    
    (0.2
    )
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (1.1
    )Affiliate eliminations(2)
    
    
    (153.2
    )
    
    
    (119.3
    )
    
    
    (296.0
    )
    
    
    (234.2
    )Adjusted EBITDA
    
    $
    34.0
    
    
    $
    5.2
    
    
    $
    42.5
    
    
    $
    10.7
         38




---



##### Table of Contents



Reconciliation of Adjusted EBITDA to Net Income (Loss):
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Adjusted EBITDA
    
    $
    34.0
    
    
    $
    5.2
    
    
    $
    42.5
    
    
    $
    10.7Depreciation, amortization and stock-based compensation
    
    
    (10.9
    )
    
    
    (12.9
    )
    
    
    (21.3
    )
    
    
    (23.9
    )Directors indemnification expense(4)
    
    
    
    
    
    
    
    
    
    
    (14.4
    )
    
    
    Operating income (loss)
    
    
    23.1
    
    
    
    (7.7
    )
    
    
    6.8
    
    
    
    (13.2
    )Interest and investment income
    
    
    2.8
    
    
    
    1.9
    
    
    
    6.1
    
    
    
    3.6Interest expense
    
    
    (0.6
    )
    
    
    1.2
    
    
    
    (1.2
    )
    
    
    Other income (expense)
    
    
    1.0
    
    
    
    
    
    
    
    0.9
    
    
    
    (0.1
    )Income tax provision
    
    
    (1.6
    )
    
    
    (6.4
    )
    
    
    (3.1
    )
    
    
    (6.4
    )Equity in net (losses) income of affiliates
    
    
    (44.4
    )
    
    
    85.3
    
    
    
    0.2
    
    
    
    79.6Net (loss) income
    
    $
    (19.7
    )
    
    $
    74.3
    
    
    $
    9.7
    
    
    $
    63.5
 (1)
    
    Represents the elimination of intercompany sales and intercompany Adjusted EBITDA
for a satellite 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 $23.3 million and $16.6 million for the three
months ended June 30, 2010 and 2009, respectively, and
$45.5 million and $40.8 million for the six
months ended June 30, 2010 and 2009, respectively.(4)
    
    Represents the indemnification of legal expenses incurred by MHR affiliated
directors in defense of claims asserted against them in their capacity as directors of Loral. Three Months Ended June 30, 2010 Compared With Three Months Ended June 30, 2009
  Revenues from Satellite Manufacturing
 Three MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    281
    
    
    $
    276
    
    
    
    2
    %Eliminations
    
    
    (1
    )
    
    
    (5
    )
    
    
    (80
    )%Revenues from Satellite Manufacturing as reported
    
    $
    280
    
    
    $
    271
    
    
    
    3
    %
  Cost of Satellite Manufacturing
 Three MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing
    
    $
    237
    
    
    $
    254
    
    
    
    (7
    )%Cost of Satellite Manufacturing as a % of Satellite Manufacturing revenues as reported
    
    
    85
    %
    
    
    94
    %
  39




---



##### Table of Contents



Selling, General and Administrative Expenses
 Three MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    20
    
    
    $
    25
    
    
    
    (20
    )%% of revenues as reported
    
    
    7
    %
    
    
    9
    %
  Interest and Investment Income
 Three MonthsEnded June 30,2010
    
    
    2009(In millions)Interest and investment income
    
    $
    3
    
    
    $
    2
  Interest Expense
 Three MonthsEnded June 30,2010
    
    
    2009(In millions)Interest expense
    
    $
    1
    
    
    $
    (1
    )
  Other Income (Expense)
  Income Tax Provision
    40




---



##### Table of Contents



Equity in Net (Losses) Income of Affiliates
  Three MonthsEnded June 30,2010
    
    
    2009(In millions)Telesat
    
    $
    (42.4
    )
    
    $
    80.6XTAR
    
    
    (2.0
    )
    
    
    4.7$
    (44.4
    )
    
    $
    85.3
  Three Months
    
    
    Three MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    205.4
    
    
    
    201.3
    
    
    
    199.6
    
    
    
    172.2Operating expenses
    
    
    (47.9
    )
    
    
    (61.8
    )
    
    
    (46.4
    )
    
    
    (52.9
    )Depreciation, amortization and stock-based compensation
    
    
    (63.9
    )
    
    
    (65.2
    )
    
    
    (62.2
    )
    
    
    (55.6
    )Operating income
    
    
    93.6
    
    
    
    74.3
    
    
    
    91.0
    
    
    
    63.7Interest expense
    
    
    (60.6
    )
    
    
    (63.6
    )
    
    
    (58.9
    )
    
    
    (54.5
    )Financial instruments gains (losses)
    
    
    51.6
    
    
    
    (114.2
    )
    
    
    49.7
    
    
    
    (93.3
    )Foreign exchange (losses) gains
    
    
    (147.9
    )
    
    
    288.5
    
    
    
    (142.3
    )
    
    
    236.7Other (expense) income
    
    
    (0.7
    )
    
    
    (2.8
    )
    
    
    (0.9
    )
    
    
    (2.3
    )Income tax provision
    
    
    0.1
    
    
    
    (9.9
    )
    
    
    0.1
    
    
    
    (8.4
    )Net (loss) income
    
    
    (63.9
    )
    
    
    172.3
    
    
    
    (61.3
    )
    
    
    141.9Average exchange rate for translating Canadian dollars
to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0287
    
    
    
    1.1676
      41




---



##### Table of Contents



Six Months Ended June 30, 2010 Compared With Six Months Ended June 30, 2009
  Revenues from Satellite Manufacturing
 Six MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    512
    
    
    $
    492
    
    
    
    4
    %Eliminations
    
    
    (3
    )
    
    
    (8
    )
    
    
    (63
    )%Revenues from Satellite Manufacturing as reported
    
    $
    509
    
    
    $
    484
    
    
    
    5
    %
  Cost of Satellite Manufacturing
 Six MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing
    
    $
    447
    
    
    $
    451
    
    
    
    (1
    )%Cost of Satellite Manufacturing as
a % of Satellite Manufacturing
revenues as reported
    
    
    88
    %
    
    
    93
    %
  Selling, General and Administrative Expenses
 Six MonthsEnded June 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    41
    
    
    $
    46
    
    
    
    (11
    )%% of revenues as reported
    
    
    8
    %
    
    
    9
    %
  Directors Indemnification Expense
   42




---



##### Table of Contents



Interest and Investment Income
 Six MonthsEnded June 30,2010
    
    
    2009(In millions)Interest and investment income
    
    $
    6
    
    
    $
    4
  Interest Expense
 Six MonthsEnded June 30,2010
    
    
    2009(In millions)Interest expense
    
    $
    1
    
    
    $
    
  Other Income (Expense)
  Income Tax Provision
   Equity in Net (Losses) Income of Affiliates
  Six MonthsEnded June 30,2010
    
    
    2009(In millions)Telesat
    
    $
    4.7
    
    
    $
    78.3XTAR
    
    
    (4.4
    )
    
    
    1.3Other
    
    
    (0.1
    )
    
    
    $
    0.2
    
    
    $
    79.6
  43




---



##### Table of Contents



Six Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    404.6
    
    
    
    406.8
    
    
    
    391.1
    
    
    
    337.4Operating expenses
    
    
    (98.5
    )
    
    
    (124.4
    )
    
    
    (95.1
    )
    
    
    (103.2
    )Depreciation, amortization and stock-based compensation
    
    
    (127.7
    )
    
    
    (128.0
    )
    
    
    (123.5
    )
    
    
    (106.1
    )Operating income
    
    
    178.4
    
    
    
    154.4
    
    
    
    172.5
    
    
    
    128.1Interest expense
    
    
    (122.9
    )
    
    
    (130.9
    )
    
    
    (118.8
    )
    
    
    (108.6
    )Financial instruments gains (losses)
    
    
    6.8
    
    
    
    (57.0
    )
    
    
    6.6
    
    
    
    (47.3
    )Foreign exchange (losses) gains
    
    
    (34.5
    )
    
    
    187.7
    
    
    
    (33.3
    )
    
    
    155.7Other income (expense)
    
    
    (1.1
    )
    
    
    (2.1
    )
    
    
    (1.2
    )
    
    
    (1.8
    )Income tax provision
    
    
    (10.6
    )
    
    
    (18.6
    )
    
    
    (10.2
    )
    
    
    (15.4
    )Net income (loss)
    
    
    16.1
    
    
    
    133.5
    
    
    
    15.6
    
    
    
    110.7Average exchange rate for translating Canadian dollars
to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0344
    
    
    
    1.2056
 June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Balance Sheet Data:Current assets
    
    
    293.8
    
    
    
    265.0
    
    
    
    276.2
    
    
    
    251.6Total assets
    
    
    5,293.8
    
    
    
    5,260.4
    
    
    
    4,975.8
    
    
    
    4,994.7Current liabilities
    
    
    245.8
    
    
    
    206.3
    
    
    
    231.0
    
    
    
    195.9Long-term debt, including current portion
    
    
    3,125.0
    
    
    
    3,110.4
    
    
    
    2,937.3
    
    
    
    2,953.3Total liabilities
    
    
    4,278.7
    
    
    
    4,257.0
    
    
    
    4,021.7
    
    
    
    4,041.9Redeemable preferred stock
    
    
    141.4
    
    
    
    141.4
    
    
    
    132.9
    
    
    
    134.3Shareholders equity
    
    
    873.7
    
    
    
    862.0
    
    
    
    821.2
    
    
    
    818.5Period end exchange rate for tanslating
Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0639
    
    
    
    1.0532
      44




---



##### Table of Contents



Backlog
  June 30,
    
    
    December 31,2010
    
    
    2009Satellite Manufacturing
    
    $
    1,864
    
    
    $
    1,632Satellite Services
    
    
    5,441
    
    
    
    5,230Total backlog before eliminations
    
    
    7,305
    
    
    
    6,862Satellite Manufacturing eliminations
    
    
    (7
    )
    
    
    (9
    )Satellite Services eliminations
    
    
    (5,441
    )
    
    
    (5,230
    )Total backlog
    
    $
    1,857
    
    
    $
    1,623
  
 Liquidity and Capital Resources
 
 Loral
     Cash and Available Credit
   45




---



##### Table of Contents



Cash Management
  Orbital Receivables
    Liquidity
     46




---



##### Table of Contents



Risks to Cash Flow
      47




---



##### Table of Contents



Telesat
 Cash and Available Credit
   Liquidity
    48




---



##### Table of Contents



Debt
  June 30,
    
    
    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
    
    
    180
    
    
    
    185U.S. term loan facility
    
    October 31, 2014
    
    USD
    
    
    1,789
    
    
    
    1,777U.S. term loan II facility
    
    October 31, 2014
    
    USD
    
    
    154
    
    
    
    152Senior notes
    
    November 1, 2015
    
    USD
    
    
    712
    
    
    
    703Senior subordinated notes
    
    November 1, 2017
    
    USD
    
    
    222
    
    
    
    220CAD
    
    
    3,057
    
    
    
    3,037Current portion
    
    
    
    CAD
    
    
    (28
    )
    
    
    (23
    )Long term portion
    
    
    
    CAD
    
    
    3,029
    
    
    
    3,014
     Interest Expense
   49




---



##### Table of Contents



Derivatives
    Interest Rate Risk
  Capital Expenditures
  
 Contractual Obligations
  
 Statement of Cash Flows
 Net Cash (Used In) Provided by Operating Activities
      50




---



##### Table of Contents



Net Cash Used in Investing Activities
   Net Cash Provided by (Used) in Financing Activities
   
 Affiliate Matters
  
 Commitments and Contingencies
  
 Other Matters
 Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency
 Loral
   ForeignCurrency
    
    
    U.S.$(In millions)Future revenues  Japanese yen
    
    ¥
    349.0
    
    
    $
    3.9Future expenditures  Japanese yen
    
    ¥
    4,483.3
    
    
    $
    50.6Future revenue  euros
    
    
    11.0
    
    
    $
    13.4
  51




---



##### Table of Contents



To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In millions)2010
    
    
    44.6
    
    
    $
    55.4
    
    
    $
    54.52011
    
    
    102.8
    
    
    
    131.0
    
    
    
    125.82012
    
    
    27.0
    
    
    
    32.6
    
    
    
    33.12013
    
    
    27.0
    
    
    
    32.9
    
    
    
    33.2
    201.4
    
    
    $
    251.9
    
    
    $
    246.6
   Telesat
  Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources  Telesat  Derivatives
 Interest
 Loral
  Telesat
   52




---



##### Table of Contents



Other
  
 Item 4.
    
    Disclosure Controls and Procedures
 Disclosure Controls and Procedures.
 Internal control over financial reporting.
  53




---



##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  In addition, in our
form 10-K under ‘Risks Factors Associated with Satellite Service”
we identify one such risk as “Changes in the Canadian competitive
environment could adversely affect Telesat“  In connection with that
risk, in July 2010, the Government of Canada adopted the legislative amendments
proposed in its 2010 budget that exempt Canadian Satellite operators, like
Telesat, from certain foreign ownership restrictions under the
Telecommunications Act and Radiocommunications Act. While we believe these amendments may
enhance Telesat’s ability to compete on a global basis, they may increase
the competition Telesat currently experiences in respect of Canadian orbital
slots and spectrum.  As a result of the July 2010 legislative
amendments, in addition to continuing to compete with other Canadian operators,
like Ciel, for the rights to Canadian orbital slots and spectrum, Telesat may
experience increased competition from non-Canadian operators for these
scarce resources, which could have a material adverse effect on Telesat’s
business prospects.  
 Item 6.
    
    Exhibits
  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.
  54




---



##### 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   55




---



##### Table of Contents



EXHIBIT INDEX
 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.
  56