##### 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, 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
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 15(d) Yes þ No o
 Yes o No þ




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##### 



LORAL SPACE & COMMUNICATIONS INC.
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended September 30, 2010
 Page No.PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 2010 and September 30, 2009
    
    
    4Condensed Consolidated Statements of Equity for the nine months ended September 30, 2010
and the year ended December 31, 2009
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,
2010 and September 30, 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2:Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 3:Quantitative and Qualitative Disclosures About Market Risk
    
    
    53Item 4:Disclosure Controls and Procedures
    
    
    55PART II  OTHER INFORMATIONItem 1:Legal Proceedings
    
    
    56Item 1A:Risk Factors
    
    
    56Item 6:Exhibits
    
    
    56Signatures
    
    
    57Exhibit 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 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    174,429
    
    
    $
    168,205Contracts-in-process
    
    
    233,243
    
    
    
    190,809Inventories
    
    
    72,002
    
    
    
    83,671Other current assets
    
    
    24,510
    
    
    
    24,343Total current assets
    
    
    504,184
    
    
    
    467,028Property, plant and equipment, net
    
    
    228,520
    
    
    
    207,996Long-term receivables
    
    
    301,594
    
    
    
    248,097Investments in affiliates
    
    
    322,973
    
    
    
    282,033Intangible assets, net
    
    
    11,843
    
    
    
    20,300Other assets
    
    
    16,254
    
    
    
    27,998Total assets
    
    $
    1,385,368
    
    
    $
    1,253,452LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    94,259
    
    
    $
    86,809Accrued employment costs
    
    
    43,294
    
    
    
    44,341Customer advances and billings in excess of costs and profits
    
    
    328,268
    
    
    
    291,021Other current liabilities
    
    
    30,573
    
    
    
    19,147Total current liabilities
    
    
    496,394
    
    
    
    441,318Pension and other post retirement liabilities
    
    
    219,158
    
    
    
    226,190Long-term liabilities
    
    
    168,899
    
    
    
    153,953Total liabilities
    
    
    884,451
    
    
    
    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, 20,728,904 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
    
    
    1,024,519
    
    
    
    1,013,790Accumulated deficit
    
    
    (437,120
    )
    
    
    (519,220
    )Accumulated other comprehensive loss
    
    
    (86,784
    )
    
    
    (62,878
    )Total equity
    
    
    500,917
    
    
    
    431,991Total liabilities and equity
    
    $
    1,385,368
    
    
    $
    1,253,452
   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 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    323,438
    
    
    $
    249,237
    
    
    $
    832,314
    
    
    $
    733,175Cost of revenues
    
    
    263,405
    
    
    
    212,009
    
    
    
    710,483
    
    
    
    663,425Selling, general and administrative expenses
    
    
    20,412
    
    
    
    22,379
    
    
    
    61,022
    
    
    
    68,076Directors indemnification expense
    
    
    
    
    
    
    
    
    
    
    14,357
    
    
    
    Operating income
    
    
    39,621
    
    
    
    14,849
    
    
    
    46,452
    
    
    
    1,674Interest and investment income
    
    
    3,602
    
    
    
    1,877
    
    
    
    9,714
    
    
    
    5,455Interest expense
    
    
    (593
    )
    
    
    (707
    )
    
    
    (1,797
    )
    
    
    (754
    )Other expense
    
    
    (1,168
    )
    
    
    (7
    )
    
    
    (256
    )
    
    
    (106
    )Income before income taxes and equity in net income of affiliates
    
    
    41,462
    
    
    
    16,012
    
    
    
    54,113
    
    
    
    6,269Income tax provision
    
    
    (9,081
    )
    
    
    (659
    )
    
    
    (12,242
    )
    
    
    (7,057
    )Income (loss) before equity in net income of affiliates
    
    
    32,381
    
    
    
    15,353
    
    
    
    41,871
    
    
    
    (788
    )Equity in net income of affiliates
    
    
    40,011
    
    
    
    93,071
    
    
    
    40,229
    
    
    
    172,679Net income
    
    $
    72,392
    
    
    $
    108,424
    
    
    $
    82,100
    
    
    $
    171,891Basic and diluted income per share:Basic income per share
    
    $
    2.40
    
    
    $
    3.64
    
    
    $
    2.74
    
    
    $
    5.78Diluted income per share
    
    $
    2.29
    
    
    $
    3.61
    
    
    $
    2.63
    
    
    $
    5.75Weighted average shares outstanding:Basic
    
    
    30,206
    
    
    
    29,771
    
    
    
    30,017
    
    
    
    29,742Diluted
    
    
    31,204
    
    
    
    30,004
    
    
    
    30,777
    
    
    
    29,870
   4




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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,100Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,906
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,194Exercise of stock options
    
    
    351
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    9,259
    
    
    
    
    
    
    
    
    
    
    
    9,262Shares repurchased to
fund withholding taxes
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    
    
    
    
    (779
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    2,249Balance, September 30,
2010
    
    
    20,729
    
    
    $
    207
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,024,519
    
    
    $
    (437,120
    )
    
    $
    (86,784
    )
    
    $
    500,917
   5




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LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)
 Nine MonthsEnded September 30,2010
    
    
    2009Operating activities:Net income
    
    $
    82,100
    
    
    $
    171,891Adjustments to reconcile net income to net cash provided by operating activities:Non-cash operating items (Note 3)
    
    
    (6,197
    )
    
    
    (136,111
    )Changes in operating assets and liabilities:Contracts-in-process
    
    
    (66,135
    )
    
    
    (8,492
    )Inventories
    
    
    13,506
    
    
    
    17,006Long-term receivables
    
    
    (4,432
    )
    
    
    (4,136
    )Other current assets and other assets
    
    
    (165
    )
    
    
    2,359Accounts payable
    
    
    8,693
    
    
    
    8,137Accrued expenses and other current liabilities
    
    
    (2,646
    )
    
    
    (11,284
    )Customer advances and billings in excess of costs and profits
    
    
    16,012
    
    
    
    85,407Income taxes payable
    
    
    1,110
    
    
    
    18,266Pension and other postretirement liabilities
    
    
    (7,032
    )
    
    
    (2,249
    )Long-term liabilities
    
    
    3,551
    
    
    
    7,322Net cash provided by operating activities
    
    
    38,365
    
    
    
    148,116Investing activities:Capital expenditures
    
    
    (40,624
    )
    
    
    (32,200
    )Decrease in restricted cash in escrow
    
    
    
    
    
    
    10Distribution from equity investment
    
    
    
    
    
    
    277Investments in and advances to affiliates
    
    
    
    
    
    
    (4,480
    )Net cash used in investing activities
    
    
    (40,624
    )
    
    
    (36,393
    )Financing activities:Proceeds from the exercise of stock options
    
    
    9,262
    
    
    
    35Common stock repurchased to fund withholding taxes
    
    
    (779
    )
    
    
    (889
    )Repayment of borrowings under SS/L revolving credit facility
    
    
    
    
    
    
    (55,000
    )Net cash provided by (used in) financing activities
    
    
    8,483
    
    
    
    (55,854
    )Increase in cash and cash equivalents
    
    
    6,224
    
    
    
    55,869Cash and cash equivalents  beginning of period
    
    
    168,205
    
    
    
    117,548Cash and cash equivalents  end of period
    
    $
    174,429
    
    
    $
    173,417
   6




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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



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:
 Level 3:
  8




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Assets and Liabilities Measured at Fair Value on Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Marketable securities
    
    $
    1,712
    
    
    $
    
    
    
    $
    Derivative assets
    
    $
    
    
    
    $
    3,988
    
    
    $
    Derivative liabilities
    
    $
    
    
    
    $
    21,778
    
    
    $
    Non-qualified pension plan assets
    
    $
    2,387
    
    
    $
    
    
    
    $
    53
  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




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses, Receivables
 3. Additional Cash Flow Information
  Nine MonthsEnded September 30,2010
    
    
    2009Non-cash operating items:Equity in net income of affiliates
    
    $
    (40,229
    )
    
    $
    (172,679
    )Deferred taxes
    
    
    3,635
    
    
    
    (1,254
    )Depreciation and amortization
    
    
    26,627
    
    
    
    29,550Stock based compensation
    
    
    6,615
    
    
    
    6,366Provisions for inventory obsolescence
    
    
    4,297
    
    
    
    Warranty expense (reversals) accruals
    
    
    (1,259
    )
    
    
    2,102Increase in allowance for billed receivables
    
    
    
    
    
    
    2,759Amortization of prior service credits and net actuarial gains
    
    
    (106
    )
    
    
    281Unrealized gain on non-qualified pension plan assets
    
    
    (201
    )
    
    
    (717
    )Non-cash net interest income
    
    
    (2,327
    )
    
    
    (1,190
    )Gain on foreign currency transactions and contracts
    
    
    (2,085
    )
    
    
    (898
    )Amortization of fair value adjustments related to orbital incentives
    
    
    (1,164
    )
    
    
    (431
    )Net non-cash operating items
    
    $
    (6,197
    )
    
    $
    (136,111
    )Non-cash investing activities:Capital expenditures incurred not yet paid
    
    $
    1,848
    
    
    $
    2,116Non-cash financing activities:Issuance of restricted stock
    
    $
    
    
    
    $
    1,591Supplemental information:Interest paid
    
    $
    1,382
    
    
    $
    1,700Tax (refunds) payments, net
    
    $
    (1,078
    )
    
    $
    (17,987
    )
   10




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 4. Comprehensive Income
  Three MonthsEnded September 30,2010
    
    
    2009Net income
    
    $
    72,392
    
    
    $
    108,424Amortization of prior service credits and net actuarial gains
    
    
    (36
    )
    
    
    95Proportionate share of Telesat Holdco other comprehensive income (loss)
    
    
    953
    
    
    
    (613
    )Unrealized loss on foreign currency hedges:Unrealized loss on foreign currency hedges
    
    
    (22,715
    )
    
    
    (2,340
    )Less: reclassification adjustment for gains included in net income
    
    
    (2,770
    )
    
    
    (2,865
    )Net unrealized loss
    
    
    (25,485
    )
    
    
    (5,205
    )Unrealized gain (loss) on securities:Unrealized gain (loss) on available-for-sale securities
    
    
    197
    
    
    
    (285
    )Comprehensive income
    
    $
    48,021
    
    
    $
    102,416
 Nine MonthsEnded September 30,2010
    
    
    2009Net income
    
    $
    82,100
    
    
    $
    171,891Amortization of prior service credits and net actuarial gains
    
    
    (106
    )
    
    
    281Proportionate share of Telesat Holdco other comprehensive income
    
    
    711
    
    
    
    2,231Unrealized loss on foreign currency hedges:Unrealized loss on foreign currency hedges
    
    
    (20,614
    )
    
    
    (626
    )Less: reclassification adjustment for gains included in net income
    
    
    (4,753
    )
    
    
    (10,171
    )Net unrealized loss
    
    
    (25,367
    )
    
    
    (10,797
    )Unrealized gain on securities:Unrealized gain on available-for-sale securities
    
    
    856
    
    
    
    551Comprehensive income
    
    $
    58,194
    
    
    $
    164,157
 5. Contracts-in-Process and Inventories
  September 30,
    
    
    December 31,2010
    
    
    2009Contracts-in-Process:Amounts billed
    
    $
    170,108
    
    
    $
    124,034Unbilled receivables
    
    
    63,135
    
    
    
    66,775$
    233,243
    
    
    $
    190,809Inventories:Inventories-gross
    
    $
    104,637
    
    
    $
    119,528Allowance for obsolescence
    
    
    (31,210
    )
    
    
    (28,297
    )73,427
    
    
    
    91,231Inventories included in other assets
    
    
    (1,425
    )
    
    
    (7,560
    )$
    72,002
    
    
    $
    83,671
   11




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##### 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
    
    ¥
    224,479
    
    
    $
    2,683Future expenditures  Japanese yen
    
    ¥
    4,508,757
    
    
    $
    53,885Future revenues  euros
    
    
    10,494
    
    
    $
    14,284Future expenditures  euros
    
    
    8,698
    
    
    $
    11,839
 Derivatives and Hedging Transactions
    Cash Flow Hedges
   12




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
    To SellHedge
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2010
    
    
    22,066
    
    
    $
    27,229
    
    
    $
    30,0042011
    
    
    102,805
    
    
    
    131,042
    
    
    
    139,2402012
    
    
    27,000
    
    
    
    32,649
    
    
    
    36,2712013
    
    
    27,000
    
    
    
    32,894
    
    
    
    36,090
    178,871
    
    
    $
    223,814
    
    
    $
    241,605
 Balance Sheet Classification
  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair Value(In thousands)
    
    
    
    
    (In thousands)Derivatives designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    3,679
    
    
    Other current liabilities
    
    $
    12,791Other liabilities
    
    
    8,8173,679
    
    
    
    
    
    21,608Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    
    309
    
    
    Other liabilities
    
    
    170Total Derivatives
    
    
    
    $
    3,988
    
    
    
    
    $
    21,778
  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




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Cash Flow Hedge Gains (Losses) Recognition
  Amount of Loss
    
    
    Gain Reclassified from
    
    
    Gain (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 September 30, 2010:Foreign exchange contracts
    
    $
    (22,715
    )
    
    Revenue
    
    $
    2,770
    
    
    Revenue
    
    $
    1,528Interest income
    
    $
    14Nine months ended September 30, 2010:Foreign exchange contracts
    
    $
    (20,614
    )
    
    Revenue
    
    $
    4,753
    
    
    Revenue
    
    $
    1,189Interest income
    
    $
    (5
    )
 LossRecognized in Incomeon DerivativeCash Flow Derivatives Not Designated as Hedging Instruments
    
    Location
    
    AmountThree months ended September 30, 2010:Foreign exchange contracts
    
    Revenue
    
    $
    (550
    )Nine months ended September 30, 2010:Foreign exchange contracts
    
    Revenue
    
    $
    (28
    )
  Amount of Loss
    
    
    Gain Reclassified from
    
    
    Gain (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 September 30, 2009:Foreign exchange contracts
    
    $
    (2,340
    )
    
    Revenue
    
    $
    2,865
    
    
    Revenue
    
    $
    300Interest income
    
    $
    (24
    )Nine months ended September 30, 2009:Foreign exchange contracts
    
    $
    (626
    )
    
    Revenue
    
    $
    10,171
    
    
    Revenue
    
    $
    (943
    )Interest income
    
    $
    (70
    )
 Gain (Loss)Recognized in Incomeon DerivativeCash Flow Derivatives Not Designated as Hedging Instruments
    
    Location
    
    AmountThree months ended September 30, 2009:Foreign exchange contracts
    
    Revenue
    
    $
    (310
    )Nine months ended September 30, 2009:Foreign exchange contracts
    
    Revenue
    
    $
    120
   14




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 7. Property, Plant and Equipment
 September 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
    
    
    172,360
    
    
    
    156,669Satellite capacity under construction (see Note 17)
    
    
    37,191
    
    
    
    27,412Other construction in progress
    
    
    30,935
    
    
    
    17,243347,390
    
    
    
    308,007Accumulated depreciation and amortization
    
    
    (118,870
    )
    
    
    (100,011
    )$
    228,520
    
    
    $
    207,996
  8. Investments in Affiliates
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Telesat Holdings Inc.
    
    $
    255,601
    
    
    $
    208,101XTAR, LLC
    
    
    65,887
    
    
    
    72,284Other
    
    
    1,485
    
    
    
    1,648$
    322,973
    
    
    $
    282,033
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Telesat Holdings Inc.
    
    $
    42,086
    
    
    $
    94,948
    
    
    $
    46,789
    
    
    $
    173,240XTAR, LLC
    
    
    (2,039
    )
    
    
    (2,154
    )
    
    
    (6,397
    )
    
    
    (838
    )Other
    
    
    (36
    )
    
    
    277
    
    
    
    (163
    )
    
    
    277$
    40,011
    
    
    $
    93,071
    
    
    $
    40,229
    
    
    $
    172,679
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    41,111
    
    
    $
    21,336
    
    
    $
    86,562
    
    
    $
    62,179Elimination of Lorals proportionate share of profits
relating to affiliate transactions
    
    
    (5,608
    )
    
    
    (6,804
    )
    
    
    (9,318
    )
    
    
    (7,047
    )Profits relating to affiliate transactions not eliminated
    
    
    3,158
    
    
    
    3,817
    
    
    
    5,246
    
    
    
    3,969
   15




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Telesat
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    201,611
    
    
    $
    170,510
    
    
    $
    592,723
    
    
    $
    507,907Operating expenses
    
    
    (47,186
    )
    
    
    (52,722
    )
    
    
    (142,266
    )
    
    
    (155,926
    )Depreciation, amortization and stock-based compensation
    
    
    (61,766
    )
    
    
    (54,660
    )
    
    
    (185,299
    )
    
    
    (160,783
    )Gain on disposition of long-lived assets
    
    
    950
    
    
    
    29,648
    
    
    
    950
    
    
    
    29,648Operating income
    
    
    93,609
    
    
    
    92,775
    
    
    
    266,108
    
    
    
    220,846Interest expense
    
    
    (57,888
    )
    
    
    (58,076
    )
    
    
    (176,693
    )
    
    
    (166,623
    )Financial instruments losses
    
    
    (56,533
    )
    
    
    (94,932
    )
    
    
    (49,907
    )
    
    
    (142,197
    )Foreign exchange gains
    
    
    102,536
    
    
    
    238,512
    
    
    
    69,181
    
    
    
    394,190Other income (expense)
    
    
    134
    
    
    
    (717
    )
    
    
    (1,043
    )
    
    
    (2,495
    )Income tax provision
    
    
    (8,821
    )
    
    
    (9,584
    )
    
    
    (18,994
    )
    
    
    (25,006
    )Net income
    
    
    73,037
    
    
    
    167,978
    
    
    
    88,652
    
    
    
    278,715
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Current assets
    
    $
    324,355
    
    
    $
    251,573Total assets
    
    
    5,181,365
    
    
    
    4,994,684Current liabilities
    
    
    287,825
    
    
    
    195,890Long-term debt, including current portion
    
    
    2,933,373
    
    
    
    2,953,281Total liabilities
    
    
    4,121,116
    
    
    
    4,041,932Redeemable preferred stock
    
    
    137,422
    
    
    
    134,291Shareholders equity
    
    
    922,827
    
    
    
    818,461
 XTAR
  o o
   16




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
      Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues
    
    $
    9,274
    
    
    $
    8,382
    
    
    $
    26,118
    
    
    $
    22,973Operating expenses
    
    
    (9,286
    )
    
    
    (8,681
    )
    
    
    (26,680
    )
    
    
    (25,826
    )Depreciation and amortization
    
    
    (2,404
    )
    
    
    (2,404
    )
    
    
    (7,213
    )
    
    
    (7,214
    )Operating loss
    
    
    (2,416
    )
    
    
    (2,704
    )
    
    
    (7,775
    )
    
    
    (10,067
    )Net loss
    
    
    (3,609
    )
    
    
    (3,832
    )
    
    
    (11,386
    )
    
    
    (1,458
    )
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Current assets
    
    $
    6,393
    
    
    $
    10,372Total assets
    
    
    95,890
    
    
    
    107,084Current liabilities
    
    
    60,661
    
    
    
    45,672Total liabilities
    
    
    68,074
    
    
    
    67,882Members equity
    
    
    27,816
    
    
    
    39,202
  17




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##### 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
    
    
    September 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
    
    
    $
    (54,084
    )
    
    $
    59,027
    
    
    $
    (45,972
    )Trade names
    
    
    15
    
    
    
    9,200
    
    
    
    (2,300
    )
    
    
    9,200
    
    
    
    (1,955
    )$
    68,227
    
    
    $
    (56,384
    )
    
    $
    68,227
    
    
    $
    (47,927
    )
  2010
    
    $
    9,1902011
    
    
    2,9312012
    
    
    2,3142013
    
    
    4602014
    
    
    460
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Gross fair value adjustments
    
    $
    (36,896
    )
    
    $
    (36,896
    )Accumulated amortization
    
    
    18,298
    
    
    
    16,446$
    (18,598
    )
    
    $
    (20,450
    )
  10. Debt
   September 30,
    
    
    December 31,2010
    
    
    2009Letters of credit outstanding
    
    $
    4,911
    
    
    $
    4,921Borrowings
    
    
    
    
    
    
    
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest expense (including commitment and letter of credit fees)
    
    $
    202
    
    
    $
    248
    
    
    $
    600
    
    
    $
    959Amortization of issuance costs
    
    $
    219
    
    
    $
    219
    
    
    $
    657
    
    
    $
    657
  18




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 11. Income Taxes
      Nine MonthsEnded September 30,2010
    
    
    2009(In thousands)Liabilities for UTPs:Opening balance  January 1
    
    $
    111,316
    
    
    $
    109,006Current provision (benefit) for:Unrecognized tax benefits
    
    
    4,241
    
    
    
    1,439Potential additional interest
    
    
    4,365
    
    
    
    5,054Potential additional penalties
    
    
    667
    
    
    
    2,465Statute expirations
    
    
    (698
    )
    
    
    (927
    )Ending balance  September 30
    
    
    119,891
    
    
    
    117,037UTP adjustment to net deferred tax asset:Opening balance  January 1
    
    
    239
    
    
    
    (832
    )Current provision (benefit) for unrecognized tax benefits
    
    
    4,582
    
    
    
    (419
    )Ending balance  September 30
    
    
    4,821
    
    
    
    (1,251
    )Total uncertain tax positions
    
    $
    124,712
    
    
    $
    115,786
     19




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##### Table of Contents



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




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##### 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 September 30,
    
    
    Ended September 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)
    
    
    130
    
    
    
    226
    
    
    
    (166
    )
    
    
    (133
    )Net periodic cost
    
    $
    3,686
    
    
    $
    4,210
    
    
    $
    1,041
    
    
    $
    1,168
 Pension Benefits
    
    
    Other BenefitsNine Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Service cost
    
    $
    7,788
    
    
    $
    6,783
    
    
    $
    702
    
    
    $
    792Interest cost
    
    
    18,351
    
    
    
    17,988
    
    
    
    2,943
    
    
    
    3,150Expected return on plan assets
    
    
    (15,471
    )
    
    
    (12,819
    )
    
    
    (24
    )
    
    
    (39
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    392
    
    
    
    678
    
    
    
    (498
    )
    
    
    (399
    )Net periodic cost
    
    $
    11,060
    
    
    $
    12,630
    
    
    $
    3,123
    
    
    $
    3,504
 14. Commitments and Contingencies
 Financial Matters
  Balance of deferred amounts at January 1, 2010
    
    $
    37,167Warranty costs incurred including payments
    
    
    (966
    )Accruals relating to pre-existing contracts (including changes in estimates)
    
    
    (292
    )Balance of deferred amounts at September 30, 2010
    
    $
    35,909
   21




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




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##### Table of Contents



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




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##### 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




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##### 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




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##### Table of Contents



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




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 15. Earnings Per Share
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income, as reported  basic
    
    $
    72,392
    
    
    $
    108,424
    
    
    $
    82,100
    
    
    $
    171,891Less: Adjustment for dilutive effect of Telesat stock options
    
    
    (1,003
    )
    
    
    
    
    
    
    (1,116
    )
    
    
    Net income  diluted
    
    $
    71,389
    
    
    $
    108,424
    
    
    $
    80,984
    
    
    $
    171,891
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Common and potential common shares:Weighted average common shares outstanding
    
    
    30,206
    
    
    
    29,771
    
    
    
    30,017
    
    
    
    29,742Stock options
    
    
    591
    
    
    
    
    
    
    
    425
    
    
    
    Unvested restricted stock units
    
    
    213
    
    
    
    145
    
    
    
    201
    
    
    
    96Unvested restricted stock
    
    
    7
    
    
    
    2
    
    
    
    10
    
    
    
    4Unvested SS/L Phantom SARs
    
    
    187
    
    
    
    86
    
    
    
    124
    
    
    
    28Common and potential common shares
    
    
    31,204
    
    
    
    30,004
    
    
    
    30,777
    
    
    
    29,870
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2009(In thousands)
    
    
    (In thousands)Stock options outstanding
    
    
    2,158
    
    
    
    2,158Unvested restricted stock units
    
    
    23
    
    
    
    23Unvested restricted stock
    
    
    41
    
    
    
    41
 16. Segments
    27




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
    28




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)RevenuesSatellite manufacturing:External revenues
    
    $
    282,344
    
    
    $
    227,908
    
    
    $
    745,772
    
    
    $
    671,016Intersegment revenues(1)
    
    
    42,581
    
    
    
    25,611
    
    
    
    91,199
    
    
    
    74,809Satellite manufacturing revenues
    
    
    324,925
    
    
    
    253,519
    
    
    
    836,971
    
    
    
    745,825Satellite services revenues(2)
    
    
    201,611
    
    
    
    170,510
    
    
    
    592,723
    
    
    
    507,907Operating segment revenues before eliminations
    
    
    526,536
    
    
    
    424,029
    
    
    
    1,429,694
    
    
    
    1,253,732Intercompany eliminations(3)
    
    
    (1,487
    )
    
    
    (4,282
    )
    
    
    (4,657
    )
    
    
    (12,650
    )Affiliate eliminations(2)
    
    
    (201,611
    )
    
    
    (170,510
    )
    
    
    (592,723
    )
    
    
    (507,907
    )Total revenues as reported
    
    $
    323,438
    
    
    $
    249,237
    
    
    $
    832,314
    
    
    $
    733,175Segment Adjusted EBITDA(4)Satellite manufacturing
    
    $
    55,788
    
    
    $
    31,620
    
    
    $
    105,558
    
    
    $
    54,166Satellite services(2)
    
    
    154,400
    
    
    
    117,788
    
    
    
    450,457
    
    
    
    351,981Corporate(5)
    
    
    (3,601
    )
    
    
    (4,440
    )
    
    
    (10,372
    )
    
    
    (15,192
    )Adjusted EBITDA before eliminations
    
    
    206,587
    
    
    
    144,968
    
    
    
    545,643
    
    
    
    390,955Intercompany eliminations(3)
    
    
    (623
    )
    
    
    (291
    )
    
    
    (1,135
    )
    
    
    (1,383
    )Affiliate eliminations(2)
    
    
    (154,400
    )
    
    
    (117,788
    )
    
    
    (450,457
    )
    
    
    (351,981
    )Adjusted EBITDA
    
    
    51,564
    
    
    
    26,889
    
    
    
    94,051
    
    
    
    37,591Depreciation, Amortization and Stock-Based Compensation(4)Satellite manufacturing
    
    
    (10,431
    )
    
    
    (10,950
    )
    
    
    (29,934
    )
    
    
    (33,082
    )Satellite services(2)
    
    
    (61,766
    )
    
    
    (54,661
    )
    
    
    (185,299
    )
    
    
    (160,783
    )Corporate
    
    
    (1,512
    )
    
    
    (1,090
    )
    
    
    (3,308
    )
    
    
    (2,835
    )Segment depreciation before affiliate eliminations
    
    
    (73,709
    )
    
    
    (66,701
    )
    
    
    (218,541
    )
    
    
    (196,700
    )Affiliate eliminations(2)
    
    
    61,766
    
    
    
    54,661
    
    
    
    185,299
    
    
    
    160,783Depreciation, amortization and stock-based compensation as reported
    
    
    (11,943
    )
    
    
    (12,040
    )
    
    
    (33,242
    )
    
    
    (35,917
    )Directors indemnification expense (6)
    
    
    
    
    
    
    
    
    
    
    (14,357
    )
    
    
    Operating income as reported
    
    $
    39,621
    
    
    $
    14,849
    
    
    $
    46,452
    
    
    $
    1,674
 September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Total AssetsSatellite manufacturing
    
    $
    966,838
    
    
    $
    863,866Satellite services (includes goodwill of $2.4 billion in 2010 and $2.3 billion in 2009)(2)
    
    
    5,436,966
    
    
    
    5,202,785Corporate
    
    
    162,929
    
    
    
    181,485Total Assets before affiliate eliminations
    
    
    6,566,733
    
    
    
    6,248,136Affiliate eliminations(2)
    
    
    (5,181,365
    )
    
    
    (4,994,684
    )Total assets as reported(7)
    
    $
    1,385,368
    
    
    $
    1,253,452
 (1)
    
    Intersegment revenues for satellite manufacturing includes affiliate revenue of
$41.1 million and $21.3 million for the three months ended September 30, 2010 and 2009,
respectively, and $86.6 million and $62.2 million for the nine months ended September 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.  29




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 (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
      30




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Revenues from Telesat satellite construction contracts
    
    $
    41,079
    
    
    $
    21,323
    
    
    $
    86,525
    
    
    $
    62,142Milestone payments received from Telesat
    
    
    48,058
    
    
    
    36,227
    
    
    
    101,045
    
    
    
    67,845
      o
  31




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




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LORAL SPACE & COMMUNICATIONS INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
      33




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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
    
    34Consolidated Operating Results
    
    37Liquidity and Capital Resources:Loral
    
    46Telesat
    
    50Contractual Obligations
    
    52Statement of Cash Flows
    
    52Affiliate Matters
    
    52Commitments and Contingencies
    
    53Other Matters
    
    53
  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
   34




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Satellite Services
   35




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36




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General
      
 Consolidated Operating Results
 Critical Accounting Matters
 Changes in Critical Accounting Policies
 Consolidated Operating Results 
     37




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Revenues:
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Satellite Manufacturing
    
    $
    324.9
    
    
    $
    253.5
    
    
    $
    837.0
    
    
    $
    745.8Satellite Services
    
    
    201.6
    
    
    
    170.5
    
    
    
    592.7
    
    
    
    507.9Segment revenues
    
    
    526.5
    
    
    
    424.0
    
    
    
    1,429.7
    
    
    
    1,253.7Eliminations(1)
    
    
    (1.5
    )
    
    
    (4.3
    )
    
    
    (4.7
    )
    
    
    (12.6
    )Affiliate eliminations(2)
    
    
    (201.6
    )
    
    
    (170.5
    )
    
    
    (592.7
    )
    
    
    (507.9
    )Revenues as reported(3)
    
    $
    323.4
    
    
    $
    249.2
    
    
    $
    832.3
    
    
    $
    733.2
       38




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Adjusted EBITDA:
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Satellite Manufacturing
    
    $
    55.8
    
    
    $
    31.6
    
    
    $
    105.6
    
    
    $
    54.2Satellite Services
    
    
    154.4
    
    
    
    117.8
    
    
    
    450.4
    
    
    
    352.0Corporate expenses
    
    
    (3.6
    )
    
    
    (4.4
    )
    
    
    (10.4
    )
    
    
    (15.2
    )Segment Adjusted EBITDA before eliminations
    
    
    206.6
    
    
    
    145.0
    
    
    
    545.6
    
    
    
    391.0Eliminations(1)
    
    
    (0.6
    )
    
    
    (0.3
    )
    
    
    (1.1
    )
    
    
    (1.4
    )Affiliate eliminations(2)
    
    
    (154.4
    )
    
    
    (117.8
    )
    
    
    (450.4
    )
    
    
    (352.0
    )Adjusted EBITDA
    
    $
    51.6
    
    
    $
    26.9
    
    
    $
    94.1
    
    
    $
    37.6
         39




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Reconciliation of Adjusted EBITDA to Net Income (Loss):
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Adjusted EBITDA
    
    $
    51.6
    
    
    $
    26.9
    
    
    $
    94.1
    
    
    $
    37.6Depreciation, amortization and stock-based compensation
    
    
    (12.0
    )
    
    
    (12.1
    )
    
    
    (33.2
    )
    
    
    (35.9
    )Directors indemnification expense(4)
    
    
    
    
    
    
    
    
    
    
    (14.4
    )
    
    
    Operating income
    
    
    39.6
    
    
    
    14.8
    
    
    
    46.5
    
    
    
    1.7Interest and investment income
    
    
    3.6
    
    
    
    1.9
    
    
    
    9.7
    
    
    
    5.5Interest expense
    
    
    (0.6
    )
    
    
    (0.7
    )
    
    
    (1.8
    )
    
    
    (0.7
    )Other income (expense)
    
    
    (1.1
    )
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.1
    )Income tax provision
    
    
    (9.1
    )
    
    
    (0.7
    )
    
    
    (12.2
    )
    
    
    (7.1
    )Equity in net income of affiliates
    
    
    40.0
    
    
    
    93.1
    
    
    
    40.2
    
    
    
    172.6Net income
    
    $
    72.4
    
    
    $
    108.4
    
    
    $
    82.1
    
    
    $
    171.9
 (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 $41.1 million and $21.3 million for the three
months ended September 30, 2010 and 2009, respectively, and $86.6 million and $62.2 million
for the nine months ended September 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 September 30, 2010 Compared With Three Months Ended September 30, 2009
  Revenues from Satellite Manufacturing
 Three MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    325
    
    
    $
    253
    
    
    
    28
    %Eliminations
    
    
    (2
    )
    
    
    (4
    )
    
    
    (50
    )%Revenues from Satellite Manufacturing as reported
    
    $
    323
    
    
    $
    249
    
    
    
    30
    %
   40




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Cost of Satellite Manufacturing
 Three MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing
    
    $
    263
    
    
    $
    212
    
    
    
    24
    %Cost of Satellite Manufacturing as a % of Satellite Manufacturing revenues as reported
    
    
    81
    %
    
    
    85
    %
  Selling, General and Administrative Expenses
 Three MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    20
    
    
    $
    22
    
    
    
    (9
    )%% of revenues as reported
    
    
    6
    %
    
    
    9
    %
  Interest and Investment Income
 Three MonthsEnded September 30,2010
    
    
    2009(In millions)Interest and investment income
    
    $
    4
    
    
    $
    2
  Interest Expense
 Three MonthsEnded September 30,2010
    
    
    2009(In millions)Interest expense
    
    $
    1
    
    
    $
    1
  Other Expense
  Income Tax Provision
   41




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Equity in Net Income of Affiliates
  Three MonthsEnded September 30,2010
    
    
    2009(In millions)Telesat
    
    $
    42.1
    
    
    $
    95.0XTAR
    
    
    (2.1
    )
    
    
    (2.2
    )Other
    
    
    
    
    
    
    0.3$
    40.0
    
    
    $
    93.1
  Three Months
    
    
    Three MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    209.5
    
    
    
    187.0
    
    
    
    201.6
    
    
    
    170.5Operating expenses
    
    
    (48.9
    )
    
    
    (57.9
    )
    
    
    (47.2
    )
    
    
    (52.7
    )Depreciation, amortization and stock-based compensation
    
    
    (64.3
    )
    
    
    (60.0
    )
    
    
    (61.8
    )
    
    
    (54.7
    )Gain on disposition of long lived assets
    
    
    1.0
    
    
    
    34.7
    
    
    
    1.0
    
    
    
    29.6Operating income
    
    
    97.3
    
    
    
    103.8
    
    
    
    93.6
    
    
    
    92.7Interest expense
    
    
    (60.2
    )
    
    
    (63.9
    )
    
    
    (57.9
    )
    
    
    (58.0
    )Financial instruments losses
    
    
    (58.5
    )
    
    
    (109.2
    )
    
    
    (56.5
    )
    
    
    (94.9
    )Foreign exchange gains
    
    
    106.2
    
    
    
    273.1
    
    
    
    102.5
    
    
    
    238.5Other income (expense)
    
    
    0.1
    
    
    
    (0.8
    )
    
    
    0.1
    
    
    
    (0.7
    )Income tax provision
    
    
    (9.1
    )
    
    
    (10.6
    )
    
    
    (8.8
    )
    
    
    (9.6
    )Net income
    
    
    75.8
    
    
    
    192.3
    
    
    
    73.0
    
    
    
    168.0Average exchange rate for translating Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0392
    
    
    
    1.0976
      42




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Nine Months Ended September 30, 2010 Compared With Nine Months Ended September 30, 2009
  Revenues from Satellite Manufacturing
 Nine MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    837
    
    
    $
    746
    
    
    
    12
    %Eliminations
    
    
    (5
    )
    
    
    (13
    )
    
    
    (62
    )%Revenues from Satellite Manufacturing as reported
    
    $
    832
    
    
    $
    733
    
    
    
    14
    %
  Cost of Satellite Manufacturing
 Nine MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing
    
    $
    710
    
    
    $
    663
    
    
    
    7
    %Cost of Satellite Manufacturing as a % of Satellite Manufacturing revenues as reported
    
    
    85
    %
    
    
    90
    %
  Selling, General and Administrative Expenses
 Nine MonthsEnded September 30,
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    61
    
    
    $
    68
    
    
    
    (10
    )%% of revenues as reported
    
    
    7
    %
    
    
    9
    %
  Directors Indemnification Expense
   43




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Interest and Investment Income
 Nine MonthsEnded September 30,2010
    
    
    2009(In millions)Interest and investment income
    
    $
    10
    
    
    $
    5
  Interest Expense
 Nine MonthsEnded September 30,2010
    
    
    2009(In millions)Interest expense
    
    $
    2
    
    
    $
    1
  Other Expense
  Income Tax Provision
     44




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Equity in Net Income of Affiliates
  Nine MonthsEnded September 30,2010
    
    
    2009(In millions)Telesat
    
    $
    46.8
    
    
    $
    173.2XTAR
    
    
    (6.4
    )
    
    
    (0.8
    )Other
    
    
    (0.2
    )
    
    
    0.3$
    40.2
    
    
    $
    172.7
  Nine Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    614.1
    
    
    
    593.7
    
    
    
    592.7
    
    
    
    507.9Operating expenses
    
    
    (147.4
    )
    
    
    (182.3
    )
    
    
    (142.3
    )
    
    
    (155.9
    )Depreciation, amortization and stock-based compensation
    
    
    (192.0
    )
    
    
    (188.0
    )
    
    
    (185.3
    )
    
    
    (160.8
    )Gain on disposition of long-lived assets
    
    
    1.0
    
    
    
    34.7
    
    
    
    1.0
    
    
    
    29.6Operating income
    
    
    275.7
    
    
    
    258.1
    
    
    
    266.1
    
    
    
    220.8Interest expense
    
    
    (183.1
    )
    
    
    (194.8
    )
    
    
    (176.7
    )
    
    
    (166.6
    )Financial instruments losses
    
    
    (51.7
    )
    
    
    (166.2
    )
    
    
    (49.9
    )
    
    
    (142.2
    )Foreign exchange gains
    
    
    71.7
    
    
    
    460.8
    
    
    
    69.2
    
    
    
    394.2Other expense
    
    
    (1.0
    )
    
    
    (2.9
    )
    
    
    (1.0
    )
    
    
    (2.5
    )Income tax provision
    
    
    (19.7
    )
    
    
    (29.2
    )
    
    
    (19.0
    )
    
    
    (25.0
    )Net income loss
    
    
    91.9
    
    
    
    325.8
    
    
    
    88.7
    
    
    
    278.7Average exchange rate for translating Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0361
    
    
    
    1.1690
 September 30,
    
    
    December 31,
    
    
    September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Canadian dollars)
    
    
    (In U.S. dollars)Balance Sheet Data:Current assets
    
    
    333.9
    
    
    
    265.0
    
    
    
    324.4
    
    
    
    251.6Total assets
    
    
    5,332.7
    
    
    
    5,260.4
    
    
    
    5,181.4
    
    
    
    4,994.7Current liabilities
    
    
    296.2
    
    
    
    206.3
    
    
    
    287.8
    
    
    
    195.9Long-term debt, including current portion
    
    
    3,019.1
    
    
    
    3,110.4
    
    
    
    2,933.4
    
    
    
    2,953.3Total liabilities
    
    
    4,241.5
    
    
    
    4,257.0
    
    
    
    4,121.1
    
    
    
    4,041.9Redeemable preferred stock
    
    
    141.4
    
    
    
    141.4
    
    
    
    137.4
    
    
    
    134.3Shareholders equity
    
    
    949.8
    
    
    
    862.0
    
    
    
    922.9
    
    
    
    818.5Period end exchange rate for translating Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    1.0292
    
    
    
    1.0532
      45




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Backlog
  September 30,
    
    
    December 31,2010
    
    
    2009Satellite Manufacturing
    
    $
    1,733
    
    
    $
    1,632Satellite Services
    
    
    5,462
    
    
    
    5,230Total backlog before eliminations
    
    
    7,195
    
    
    
    6,862Satellite Manufacturing eliminations
    
    
    (5
    )
    
    
    (9
    )Satellite Services eliminations
    
    
    (5,462
    )
    
    
    (5,230
    )Total backlog
    
    $
    1,728
    
    
    $
    1,623
  
 Liquidity and Capital Resources
 
 Loral
      46




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Cash and Available Credit
   Cash Management
  Orbital Receivables
     47




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##### Table of Contents



Liquidity
 ViaSat-1 ViaSat-1
     Risks to Cash Flow
    48




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49




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Telesat
 Cash and Available Credit
   Liquidity
   Debt
  September 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
    
    
    175
    
    
    
    185U.S. term loan facility
    
    October 31, 2014
    
    USD
    
    
    1,727
    
    
    
    1,777U.S. term loan II facility
    
    October 31, 2014
    
    USD
    
    
    148
    
    
    
    152Senior notes
    
    November 1, 2015
    
    USD
    
    
    689
    
    
    
    703Senior subordinated notes
    
    November 1, 2017
    
    USD
    
    
    215
    
    
    
    220CAD
    
    
    2,954
    
    
    
    3,037Current portion
    
    
    
    CAD
    
    
    (62
    )
    
    
    (23
    )Long term portion
    
    
    
    CAD
    
    
    2,892
    
    
    
    3,014
   50




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##### Table of Contents



Interest Expense
  Derivatives
    Interest Rate Risk
   51




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##### Table of Contents



Capital Expenditures
  
 Contractual Obligations
  
 Statement of Cash Flows
 Net Cash Provided by Operating Activities
     Net Cash Used in Investing Activities
   Net Cash Provided by (Used) in Financing Activities
   
 Affiliate Matters
   52




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##### Table of Contents



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
    
    ¥
    224.5
    
    
    $
    2.7Future expenditures  Japanese yen
    
    ¥
    4,508.8
    
    
    $
    53.9Future revenue  euros
    
    
    10.5
    
    
    $
    14.3Future expenditures  euros
    
    
    8.7
    
    
    $
    11.8
    53




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##### Table of Contents



To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In millions)2010
    
    
    22.1
    
    
    $
    27.2
    
    
    $
    30.02011
    
    
    102.8
    
    
    
    131.0
    
    
    
    139.22012
    
    
    27.0
    
    
    
    32.6
    
    
    
    36.32013
    
    
    27.0
    
    
    
    32.9
    
    
    
    36.1
    178.9
    
    
    $
    223.7
    
    
    $
    241.6
   Telesat
  Managements Discussion and Analysis of Financial Condition and Results of Operations   Telesat  Derivatives
 Interest
 Loral
  Telesat
  Other
   54




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##### Table of Contents



Item 4. Disclosure Controls and Procedures
 Disclosure Controls and Procedures.
 Internal control over financial reporting.
  55




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
    
 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.
  56




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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   57




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##### 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.
  58