##### 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 March 31, 2007
  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
  Rule 12b-2
  o þ o
  þ o
  Rule 12b-2 o þ




---



TABLE OF CONTENTS  PART 1. FINANCIAL INFORMATIONItem 1. Financial StatementsCONDENSED CONSOLIDATED BALANCE SHEETSCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Disclosure Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 6. ExhibitsSIGNATURESEXHIBIT INDEXEX-10.2: LETTER AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    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)
  March 31,


December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
390,345


$
186,542Short-term investments


116,540



106,588Accounts receivable, net


12,633



76,420Contracts-in-process


128,781



40,433Inventories


93,036



82,183Other current assets


55,909



55,534Total current assets


797,244



547,700Property, plant and equipment, net


562,535



558,879Long-term receivables


92,985



81,164Investments in and advances to
    affiliates


94,676



97,202Goodwill


312,861



305,691Other assets


131,930



139,275Total assets

$
1,992,231


$
1,729,911LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
68,833


$
67,604Accrued employment costs


33,501



43,797Customer advances and billings in
    excess of costs and profits


256,576



242,661Income taxes payable


1,584



2,567Accrued interest and preferred
    dividends


11,606



20,097Other current liabilities


25,327



42,828Total current liabilities


397,427



419,554Pension and other post retirement
    liabilities


170,656



167,987Long-term debt


128,054



128,084Long-term liabilities


165,009



153,028Total liabilities


861,146



868,653Minority interest


225,617



214,256Commitments and contingenciesShareholders equity:Series A-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,200,000 shares authorized, 136,526 shares
    issued and outstanding


40,237



Series B-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,000,000 shares authorized, 858,486 shares
    issued and outstanding


253,013



Common stock, $.01 par value


201



200Paid-in capital


637,828



644,708Accumulated deficit


(63,106
)


(37,981
)Accumulated other comprehensive
    income


37,295



40,075Total shareholders equity


905,468



647,002Total liabilities and
    shareholders equity

$
1,992,231


$
1,729,911    1




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except per share amounts)
    (Unaudited)
  Three Months EndedMarch 31,2007


2006Revenues from satellite
    manufacturing

$
187,677


$
136,492Revenues from satellite services


32,855



35,484Total revenues


220,532



171,976Cost of satellite manufacturing


174,101



125,948Cost of satellite services


24,967



23,830Selling, general and
    administrative expenses


33,262



28,414Operating loss


(11,798
)


(6,216
)Interest and investment income


6,554



4,544Interest expense


(2,813
)


(5,168
)Other income


4,046



1,014Loss before income taxes, equity
    losses in affiliates and minority interest


(4,011
)


(5,826
)Income tax provision


(3,401
)


(2,594
)Loss before equity losses in
    affiliates and minority interest


(7,412
)


(8,420
)Equity losses in affiliates


(2,425
)


(1,420
)Minority interest


(6,986
)


(6,000
)Net loss


(16,823
)


(15,840
)Preferred dividends


(2,063
)


Beneficial conversion feature
    related to the issuance of Loral
    Series A-1
    Preferred Stock (Note 11)


(24,476
)


Net loss applicable to common
    shareholders

$
(43,362
)

$
(15,840
)Basic and diluted loss per common
    share:Basic loss per share

$
(2.16
)

$
(0.79
)Diluted loss per share

$
(2.16
)

$
(0.79
)Weighted average shares
    outstanding:Basic


20,041



20,000Diluted


20,041



20,000    2




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)
  Three Months Ended March 31,2007


2006Operating activities:Net loss

$
(16,823
)

$
(15,840
)Non-cash operating items


26,435



24,977Changes in operating assets and
    liabilities:Accounts receivable, net


63,926



48,849Contracts-in-process


(89,159
)


22,706Inventories


(11,233
)


1,221Long-term receivables


(106
)


(2,261
)Other current assets and other
    assets


3,807



4,646Accounts payable


656



(15,835
)Accrued expenses and other current
    liabilities


(31,117
)


(11,875
)Customer advances


4,894



20,692Income taxes payable


(983
)


181Pension and other postretirement
    liabilities


1,894



4,295Long-term liabilities


621



3,668Other






15Net cash (used in) provided by
    operating activities


(47,188
)


85,439Investing activities:Capital expenditures


(20,447
)


(6,066
)Increase in restricted cash in
    escrow


(2,796
)


Proceeds received from the
    disposition of an orbital slot






5,742Proceeds received from the sale of
    short-term investments


107,670



Purchase of short-term investments


(117,622
)


Net cash used in investing
    activities


(33,195
)


(324
)Financing activities:Proceeds from the sale of
    preferred stock


293,250



Proceeds from the exercise of
    stock options


1,653



Preferred stock issuance costs


(8,948
)


Cash dividends paid on preferred
    stock of subsidiary


(1,769
)


Net cash provided by financing
    activities


284,186



Net increase in cash and cash
    equivalents


203,803



85,115Cash and cash
    equivalents  beginning of period


186,542



275,796Cash and cash
    equivalents  end of period

$
390,345


$
360,911    3




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    Organization
    and Principal Business        Satellite Manufacturing: direct-to-home
  Satellite Services:
  2.
    Reorganization  No. 03-41710 03-41709 03-41728
     4




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Basis of
    Presentation    Form 10-K
  Cash
    and Cash Equivalents and Short-term Investments
  Available-for-sale
  Concentration
    of Credit Risk
  contracts-in-process,
  Minority
    Interest
     5




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income
    Taxes
  Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
           6




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  paid-in-capital.
  Pensions
    and Other Employee Benefits
    Pension Benefits


Other BenefitsThree Months Ended


Three Months EndedMarch 31,


March 31,2007


2006


2007


2006Service cost

$
2,412


$
3,375


$
360


$
300Interest cost


5,432



5,700



1,250



1,125Expected return on plan assets


(5,837
)


(5,425
)


(10
)


Amortization of prior service
    credits and net actuarial gain


(700
)






(75
)


$
1,307


$
3,650


$
1,525


$
1,425    7




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Additional
    Cash Flow Information
    Three Months EndedMarch 31,2007


2006Non-cash operating items:Equity losses in affiliates

$
2,526


$
1,420Minority interest


6,986



6,000Deferred taxes


1,834



Depreciation and amortization


19,118



16,288Stock option compensation


559



583(Recoveries of) provisions for bad
    debts on billed receivables


(139
)


540Provisions for inventory
    obsolescence


380



1,678Warranty expense accruals


(722
)


(390
)Net gain on the disposition of an
    orbital slot






(1,149
)Withholding tax  impact of
    cashless stock option exercises


(143
)


Non cash net interest and (gain)
    loss on foreign currency transactions


(3,964
)


7Net non-cash operating items

$
26,435


$
24,977Non-cash financing activities:Issuance of preferred stock by
    subsidiary as payment for dividend

$
11,087


$
Accrued dividends on
    Series A-1 and Series B-1 preferred stock

$
2,063


$
Supplemental information:Interest paid, net of capitalized
    interest

$
10,011


$
757Taxes paid, net of refunds

$
1,365


$
628Cash paid for reorganization items:Professional fees

$



$
(4,342
)   New
    Accounting Pronouncements
  SFAS 157
  Fair Value Measurements,
  SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
 8




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    4.
    Comprehensive
    Loss    Three Months EndedMarch 31,2007


2006Net loss

$
(16,823
)

$
(15,840
)Cumulative translation adjustment


30



40Amortization of prior service
    credits and net actuarial gain, net of taxes


(469
)


Unrealized gains on
    available-for-sale
    securities, net of taxes


(2,341
)


Comprehensive loss

$
(19,603
)

$
(15,800
)   5.
    Contracts-in-Process  March 31,


December 31,2007


2006(In thousands)Amounts billed

$
92,362


$
18,289Unbilled receivables


36,419



22,144$
128,781


$
40,433   contracts-in-process
  6.
    Financial
    Instruments and Foreign Currency  Derivatives
     9




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    mark-to-market mark-to-market
  Foreign
    Currency
      ForeignCurrency


U.S. $Future revenues 
    Japanese Yen

¥
251.4


$
2.1Future expenditures 
    Japanese Yen

¥
3,172.8


$
26.9Contracts-in-process,
    unbilled receivables  Japanese Yen

¥
29.6


$
0.3Future expenditures 
    EUROs


3.7


$
5.0  10




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Property,
    Plant and Equipment  March 31,


December 31,2007


2006(In thousands)Land and land improvements

$
27,533


$
27,533Buildings


53,901



53,572Leasehold improvements


6,693



6,434Satellites in-orbit, including
    satellite transponder rights of $136.7 million


386,196



386,196Satellites under construction


72,050



59,085Earth stations


18,117



18,141Equipment, furniture and fixtures


78,507



76,787Other construction in progress


23,911



18,167666,908



645,915Accumulated depreciation and
    amortization


(104,373
)


(87,036
)$
562,535


$
558,879     8.
    Investment
    in and Advances to Affiliates    March 31,


December 31,2007


2006XTAR equity investment

$
94,676


$
97,202     Three Months EndedMarch 31,2007


2006XTAR

$
(2,526
)

$
(1,420
)Globalstar service provider
    partnerships


101



$
(2,425
)

$
(1,420
)     Three Months EndedMarch 31,2007


2006Revenues

$
390


$
2,816Elimination of our proportionate
    share of (profits) losses relating to affiliate transactions


(11
)


367Profit (loss) relating to
    affiliate transactions not eliminated


9



(289
)  11




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  XTAR
        paid-in-kind
     Three Months EndedMarch 31,2007


2006Revenues

$
4.7


$
3.4Operating loss


(3.6
)


(1.2
)Net loss


(4.2
)


(2.1
)     March 31,


December 31,2007


2006Current assets

$
5.9


$
6.4Total assets


129.1



132.1Current liabilities


20.7



20.1Long-term liabilities


33.7



33.1Members equity


74.7



78.9   Other
   12




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  lock-up available-for-sale
    9.
    Goodwill
    and Other Intangible Assets  Goodwill
  Income Taxes
  Other
    Intangible Assets
    Weighted AverageRemaining


March 31, 2007


December 31, 2006Amortization Period


Gross


Accumulated


Gross


Accumulated(Years)


Amount


Amortization


Amount


AmortizationInternally developed software and
    technology


4


$
59.0


$
(16.2
)

$
59.0


$
(13.5
)Orbital slots


9



10.8



(2.2
)


10.8



(1.8
)Trade names


18



13.2



(1.0
)


13.2



(0.8
)Customer relationships


13



20.0



(2.0
)


20.0



(1.7
)Customer contracts


8



33.0



(9.6
)


33.0



(8.3
)Other intangibles


3



2.7



(0.9
)


2.7



(0.8
)$
138.7


$
(31.9
)

$
138.7


$
(26.9
)     2007

$
19.82008


19.22009


18.22010


14.62011


7.4  13




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  contracts-in-process,
  10.
    Debt    March 31,


December 31,2007


2006(In thousands)Loral Skynet 14.0% senior
    secured notes due 2015 (principal amount $126 million)

$
128,054


$
128,084   Loral
    Skynet Notes
       14




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   SS/L
    Letter of Credit Facility
    11.
    Shareholders
    Equity  Series A-1 Series A-1 Series B-1 Series B-1 Series A-1 Series A-1 Class B-1 Series B-1 Class B-1 Series B-1 Class B-1 Series B-1 Class B-1
  Series A-1
   15




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-day Class B-1 Class B-2
  Series A-1 Series B-1 Class B-1 Class B-2 Class B-2 Series A-1 Series A-2 Series A-2 Series B-1 Series B-2 Series B-2
  Series A-1 Series A-2 Series B-1 Series B-2
  Series A-2 Series B-2 Series A-2 Series B-2
  Series A-1 Series B-1 Class B-1
 16




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Class B-1 class B-1
      Form 8-K
  12.
    Commitments
    and Contingencies  Financial
    Matters
    Balance of deferred amounts at
    January 1, 2007

$
53.9Accruals for deferred amounts
    issued during the period


Accruals relating to pre-existing
    contracts (including changes in estimates)


(0.7
)Balance of deferred amounts at
    March 31, 2007

$
53.2   start-up SS/L.
   17




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Telesat
    Canada Transaction
         18




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    1 3 2 3
        and/or true-up and/or
    Satellite
    Matters
   19




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      back-up back-up
     20




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Regulatory
    Matters
      Legal
    Proceedings
  Rainbow
    DBS Litigation
   21




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    New York
    Shareholder Litigation
    Babus
  Babus
  Form 8-K Form 8-K.
 22




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Babus Babus Babus
  Babus
  Delaware
    Shareholder Litigation
      Blackrock Highland
 23




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Blackrock Highland
  Indemnification
    Claims of Directors and Officers of Old Loral
  In re: Loral Space ERISA Litigation In re: Loral Space & Communications Ltd. Securities
    Litigation
  Class Action
    Securities Litigations
  Rule 10b-5 Beleson
  Rule 10b-5
 24




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Class Action
    ERISA Litigation
  In re:
    Loral Space ERISA Litigation
 25




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   In re: Loral Space ERISA
    Litigation, In re: Loral Space ERISA Litigation
  Globalstar
    Related Class Action Securities Litigations
  Rule 10b-5
 26




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    In re:
    Loral Space & Communications Ltd. Securities
    Litigation Rule 10b-5
  In re: Loral
    Space & Communications Ltd. Securities Litigation In re: Loral Space &
    Communications Ltd. Securities Litigation
  Reorganization
    Matters
   27




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Other and
    Routine Litigation
    13.
    Loss Per
    Share  Series A-1
  14.
    Segments   28




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        29




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Three
    Months Ended March 31, 2007
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
187.6


$
32.9






$
220.5Intersegment revenues


12.7



0.7







13.4Operating segment revenues

$
200.3


$
33.6







233.9Eliminations(3)














(13.4
)Operating revenues as reported













$
220.5Segment Adjusted EBITDA before
    eliminations

$
7.4


$
11.9


$
(8.7
)

$
10.6Eliminations(3)














(2.7
)Adjusted EBITDA














7.9Depreciation and amortization

$
(6.1
)

$
(13.1
)

$
(0.5
)


(19.7
)Operating loss














(11.8
)Interest and investment income














6.6Interest expense














(2.8
)Other income














4.0Income tax provision














(3.4
)Equity losses in affiliates














(2.4
)Minority Interest














(7.0
)Net loss













$
(16.8
)Other Data:Total
    assets(4)

$
948.0


$
747.0


$
297.2


$
1,992.2  30




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Three
    Months Ended March 31, 2006
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
136.5


$
35.5






$
172.0Intersegment revenues


2.8



0.7







3.5Operating segment revenues

$
139.3


$
36.2







175.5Eliminations(3)














(3.5
)Operating revenues as reported













$
172.0Segment Adjusted EBITDA before
    eliminations

$
5.8


$
12.6


$
(6.9
)

$
11.5Eliminations(3)














(0.8
)Adjusted EBITDA














10.7Depreciation and amortization

$
(5.5
)

$
(10.9
)

$
(0.5
)


(16.9
)Operating loss














(6.2
)Interest and investment income














4.5Interest expense














(5.1
)Other income














1.0Income tax provision














(2.6
)Equity loss in affiliate














(1.4
)Minority Interest














(6.0
)Net loss













$
(15.8
)Other Data:Total
    assets(4)

$
913.0


$
737.1


$
55.1


$
1,705.2     (1)
    
    Represents corporate expenses incurred in support of our
    operations. The increase in corporate expenses in 2007 is
    primarily due to litigation costs.(2)
    
    Includes revenues from affiliates of $0.4 million and
    $2.8 million for the three months ended March 31, 2007
    and 2006, respectively.(3)
    
    Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA, primarily for satellites under
    construction by SS/L for Satellite Services.(4)
    
    Amounts are presented after the elimination of intercompany
    profit. Total assets include $220.6 million and
    $92.3 million of goodwill for Satellite Manufacturing and
    Satellite Services, respectively, as of March 31, 2007. 31




---



##### 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.
      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 New
    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
  direct-to-home
  quarter-to-quarter.
 32




---



##### Table of Contents



Satellite
    Services
  point-to-point end-to-end point-to-multipoint
     33




---



##### Table of Contents



Bankruptcy
    Reorganization
  2001-2003, two-and-a-half
  No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7)
  Future
    Outlook
    o
     34




---



##### Table of Contents



Consolidated
    Operating Results
  Form 10-K
  Changes in Critical Accounting Policies
  Accounting for Uncertainty in
    Income Taxes, an interpretation of FASB Statement No. 109
    (FIN 48)
      Consolidated Operating Results 
     35




---



##### Table of Contents



Revenues:
  Three Months Ended March 31,2007


2006(In millions)Satellite Manufacturing

$
200.3


$
139.3Satellite Services


33.6



36.2Segment revenues


233.9



175.5Eliminations(1)


(13.4
)


(3.5
)Revenues as
    reported(2)

$
220.5


$
172.0   Adjusted
    EBITDA:
  Three Months EndedMarch 31,2007


2006(In millions)Satellite Manufacturing

$
7.4


$
5.8Satellite Services


11.9



12.6Corporate
    expenses(3)


(8.7
)


(6.9
)Segment Adjusted EBITDA before
    eliminations


10.6



11.5Eliminations(1)


(2.7
)


(0.8
)Adjusted EBITDA

$
7.9


$
10.7  36




---



##### Table of Contents



Reconciliation
    of Adjusted EBITDA to Net Loss:
  Three Months EndedMarch 31,2007


2006(In millions)Adjusted EBITDA

$
7.9


$
10.7Depreciation and amortization


(19.7
)


(16.9
)Operating loss


(11.8
)


(6.2
)Interest and investment income


6.6



4.5Interest expense


(2.8
)


(5.1
)Other income


4.0



1.0Income tax provision


(3.4
)


(2.6
)Equity in net losses of affiliates


(2.4
)


(1.4
)Minority interest


(7.0
)


(6.0
)Net loss

$
(16.8
)

$
(15.8
)     (1)
    
    Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA, primarily for satellites under
    construction by SS/L for Satellite Services and for Satellite
    Services leasing transponder capacity to
    SS/L.(2)
    
    Includes revenues from affiliates of $0.4 million and
    $2.8 million for the three months ended March 31, 2007
    and 2006, respectively.(3)
    
    Represents corporate expenses incurred in support of our
    operations. The increase in corporate expenses in 2007 is
    primarily due to litigation costs.  Three
    Months Ended March 31, 2007 Compared With March 31,
    2006
  Revenues
    from Satellite Manufacturing
  Three Months Ended March 31,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite
    Manufacturing

$
200


$
139



44
%Eliminations


(13
)


(3
)Revenues from Satellite
    Manufacturing as reported

$
187


$
136



38
%    37




---



##### Table of Contents



Revenues
    from Satellite Services
  Three Months Ended March 31,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite Services

$
34


$
36



(7
)%Eliminations


(1
)


(1
)


4
%Revenues from Satellite Services
    as reported

$
33


$
35



(7
)%     Cost
    of Satellite Manufacturing
  Three Months Ended March 31,


% Increase/2007


2006


(Decrease)(In millions)Cost of Satellite Manufacturing
    includes:Cost of Satellite Manufacturing
    before the following specific charges

$
169


$
122



39
%Accrued warranty obligations


(1
)


(1
)


25
%Depreciation and amortization


6



5



12
%Cost of Satellite Manufacturing

$
174


$
126



38
%Cost of Satellite Manufacturing as
    a % of Satellite Manufacturing revenues as reported


93
%


92
%    38




---



##### Table of Contents



Cost of
    Satellite Services
  Three Months Ended March 31,


% Increase/2007


2006


(Decrease)(In millions)Cost of Satellite Services
    includes:Cost of Satellite Services before
    depreciation and amortization

$
12


$
13



(8
)%Depreciation and amortization


13



11



20
%Total cost of Satellite Services

$
25


$
24



5
%Cost of Satellite Services as a %
    of Satellite Services revenues as reported


76
%


67
%     Selling,
    General and Administrative Expenses
  Three Months Ended March 31,


% Increase/2007


2006


(Decrease)(In millions)Selling, general and
    administrative expenses

$
33


$
27



22
%Continuing expenses related to
    remaining bankruptcy related matters






1Selling, general and
    administrative expenses

$
33


$
28



17
%% of revenues as reported


15
%


16
%     Interest
    and Investment Income
  Three Months Ended March 31,

% Increase/2007

2006

(Decrease)(In millions)Interest and investment income

$
7


$
5



44
%    39




---



##### Table of Contents



Interest
    Expense
  Three Months EndedMarch 31,2007


2006(In millions)Interest cost before capitalized
    interest

$
5


$
5Capitalized interest


(2
)


Interest expense

$
3


$
5     Other
    Income
    Income
    Tax Provision
  Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109 Income
    Taxes
    paid-in-capital.
  Equity
    Income (Losses) in Affiliates
  Three Months EndedMarch 31,2007


2006(In millions)XTAR

$
(2.5
)

$
(1.4
)Other


0.1



$
(2.4
)

$
(1.4
)    40




---



##### Table of Contents



Minority
    Interest
    Backlog
  Consolidated
    Satellite Manufacturing
    Satellite Services
    Liquidity
    and Capital Resources
  Cash
    and Available Credit
       41




---



##### Table of Contents



Series A-1 Series B-1 Class B-1 Class B-1 class B-1
         42




---



##### Table of Contents



Telesat
    Canada Transaction
   43




---



##### Table of Contents



direct-to-home
  true-up and/or
  1 3 2 3
    Contractual
    Obligations
  Form 10-K
  Net
    Cash (Used in) Provided by Operating Activities
  contracts-in-process
   44




---



##### Table of Contents



contracts-in-process
  Net
    Cash Used in Investing Activities
      Net
    Cash Provided by Financing Activities
    Affiliate
    Matters
    Commitments
    and Contingencies
    Other
    Matters
  Accounting
    Pronouncements
  SFAS 157
  Fair Value Measurements,
  SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
 
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Foreign Currency
   45




---



##### Table of Contents



ForeignCurrency


U.S. $Future revenues 
    Japanese Yen

¥
251.4


$
2.1Future expenditures 
    Japanese Yen

¥
3,172.8


$
26.9Contracts-in-process,
    unbilled receivables  Japanese Yen

¥
29.6


$
0.3Future expenditures 
    EUROs


3.7


$
5.0   Telesat
    Canada Transaction  Derivatives
      mark-to-market mark-to-market
  Interest
   46




---



##### Table of Contents



Item 4.
    Disclosure
    Controls and Procedures  Disclosure controls and
    procedures. Rules 13a-15(e) 15d-15(e)
  Internal control over financial
    reporting. Rules 13a-15(f) 15-d-15(f))
  
 PART II.
    OTHER INFORMATION
 
  Item 1.
    Legal
    Proceedings  Form 10-Q
 
  Item 1A.
    Risk
    Factors  Form 10-K Form 10-K, and/or
 47




---



##### Table of Contents



Item 6.
    Exhibits    Form 8-K
           48




---



##### Table of Contents



SIGNATURES
      Loral Space &
    Communications Inc.
  Richard
    J. Townsend
   Executive Vice President and
 Chief Financial Officer
 (Principal Financial Officer)
 and Registrants Authorized Officer
   49




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit No.



DescriptionExhibit 10
.1



Memorandum of Understanding, dated
    March 21, 2007 (Incorporated by reference to
    Exhibit 10.1 of the Current Report on
    Form 8-K
    filed by the Company on March 21, 2007).Exhibit 10
.2



Letter Agreement between Loral
    Space & Communications Inc. and MHR Fund Management
    LLC dated April 25, 2007.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.