##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-Q
  QUARTERLY REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF
    1934
  For the quarterly period ended June 30, 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 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSIGNATURESEXHIBIT INDEXEX-10.6: 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)
  June 30,


December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
421,618


$
186,542Short-term investments


104,720



106,588Accounts receivable, net


12,277



76,420Contracts-in-process


110,384



40,433Inventories


92,762



82,183Other current assets


122,450



55,534Total current assets


864,211



547,700Property, plant and equipment, net


578,049



558,879Long-term receivables


105,912



81,164Investments in and advances to
    affiliates


92,310



97,202Goodwill


288,472



305,691Other assets


126,978



139,275Total assets

$
2,055,932


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

$
73,133


$
67,604Accrued employment costs


37,190



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


270,674



242,661Income taxes payable


3,847



2,567Accrued interest and preferred
    dividends


25,635



20,097Other current liabilities


19,158



42,828Total current liabilities


429,637



419,554Pension and other post retirement
    liabilities


173,218



167,987Long-term debt


128,024



128,084Long-term liabilities


167,833



153,028Total liabilities


898,712



868,653Minority interest


225,343



214,256Commitments and contingenciesShareholders equity:Series A-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,200,000 shares authorized, 140,934 shares
    issued and outstanding


41,566



Series B-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,000,000 shares authorized, 863,404 shares
    issued and outstanding


254,496



Common stock, $.01 par value


203



200Paid-in capital


648,523



644,708Accumulated deficit


(48,148
)


(37,981
)Accumulated other comprehensive
    income


35,237



40,075Total shareholders equity


931,877



647,002Total liabilities and
    shareholders equity

$
2,055,932


$
1,729,911    1




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
  Three Months


Six MonthsEnded June 30,


Ended June 30,2007



2006


2007



2006Revenues from satellite
    manufacturing

$
191,327



$
155,810


$
379,004



$
292,302Revenues from satellite services


34,674




37,073



67,529




72,557Total revenues


226,001




192,883



446,533




364,859Cost of satellite manufacturing


173,027




138,252



347,128




264,200Cost of satellite services


25,572




23,456



50,539




47,286Selling, general and
    administrative expenses


42,523




31,695



75,785




60,109Operating loss


(15,121
)



(520
)


(26,919
)



(6,736
)Interest and investment income


10,657




5,014



17,211




9,559Interest expense


(2,233
)



(5,495
)


(5,046
)



(10,663
)Unrealized gain on foreign
    exchange contracts (Note 6)


61,508








65,472




Other income (expense)


179




(87
)


261




926Income (loss) before income taxes,
    equity income (losses) in affiliates and minority interest


54,990




(1,088
)


50,979




(6,914
)Income tax provision


(28,363
)



(2,423
)


(31,764
)



(5,017
)Income (loss) before equity income
    (losses) in affiliates and minority interest


26,627




(3,511
)


19,215




(11,931
)Equity income (losses) in
    affiliates


487




(1,884
)


(1,938
)



(3,304
)Minority interest


(6,487
)



(6,000
)


(13,473
)



(12,000
)Net income (loss)


20,627




(11,395
)


3,804




(27,235
)Preferred dividends


(5,669
)







(7,732
)



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


(927
)







(25,404
)



Net income (loss) applicable to
    common shareholders

$
14,031



$
(11,395
)

$
(29,332
)


$
(27,235
)Basic and diluted income (loss)
    per common share:Basic income (loss) per share

$
0.70



$
(0.57
)

$
(1.46
)


$
(1.36
)Diluted income (loss) per share

$
0.67



$
(0.57
)

$
(1.46
)


$
(1.36
)Weighted average shares
    outstanding:Basic


20,070




20,000



20,055




20,000Diluted


30,594




20,000



20,055




20,000    2




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
  Six Months Ended June 30,2007


2006Operating activities:Net income(loss)

$
3,804


$
(27,235
)Non-cash operating items


22,005



52,155Changes in operating assets and
    liabilities:Accounts receivable, net


64,223



15,289Contracts-in-process


(69,646
)


(14,067
)Inventories


(10,959
)


(9,896
)Long-term receivables


(212
)


(323
)Other current assets and other
    assets


(1,875
)


8,996Accounts payable


3,838



(14,007
)Accrued expenses and other current
    liabilities


(24,063
)


(19,180
)Customer advances


4,874



72,562Income taxes payable


1,280



(126
)Pension and other postretirement
    liabilities


5,231



8,544Long-term liabilities


7,011



6,995Other


(60
)


85Net cash provided by operating
    activities


5,451



79,792Investing activities:Capital expenditures


(52,673
)


(20,590
)(Increase) decrease in restricted
    cash in escrow


(9,118
)


1,194Proceeds received from the
    disposition of an orbital slot






5,742Distribution from equity investment


2,954



Proceeds from the sale of
    short-term investments and available for sale securities


307,862



Purchase of short-term investments


(303,489
)


Net cash used in investing
    activities


(54,464
)


(13,654
)Financing activities:Proceeds from the sale of
    preferred stock


293,250



Proceeds from the exercise of
    stock options


1,707



Preferred stock issuance costs


(9,099
)


Cash dividends paid on preferred
    stock of subsidiary


(1,769
)


Net cash provided by financing
    activities


284,089



Net increase in cash and cash
    equivalents


235,076



66,138Cash and cash
    equivalents  beginning of period


186,542



275,796Cash and cash
    equivalents  end of period

$
421,618


$
341,934    3




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##### Table of Contents



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




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##### 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
    Concentration
    of Credit Risk
  contracts-in-process,
  Minority
    Interest
     5




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##### 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




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##### 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


Three MonthsEnded June 30,


Ended June 30,2007


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   Pension Benefits


Other BenefitsSix Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006Service cost

$
4,824


$
6,750


$
720


$
600Interest cost


10,864



11,400



2,500



2,250Expected return on plan assets


(11,674
)


(10,850
)


(20
)


Amortization of prior service
    credits and net actuarial gain


(1,400
)






(150
)


$
2,614


$
7,300


$
3,050


$
2,850    7




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Additional
    Cash Flow Information
    Six MonthsEnded June 30,2007


2006Non-cash operating items:Equity losses in affiliates

$
1,938


$
3,304Minority interest


13,473



12,000Deferred taxes


25,808



Depreciation and amortization


40,607



33,074Stock based compensation


11,354



1,371(Recoveries of) provisions for bad
    debts on billed receivables


(80
)


499Provisions for inventory
    obsolescence


380



1,678Warranty expense accruals


(1,573
)


1,351Net gain on the disposition of an
    orbital slot






(1,149
)Amortization of prior service
    credits and net actuarial gain


(1,550
)


Gain on disposition of available
    for sale securities


(2,505
)


Withholding tax impact of cashless
    stock option exercises


(143
)


Non cash net interest and gain on
    foreign exchange contracts


(65,303
)


Other


(401
)


27Net non-cash operating items

$
22,005


$
52,155Non-cash financing activities:Issuance of preferred stock by
    subsidiary as payment for dividend

$
11,087


$
Issuance of Loral Series-1
    Preferred Stock as payment for dividend

$
2,812


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

$
4,920


$
Supplemental information:Capital expenditures incurred not
    yet paid

$
1,780


$
586Interest paid

$
10,335


$
3,030Taxes paid, net of refunds

$
1,726


$
1,574Cash paid for reorganization items:Professional fees

$
(160
)

$
(9,177
)   New
    Accounting Pronouncements
  SFAS 157
  Fair
    Value Measurements
 8




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  4.
    Comprehensive
    Income (Loss)    Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006Net income (loss)

$
20,627


$
(11,395
)

$
3,804


$
(27,235
)Cumulative translation adjustment


29



97



59



137Amortization of prior service
    credits and net actuarial gains, net of taxes


(469
)






(938
)


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


(1,618
)






(3,959
)


Less: Reclassification adjustment
    for gains included in net income


1,475







1,475



Comprehensive income (loss)

$
20,044


$
(11,298
)

$
441


$
(27,098
)   Form 10-K, Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans Reporting
    Comprehensive Income Form 10-K,
 9




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Contracts-in-Process  June 30,


December 31,2007


2006(In thousands)Amounts billed

$
55,643


$
18,289Unbilled receivables


54,741



22,144$
110,384


$
40,433   contracts-in-process
  6.
    Financial
    Instruments and Foreign Currency  Derivatives
  $1.00/CAD
       10




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##### Table of Contents



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


U.S. $Future revenues 
    Japanese Yen

¥
142.2


$
1.2Future expenditures 
    Japanese Yen

¥
3,781.7


$
30.7Contracts-in-process,
    unbilled receivables/(customer advances)  Japanese Yen

¥
(9.5
)

$
(0.1
)Future expenditures 
    EUROs


3.7


$
5.0  11




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Property,
    Plant and Equipment  June 30,


December 31,2007


2006(In thousands)Land and land improvements

$
27,533


$
27,533Buildings


54,134



53,572Leasehold improvements


8,519



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


386,092



386,196Satellites under construction


93,526



59,085Earth stations


18,509



18,141Equipment, furniture and fixtures


89,141



76,787Other construction in progress


22,751



18,167700,205



645,915Accumulated depreciation and
    amortization


(122,156
)


(87,036
)$
578,049


$
558,879     8.
    Investment
    in and Advances to Affiliates    June 30,


December 31,2007


2006XTAR equity investment

$
92,310


$
97,202     Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006XTAR

$
(2,366
)

$
(1,884
)

$
(4,892
)

$
(3,304
)Globalstar service provider
    partnerships


2,853







2,954



$
487


$
(1,884
)

$
(1,938
)

$
(3,304
)     Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006Revenues

$
18


$
5,638


$
408


$
8,454Elimination of our proportionate
    share of profit relating to affiliate transactions


(20
)


(53
)


(31
)


(287
)Profit relating to affiliate
    transactions not eliminated


15



42



24



225  12




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  XTAR
        paid-in-kind
      Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006Revenues

$
4.6


$
3.8


$
9.3


$
7.2Operating loss


(3.8
)


(2.2
)


(7.4
)


(3.4
)Net loss


(4.1
)


(3.3
)


(8.3
)


(5.4
)     June 30,


December 31,2007


2006Current assets

$
6.6


$
6.4Total assets


127.4



132.1Current liabilities


22.4



20.1Long-term liabilities


34.4



33.1Members equity


70.6



78.9   Other
   13




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  lock-up
    9.
    Goodwill
    and Other Intangible Assets  Goodwill
  Income Taxes
  Goodwill 
    December 31, 2006

$
305,691Cumulative effect of adopting
    FIN 48 (see Note 3)


7,541Reversal of excess valuation
    allowance on deferred tax assets


(24,760
)Goodwill  June 30,
    2006

$
288,472   Other
    Intangible Assets
    Weighted AverageRemaining


June 30, 2007


December 31, 2006Amortization Period


Gross


Accumulated


Gross


Accumulated(Years)


Amount


Amortization


Amount


AmortizationInternally developed software and
    technology


4


$
59.0


$
(18.9
)

$
59.0


$
(13.5
)Orbital slots


9



10.8



(2.6
)


10.8



(1.8
)Trade names


18



13.2



(1.2
)


13.2



(0.8
)Customer relationships


13



20.0



(2.3
)


20.0



(1.7
)Customer contracts


8



33.0



(10.9
)


33.0



(8.3
)Other intangibles


3



2.7



(1.1
)


2.7



(0.8
)$
138.7


$
(37.0
)

$
138.7


$
(26.9
)  14




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007

$
19.82008


19.22009


18.22010


14.62011


7.4   contracts-in-process,
  10.
    Debt  June 30,


December 31,2006


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

$
128,024


$
128,084   Loral
    Skynet Notes
         15




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      SS/L
    Letter of Credit Facility
    11.
    Shareholders
    Equity  Preferred
    Stock
  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 and/or
 16




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A-1
  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
 17




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Series A-2 Series B-2 Series A-2 Series B-2
  Series A-1 Series B-1 Class B-1 Class B-1 class B-1 Series A-1 Series A-1 Series B-1 class B-1 Series B-1 class B-1
      Form 8-K
  Stock
    Incentive Plan
   18




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##### Table of Contents



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


(1.6
)Balance of deferred amounts at
    June 30, 2007

$
52.3   start-up SS/L.
   19




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FM-6
    Telesat
    Canada Transaction
       20




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    1 3 2 3
        and/or true-up and/or
   21




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Satellite
    Matters
      back-up back-up
   22




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Regulatory
    Matters
       23




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Legal
    Proceedings
  Informal
    SEC Inquiry
    Skynet
    Noteholders Litigation
       24




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Rainbow
    DBS Litigation
   25




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##### 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.
 26




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Babus Babus Babus
  Babus
  Babus
  Delaware
    Shareholder Litigation
  In re: Loral Space and
    Communications Inc. Consolidated Litigation
     27




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##### 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
 28




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##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Beleson
  Rule 10b-5
  Class Action
    ERISA Litigation
  In re:
    Loral Space ERISA Litigation
 29




---



##### 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
 30




---



##### 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
 31




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Reorganization
    Matters
        Other and
    Routine Litigation
   32




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Income
    (Loss) Per Share    Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006Basic:Net income (loss) applicable to
    common shareholders

$
14,031


$
(11,395
)

$
(29,332
)

$
(27,235
)Weighted average common shares
    outstanding


20,070



20,000



20,055



20,000Basic income (loss) per share

$
0.70


$
(0.57
)

$
(1.46
)

$
(1.36
)   Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006Diluted:Net income (loss) applicable to
    common shareholders

$
14,031


$
(11,395
)

$
(29,332
)

$
(27,235
)Plus:Dividends on Loral Series-1
    Preferred Stock


5,669











Beneficial conversion feature
    related to dividends on Loral Series-1 Preferred Stock


927











Net income (loss) for diluted

$
20,627


$
(11,395
)

$
(29,332
)

$
(27,235
)Common and potential common shares:Weighted average common shares
    outstanding


20,070



20,000



20,055



20,000Assumed exercise of stock options


473











Unvested restricted stock awards


20











Assumed conversion of Loral
    Series-1 Preferred Stock


10,031











Common and potential common shares


30,594



20,000



20,055



20,000Diluted income (loss) per share

$
0.67


$
(0.57
)

$
(1.46
)

$
(1.36
)     14.
    Segments   33




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       34




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three
    Months Ended June 30, 2007
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
191.3


$
34.7






$
226.0Intersegment revenues


18.9



0.7







19.6Operating segment revenues

$
210.2


$
35.4







245.6Eliminations(3)














(19.6
)Operating revenues as reported













$
226.0Segment Adjusted EBITDA before
    eliminations

$
12.8


$
13.7


$
(8.5
)

$
18.0Eliminations(3)














(0.9
)Adjusted EBITDA














17.1Depreciation and
    amortization(4)

$
(10.1
)

$
(13.1
)

$
(9.0
)


(32.2
)Operating loss














(15.1
)Interest and investment income














10.6Interest expense














(2.2
)Unrealized gain on foreign
    exchange contracts














61.5Other income (expense)














0.2Income tax provision














(28.4
)Equity income in affiliates














0.5Minority Interest














(6.5
)Net income













$
20.6  35




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Six
    Months Ended June 30, 2007
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
379.0


$
67.5






$
446.5Intersegment revenues


31.6



1.4







33.0Operating segment revenues

$
410.6


$
68.9







479.5Eliminations(3)














(33.0
)Operating revenues as reported













$
446.5Segment Adjusted EBITDA before
    eliminations

$
20.2


$
25.6


$
(17.2
)

$
28.6Eliminations(3)














(3.6
)Adjusted EBITDA














25.0Depreciation and
    amortization(4)

$
(16.2
)

$
(26.2
)

$
(9.5
)


(51.9
)Operating loss














(26.9
)Interest and investment income














17.2Interest expense














(5.0
)Unrealized gain on foreign
    exchange contracts














65.5Other income (expense)














0.2Income tax provision














(31.8
)Equity loss in affiliates














(1.9
)Minority Interest














(13.5
)Net income













$
3.8Other Data:Total
    assets(5)

$
964.9


$
789.2


$
301.8


$
2,055.9  36




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Three
    Months Ended June 30, 2006
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
155.9


$
37.0






$
192.9Intersegment revenues


7.4



0.9







8.3Operating segment revenues

$
163.3


$
37.9







201.2Eliminations(3)














(8.3
)Operating revenues as reported













$
192.9Segment Adjusted EBITDA before
    eliminations

$
11.8


$
14.1


$
(7.3
)

$
18.6Eliminations(3)














(1.5
)Adjusted EBITDA














17.1Depreciation and amortization

$
(6.1
)

$
(10.9
)

$
(0.6
)


(17.6
)Operating loss














(0.5
)Interest and investment income














5.0Interest expense














(5.5
)Other income (expense)














(0.1
)Income tax provision














(2.4
)Equity loss in affiliates














(1.9
)Minority Interest














(6.0
)Net loss













$
(11.4
)  37




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Six
    Months Ended June 30, 2006
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
292.3


$
72.6






$
364.9Intersegment revenues


10.3



1.5







11.8Operating segment revenues

$
302.6


$
74.1







376.7Eliminations(3)














(11.8
)Operating revenues as reported













$
364.9Segment Adjusted EBITDA before
    eliminations

$
17.6


$
26.7


$
(14.2
)

$
30.1Eliminations(3)














(2.3
)Adjusted EBITDA














27.8Depreciation and amortization

$
(11.6
)

$
(21.8
)

$
(1.1
)


(34.5
)Operating loss from continuing
    operations














(6.7
)Interest and investment income














9.6Interest expense














(10.7
)Other income (expense)














0.9Income tax provision














(5.0
)Equity loss in affiliates














(3.3
)Minority Interest














(12.0
)Net loss













$
(27.2
)Other Data:Total
    assets(5)

$
951.2


$
722.1


$
61.5


$
1,734.8     (1)
    
    Represents corporate expenses incurred in support of our
    operations and continuing expenses related to the remaining
    bankruptcy matters.(2)
    
    Includes revenues from affiliates of nil and $5.6 million
    for the three months ended June 30, 2007 and 2006,
    respectively, and $0.4 million and $8.4 million for
    the six months ended June 30, 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)
    
    Includes non-cash stock based compensation of $10.3 million
    for the three and six months ended June 30, 2007,
    respectively, as a result of shareholder approval of the Stock
    Incentive Plan amendments on May 22, 2007 (see
    Note 11).(5)
    
    Amounts are presented after the elimination of intercompany
    profit. Total assets include $220.8 million and
    $67.7 million of goodwill for Satellite Manufacturing and
    Satellite Services, respectively, as of June 30, 2007. 38




---



##### 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
     39




---



##### Table of Contents



Satellite
    Services
       40




---



##### 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
         41




---



##### 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 
     42




---



##### Table of Contents



Revenues:
  Six MonthsThree Months Ended June 30,


Ended June 30,2007


2006


2007


2006(In millions)


(In millions)Satellite Manufacturing

$
210.2


$
163.3


$
410.6


$
302.6Satellite Services


35.4



37.9



68.9



74.1Segment revenues


245.6



201.2



479.5



376.7Eliminations(1)


(19.6
)


(8.3
)


(33.0
)


(11.8
)Revenues as
    reported(2)

$
226.0


$
192.9


$
446.5


$
364.9   Adjusted
    EBITDA:
  Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006(In millions)


(In millions)Satellite Manufacturing

$
12.8


$
11.8


$
20.2


$
17.6Satellite Services


13.7



14.1



25.6



26.7Corporate
    expenses(3)


(8.5
)


(7.3
)


(17.2
)


(14.2
)Segment Adjusted EBITDA before
    eliminations


18.0



18.6



28.6



30.1Eliminations(1)


(0.9
)


(1.5
)


(3.6
)


(2.3
)Adjusted EBITDA

$
17.1


$
17.1


$
25.0


$
27.8  43




---



##### Table of Contents



Reconciliation
    of Adjusted EBITDA to Net Income (Loss):
  Three Months


Six MonthsEnded June 30,


Ended June 30,2007


2006


2007


2006(In millions)


(In millions)Adjusted EBITDA

$
17.1


$
17.1


$
25.0


$
27.8Depreciation and
    amortization(4)


(32.2
)


(17.6
)


(51.9
)


(34.5
)Operating loss


(15.1
)


(0.5
)


(26.9
)


(6.7
)Interest and investment income


10.6



5.0



17.2



9.6Interest expense


(2.2
)


(5.5
)


(5.0
)


(10.7
)Unrealized gain on foreign
    exchange contracts (marked to market)


61.5







65.5



Other income (expense)


0.2



(0.1
)


0.2



0.9Income tax provision


(28.4
)


(2.4
)


(31.8
)


(5.0
)Equity in net income (losses) of
    affiliates


0.5



(1.9
)


(1.9
)


(3.3
)Minority interest


(6.5
)


(6.0
)


(13.5
)


(12.0
)Net income (loss)

$
20.6


$
(11.4
)

$
3.8


$
(27.2
)     (1)
    
    Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA 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 nil and $5.6 million
    for the three months ended June 30, 2007 and 2006,
    respectively, and $0.4 million and $8.4 million for
    the six months ended June 30, 2007 and 2006, respectively.(3)
    
    Represents corporate expenses incurred in support of our
    operations and continuing expenses related to the remaining
    bankruptcy matters.(4)
    
    Includes non-cash stock based compensation of $10.3 million
    for the three and six months ended June 30, 2007,
    respectively, as a result of shareholder approval of the Stock
    Incentive Plan amendments on May 22, 2007 (see Note 11
    to the financial statements).  Three
    Months Ended June 30, 2007 Compared With June 30,
    2006
  Revenues
    from Satellite Manufacturing
  Three Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite
    Manufacturing

$
210


$
163



29
%Eliminations


(19
)


(7
)Revenues from Satellite
    Manufacturing as reported

$
191


$
156



23
%    44




---



##### Table of Contents



Revenues
    from Satellite Services
  Three Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite Services

$
36


$
38



(7
)%Eliminations


(1
)


(1
)


(21
)%Revenues from Satellite Services
    as reported

$
35


$
37



(6
)%     Cost
    of Satellite Manufacturing
  Three MonthsEnded June 30,


% Increase/2007


2006


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

$
163


$
132



23
%Depreciation and amortization


10



6



65
%Total cost of Satellite
    Manufacturing as reported

$
173


$
138



25
%Cost of Satellite Manufacturing as
    a % of Satellite Manufacturing revenues as reported


90
%


89
%     Cost
    of Satellite Services
  Three Months Ended June 30,


% Increase/2007


2006


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

$
12


$
12



(1
)%Depreciation and amortization


13



11



21
%Total cost of Satellite Services
    as reported

$
25


$
23



9
%Cost of Satellite Services as a %
    of Satellite Services revenues as reported


74
%


63
%  45




---



##### Table of Contents



Selling,
    General and Administrative Expenses
  Three Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Selling, general and
    administrative expenses includes:Selling, general and
    administrative expenses before specific charges

$
31


$
30



1
%Litigation costs


3



Stock based compensation


9



1Continuing expenses related to
    remaining bankruptcy matters






1Selling, general and
    administrative expenses

$
43


$
32



34
%% of revenues as reported


19
%


16
%     Interest
    and Investment Income
  Three Months Ended June 30,2007


2006(In millions)Interest and Investment Income

$
11


$
5     Interest
    Expense
  Three Months Ended June 30,2007


2006(In millions)Interest cost before capitalized
    interest

$
5


$
5Capitalized interest


(3
)


Interest expense

$
2


$
5  46




---



##### Table of Contents



Gain
    on Foreign Currency Contracts
    Other
    Income (Expense)
    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 Ended June 30,2007


2006(In millions)XTAR

$
(3
)

$
(2
)Globalstar


3



$



$
(2
)    47




---



##### Table of Contents



Minority
    Interest
    Six
    Months Ended June 30, 2007 Compared With June 30,
    2006
  Revenues
    from Satellite Manufacturing
  Six Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite
    Manufacturing

$
411


$
303



36
%Eliminations


(32
)


(11
)Revenues from Satellite
    Manufacturing as reported

$
379


$
292



30
%     Revenues
    from Satellite Services
  Six Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Revenues from Satellite Services

$
69


$
74



(7
)%Eliminations


(1
)


(1
)


(10
)%Revenues from Satellite Services
    as reported

$
68


$
73



(7
)%    48




---



##### Table of Contents



Cost
    of Satellite Manufacturing
  Six Months Ended June 30,


% Increase/2007


2006


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

$
331


$
252



31
%Depreciation and amortization


16



12



40
%Total cost of Satellite
    Manufacturing as reported

$
347


$
264



31
%Cost of Satellite Manufacturing as
    a% of Satellite Manufacturing revenues as reported


92
%


90
%     Cost
    of Satellite Services
  Six Months Ended June 30,


% Increase/2007


2006


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

$
24


$
25



(5
)%Depreciation and amortization


26



22



20
%Total cost of Satellite Services
    as reported

$
50


$
47



7
%Cost of Satellite Services as a %
    of Satellite Services revenues as reported


75
%


65
%    49




---



##### Table of Contents



Selling,
    General and Administrative Expenses
  Six Months Ended June 30,


% Increase/2007


2006


(Decrease)(In millions)Selling, general and
    administrative expenses includes:Selling, general and
    administrative expenses before specific charges

$
60


$
56



6
%Litigation costs


7



Stock based compensation


9



1Continuing expenses related to
    remaining bankruptcy matters






3Selling, general and
    administrative expenses

$
76


$
60



26
%% of revenues as reported


17
%


16
%     Interest
    and Investment Income
  Six Months Ended June 30,2007


2006(In millions)Interest and investment income

$
17


$
10     Interest
    Expense
  Six Months Ended June 30,2007


2006(In millions)Interest cost before capitalized
    interest

$
11


$
11Capitalized interest


(6
)


Interest expense

$
5


$
11    50




---



##### Table of Contents



Gain
    on Foreign Currency Contracts
    Other
    Income (Expense)
    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
  Six Months Ended June 30,2007


2006(In millions)XTAR

$
(5
)

$
(3
)Globalstar


3



$
(2
)

$
(3
)     Minority
    Interest
   51




---



##### Table of Contents



Backlog
  Consolidated
    Satellite
    Manufacturing
    Satellite
    Services
    Liquidity
    and Capital Resources
  Cash
    and Available Credit
    and/or
       52




---



##### Table of Contents



Series A-1 Series B-1 Class B-1 Class B-1 class B-1 Series A-1 Series A-1 Series B-1 class B-1 Series B-1 class B-1
       53




---



##### Table of Contents



FM-6
     54




---



##### Table of Contents



Telesat
    Canada Transaction
        true-up and/or
  1 3 2 3
 55




---



##### Table of Contents



Contractual
    Obligations
  Form 10-K
  Net
    Cash Provided by Operating Activities
  contracts-in-process
  contracts-in-process
  Net
    Cash Used in Investing Activities
      Net
    Cash Provided by Financing Activities
    Affiliate
    Matters
    Commitments
    and Contingencies
   56




---



##### Table of Contents



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
      Foreign Currency


U.S. $Future revenues 
    Japanese Yen

¥
142.2


$
1.2Future expenditures 
    Japanese Yen

¥
3,781.7


$
30.7Contracts-in-process,
    unbilled receivables/(customer advances)  Japanese Yen

¥
(9.5
)

$
(0.1
)Future expenditures 
    EUROs


3.7


$
5.0   Telesat
    Canada Transaction  Derivatives
     57




---



##### Table of Contents



mark-to-market
  Interest
       
  Item 4.
    Disclosure
    Controls and Procedures  Disclosure controls and
    procedures. Rules 13a-15(e) 15d-15(e)
 58




---



##### Table of Contents



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
 
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   
  Item 6.
    Exhibits    Form 8-K
  Form 8-K
  Form 8-K
  Form 8-K
 59




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##### Table of Contents



Form 8-K
           60




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##### Table of Contents



SIGNATURES
      Loral Space &
    Communications Inc.
  Richard
    J. Townsend
  Richard J. Townsend
 Executive Vice President and
 Chief Financial Officer
 (Principal Financial Officer)
 and Registrants Authorized Officer
   61




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.



DescriptionExhibit 10
.1



Amended and Restated 2005 Stock
    Incentive Plan (Management compensation plan) (Incorporated by
    reference from the Companys Current Report on
    Form 8-K
    filed on May 29, 2007).Exhibit 10
.2



Form of Director 2006 Restricted
    Stock Agreement (Management compensation plan) (Incorporated by
    reference from the Companys Current Report on
    Form 8-K
    filed on May 29, 2007).Exhibit 10
.3



Form of Director 2007 Restricted
    Stock Agreement (Management compensation plan) (Incorporated by
    reference from the Companys Current Report on
    Form 8-K
    filed on May 29, 2007).Exhibit 10
.4



Form of Employee Restricted Stock
    Agreement (Management compensation plan) (Incorporated by
    reference from the Companys Current Report on
    Form 8-K
    filed on May 29, 2007).Exhibit 10
.5



Amended and Restated Customer
    Credit Agreement, dated as of July 30, 2007, by and between
    Sirius Satellite Radio Inc. and Space Systems/Loral, Inc.
    (Incorporated by reference from the Companys Current
    Report on
    Form 8-K
    filed on August 2, 2007).Exhibit 10
.6



Letter Agreement dated
    August 8, 2007 between Loral Space &
    Communications Inc. and MHR Fund Management LLC.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.