##### 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, 2011
 Commission file number 1-14180
 Loral Space & Communications Inc.
 600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
 Jurisdiction of incorporation: Delaware
 IRS identification number: 87-0748324
 Yes þ No o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes þ No o
 Yes o No þ




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##### 



LORAL SPACE & COMMUNICATIONS INC.
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 2011
 Page No.PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2011 and March 31, 2010
    
    
    4Condensed Consolidated Statements of Equity for the three months ended March 31, 2011 and the year ended
December 31, 2010
    
    
    5Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and March 31, 2010
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2:Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 3:Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 4:Disclosure Controls and Procedures
    
    
    50PART II  OTHER INFORMATIONItem 1:Legal Proceedings
    
    
    50Item 1A:Risk Factors
    
    
    50Item 6:Exhibits
    
    
    51Signatures
    
    
    52Exhibit 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)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    106,512
    
    
    $
    165,801Contracts-in-process
    
    
    285,421
    
    
    
    186,896Inventories
    
    
    83,569
    
    
    
    71,233Deferred tax assets
    
    
    66,220
    
    
    
    66,220Assets held-for-sale
    
    
    47,796
    
    
    
    Other current assets
    
    
    19,520
    
    
    
    28,927Total current assets
    
    
    609,038
    
    
    
    519,077Property, plant and equipment, net
    
    
    188,402
    
    
    
    235,905Long-term receivables
    
    
    333,125
    
    
    
    319,426Investments in affiliates
    
    
    406,472
    
    
    
    362,556Intangible assets, net
    
    
    10,378
    
    
    
    11,110Long-term deferred tax assets
    
    
    281,861
    
    
    
    294,019Other assets
    
    
    24,379
    
    
    
    12,816Total assets
    
    $
    1,853,655
    
    
    $
    1,754,909LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    104,484
    
    
    $
    95,952Accrued employment costs
    
    
    40,145
    
    
    
    52,017Customer advances and billings in excess of costs and profits
    
    
    318,291
    
    
    
    261,603Liabilities held-for-sale
    
    
    3,514
    
    
    
    Other current liabilities
    
    
    32,116
    
    
    
    30,375Total current liabilities
    
    
    498,550
    
    
    
    439,947Pension and other postretirement liabilities
    
    
    243,161
    
    
    
    244,817Long-term liabilities
    
    
    164,846
    
    
    
    169,196Total liabilities
    
    
    906,557
    
    
    
    853,960Commitments and contingenciesEquity:Loral shareholders equity: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, 21,191,528 and 20,924,874
issued and outstanding
    
    
    212
    
    
    
    209Non-voting common stock, $.01 par value; 20,000,000 shares authorized, 9,505,673 issued and
outstanding
    
    
    95
    
    
    
    95Paid-in capital
    
    
    1,013,718
    
    
    
    1,028,263Retained earnings (accumulated deficit)
    
    
    35,445
    
    
    
    (32,374
    )Accumulated other comprehensive loss
    
    
    (102,977
    )
    
    
    (95,873
    )Total shareholders equity attributable to Loral
    
    
    946,493
    
    
    
    900,320Noncontrolling interest
    
    
    605
    
    
    
    629Total equity
    
    
    947,098
    
    
    
    900,949Total liabilities and equity
    
    $
    1,853,655
    
    
    $
    1,754,909
   3




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LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Three MonthsEnded March 31,2011
    
    
    2010Revenues
    
    $
    279,899
    
    
    $
    228,914Cost of revenues
    
    
    231,521
    
    
    
    210,425Selling, general and administrative expenses
    
    
    20,926
    
    
    
    20,399Directors indemnification expense
    
    
    
    
    
    
    14,357Operating income (loss)
    
    
    27,452
    
    
    
    (16,267
    )Interest and investment income
    
    
    7,573
    
    
    
    3,279Interest expense
    
    
    (632
    )
    
    
    (623
    )Gain on litigation, net
    
    
    4,470
    
    
    
    Other expense
    
    
    (1,951
    )
    
    
    (93
    )Income (loss) before income taxes and equity in net income of affiliates
    
    
    36,912
    
    
    
    (13,704
    )Income tax provision
    
    
    (15,363
    )
    
    
    (1,515
    )Income (loss) before equity in net income of affiliates
    
    
    21,549
    
    
    
    (15,219
    )Equity in net income of affiliates
    
    
    46,246
    
    
    
    44,592Net income
    
    
    67,795
    
    
    
    29,373Net loss attributable to noncontrolling interest
    
    
    24
    
    
    
    Net income attributable to Loral
    
    
    67,819
    
    
    
    29,373Net income per share attributable to Loral common shareholders:Basic
    
    $
    2.21
    
    
    $
    0.98Diluted
    
    $
    2.10
    
    
    $
    0.97Weighted average common shares outstanding:Basic
    
    
    30,637
    
    
    
    29,862Diluted
    
    
    31,338
    
    
    
    30,388
   4




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 (In thousands)
 (Unaudited)
 Common Stock
    
    
    
    
    
    
    Retained
    
    
    AccumulatedVoting
    
    
    Non-Voting
    
    
    
    
    
    
    Earnings/
    
    
    OtherShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    Paid-In
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    Noncontrolling
    
    
    TotalIssued
    
    
    Amount
    
    
    Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Loss
    
    
    Interest
    
    
    EquityBalance, January 1, 2010
    
    
    20,391
    
    
    $
    204
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,013,790
    
    
    $
    (519,220
    )
    
    $
    (62,878
    )
    
    
    
    
    
    $
    431,991Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    486,846
    
    
    
    
    
    
    $
    495Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,995
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454,346Exercise of stock options
    
    
    547
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    13,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,995Shares surrendered to fund withholding
taxes
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,477
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,477
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,548Contribution by noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    134Balance, December 31, 2010
    
    
    20,925
    
    
    
    209
    
    
    
    9,506
    
    
    
    95
    
    
    
    1,028,263
    
    
    
    (32,374
    )
    
    
    (95,873
    )
    
    
    629
    
    
    
    900,949Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,819
    
    
    
    
    
    
    
    (24
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,104
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,691Exercise of stock options
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    331
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334Shares surrendered to fund withholding
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,478
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,478
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,321Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281Balance, March 31, 2011
    
    
    20,925
    
    
    $
    212
    
    
    
    9,506
    
    
    $
    95
    
    
    $
    1,013,718
    
    
    $
    35,445
    
    
    $
    (102,977
    )
    
    $
    605
    
    
    $
    947,098
   5




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three MonthsEnded March 31,2011
    
    
    2010Operating activities:Net income
    
    $
    67,795
    
    
    $
    29,373Adjustments to reconcile net income to net cash used in operating activities:Non-cash operating items (Note 3)
    
    
    (24,055
    )
    
    
    (36,474
    )Changes in operating assets and liabilities:Contracts-in-process
    
    
    (97,156
    )
    
    
    (7,805
    )Inventories
    
    
    (12,336
    )
    
    
    1,527Long-term receivables
    
    
    (1,553
    )
    
    
    (1,450
    )Other current assets and other assets
    
    
    5,981
    
    
    
    26Accounts payable
    
    
    9,920
    
    
    
    9,035Accrued expenses and other current liabilities
    
    
    (12,808
    )
    
    
    7,170Customer advances
    
    
    49,621
    
    
    
    (18,577
    )Income taxes payable
    
    
    (3,434
    )
    
    
    468Pension and other postretirement liabilities
    
    
    (1,656
    )
    
    
    (393
    )Long-term liabilities
    
    
    (5,479
    )
    
    
    1,229Net cash used in operating activities
    
    
    (25,160
    )
    
    
    (15,871
    )Investing activities:Capital expenditures
    
    
    (7,406
    )
    
    
    (9,936
    )Increase in restricted cash
    
    
    (11,900
    )
    
    
    Net cash used in investing activities
    
    
    (19,306
    )
    
    
    (9,936
    )Financing activities:Proceeds from the exercise of stock options
    
    
    334
    
    
    
    35Funding of withholding taxes on employee cashless stock option exercises
    
    
    (16,478
    )
    
    
    (205
    )Excess tax benefit associated with exercise of stock options
    
    
    1,321
    
    
    
    Net cash used in financing activities
    
    
    (14,823
    )
    
    
    (170
    )Decrease in cash and cash equivalents
    
    
    (59,289
    )
    
    
    (25,977
    )Cash and cash equivalents  beginning of period
    
    
    165,801
    
    
    
    168,205Cash and cash equivalents  end of period
    
    $
    106,512
    
    
    $
    142,228
   6




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##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Organization and Principal Business
   Satellite Manufacturing
  Satellite Services
  1 3
  2. Basis of Presentation
     7




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##### Table of Contents



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




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##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Cash equivalentsMoney market funds
    
    $
    102,946
    
    
    $
    
    
    
    $
    Available-for-sale securitiesCommunications industry
    
    $
    1,250
    
    
    $
    
    
    
    $
    DerivativesForeign exchange contracts
    
    $
    
    
    
    $
    45
    
    
    $
    Non-qualified pension plan assets
    
    $
    1,900
    
    
    $
    
    
    
    $
    Liabilities:DerivativesForeign exchange contracts
    
    $
    
    
    
    $
    22,624
    
    
    $
    
  Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
  3. Additional Cash Flow Information
  Three MonthsEnded March 31,2011
    
    
    2010Non-cash operating items:Equity in net income of affiliates
    
    $
    (46,246
    )
    
    $
    (44,592
    )Deferred taxes
    
    
    16,952
    
    
    
    229Depreciation and amortization
    
    
    7,705
    
    
    
    8,739Stock based compensation
    
    
    281
    
    
    
    1,682Warranty expense accruals (reversals)
    
    
    148
    
    
    
    (634
    )Amortization of prior service credits and net actuarial gain
    
    
    332
    
    
    
    (35
    )Unrealized gain on non-qualified pension plan assets
    
    
    (177
    )
    
    
    (111
    )Non-cash net interest income
    
    
    (2,752
    )
    
    
    (753
    )Gain on foreign currency transactions and contracts
    
    
    (42
    )
    
    
    (215
    )Amortization of fair value adjustments related to orbital incentives
    
    
    (256
    )
    
    
    (784
    )Net non-cash operating items
    
    $
    (24,055
    )
    
    $
    (36,474
    )Non-cash investing activities:Capital expenditures incurred not yet paid
    
    $
    2,213
    
    
    $
    2,992Supplemental information:Interest paid
    
    $
    211
    
    
    $
    580Tax payments (refunds), net
    
    $
    3,166
    
    
    $
    (1,521
    )
   9




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4. Comprehensive Income
  Three MonthsEnded March 31,2011
    
    
    2010Net income
    
    $
    67,795
    
    
    $
    29,373Amortization of prior service credits and net actuarial loss (gain), net of tax provision of $134 in 2011
    
    
    198
    
    
    
    (35
    )Proportionate share of Telesat Holdco other comprehensive loss, net of tax benefit of $937 in 2011
    
    
    (1,393
    )
    
    
    (328
    )Derivatives:Unrealized (loss) gain on foreign currency hedges, net of tax benefit of $4,666 in 2011
    
    
    (6,906
    )
    
    
    2,360Less: reclassification adjustment for loss (gain) included in net income, net of tax provision of
$745 in 2011
    
    
    1,104
    
    
    
    (1,031
    )Net unrealized (loss) gain on derivatives
    
    
    (5,802
    )
    
    
    1,329Unrealized (loss) gain on available-for-sale securities, net of tax benefit of $70 in 2011
    
    
    (107
    )
    
    
    482Comprehensive income
    
    $
    60,691
    
    
    $
    30,821
 5. Contracts-in-Process, Long-Term Receivables and Inventories
 Contracts-in-Process
  March 31,
    
    
    December 31,2011
    
    
    2010Contracts-in-Process:Amounts billed
    
    $
    204,185
    
    
    $
    125,593Unbilled receivables
    
    
    81,236
    
    
    
    61,303$
    285,421
    
    
    $
    186,896
   Long-Term Receivables
   March 31,
    
    
    December 31,2011
    
    
    2010Orbital receivables
    
    $
    325,936
    
    
    $
    312,412Deferred receivables
    
    
    1,973
    
    
    
    2,893Telesat consulting services receivables
    
    
    19,109
    
    
    
    17,556347,018
    
    
    
    332,861Less, current portion included in contracts-in-process
    
    
    (13,893
    )
    
    
    (13,435
    )Long-term receivables
    
    $
    333,125
    
    
    $
    319,426
  10




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##### Table of Contents



Financing Receivables
  FinancingReceivables
    
    
    
    
    
    
    
    
    
    
    MoreSubject To
    
    
    
    
    
    
    90 Days or
    
    
    Than 90Total
    
    
    Unlaunched
    
    
    Launched
    
    
    Aging
    
    
    Current
    
    
    Less
    
    
    DaysSatellite Manufacturing:Orbital ReceivablesLong term orbitals
    
    $
    312,043
    
    
    $
    145,940
    
    
    $
    166,103
    
    
    $
    166,103
    
    
    $
    166,103
    
    
    $
    
    
    
    $
    Short term unbilled
    
    
    10,499
    
    
    
    
    
    
    
    10,499
    
    
    
    10,499
    
    
    
    10,499
    
    
    
    
    
    
    
    Short term billed
    
    
    3,394
    
    
    
    
    
    
    
    3,394
    
    
    
    3,394
    
    
    
    1,559
    
    
    
    
    
    
    
    1,835325,936
    
    
    
    145,940
    
    
    
    179,996
    
    
    
    179,996
    
    
    
    178,161
    
    
    
    
    
    
    
    1,835Deferred Receivables
    
    
    1,973
    
    
    
    
    
    
    
    
    
    
    
    1,973
    
    
    
    1,973
    
    
    
    
    
    
    
    Consulting Services:Receivables from Telesat
    
    
    19,109
    
    
    
    
    
    
    
    
    
    
    
    19,109
    
    
    
    19,109
    
    
    
    
    
    
    
    347,018
    
    
    
    145,940
    
    
    
    179,996
    
    
    
    201,078
    
    
    
    199,243
    
    
    
    
    
    
    
    1,835Contracts-in-Process:Unbilled receivables
    
    
    70,737
    
    
    
    70,737
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    417,755
    
    
    $
    216,677
    
    
    $
    179,996
    
    
    $
    201,078
    
    
    $
    199,243
    
    
    $
    
    
    
    $
    1,835
  FinancingReceivables
    
    
    
    
    
    
    
    
    
    
    MoreSubject To
    
    
    
    
    
    
    90 Days or
    
    
    Than 90Total
    
    
    Unlaunched
    
    
    Launched
    
    
    Aging
    
    
    Current
    
    
    Less
    
    
    DaysSatellite Manufacturing:Orbital ReceivablesLong term orbitals
    
    $
    298,977
    
    
    $
    133,688
    
    
    $
    165,289
    
    
    $
    165,289
    
    
    $
    165,289
    
    
    $
    
    
    
    $
    Short term unbilled
    
    
    11,009
    
    
    
    
    
    
    
    11,009
    
    
    
    11,009
    
    
    
    11,009
    
    
    
    
    
    
    
    Short term billed
    
    
    2,426
    
    
    
    
    
    
    
    2,426
    
    
    
    2,426
    
    
    
    659
    
    
    
    
    
    
    
    1,767312,412
    
    
    
    133,688
    
    
    
    178,724
    
    
    
    178,724
    
    
    
    176,957
    
    
    
    
    
    
    
    1,767Deferred Receivables
    
    
    2,893
    
    
    
    
    
    
    
    
    
    
    
    2,893
    
    
    
    2,893
    
    
    
    
    
    
    
    Consulting Services:Receivables from Telesat
    
    
    17,556
    
    
    
    
    
    
    
    
    
    
    
    17,556
    
    
    
    17,556
    
    
    
    
    
    
    
    332,861
    
    
    
    133,688
    
    
    
    178,724
    
    
    
    199,173
    
    
    
    197,406
    
    
    
    
    
    
    
    1,767Contracts-in-Process:Unbilled receivables
    
    
    50,294
    
    
    
    50,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    383,155
    
    
    $
    183,982
    
    
    $
    178,724
    
    
    $
    199,173
    
    
    $
    197,406
    
    
    $
    
    
    
    $
    1,767
    11




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##### Table of Contents



March 31,
    
    
    December 31,Rating Categories
    
    2011
    
    
    2010A/BBB
    
    $
    28,662
    
    
    $
    37,303BB/B
    
    
    238,461
    
    
    
    225,533B/CCC
    
    
    83,826
    
    
    
    80,222Customers in bankruptcy
    
    
    39,056
    
    
    
    39,376Other
    
    
    27,750
    
    
    
    721Total financing receivables
    
    $
    417,755
    
    
    $
    383,155
 Inventories
  March 31,
    
    
    December 31,2011
    
    
    2010Inventories-gross
    
    $
    116,365
    
    
    $
    104,029Impaired inventory
    
    
    (31,370
    )
    
    
    (31,370
    )84,995
    
    
    
    72,659Inventories included in other assets
    
    
    (1,426
    )
    
    
    (1,426
    )$
    83,569
    
    
    $
    71,233
 6. Financial Instruments, Derivatives and Hedging Transactions
 Financial Instruments
  Foreign Currency
   ForeignCurrency
    
    
    U.S. $(In thousands)Future revenues  Japanese yen
    
    ¥
    51,097
    
    
    $
    616Future expenditures  Japanese yen
    
    ¥
    2,980,475
    
    
    $
    35,955Future revenue euros
    
    
    12,334
    
    
    $
    17,477Future expenditures  euros
    
    
    8,688
    
    
    $
    12,311
  12




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##### Table of Contents



Derivatives and Hedging Transactions
   ash Flow Hedges
    To SellHedge
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In thousands)2011
    
    
    102,950
    
    
    $
    131,995
    
    
    $
    145,4272012
    
    
    27,000
    
    
    
    32,649
    
    
    
    37,5782013
    
    
    27,000
    
    
    
    32,894
    
    
    
    37,112
    156,950
    
    
    $
    197,538
    
    
    $
    220,117
 Balance Sheet Classification
  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair ValueDerivatives designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    
    
    
    Other current liabilities
    
    $
    14,113Other liabilities
    
    
    6,959
    
    
    
    
    
    21,072Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    
    45
    
    
    Other current liabilities
    
    
    1,447Other liabilities
    
    
    105Total derivatives
    
    
    
    $
    45
    
    
    
    
    $
    22,624
  13




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##### Table of Contents



Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair ValueDerivatives designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    $
    4,152
    
    
    Other current liabilities
    
    $
    9,451Other liabilities
    
    
    5,3604,152
    
    
    
    
    
    14,811Derivatives not designated as hedging instrumentsForeign exchange contracts
    
    Other current assets
    
    
    396
    
    
    Other current liabilities
    
    
    133Other liabilities
    
    
    63Total derivatives
    
    
    
    $
    4,548
    
    
    
    
    $
    15,007
 Cash Flow Hedge Gains (Losses) Recognition
  Gain (Loss)
    
    
    Gain (Loss) Reclassified from
    
    
    Gain (Loss) on DerivativeRecognized
    
    
    Accumulated
    
    
    Ineffectiveness andDerivatives in Cash Flow
    
    in OCI on Derivatives
    
    
    OCI into Income
    
    
    Amounts Excluded fromHedging Relationships
    
    (Effective Portion)
    
    
    (Effective Portion)
    
    
    Effectiveness TestingLocation
    
    Amount
    
    
    Location
    
    AmountThree months ended March 31, 2011Foreign exchange contracts
    
    $
    (11,572
    )
    
    Revenue
    
    $
    (1,849
    )
    
    Revenue
    
    $
    1,135Interest income
    
    $
    (1
    )Three months ended March 31, 2010Foreign exchange contracts
    
    $
    2,360
    
    
    Revenue
    
    $
    1,031
    
    
    Revenue
    
    $
    (305
    )Interest income
    
    $
    (11
    )
 Gain (Loss) Recognized inIncomeon DerivativesCash Flow Derivatives Not Designated as Hedging Instruments
    
    Location
    
    
    AmountThree months ended March 31, 2011Foreign exchange contracts
    
    Revenue
    
    $
    (2,450
    )Three months ended March 31, 2010Foreign exchange contracts
    
    Revenue
    
    $
    260
   14




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##### Table of Contents



7. Property, Plant and Equipment
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Land and land improvements
    
    $
    27,036
    
    
    $
    27,036Buildings
    
    
    70,145
    
    
    
    68,899Leasehold improvements
    
    
    14,042
    
    
    
    14,007Equipment, furniture and fixtures
    
    
    193,853
    
    
    
    185,801Satellite capacity under construction (see Note 17)
    
    
    
    
    
    
    40,495Other construction in progress
    
    
    10,749
    
    
    
    20,187315,825
    
    
    
    356,425Accumulated depreciation and amortization
    
    
    (127,423
    )
    
    
    (120,520
    )$
    188,402
    
    
    $
    235,905
  8. Investments in Affiliates
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Telesat Holdings Inc.
    
    $
    341,490
    
    
    $
    295,797XTAR, LLC
    
    
    63,529
    
    
    
    65,293Other
    
    
    1,453
    
    
    
    1,466$
    406,472
    
    
    $
    362,556
  Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Telesat Holdings Inc.
    
    $
    48,022
    
    
    $
    47,063XTAR, LLC
    
    
    (1,764
    )
    
    
    (2,407
    )Other
    
    
    (12
    )
    
    
    (64
    )$
    46,246
    
    
    $
    44,592
  Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Revenues
    
    $
    42,251
    
    
    $
    22,182Elimination of Lorals proportionate share of profits relating to affiliate transactions
    
    
    (7,320
    )
    
    
    (1,363
    )Profits relating to affiliate transactions not eliminated
    
    
    4,119
    
    
    
    768
 1 3
  15




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##### Table of Contents



Telesat
  Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Statement of Operations Data:Revenues
    
    $
    205,722
    
    
    $
    191,519Operating expenses
    
    
    (46,775
    )
    
    
    (48,713
    )Depreciation, amortization and stock-based compensation
    
    
    (62,191
    )
    
    
    (61,308
    )Loss on disposition of long lived asset
    
    
    (759
    )
    
    
    Operating income
    
    
    95,997
    
    
    
    81,498Interest expense
    
    
    (56,312
    )
    
    
    (59,936
    )Foreign exchange gains
    
    
    83,330
    
    
    
    108,996Losses on financial instruments
    
    
    (29,723
    )
    
    
    (43,053
    )Other income (expense)
    
    
    1,096
    
    
    
    (276
    )Income tax provision
    
    
    (15,725
    )
    
    
    (10,308
    )Net income
    
    
    78,663
    
    
    
    76,921
 March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Balance Sheet Data:Current assets
    
    $
    337,842
    
    
    $
    291,367Total assets
    
    
    5,545,952
    
    
    
    5,309,441Current liabilities
    
    
    378,694
    
    
    
    294,485Long-term debt, including current portion
    
    
    2,923,811
    
    
    
    2,928,916Total liabilities
    
    
    4,265,687
    
    
    
    4,145,336Redeemable preferred stock
    
    
    145,719
    
    
    
    141,718Shareholders equity
    
    
    1,134,546
    
    
    
    1,022,387
 XTAR
  o o
  16




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##### Table of Contents



Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Statement of Operations Data:Revenues
    
    $
    8,870
    
    
    $
    7,941Operating expenses
    
    
    (8,504
    )
    
    
    (8,518
    )Depreciation and amortization
    
    
    (2,405
    )
    
    
    (2,405
    )Operating loss
    
    
    (2,039
    )
    
    
    (2,982
    )Net loss
    
    
    (3,137
    )
    
    
    (4,286
    )
 March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Balance Sheet Data:Current assets
    
    $
    9,466
    
    
    $
    9,290Total assets
    
    
    94,155
    
    
    
    96,383Current liabilities
    
    
    62,460
    
    
    
    61,839Total liabilities
    
    
    70,525
    
    
    
    69,616Members equity
    
    
    23,630
    
    
    
    26,767
 Other
   17




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##### Table of Contents



9. Intangible Assets
  Weighted AverageRemaining
    
    
    March 31, 2011
    
    
    December 31, 2010Amortization Period
    
    
    Gross
    
    
    Accumulated
    
    
    Gross
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(In thousands)
    
    
    (In thousands)Internally developed software and technology
    
    
    2
    
    
    $
    59,027
    
    
    $
    (55,319
    )
    
    $
    59,027
    
    
    $
    (54,702
    )Trade names
    
    
    15
    
    
    
    9,200
    
    
    
    (2,530
    )
    
    
    9,200
    
    
    
    (2,415
    )$
    68,227
    
    
    $
    (57,849
    )
    
    $
    68,227
    
    
    $
    (57,117
    )
  2011
    
    $
    2,9312012
    
    
    2,3142013
    
    
    4602014
    
    
    4602015
    
    
    460
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Gross fair value adjustments
    
    $
    (36,896
    )
    
    $
    (36,896
    )Accumulated amortization
    
    
    19,487
    
    
    
    19,299$
    (17,409
    )
    
    $
    (17,597
    )
  10. Debt
 SS/L Credit Agreement
   18




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##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010Letters of credit outstanding
    
    $
    4,911
    
    
    $
    4,911Borrowings
    
    
    
    
    
    
    
 Three MonthsEnded March 31,2011
    
    
    2010Interest expense (including commitment and letter of credit fees)
    
    $
    321
    
    
    $
    198Amortization of issuance costs
    
    $
    181
    
    
    $
    219
 11. Income Taxes
      19




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##### Table of Contents



Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Liabilities for UTPs:Opening balance  January 1
    
    $
    122,857
    
    
    $
    111,316Current provision (benefit) for:Unrecognized tax benefits
    
    
    (92
    )
    
    
    866Potential additional interest
    
    
    1,292
    
    
    
    1,411Potential additional penalties
    
    
    355
    
    
    
    351Statute expirations
    
    
    (942
    )
    
    
    (288
    )Tax settlements
    
    
    (3,257
    )
    
    
    Ending balance  March 31
    
    
    120,213
    
    
    
    113,656UTP adjustment to net deferred tax asset:Opening balance  January 1
    
    
    13,920
    
    
    
    (239
    )Current change for unrecognized tax benefits
    
    
    689
    
    
    
    222Ending balance  March 31
    
    
    14,609
    
    
    
    (17
    )Total uncertain tax positions
    
    $
    134,822
    
    
    $
    113,639
  12. Stock-Based Compensation
    13. Pensions and Other Employee Benefit Plans
  Pension Benefits
    
    
    Other BenefitsThree Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)
    
    
    (In thousands)Service cost
    
    $
    3,048
    
    
    $
    2,596
    
    
    $
    181
    
    
    $
    234Interest cost
    
    
    6,327
    
    
    
    6,117
    
    
    
    837
    
    
    
    981Expected return on plan assets
    
    
    (5,813
    )
    
    
    (5,157
    )
    
    
    (4
    )
    
    
    (8
    )Amortization of prior service credits and net actuarial loss or (gain)
    
    
    711
    
    
    
    131
    
    
    
    (379
    )
    
    
    (166
    )Net periodic cost
    
    $
    4,273
    
    
    $
    3,687
    
    
    $
    635
    
    
    $
    1,041
  20




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##### Table of Contents



14. Commitments and Contingencies
 Financial Matters
  Balance of deferred amounts at January 1, 2011
    
    $
    35,730Warranty costs incurred including payments
    
    
    (394
    )Accruals relating to pre-existing contracts (including changes in estimates)
    
    
    542Balance of deferred amounts at March 31, 2011
    
    $
    35,878
     21




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##### Table of Contents



Transactions with Affiliates  Telesat
 Satellite Matters
    22




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##### Table of Contents



Transactions with Affiliates  Telesat
 Regulatory Matters
  Legal Proceedings
 Insurance Coverage Litigation
 In re: Loral
Space and Communications Inc. Consolidated Litigation Babus
  23




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##### Table of Contents



Reorganization Matters
  Indemnification Claims of Directors and Officers of Old Loral. Old Loral Class Action Securities Litigations
 Old Loral Class Action Securities Litigations
 Beleson
  24




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##### Table of Contents



Beleson Christ Christ
 Christ Beleson Beleson Christ Christ Beleson Beleson
 Other and Routine Litigation
  15. Earnings Per Share
  Three MonthsEnded March 31, 2011Net income attributable to Loral common shareholders  basic
    
    $
    67,819Less: Adjustment for dilutive effect of Telesat stock options
    
    
    (1,969
    )Net income attributable to Loral common shareholders  diluted
    
    $
    65,850
   25




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##### Table of Contents



Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Common and potential common shares:Weighted average common shares outstanding
    
    
    30,637
    
    
    
    29,862Stock options
    
    
    474
    
    
    
    249Unvested restricted stock units
    
    
    224
    
    
    
    189Unvested restricted stock
    
    
    3
    
    
    
    9Unvested SARS
    
    
    
    
    
    
    79Common and potential common shares
    
    
    31,338
    
    
    
    30,388
  Three MonthsEnded March 31, 2010Stock options outstanding
    
    
    125,000Non-vested restricted stock units
    
    
    8,250
 16. Segments
      26




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##### Table of Contents



Three MonthsEnded March 31,2011
    
    
    2010(In thousands)RevenuesSatellite manufacturing:External revenues
    
    $
    237,655
    
    
    $
    206,739Intersegment revenues(1)
    
    
    43,074
    
    
    
    24,115Satellite manufacturing revenues
    
    
    280,729
    
    
    
    230,854Satellite services revenues(2)
    
    
    205,722
    
    
    
    191,519Operating segment revenues before eliminations
    
    
    486,451
    
    
    
    422,373Intercompany eliminations(3)
    
    
    (830
    )
    
    
    (1,940
    )Affiliate eliminations(2)
    
    
    (205,722
    )
    
    
    (191,519
    )Total revenues as reported
    
    $
    279,899
    
    
    $
    228,914Segment Adjusted EBITDA(4)Satellite manufacturing
    
    $
    40,515
    
    
    $
    12,730Satellite services(2)
    
    
    158,947
    
    
    
    142,833Corporate(5)
    
    
    (4,798
    )
    
    
    (3,901
    )Adjusted EBITDA before eliminations
    
    
    194,664
    
    
    
    151,662Intercompany eliminations(3)
    
    
    (279
    )
    
    
    (318
    )Affiliate eliminations(2)
    
    
    (158,947
    )
    
    
    (142,833
    )Adjusted EBITDA
    
    
    35,438
    
    
    
    8,511Reconciliation to Operating IncomeDepreciation, Amortization and Stock-Based Compensation(4)Satellite manufacturing
    
    
    (7,691
    )
    
    
    (9,504
    )Satellite services(2)
    
    
    (62,191
    )
    
    
    (61,308
    )Corporate
    
    
    (295
    )
    
    
    (917
    )Segment depreciation before affiliate eliminations
    
    
    (70,177
    )
    
    
    (71,729
    )Affiliate eliminations(2)
    
    
    62,191
    
    
    
    61,308Depreciation, amortization and stock-based compensation as reported
    
    
    (7,986
    )
    
    
    (10,421
    )Directors indemnification expense(6)
    
    
    
    
    
    
    (14,357
    )Operating income (loss) as reported
    
    $
    27,452
    
    
    $
    (16,267
    )
 March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Total Assets(7)Satellite manufacturing
    
    $
    956,250
    
    
    $
    920,647Satellite services(2) (8)
    
    
    5,887,442
    
    
    
    5,605,239Corporate(4)
    
    
    555,915
    
    
    
    538,464Total assets before affiliate eliminations
    
    
    7,399,607
    
    
    
    7,064,350Affiliate eliminations(2)
    
    
    (5,545,952
    )
    
    
    (5,309,441
    )Total assets as reported
    
    $
    1,853,655
    
    
    $
    1,754,909
 (1)
    
    Intersegment revenues include $42.2 million and $22.2 million for the three months
ended March 31, 2011 and 2010, respectively, of revenue from affiliates.(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 and restricted stock units paid in
cash or expected to be paid in cash is included in Adjusted EBITDA. Compensation expense
related to SS/L Phantom SARs and restricted stock units paid in Loral
common stock or expected to be paid in Loral common stock is included in depreciation,
amortization and stock-based compensation.  27




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##### Table of Contents



(5)
    
    Includes corporate expenses incurred in support of our operations and includes our
equity investments in XTAR and Globalstar service providers.(6)
    
    Represents indemnification expense, in connection with defense costs incurred by MHR
affiliated directors in the Delaware Shareholder derivative case (see Note 14).(7)
    
    Amounts are presented after the elimination of intercompany profit.(8)
    
    Includes $2.5 billion and $2.4 billion of satellite services goodwill related to
Telesat as of March 31, 2011 and December 31, 2010, respectively. 17. Related Party Transactions
 Transactions with Affiliates
 Telesat
      28




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Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Revenues from Telesat satellite construction contracts
    
    $
    42,238
    
    
    $
    22,169Milestone payments received from Telesat
    
    
    30,997
    
    
    
    19,269
    ViaSat/Telesat
     29




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##### Table of Contents



XTAR
  MHR Fund Management LLC
   30




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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
    
    31Consolidated Operating Results
    
    34Liquidity and Capital Resources:Loral
    
    41Telesat
    
    45Contractual Obligations
    
    47Statement of Cash Flows
    
    47Affiliate Matters
    
    48Commitments and Contingencies
    
    48Other Matters
    
    48
  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
   31




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Satellite Manufacturing
          32




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Satellite Services
 1 3
            33




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General
     o
  
 Consolidated Operating Results
 Critical Accounting Matters
 Changes in Critical Accounting Policies
  34




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Consolidated Operating Results 
      Revenues:
 Three MonthsEnded March 31,2011
    
    
    2010(In millions)Satellite Manufacturing
    
    $
    280.7
    
    
    $
    230.8Satellite Services
    
    
    205.7
    
    
    
    191.5Segment revenues
    
    
    486.4
    
    
    
    422.3Eliminations(1)
    
    
    (0.8
    )
    
    
    (1.9
    )Affiliate eliminations(2)
    
    
    (205.7
    )
    
    
    (191.5
    )Revenues as reported(3)
    
    $
    279.9
    
    
    $
    228.9
     35




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##### Table of Contents



Adjusted EBITDA:
 Three MonthsEnded March 31,2011
    
    
    2010(In millions)Satellite Manufacturing
    
    $
    40.5
    
    
    $
    12.7Satellite Services
    
    
    158.9
    
    
    
    142.8Corporate expenses
    
    
    (4.8
    )
    
    
    (3.9
    )Segment Adjusted EBITDA before eliminations
    
    
    194.6
    
    
    
    151.6Eliminations(1)
    
    
    (0.3
    )
    
    
    (0.3
    )Affiliate eliminations(2)
    
    
    (158.9
    )
    
    
    (142.8
    )Adjusted EBITDA
    
    $
    35.4
    
    
    $
    8.5
     Reconciliation of Adjusted EBITDA to Net Income:
 Three MonthsEnded March 31,2011
    
    
    2010(In millions)Adjusted EBITDA
    
    $
    35.4
    
    
    $
    8.5Depreciation, amortization and stock-based compensation(4)
    
    
    (8.0
    )
    
    
    (10.4
    )Directors indemnification expense(5)
    
    
    
    
    
    
    (14.4
    )Operating income (loss)
    
    
    27.4
    
    
    
    (16.3
    )Interest and investment income
    
    
    7.6
    
    
    
    3.3Interest expense
    
    
    (0.6
    )
    
    
    (0.6
    )Gain on litigation, net
    
    
    4.5
    
    
    
    Other expense
    
    
    (1.9
    )
    
    
    (0.1
    )Income tax provision
    
    
    (15.4
    )
    
    
    (1.5
    )Equity in net income of affiliates
    
    
    46.2
    
    
    
    44.6Net income
    
    $
    67.8
    
    
    $
    29.4
  36




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##### Table of Contents



(1)
    
    Represents the elimination of intercompany sales and intercompany Adjusted EBITDA,
primarily for satellites under construction by SS/L for Loral and its wholly owned
subsidiaries.(2)
    
    Represents the elimination of amounts attributed to Telesat whose results are
reported in our consolidated statements of operations as equity in net income of affiliates
(see Note 8 to the financial statements).(3)
    
    Includes revenues from affiliates of $42.2 million and $22.2 million for the three
months ended March 31, 2011 and 2010, respectively.(4)
    
    Includes non-cash stock-based compensation of $0.3 million and $1.7 million for the
three months ended March 31, 2011 and 2010, respectively.(5)
    
    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 March 31, 2011 Compared With Three Months Ended March 31, 2010
  Revenues from Satellite Manufacturing
 Three MonthsEnded March 31,
    
    
    % Increase/2011
    
    
    2010
    
    
    (Decrease)(In millions)Revenues from Satellite Manufacturing
    
    $
    281
    
    
    $
    231
    
    
    
    22
    %Eliminations
    
    
    (1
    )
    
    
    (2
    )
    
    
    (50
    )%Revenues from Satellite Manufacturing as reported
    
    $
    280
    
    
    $
    229
    
    
    
    22
    %
  Cost of Satellite Manufacturing
 Three MonthsEnded March 31,
    
    
    % Increase/2011
    
    
    2010
    
    
    (Decrease)(In millions)Cost of Satellite Manufacturing
    
    $
    232
    
    
    $
    210
    
    
    
    10
    %Cost of Satellite Manufacturing as
a % of Satellite Manufacturing
revenues as reported
    
    
    83
    %
    
    
    92
    %
   37




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Selling, General and Administrative Expenses
 Three MonthsEnded March 31,
    
    
    % Increase/2011
    
    
    2010
    
    
    (Decrease)(In millions)Selling, general and administrative expenses
    
    $
    21
    
    
    $
    20
    
    
    
    5
    %% of revenues as reported
    
    
    8
    %
    
    
    9
    %
  Directors Indemnification Expense
  Interest and Investment Income
 Three MonthsEnded March 31,2011
    
    
    2010(In millions)Interest and investment income
    
    $
    8
    
    
    $
    3
  Interest Expense
 Three MonthsEnded March 31,2011
    
    
    2010(In millions)Interest expense
    
    $
    1
    
    
    $
    1
  Gain on Litigation
  Other Expense
   38




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##### Table of Contents



Income Tax Provision
    Equity in Net Income of Affiliates
  Three MonthsEnded March 31,2011
    
    
    2010(In millions)Telesat
    
    $
    48.0
    
    
    $
    47.1XTAR
    
    
    (1.8
    )
    
    
    (2.4
    )Other
    
    
    
    
    
    
    (0.1
    )$
    46.2
    
    
    $
    44.6
   39




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##### Table of Contents



Three Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In Canadian dollars)
    
    
    (In U.S. dollars)Statement of Operations Data:Revenues
    
    
    202.8
    
    
    
    199.2
    
    
    
    205.7
    
    
    
    191.5Operating expenses
    
    
    (46.1
    )
    
    
    (50.6
    )
    
    
    (46.8
    )
    
    
    (48.7
    )Depreciation, amortization and stock-based compensation
    
    
    (61.3
    )
    
    
    (63.8
    )
    
    
    (62.2
    )
    
    
    (61.3
    )Loss on disposition of long lived assets
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.7
    )
    
    
    Operating income
    
    
    94.6
    
    
    
    84.8
    
    
    
    96.0
    
    
    
    81.5Interest expense
    
    
    (55.5
    )
    
    
    (62.3
    )
    
    
    (56.3
    )
    
    
    (59.9
    )Foreign exchange gains
    
    
    82.1
    
    
    
    113.4
    
    
    
    83.3
    
    
    
    109.0Losses on financial instruments
    
    
    (29.3
    )
    
    
    (44.8
    )
    
    
    (29.7
    )
    
    
    (43.1
    )Other income (expense)
    
    
    1.2
    
    
    
    (0.3
    )
    
    
    1.1
    
    
    
    (0.3
    )Income tax provision
    
    
    (15.5
    )
    
    
    (10.7
    )
    
    
    (15.7
    )
    
    
    (10.3
    )Net income
    
    
    77.6
    
    
    
    80.0
    
    
    
    78.7
    
    
    
    76.9Average exchange rate for translating Canadian dollars
to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    0.9857
    
    
    
    1.0403
 March 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In Canadian dollars)
    
    
    (In U.S. dollars)Balance Sheet Data:Current assets
    
    
    327.9
    
    
    
    290.8
    
    
    
    337.8
    
    
    
    291.4Total assets
    
    
    5,382.9
    
    
    
    5,298.8
    
    
    
    5,546.0
    
    
    
    5,309.4Current liabilities
    
    
    367.6
    
    
    
    293.9
    
    
    
    378.7
    
    
    
    294.5Long-term debt, including current portion
    
    
    2,837.8
    
    
    
    2,923.0
    
    
    
    2,923.8
    
    
    
    2,928.9Total liabilities
    
    
    4,140.3
    
    
    
    4,137.1
    
    
    
    4,265.7
    
    
    
    4,145.3Redeemable preferred stock
    
    
    141.4
    
    
    
    141.4
    
    
    
    145.7
    
    
    
    141.7Shareholders equity
    
    
    1,101.2
    
    
    
    1,020.4
    
    
    
    1,134.5
    
    
    
    1,022.4Period end exchange rate for translating
Canadian dollars to U.S. dollars
    
    
    
    
    
    
    
    
    
    
    0.9706
    
    
    
    0.9980
    40




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Backlog
  March 31,
    
    
    December 31,2011
    
    
    2010Satellite Manufacturing
    
    $
    1,467
    
    
    $
    1,625Satellite Services
    
    
    5,802
    
    
    
    5,477Total backlog before eliminations
    
    
    7,269
    
    
    
    7,102Satellite Manufacturing eliminations
    
    
    (3
    )
    
    
    (4
    )Satellite Services eliminations
    
    
    (5,802
    )
    
    
    (5,477
    )Total backlog
    
    $
    1,464
    
    
    $
    1,621
  
 Liquidity and Capital Resources
 
 Loral
     Cash and Available Credit
   41




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Cash Management
  Orbital Receivables
   Liquidity
       42




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##### Table of Contents



Risks to Cash Flow
      43




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44




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##### Table of Contents



Telesat
 Cash and Available Credit
  Liquidity
   45




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##### Table of Contents



Debt
  March 31,
    
    
    December 31,Maturity
    
    Currency
    
    2011
    
    
    2010(In CAD millions)Senior Secured Credit Facilities:Revolving facility
    
    October 31, 2012
    
    CAD or USD equivalent
    
    
    
    
    
    
    Canadian term loan facility
    
    October 31, 2012
    
    CAD
    
    
    165
    
    
    
    170U.S. term loan facility
    
    October 31, 2014
    
    USD
    
    
    1,648
    
    
    
    1,699U.S. term loan II facility
    
    October 31, 2014
    
    USD
    
    
    142
    
    
    
    146Senior notes
    
    November 1, 2015
    
    USD
    
    
    672
    
    
    
    691Senior subordinated notes
    
    November 1, 2017
    
    USD
    
    
    211
    
    
    
    217CAD
    
    
    2,838
    
    
    
    2,923Less: deferred financing costs and
repayment options
    
    
    
    
    
    
    (52
    )
    
    
    (54
    )2,786
    
    
    
    2,869Current portion
    
    
    
    CAD
    
    
    (131
    )
    
    
    (97
    )Long term portion
    
    
    
    CAD
    
    
    2,655
    
    
    
    2,772
  1 4
   Interest Expense
   46




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Derivatives
    Interest
  Capital Expenditures
  
 Contractual Obligations
  
 Statement of Cash Flows
 Net Cash Used In Operating Activities
     47




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Net Cash Used in Investing Activities
   Net Cash Used in Financing Activities
  
 Affiliate Matters
  
 
 Commitments and Contingencies
  
 Other Matters
 Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency
 Loral
   48




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ForeignCurrency
    
    
    U.S. $(In millions)Future revenues  Japanese yen
    
    ¥
    51.1
    
    
    $
    0.6Future expenditures  Japanese yen
    
    ¥
    2,980.5
    
    
    $
    36.0Future revenues  euros
    
    
    12.3
    
    
    $
    17.5Future expenditures  euros
    
    
    8.7
    
    
    $
    12.3
 Derivatives
   To SellAt
    
    
    AtEuro
    
    
    Contract
    
    
    MarketMaturity
    
    Amount
    
    
    Rate
    
    
    Rate(In millions)2011
    
    
    103.0
    
    
    $
    132.0
    
    
    $
    145.42012
    
    
    27.0
    
    
    
    32.6
    
    
    
    37.62013
    
    
    27.0
    
    
    
    32.9
    
    
    
    37.1
    157.0
    
    
    $
    197.5
    
    
    $
    220.1
  Telesat
  Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources  Telesat  Derivatives
 Interest
 Loral
   49




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Telesat
  Other
  
 Item 4.
    
    Disclosure Controls and Procedures
 Disclosure Controls and Procedures.
 Internal control over financial reporting.
 
 PART II.
OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
   50




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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.
  51




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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   52




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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.
  53