NEW YORK, Nov. 13 /PRNewswire-FirstCall/ -- Loral Space & Communications Inc. today reported its financial results for the third quarter and nine months ended September 30, 2006.
The company's results reflect Loral's continued leading role in the revitalized commercial satellite manufacturing industry and the steady, reliable performance of its fixed satellite services business.
Highlights
-- Revenue for the third quarter of 2006 rose 42 percent to $227 million,
compared to revenue of $160 million last year. For the first nine
months of 2006, revenue was $592 million, an increase of 38 percent
over the $429 million reported in the same period in 2005. Non-
recurring items increased revenue growth by $10 million in both
current periods.
-- Adjusted EBITDA(1) for the third quarter of 2006 was $36.1 million,
compared to $9.9 million last year. For the first nine months of
2006, Adjusted EBITDA was $63.8 million versus $25.4 million in the
same period in 2005. Third quarter non-recurring items increased
Adjusted EBITDA by $17.8 million offset by $3.5 million of increased
expenditures for growth.
-- Loral reported net income of $1.2 million and a net loss of $26.1
million for the third quarter and first nine months of 2006,
respectively. In 2005, Loral reported a loss from continuing
operations of $27.8 million and $72.8 million for the same periods.
-- As of September 30, 2006, Loral had $321 million in cash and short-
term investments. Our cash balance will be used primarily for funding
our current satellite build (Telstar 11N), working capital associated
with the revenue growth at SS/L, and facility upgrades and capacity
increases at SS/L.
-- Loral's consolidated backlog totaled $1.359 billion.
"Our overall business execution has been excellent," said Michael B. Targoff, Loral's chief executive officer. "Space Systems/Loral's vigorous pursuit of opportunities in the commercial satellite manufacturing industry has resulted in the capture of five satellite awards this year. In addition, four satellites have been delivered to customers thus far and another is scheduled for delivery in December. We believe that both short- and long-term opportunities for SS/L continue to evidence the recovery of the satellite manufacturing industry.
"On the fixed satellite services side, the transponders in Loral Skynet's fleet are operating at 74 percent capacity and we foresee continued steady results from our core transponder leasing business."
In response to certain shareholders' expressions of interest in participating in our financing plans following Loral's October 17th announcement regarding a $300 million equity financing with MHR Fund Management LLC, the company has asked MHR to consider proposing an alternative that would include the participation of all interested shareholders. MHR has indicated that its response to Loral will be forthcoming.
Loral emerged from bankruptcy on November 21, 2005, and its financial statements reflect fresh-start accounting effective October 1, 2005. Comparisons to third quarter 2005 financial information throughout this release refer to the results of Loral prior to its emergence.
Business Unit Review
Satellite Manufacturing
Benefiting from an industry-wide return to historic order levels and SS/L's success in winning new awards, SS/L's third quarter 2006 revenues before eliminations rose to $191 million, a 55 percent improvement over the third quarter of 2005. For the first nine months of 2006, SS/L revenue totaled $494 million, up 50 percent over the same period in 2005.
SS/L's third quarter Adjusted EBITDA increased to $15.9 million versus $4.8 million in the same period last year. For the first nine months of 2006, Adjusted EBITDA was $33.4 million, versus $15.2 million a year earlier. These increases were driven by increased revenue and improved profit margins in addition to a $9 million litigation settlement.
During the third quarter, SS/L was selected to design and construct the TerreStar-2 MSS (mobile satellite services) satellite for TerreStar Networks, Inc. This brings the 2006 award total to five satellites. Four SS/L-built satellites have been launched this year. SS/L expects to conclude its 2006 campaign with the launch of the state-of-the-art WildBlue-1 broadband satellite.
SS/L backlog at September 30, 2006 reached $1.167 billion and includes intercompany backlog of $147 million, much of which is accounted for by the Telstar 11N satellite being built for Loral Skynet.
Satellite Services
Loral Skynet third quarter 2006 revenues before intercompany eliminations were $52.2 million, a 27 percent improvement over the $41.1 million a year earlier driven by the $10 million of one-time items explained below. For the first nine months of 2006, revenues before intercompany eliminations totaled $126 million, compared to $115 million last year.
In the third quarter, Adjusted EBITDA before intercompany eliminations was $28.0 million compared to $18.9 million in the third quarter of 2005. The increase reflects $10 million of one time revenue items: a $15 million termination payment from Boeing resulting from the discontinuation of its Connexion by Boeing service offset by recognition of $5 million in revenue in 2005 for services provided in prior years. Adjusted EBITDA for the nine months ended September 30, 2006 grew to $54.8 million from $39.8 million for the same period last year.
Utilization on Loral Skynet's satellite fleet at the end of the third quarter was 74 percent compared to 67 percent at the end of the third quarter of 2005.
After accounting for the Connexion by Boeing cancellation of $37 million in backlog, Loral Skynet's backlog at September 30, 2006 was $358 million, including intercompany backlog of $18 million.
A full discussion of Loral's results is contained in the company's Form 10-Q, filed today with the Securities and Exchange Commission (SEC) and available on Loral's web site at http://www.loral.com/ or from the SEC at http://www.sec.gov/.
Subsequent Event
On November 13, 2006, Loral filed with the SEC a universal shelf registration statement on Form S-3. The registration statement covers the offer and sale by Loral of up to $500 million of securities which may include debt securities, common stock, preferred stock, warrants and subscription rights. Pursuant to Loral's obligation under a registration rights agreement dated November 21, 2005, the registration statement also covers any future offers and sales of the 7,180,629 outstanding shares of Loral common stock owned by affiliates of MHR Fund Management LLC. The registration statement has not yet become effective, and these securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.
Special Meeting of Stockholders Webcast
On Tuesday, November 14th, Loral will host a live, listen-only audio webcast of the company's special meeting of stockholders, hosted by chief executive officer Michael B. Targoff. Loral's special meeting of stockholders is being held to discuss company affairs, including its third quarter results. No proposals have been submitted to stockholders for action at this meeting, and, accordingly, the company did not solicit proxies in connection with the meeting.
The webcast will begin at approximately 10:00 am EST on November 14th. Listeners can access the webcast on Loral's web site at http://www.loral.com/. An archive of the webcast will be available on Loral's web site for 30 days, beginning approximately one hour after the meeting ends.
If you are unable to access the webcast, you may listen by telephone by dialing (719) 457-2680.
Loral Space & Communications is a satellite communications company. It is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management. Loral also owns and operates a fleet of telecommunications satellites used to broadcast video entertainment programming, distribute broadband data, and provide access to Internet services and other value-added communications services. For more information, visit Loral's web site at http://www.loral.com/.
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, Loral Space & Communications Inc. or its representatives have made or may make forward- looking statements, orally or in writing, which may be included in, but are not limited to, various filings made from time to time with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions. Many of these factors and conditions are described under the caption "Risk Factors" in each of the company's annual report on Form 10-K for the fiscal year ended December 31, 2005 and its quarterly reports on Form 10-Q for subsequent periods. The reader is specifically referred to these documents, as well as the company's other filings with the Securities and Exchange Commission.
(1) The common definition of EBITDA is "Earnings Before Interest, Taxes, Depreciation and Amortization." In evaluating financial performance, we use revenues and operating income (loss) before depreciation and amortization, including amortization of stock based compensation, and reorganization expenses due to bankruptcy ("Adjusted EBITDA") as the measure of a segment's profit or loss. Adjusted EBITDA is equivalent to the common definition of EBITDA before: reorganization expenses due to bankruptcy; gain on discharge of pre-petition obligations and fresh-start adjustments; gain (loss) on investments; other income (expense); equity in net income (losses) of affiliates; and minority interest, net of tax.
Adjusted EBITDA allows investors to compare our operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, reorganization expenses due to bankruptcy, net losses of affiliates and minority interest. Financial results of competitors in our industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets' lives, the timing and amount of investments, and effects of investments not directly managed. The use of adjusted EBITDA allows investors to compare operating results exclusive of these items. Competitors in our industry have significantly different capital structures. The use of Adjusted EBITDA maintains comparability of performance by excluding interest expense. In addition, during Chapter 11, we only recognized interest expense on the actual interest payments we made. During this period, we did not make any further interest payments on our debt obligations after March 17, 2004, the date we repaid our secured bank debt. Reorganization expenses due to bankruptcy were only incurred during the period we were in Chapter 11. These expenses have been excluded from Adjusted EBITDA to maintain comparability with our results during periods we were not in Chapter 11 and with the results of competitors using similar measures.
We believe the use of Adjusted EBITDA along with U.S. GAAP financial measures enhances the understanding of our operating results and is useful to investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be comparable to similarly titled measures reported by competitors. We also use Adjusted EBITDA to evaluate operating performance of our segments, to allocate resources and capital to such segments, to measure performance for incentive compensation programs, and to evaluate future growth opportunities. Adjusted EBITDA should be used in conjunction with U.S. GAAP financial measures and is not presented as an alternative to cash flow from operations as a measure of our liquidity or as an alternative to net income as an indicator of our operating performance.
A full reconciliation of Adjusted EBITDA to net loss is included in the accompanying tables to this report and also in Loral's quarterly report on Form 10-Q, available on the company's web site at http://www.loral.com/ or on the SEC's EDGAR service at http://www.sec.gov/.
LORAL SPACE & COMMUNICATIONS INC.
Statements of Operations
(In millions)
Revenues
Successor Predecessor Successor Predecessor
Registrant Registrant Registrant Registrant
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Satellite Services $52.2 $41.1 $126.3 $114.5
Satellite Manufacturing 191.0 123.3 493.6 329.5
Segment revenues 243.2 164.4 619.9 444.0
Eliminations (16.4) (4.4) (28.2) (14.8)
Revenues as reported $226.8 $160.0 $591.7 $429.2
Adjusted EBITDA
Successor Predecessor Successor Predecessor
Registrant Registrant Registrant Registrant
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Satellite Services $28.0 $18.9 $54.8 $39.8
Satellite Manufacturing 15.9 4.8 33.4 15.2
Corporate expenses (1) (7.7) (5.0) (21.9) (17.3)
Segment Adjusted EBITDA before
eliminations 36.2 18.7 66.3 37.7
Eliminations (0.1) (8.8) (2.5) (12.3)
Adjusted EBITDA $36.1 $9.9 $63.8 $25.4
Reconciliation of Adjusted EBITDA to Net Income (Loss) (in millions)
Successor Predecessor Successor Predecessor
Registrant Registrant Registrant Registrant
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Adjusted EBITDA $36.1 $9.9 $63.8 $25.4
Depreciation and
amortization (18.6) (17.7) (53.0) (61.2)
Reorganization expenses
due to bankruptcy (1) - (18.6) - (31.2)
Operating income (loss)
from continuing
operations 17.5 (26.4) 10.8 (67.0)
Interest and investment
income 6.9 2.3 16.4 6.4
Interest expense (8.0) (1.5) (18.7) (4.0)
Other income (expense) - - 1.0 (0.9)
Income tax provision (6.3) (1.1) (11.4) (4.6)
Equity in net losses of
affiliates (2.5) (1.2) (5.9) (2.8)
Minority interest (2) (6.4) 0.1 (18.3) 0.1
Income (loss) from
continuing operations 1.2 (27.8) (26.1) (72.8)
Gain on sale of discontinued
operations, net of taxes - 2.6 - 14.0
Net income (loss) $1.2 $(25.2) $(26.1) $(58.8)
(1) Reorganization expenses due to bankruptcy are only reflected during
the period we were in Chapter 11. After the adoption of fresh-start
accounting on October 1, 2005, continuing expenses related to the
remaining bankruptcy related matters are included in Corporate
expenses and totaled $1 million and $4 million for the three and nine
months ended September 30, 2006, respectively.
(2) Represents the dividend accrual for the Loral Skynet Series A non-
convertible preferred stock.
LORAL SPACE & COMMUNICATIONS INC.
Supplemental Financial Data
(In millions)
Successor Predecessor Successor Predecessor
Registrant Registrant Registrant Registrant
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
BOOKINGS
Fixed satellite
services $23.7 $20.5 $88.3 $126.5
Satellite manufacturing
and technology 240.4 233.1 851.4 754.0
Intercompany
eliminations - (1.0) (172.8) (1.2)
Total bookings 264.1 252.6 766.9 879.3
Debookings (45.7) (12.8) (63.8) (59.3)
NET BOOKINGS $218.4 $239.8 $703.1 $820.0
September 30, December 31,
2006 2005
FUNDED BACKLOG
Fixed satellite services $357.5 $453.4
Satellite manufacturing and
technology 1,166.9 815.0
Total funded backlog 1,524.4 1,268.4
Intercompany eliminations (165.0) (20.4)
NET FUNDED BACKLOG $1,359.4 $1,248.0
Condensed Balance Sheets
(In millions)
September 30, December 31,
2006 2005
Cash and equivalents $202.8 $275.8
Short-term investments 118.7 -
Accounts receivable, net and
Contracts-in-process 129.2 132.9
Other current assets 104.4 83.0
Total current assets 555.1 491.7
Property, plant & equipment, net 512.9 520.5
Goodwill 346.3 340.1
Other assets 308.9 326.7
Total assets $1,723.2 $1,679.0
Customer advances and billings in
excess of costs and profits $279.1 $173.0
Other current liabilities 124.6 147.2
Total current liabilities 403.7 320.2
Long-term debt 128.1 128.2
Other long-term liabilities 373.8 403.4
Total liabilities 905.6 851.8
Minority interest 214.3 200.0
Shareholders' equity 603.3 627.2
Total liabilities and
shareholders' equity $1,723.2 $1,679.0
