Loral Reports Q2 1999 Financial Results - Company Financial Information

Cambridge Telcom Report, August 9, 1999

Loral Space & Communications has reported results for the three months and six months ended June 30, 1999, which match the company's previously stated expectations for the full year.

Financial Results for the Periods Ending June 30, 1999

Prior to intercompany and affiliate eliminations, Loral's segment revenues in the second quarter were $454 million, versus $406 million a year earlier, reflecting higher sales in each of the company's operating segments. Reported revenues for the period, after all eliminations, were $378 million, up 52 percent over the $248 million reported a year earlier.

For the first six months of the year, segment revenues prior to eliminations rose 13 percent, to $869 million. After intercompany and affiliate eliminations, reported revenues for the first half of 1999 were $684 million, a 26 percent increase over revenues of $544 million a year ago.

Segment EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended June 30, 1999, prior to all eliminations and development and start-up costs, rose to $70 million, a 35 percent gain over the $52 million reported last year. Reported EBITDA, after all eliminations, was $44 million, a 257 percent increase over the $12 million in EBITDA reported a year earlier reflecting increased EBITDA from all operating segments.

Segment EBITDA for the six months ended June 30, 1999, prior to all eliminations and development and start-up costs, was $138 million, up 36 percent over the $101 million posted in the first half of 1998. Reported EBITDA for the first six months, after all eliminations and development and start-up costs, rose 162 percent to $80 million versus EBITDA of $31 million reported for the first six months last year.

"Our solid second quarter performance reflects continued progress in executing our business plan," stated Bernard L. Schwartz, Loral chairman and chief executive officer. "Space Systems/Loral maintained its margin improvements, with EBITDA up 59 percent over last year. Fixed satellite services performance was steady, despite a late start for Telstar 6, the loss of Orion 3 and a slower than expected sales ramp-up at Satmex. CBS signed on during the quarter as a new Loral Skynet broadcast customer and an important direct-to-home television customer renewed its contract with Satmex. We plan to place two more satellites - Telstar 7 and Orion 2 -- into service before year end.

"We are pleased with the activity at our data services group, where we are devoting resources to the development and introduction of broadband services," Mr. Schwartz continued, "a market we believe has huge potential.

"On the Globalstar front, with another successful launch just last weekend, we now have 32 satellites in our initial constellation and are gearing up for the start of service in several regions of the world beginning this fall. It is thrilling for all involved to be on the threshold of service. The balance of this year," Mr. Schwartz concluded, "promises to be an eventful one."

Funded backlog at June 30, 1999, net of eliminations, was $1.9 billion versus net funded backlog of $2.2 billion a year earlier. For the first half of 1999, segment bookings before eliminations were $911 million versus $1.1 billion last year. The timing of bookings at SS/L, along with a debooking of $89 million due to the Orion 3 loss, led to a decline in total bookings for the second quarter to $283 million, before eliminations, down from $832 million in a particularly strong quarter a year earlier. Both backlog and bookings are expected to show year-over-year improvement at the end of the year.

Loral's net loss for the period of $50 million, or $0.17 per share, was an improvement over last year's net loss of $71 million or $0.27 per share. For the first six months, the company's net loss was $100 million or $0.34 per share versus $98 million or $0.38 a year ago.

"While reported EBITDA is expected to improve in the second half, Loral's net loss will deepen consistent with our forecast for the year," Mr. Schwartz noted. "The expected loss is attributable to increased interest and depreciation expenses as well as to the planned costs of deployment as Globalstar service gets underway, and to increased expenses at Loral's Globalstar service ventures in Brazil, Mexico, Russia and Canada. We remain on track to meet our previously announced earnings per share target."

Per share calculations for the three-month and six-month periods ended June 30, 1999, are based on 290 million weighted shares of Loral common stock, versus 266 million and 258 million for each of the respective periods a year earlier.

The company's cash balance on June 30, 1999, was $546 million, including approximately $49 million of cash restricted for interest payments on Loral Orion's outstanding debt. The cash balance does not include the insurance proceeds of approximately $266 million due from the loss of the Orion 3 satellite. Loral's total debt of approximately $2.0 billion includes $949 million of Loral Orion debt, which is non-recourse to Loral. Business Unit Review Fixed Satellite Services (FSS)