Loral Reports Results for First Quarter 1999
Wednesday May 5, 8:09 am Eastern Time
Company Press Release
EBITDA Doubles Over Prior Year
NEW YORK--(BUSINESS WIRE)--May 5, 1999--Loral Space & Communications Ltd.
(NYSE:LOR - news) today reported results for the first quarter ended March 31, 1999, that are in line with the company's
previously stated expectations for the year.
Loral's first quarter revenues from its operating segments (prior to intercompany and affiliate eliminations) totaled $415 million,
an increase of almost 15 percent over revenues of $362 million in the same quarter last year. Significantly, revenues for the
fixed satellite services (FSS) group rose 34 percent to $72 million compared with revenues of $54 million for the same period
last year.
EBITDA (earnings before interest, taxes, depreciation and amortization) Prior to Development Costs and Eliminations rose 38
percent to $68 million from $49 million in the first quarter of 1998. Both the company's satellite manufacturing and FSS
business units made substantial contributions to the EBITDA Prior to Development Costs and Eliminations growth, with
increases of 48 percent and 35 percent, respectively.
EBITDA as reported, after all development costs and eliminations, was $37 million, double last year's first quarter EBITDA as
reported of $18 million.
Funded backlog at March 31, 1999, net of eliminations was $2.1 billion, up 16 percent over net funded backlog of $1.8 billion
at the same time last year. Total bookings for the first quarter, before eliminations, were $628 million compared to bookings a
year earlier of $282 million.
''We're off to a very good start this year, with significant growth in revenue and income, particularly in our fixed satellite
services unit,'' noted Bernard L. Schwartz, chairman and chief executive officer of Loral. ''We're also seeing margin
improvement at Space Systems/Loral and increased activity in the data services segment.
''There have been five successful Globalstar launches thus far,'' Mr. Schwartz continued. ''With just another three launches - of
the eight remaining on our schedule - we'll have 32 satellites in orbit and will begin the roll-out of service in September in major
regions of the world. Our service provider partners share our enthusiasm for the Globalstar system and are in the process of
fine-tuning their marketing plans.''
The company's net loss for the quarter of $50 million or $0.17 per share, versus a net loss in the same quarter a year ago of
$27 million or $0.11 per share, reflects a series of development cost investments for the quarter, including those for Globalstar
and, to a lesser extent, Loral Data Services, Europe*Star and SkyBridge. Also reflected in the results is a doubling of
depreciation and amortization due to the inclusion of Orion, acquired in late-March 1998 and thus not included in first quarter
1998 results.
Per share calculations are based on 289.7 million weighted shares of Loral common stock outstanding on March 31, 1999,
versus 249.3 million a year earlier.
In the first quarter of 1999, Loral completed a private offering of senior notes, raising approximately $350 million of which
approximately $150 million was used to invest in Globalstar convertible preferred stock issued during the quarter, maintaining
Loral's prior percentage ownership position of approximately 43 percent. The balance of the funds is being used for general
corporate purposes, including investments in its other core businesses and to pursue emerging satellite services opportunities
worldwide.
The company's cash balance on March 31,1999, was approximately $614 million, including almost $49 million of cash
restricted for interest payments on Loral Orion's outstanding debt. Loral's total debt of approximately $2.0 billion includes
$941 million of Loral Orion debt, which is non-recourse to Loral.
Business Unit Review
Fixed Satellite Services (FSS)
FSS revenues rose 34 percent this quarter to $72 million. EBITDA of $48 million, a 66 percent margin, rose 35 percent over
last year's first quarter.
Loral Skynet's Telstar 6 satellite was launched February 15 aboard a Proton rocket, and service was initiated in mid-March.
Located at 93 degrees West longitude, Telstar 6 is one of the most sophisticated and powerful communications satellites
available to broadcasters and program distributors in North America, covering the continental United States, Puerto Rico, the
Caribbean, and portions of Canada and Latin America. Along with Telstars 4 and 5, it creates a powerful broadcast and
syndication neighborhood for customers that include FOX and ABC. Telstar 7, when launched in mid-June, will host a strong
North American cable neighborhood at its 129 degrees West longitude orbital location, with anchor tenants such as Time
Warner and Viewer's Choice. Orion 2, which is scheduled for a September launch to 12 degrees West longitude, will expand
Loral's FSS coverage into Latin America, Russia and the Middle East.
In March, Loral was selected as the winner of an auction by Brazil's Agencia Nacional de Telecomunicacoes (ANATEL) to
acquire a Brazilian orbital satellite slot at 63 degrees West longitude. Loral's $20 million investment broadens the company's
FSS opportunities and complements the operations of Satmex, a Loral Global Alliance partner in Latin America. Loral intends
to launch a high-powered satellite into the Brazilian orbital location within the next three years, permitting the company to offer
Ku-band satellite services to customers within Brazil and throughout most of the Western hemisphere.
In April, Loral Skynet added two specialty content broadcasters to its Skynet Direct(tm) digital distribution platform.
Combining their resources on Loral Skynet's common digital video broadcast (DVB) platform, Southern Entertainment
Television, a gospel and bluegrass music video programmer, and American Digital Communications, a direct-to-home
horseracing simulcaster, will distribute their specialized programming throughout North America and the Caribbean. Skynet
Direct is a joint venture of Loral Skynet and EchoStar as is SkyVista, a service that offers consumers an all-in-one DTH
package of specialty and basic cable programming. Subscribers to SkyVista exceeded 9,000 at the end of March, and are
expected to total more than 40,000 by year end.
Data Services
Loral's Data Services Group, comprising Loral Orion's data business and CyberStar, is designed to develop products and
services to rapidly and cost-effectively deliver broadband data, multimedia and Internet content to users around the world.
Loral's CyberStar, which is still under development, focuses on electronic package delivery, and audio and video streaming.
Late last year, CyberStar acquired Satellite Network Systems (SNS), Inc., a systems integrator of business television (BTV)
services headquartered in St. Paul, Minn. SNS's system integration capability, coupled with CyberStar's IP-multicast solutions,
will enable CyberStar to deliver a full complement of broadband solutions to its clients and provide new value-added services
through the convergence of data and BTV services.
In April, the Loral Data Services Group further expanded its Internet access capacity offerings and enterprise broadband
services with two key partnership agreements. With AboveNet(tm) Communications Inc., a leading provider of Internet
connectivity, Loral Orion signed an agreement permitting it to locate servers at three AboveNet Internet Service Exchanges
(ISX) in the United States. This will speed access to the U.S. Internet backbone for Loral Orion's growing number of Internet
Service Provider (ISP) customers who currently use the company's global satellite services. Loral Orion offers advanced,
end-to-end Internet access and value-added services to ISPs around the world. By broadening the company's terrestrial
Internet gateway connections through this agreement, Loral Orion will be able to offer customers greater capacity and
enhancements, including secure, multicast services for business applications.
The Loral Data Services Group also has partnered with NeoPlanet Inc., a leading provider of integrated Internet software
services, to develop a free, customizable desktop Internet portal that businesses can use to access a varied menu of content,
including news, financial information, educational information, sports and entertainment. The portal will be available for
download free of charge from CyberStar's web site starting May 15 at www.cyberstar.com.
Satellite Manufacturing and Technology
Space Systems/Loral (SS/L) had a total backlog as of March 31, 1999, of $1.5 billion before eliminations, up from $1.3 billion
a year earlier. SS/L delivered the first of a new generation of Multi-Functional Transport Satellites (MTSAT) to the Japanese
government in March. The advanced MTSAT, which will enhance air traffic control as well as meteorological monitoring and
reporting, will be used by Japan's Ministry of Transport, Civil Aviation Bureau and Meteorological Agency.
Among SS/L's $379 million in bookings for the first quarter were Loral Skynet's Telstar 8, additional Globalstar satellites, and
Europe*Star 1, the first satellite in the Loral/Alcatel joint venture, which will provide fixed satellite services to eastern Europe,
southern and southeast Asia and parts of Africa.
The launch date for the SS/L manufactured ChinaSat 8 satellite has been delayed pending the completion of a licensing review
by the U.S. Department of State. Loral expects that, upon completion of the review, the previously approved technical
assistance agreement will be found to be in compliance with newly enacted regulations that govern the export of space-based
equipment or technology.
Global Mobile Telephony
Globalstar raised an additional $350 million in financing in January through a private offering of convertible preferred stock
bringing to $3.3 billion the total funds raised to date.
Two successful Globalstar launches aboard Soyuz rockets during the quarter -- and the most recent Soyuz launch on April 15
-- added 12 more satellites to Globalstar's constellation, bringing its total number of satellites now in orbit to 20. Three more
launches, aboard Delta II rockets -- one in June and two in July -- will place 12 additional satellites on-orbit to support the
regional roll-out of commercial service in the third quarter with at least 32 satellites in orbit. The final five launches planned for
1999 -- a Delta II in August, three Soyuz in September, October and November, and a Delta II in December -- will complete
the deployment of the full constellation of 52 satellites, including four in-orbit spares.
Nine gateways will be in operation and more than 30,000 user terminals will be in the distribution pipeline by start of service.
By the end of 1999, Globalstar expects to have a total of at least 16 gateways in operation and close to 120,000 telephones
available. All of the 38 gateways on order have been manufactured and are scheduled to come on stream throughout 2000.
Rigorous testing of the Globalstar system is proceeding as both the satellite constellation and ground infrastructure are built out.
Lab tests and over-the-air testing of the satellites already on orbit have been completed, including beam-to-beam and
satellite-to-satellite handoffs. Ongoing activities include the testing of installed gateways, network elements such as antennas and
switches, and voice calls on user terminals from all three manufacturers. Other system tests, including billing, customer care,
activation, authentication and roaming, will be conducted over the next few months, leading to the start of commercial service
this fall.
Loral Space & Communications is a high technology company that concentrates primarily on satellite manufacturing and
satellite-based services, including transponder leasing and value-added services, domestic and international corporate data
networks, global wireless telephony, broadband data transmission and content services, Internet services, and international
direct-to-home satellite services.
For more information, visit Loral's web site at 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, from time to time, Loral Space &
Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in, but are not limited to, various filings made by the company 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. These factors and conditions have been described in the section of the company's
annual report on Form 10-K for the fiscal year ended December 31, 1998, entitled ''Certain Factors That May Affect Future
Results.'' In addition, these factors and conditions have been described with particular regard to the company's interest in
Globalstar, L.P. (''Globalstar'') and Globalstar Telecommunications Limited (''GTL''), in the section of the annual report on
Form 10-K of Globalstar and GTL for the fiscal year ended December 31, 1998, entitled ''Certain Factors That May Affect
Future Results.'' With regard to forward-looking statements concerning Loral Orion, Inc. and its business, financial condition,
results of operations and prospects, the factors and conditions which could materially affect these statements are described in
the section of Loral Orion's annual report on Form 10-K for the fiscal year ended December 31, 1998, entitled ''Certain
Factors That May Affect Future Results.'' The reader is specifically referred to these documents regarding the factors and
conditions that may affect future results.
LORAL SPACE & COMMUNICATIONS LTD.
INCOME STATEMENTS
(In millions, except per share data)
Three Months Ended March 31,
---------------------------
1999 1998
----------- ------------
Revenues:
Satellite manufacturing and technology $ 326.5 $ 308.4
Fixed satellite services (1) 72.1 53.9
Data services (2) 16.3 -
----------- ------------
Operating segment revenues 414.9 362.3
Intercompany and affiliate eliminations (109.0) (67.1)
=========== ============
Operating revenues $305.9 $295.2
=========== ============
EBITDA:
Satellite manufacturing and technology $ 30.6 $ 20.6
Fixed satellite services (1) 47.6 35.3
Data services (2) (2.3) -
Corporate expenses (8.2) (7.0)
----------- ------------
EBITDA for operating segments before
development and start-up costs
and intercompany and affiliate eliminations 67.7 48.9
Development and start-up costs:
Data services (3) (4.4) (7.3)
Global mobile telephony (4) (42.1) (24.4)
----------- ------------
Total development and start-up costs (46.5) (31.7)
----------- ------------
Segment EBITDA 21.2 17.2
Intercompany and affiliate eliminations 15.4 1.2
----------- ------------
EBITDA as reported 36.6 18.4
Depreciation and amortization (37.8) (17.4)
----------- ------------
Operating income (loss) (1.2) 1.0
Interest income (expense), net (3.0) 6.9
----------- ------------
Pretax income (loss) (4.2) 7.9
Income (loss) after taxes (6.6) 4.9
Minority interest/Equity in affiliate losses (31.9) (20.3)
----------- ------------
Net loss (38.5) (15.4)
Preferred dividends (11.6) (11.6)
----------- ------------
Net loss - common shareholders $ (50.1) $ (27.0)
=========== ============
Weighted shares outstanding - Basic and Diluted 289.7 249.3
=========== ============
Loss per share - Basic and Diluted $ (0.17) $ (0.11)
=========== ============
(1) Includes Loral Orion's transponder leasing business and 100% of
EuropeStar's costs in 1999 only and 100% of SatMex's revenues and
EBITDA for all periods.
(2) Includes Loral Orion's data services business in 1999 only.
(3) Includes 100% of CyberStar's development and start-up costs for
all periods.
(4) Includes 100% of Globalstar's development and start-up costs for
all periods.
LORAL SPACE & COMMUNICATIONS LTD.
Supplemental Financial Data
(In millions)
Three Months Ended March 31,
--------------------------
1999 1998
----------- -----------
BOOKINGS
Satellite manufacturing and technology $ 378.5 $ 263.0
Fixed satellite services (1) 214.4 19.2
Data services (2) 34.7 -
----------- -----------
Total bookings 627.6 282.2
Intercompany and affiliate eliminations (333.8) (1.7)
=========== ===========
Net bookings $ 293.8 $ 280.5
=========== ===========
March 31, 1999 March 31, 1998
--------------------------------------
FUNDED BACKLOG
Satellite manufacturing and
technology $ 1,538.9 $ 1,313.5
Fixed satellite services 889.0 714.7
Data services 165.2 117.0
----------- -----------
Total funded backlog 2,593.1 2,145.2
Intercompany and affiliate eliminations (474.8) (313.0)
=========== ===========
Net funded backlog $ 2,118.3 $ 1,832.2
=========== ===========
March 31, 1999 March 31, 1998
--------------------------------------
CASH (3) $614.2 $561.8
TOTAL DEBT (4) $1,960.5 $1,444.6
EQUITY $2,874.9 $2,436.1
(1) Includes Loral Orion's transponder leasing business in 1999 only
and 100% of SatMex for all periods.
(2) Includes Loral Orion's data services business for 1999 only.
(3) Includes Loral Orion's restricted cash of $48.7 million and
$336.4 million as of March 31, 1999 and 1998, respectively, for
interest payments on Loral Orion senior debt and for satellite
payments.
(4) Total debt includes $941.3 million and $904.2 million of Loral
Orion debt as of March 31, 1999 and 1998, respectively, which is
non-recourse to Loral.
Contact:
Loral, New York
Jeanette Clonan, 212/338-5658
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