Loral Reports Third Quarter 1999 Financial Results
Performance on Target for the Year Successful Launches Lay Foundation for Near-term Growth
NEW YORK--(BUSINESS WIRE)--October 26, 1999-- Loral Space & Communications today reported results for the
three months and nine months ended September 30, 1999.
"With segment revenues and EBITDA well ahead of last year's third quarter, Loral's performance remains on track to meet
our previously stated expectations for the full year," stated Bernard L. Schwartz, Loral chairman and chief executive officer.
"Looking ahead to next year, the leasing of transponder capacity on our newly expanded fixed satellite services fleet and the
initiation of Globalstar service will be the major drivers of revenue and shareholder value.
"In 1999, five new satellites were added to our fixed satellite services fleet, doubling capacity from 202 to 431 transponders,"
Mr. Schwartz continued. "These additions significantly expand our revenue potential and provide a solid foundation for
growth. The costs related to this new capacity, however, are being incurred now and, accordingly, have reduced EBITDA
margins in the current period.
"Globalstar continues to hit its milestones following its successful service introduction this month at Telecom '99 in Geneva,"
Mr. Schwartz concluded. "There are 44 satellites in space, nine gateways in operation and 10,000 phones in the hands of our
service providers. And the feedback we're getting from early users as to voice quality and call retention is very positive."
Financial Results for the Periods Ended September 30, 1999
Loral's segment revenues in the third quarter, before intercompany and affiliate eliminations, increased to $476 million, versus
$363 million a year earlier, reflecting improved performance in each of the company's operational business segments.
Reported revenues for the quarter, after all eliminations, were $347 million, up 20 percent from the $290 million reported a
year earlier.
For the first nine months of the year, segment revenues before eliminations rose 19 percent to $1.3 billion versus $1.1 billion a
year earlier. After intercompany and affiliate eliminations, reported revenues for the first nine months of 1999 were $1.0
billion, a 24 percent increase over revenues of $833 million a year ago.
Segment EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended September 30,
1999, prior to all eliminations and development and start-up costs, rose to $73 million, a 34 percent gain over the $54 million
reported last year. Reported EBITDA, after all eliminations, was $36 million, an 80 percent increase over the $20 million in
EBITDA reported a year earlier, reflecting increased contribution from all operating segments.
Segment EBITDA for the nine months ended September 30, 1999, prior to all eliminations and development and start-up
costs, was $210 million, up 36 percent over the $155 million posted in the first nine months of 1998. Reported EBITDA for
the first nine months, after all eliminations and development and start-up costs, rose 130 percent to $116 million versus
EBITDA of $51 million reported for the first nine months last year.
For the first nine months of 1999, segment bookings before eliminations were $1.4 billion versus $1.3 billion last year, a 12
percent increase. At September 30, 1999, funded backlog, before eliminations, was $2.6 billion, up from $2.4 billion last
year. Significantly, fixed satellite services represents $1.3 billion of that backlog, an increase of 44 percent over its backlog a
year earlier. Funded backlog net of eliminations at September 30, 1999 was $2.0 billion, equal to last year.
Loral reported a smaller than expected net loss of $24 million for the quarter, or $0.08 per share, which includes a
non-recurring tax benefit of $33.6 million, resulting from a recent change in the tax code. Last year's net loss for the quarter
was $22 million or $0.08 per share, which included a one-time gain of $35 million on the sale by Loral of Globalstar common
stock. For the first nine months, the company's net loss was $124 million or $0.43 per share versus $120 million or $0.45 a
year ago.
Per share calculations are based on 290 million weighted shares of Loral common stock outstanding for the three-month and
nine-month periods ended September 30, 1999,versus 289 million and 268 million for each of the respective periods a year
earlier.
The company's cash balance on September 30, 1999, was $463 million, including approximately $50 million of cash
restricted for interest payments on Loral Orion's outstanding debt and $147 million for the final payment on Apstar IIR next
year. Loral's total debt of approximately $2.1 billion includes $957 million of Loral Orion debt, which is non-recourse to
Loral.
Business Unit Review
Fixed Satellite Services (FSS)
During the third quarter of 1999, FSS segment revenue increased 30 percent to $87 million from $67 million a year earlier. A
portion of this increase, $8.5 million, is attributable to a transaction in which Loral Skynet acquired one transponder from
Satmex (Satelites Mexicanos S.A. de C.V.), which is 49 percent owned by Loral.
FSS segment EBITDA for the third quarter of $50 million was virtually equal to the year-earlier quarter, and continued to
reflect expenses associated with the expansion of the fleet prior to generating revenue on the new satellites. Segment EBITDA
and EBITDA margins are expected to improve going forward as Telstar 7 and Orion 2 enter service and as capacity
utilization rates increase overall.
At the end of this year, the Loral Global Alliance fleet will include 10 satellites with a total of 431 transponders, twice the fleet
capacity at the end of 1998. The end-of-year capacity utilization rate for the Global Alliance fleet, absent its newest members,
is expected to be approximately 70 percent. The five satellites that entered service for Loral or were launched during 1999 -
Satmex 5, Telstar 6, Telstar 7, Apstar IIR and Orion 2 - have a revenue potential, on an annualized basis, of approximately
$387 million. In service for only a portion of the year, these satellites will generate approximately $43 million in revenue in
1999, indicating substantial revenue growth potential for the FSS segment.
Lease rates for both C- and Ku-band transponders have held steady overall during the third quarter in all geographic regions
with the exception of Asia where there has been a temporary weakness in Ku-band transponder rates. The company is
optimistic that rates in Asia are strengthening.
In the aftermath of losing its Orion 3 satellite at launch in May, Loral swiftly found a replacement satellite to provide coverage
of the Asia/Pacific region and add capacity to the Global Alliance, by purchasing from APT Satellite Company Limited, Hong
Kong, the transponder payload of Apstar IIR and the ongoing right to use its orbital slot at 76.5 degrees East longitude.
Apstar IIR, which was built by Space Systems/Loral, was launched in late 1997 and has a mission life of 15 years. It offers
customers a powerful footprint covering a region that includes Asia, Europe, Africa, and Australia. Apstar IIR has an existing
backlog of $88 million and a current annual revenue base of $17 million. Insurance proceeds from the failed launch of Orion 3
will be used to fund a substantial portion of the $273 million purchase price.
Telstar 7, Loral Skynet's new broadcast video and data communications satellite, was successfully launched on September 25
aboard an Ariane 44LP rocket, and is expected to begin service in early November. Telstar 7 will provide service to the
continental United States, Hawaii, Alaska and Puerto Rico, as well as parts of the Caribbean and Latin America from its
orbital slot at 129 degrees West longitude. Carrying a total of 48 transponders - 24 at C-band and 24 at Ku-band - the
satellite establishes a strong cable neighborhood anchored by Time Warner's AthenaTV, Viewer's Choice and Arts &
Entertainment. The three-axis, body-stabilized satellite was built by Space Systems/Loral, which also built Telstars 5 and 6
and Orion 2.
The Orion 2 broadcast video and data communications satellite was successfully launched aboard an Ariane 44 LP rocket on
October 19. The satellite's in-orbit testing is being conducted in the 15 degrees West longitude orbital slot, and the satellite is
expected to enter service in January. Loral Skynet will manage the leasing of Orion 2's 38 Ku-band transponders.
Loral entered into an agreement valued at more than $100 million to lease capacity on Orion 2 to United Pan-European
Communications (UPC), a broadband communications company. UPC will use its leased capacity on the Orion 2 satellite to
distribute an array of digital video and Internet services from its North American headquarters to locations throughout Europe
and South America.
In addition, Loral and PSINet, the first and largest independent facilities-based commercial Internet Service Provider (ISP),
entered into an agreement that includes the provision of leased transponder capacity, network hardware and system
maintenance. PSINet will link its operations in Brazil and Latin America to PSINet's global fiber backbone via satellite. The
agreement allows PSINet to reallocate Loral Global Alliance capacity to other regions around the world as it develops those
markets. This booking of approximately $40 million will be reflected in the fourth quarter.
Satmex, which showed an improvement in its capacity utilization rate over the previous quarter, recently announced its
contract with North American high-speed Internet access provider Interlink Communications. Interlink will use Solidaridad 2
to provide Internet access and corporate network telecommunications solutions for its customers in Central and South
America. In August, Satmex signed up a division of CapRock Communications Corporation to extend voice, video and data
services to the oil and gas industry throughout the Western hemisphere via the Satmex 5 communications satellite. The
arrangement, valid through 2002, will allow CapRock to provide a host of integrated wireless and terrestrial-based services,
including Internet, long distance, private line, microwave, two-way radio and high-speed data transfer.
Satellite Manufacturing and Technology
Space Systems/Loral (SS/L) posted revenues of $367 million during the third quarter, up 30 percent over the year-previous
quarter. For the first nine months, revenue totaled $1.0 billion versus $921 million for the first nine months of 1998. EBITDA
before eliminations for the quarter was $34 million, a 77 percent increase over the previous year's $19 million. The
manufacturing segment maintained an EBITDA margin of approximately nine percent, up from six percent for the nine months
last year. SS/L's total funded backlog at September 30, 1999, was $1.1 billion versus $1.3 billion a year ago.
SS/L has had an exceedingly busy and successful period of manufacturing and shipping satellites thus far this year. Thirty-six
low-earth-orbit (LEO) satellites have been delivered to Globalstar, all of them successfully launched in 1999. Another four
Globalstar satellites have been shipped to Baikonur for the Soyuz launch scheduled for November. An additional four
satellites, which will serve as in-orbit spares, will be shipped shortly for launch on a Delta rocket in late-December. The
performance of the 44 Globalstar satellites already in space is excellent, reflecting SS/L's superior design expertise and
manufacturing capability as well as its proven reliability.
In addition, during the third quarter, SS/L launched two GEO satellites, Telstar 7 and EchoStar 5, the newest direct broadcast
satellite for EchoStar's DISH Network. Just after the close of the quarter, SS/L launched Orion 2. Japan's MTSAT is to be
launched later this year on the HIIA rocket from Japan. SS/L's GOES L (Geostationary Operational Environmental Satellite),
the fourth and most advanced in the next-generation series of weather satellites built by SS/L for the National Aeronautics and
Space Administration and the National Oceanic and Atmospheric Administration (NOAA), also is scheduled for launch in the
fourth quarter.
The SS/L-built GOES-8, on orbit since April 1994, continued to exceed its mission life and in September provided critical
images of Hurricane Floyd to NOAA. In turn, NOAA was able to provide important information to the National Weather
Service and many other users. This allowed several agencies to issue storm warnings, watches and evacuation advisories in a
timely manner.
After the quarter's close SS/L announced that, as system associate contractor with Mitsubishi Electric Corporation, it has
been awarded a contract to build a high-powered communications satellite for Cable & Wireless Optus of Australia and the
Australian Department of Defence. The Optus C1 will carry 18 antennas and four payloads. It is designed for a mission life of
15 years and is scheduled for launch in 2002.
Shipment of the ChinaSat 8 satellite continues to be delayed as a result of the temporary suspension of the export license by
the Department of State. Loral has entered into negotiations with its customer to make accommodations for this delay in
shipment, including the provision of replacement capacity to offset the costs incurred by the customer. Negotiations are
expected to conclude during the fourth quarter. Notwithstanding any charge that may occur in the fourth quarter as a result of
these discussions, Loral anticipates that it will be on target with its previously projected net loss per share for 1999.
Data Services
Third quarter revenues for the Data Services segment, comprising Loral Orion and CyberStar, reached $22 million, a 70
percent increase over the same period last year. Revenues for the first nine months totaled $57 million versus $25 million in the
prior year's nine-month period.
The Data Services segment further expanded its Internet infrastructure and access capacity during the third quarter. In August,
Loral acquired Williams Global Access Services, a business television unit of The Williams Company, the communications and
energy services company. The acquisition substantially increased Loral's business television (BTV) service offerings by
combining the international audio/video networking capabilities of Global Access Services with the data networking and
broadband distribution services of Loral Orion and CyberStar.
In September, Loral Orion expanded its global network and broadband services across South America when it was
authorized to deliver domestic and international data communications services in Argentina, one of the largest markets in South
America. Loral Orion is now able to operate across virtually the entire continent, offering the full array of broadband data
services.
Also in September, Neue Zuercher Zeitung (NZZ), one of the world's leading German language newspapers, selected Loral
Orion to expand and upgrade its internal data network by providing bandwidth that can be dynamically allocated for more
rapid distribution of the news to new markets worldwide. NZZ's publishing business is time-sensitive and data-intensive,
requiring a wide-bandwidth solution that can be actively and readily controlled.
Loral Orion's two-megabit-per-second switching bandwidth service, called Dynalink(TM), gives NZZ the ability to manage a
pool of bandwidth and allocate it in any combination to either of its two printing facilities in Frankfurt or Munich, Germany, for
sending and receiving high-bandwidth data files. Editing of this information can then occur without using expensive, fixed
terrestrial connections.
Global Mobile Telephony
Globalstar officially introduced its global mobile telephony service at the International Telecommunications Union's quadrennial
Geneva Telecom `99 tradeshow during the week of October 10-17. At the show, Globalstar and its partners demonstrated a
variety of satellite-based phone products, including lightweight portable phones, fixed application phones and payphones, as
well as maritime and car kit phones. Company personnel and visitors to the company's booth and outdoor tent placed in
excess of 40,000 telephone calls over the Globalstar system throughout the week in Geneva.
Globalstar and its founding partners and equipment manufacturers participated in a press conference at the show where plans
for the phased roll-out of service were discussed. By the end of this year approximately 40,000-50,000 of the initial order of
300,000 telephones will be available for distribution. Nine gateways are in operation now to support the initiation of service.
In the first quarter of 2000, 16 operating gateways will cover 30 countries. Service providers have begun to place advertising
directed at their target markets and continue to forecast strong demand for Globalstar service.
Continued successful launches marked the third quarter, including two Delta II rockets in July, another in August, and a Soyuz
launch in September. On October 18, Globalstar launched an additional four satellites aboard a Soyuz rocket from the
Baikonur Cosmodrome in Kazakhstan, bringing its space segment constellation to 44 satellites. Ultimately, Globalstar will
have 52 satellites, including four in-orbit spares, in its first-generation constellation.
Loral Space & Communications (NYSE: LOR) is a high-technology company that primarily concentrates on satellite
manufacturing and satellite-based services, including broadcast transponder leasing and value-added services, domestic and
international corporate data networks, global wireless telephony, broadband data transmission and formatting, Internet
connectivity, digital audio radio services, and international direct-to-home satellite services. For more information, visit Loral's
web site at loral.com.
Some statements and information contained in this document 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, the company or its representatives
have made and may continue to make forward-looking statements, orally or in writing, in other contexts, such as in reports
filed with the SEC, press releases or statements made with the approval of an authorized executive officer of the company.
These forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects,"
"plans," "may," "will," "would," "could," "should," "anticipates," "estimates," "project," "intend," or "outlook" or the negative of
these words or other variations of these words or other comparable words, or by discussion of strategy that involve risks and
uncertainties. We caution you that these forward-looking statements are only predictions, and 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. Some of these
factors and conditions include: (i) the harshness of the space environment in which our satellites operate; (ii) governmental or
regulatory changes; (iii) access to scarce launch vehicle resources and risk of launch failures; (iv) our affiliate, Globalstar is a
development-stage company that may continue to lose money, have negative cash flow, require additional money and suffer
delays in meeting its targets; (v) dependence on our operating subsidiaries, especially Space Systems/Loral, Inc., for operating
income; (vi) severe competition in our industry; and (vii) we and our subsidiaries and affiliates owe significant amounts of
money. For a detailed discussion of these factors and conditions, please refer to the periodic reports that we (Loral Space &
Communications Ltd.) and our subsidiaries and affiliates (Globalstar, L.P., Globalstar Telecommunications Limited, Loral
Orion, Inc. and Satelites Mexicanos, S.A. de C.V.) file with the SEC. In addition, we caution you that the company operates
in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the
company's control.
LORAL SPACE & COMMUNICATIONS LTD
INCOME STATEMENTS
(In millions, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Segment Revenues:
Satellite manufacturing
and technology $ 366.8 $ 282.9 $ 1,038.6 $ 921.4
Fixed satellite
services (1) 86.9 67.1 249.4 185.6
Data services (2) 22.3 13.1 56.6 25.0
------- ------- --------- -------
Operating segment
revenues 476.0 363.1 1,344.6 1,132.0
Intercompany and
affiliate eliminations (128.8) (73.5) (313.1) (298.9)
-------- -------- --------- -------
Operating revenues $ 347.2 $ 289.6 $ 1,031.5 $ 833.1
======== ======== ========= =======
Segment EBITDA:
Satellite manufacturing
and technology $ 33.9 $ 19.2 $ 95.9 $ 59.6
Fixed satellite
services (1) 49.6 48.9 144.7 129.9
Data services (2) (2.3) (4.3) (5.1) (10.0)
Corporate expenses (8.6) (9.7) (25.3) (24.4)
EBITDA for operating
segments before
development and
start-up costs
and intercompany
and affiliate
eliminations 72.6 54.1 210.2 155.1
Development and
start-up costs:
Data services (3) (5.2) (8.1) (13.2) (24.8)
Global mobile
telephony(4) (41.3) (45.9) (120.0) (98.2)
------- --------- --------- ------
Total development
and start-up costs (46.5) (54.0) (133.2) (123.0)
------- --------- --------- ------
26.1 0.1 77.0 32.1
Intercompany and
affiliate eliminations 9.8 19.8 39.1 18.4
------- --------- --------- ------
EBITDA as reported 35.9 19.9 116.1 50.5
Depreciation and
amortization (44.5) (39.5) (123.8) (95.3)
-------- --------- --------- ------
Operating loss (8.6) (19.6) (7.7) (44.8)
Interest and
investment income
(expense), net 0.3 0.6 (8.0) 2.5
Gain on investment (5) -- 35.0 -- 35.0
------- --------- --------- ------
Pretax income (loss) (8.3) 16.0 (15.7) (7.3)
Income tax benefit (6) 27.7 4.0 27.9 10.6
------- --------- --------- ------
Income after taxes 19.4 20.0 12.2 3.3
Minority interest/Equity
in affiliate losses (31.9) (30.7) (101.3) (88.4)
------- --------- --------- ------
Net loss (12.5) (10.7) (89.1) (85.1)
Preferred dividends (11.6) (11.6) (34.8) (34.8)
------- --------- --------- ------
Net loss - common
shareholders $ (24.1) $ (22.3) $ (123.9) $ (119.9)
======= ========= ========== =========
Weighted shares
outstanding - Basic
and Diluted 290.4 289.0 290.1 268.0
======= ========= ========= =========
Loss per share - Basic
and Diluted $ (0.08) $ (0.08) $ (0.43) $ (0.45)
======= ========= ========= =========
(1) Includes Loral Orion's transponder leasing business from April 1,
1998, 100% of EuropeStar's costs in 1999 only and 100% of
SatMex's revenues and EBITDA for all periods, (for the three and
nine months ended September 30, 1999, SatMex's results includes
$8.5 million and $25.5 million in revenues and $3.7 million and
$11.2 million in EBITDA, respectively, from the sale of
transponders to Loral Skynet). (2) Includes Loral Orion's data services business from April 1, 1998. (3) Includes 100% of
CyberStar's EBITDA for all periods. (4) Includes 100% of Globalstar's EBITDA for all periods. (5) The three and nine
months ended September 30, 1998, include a $35
million gain realized on the purchase of additional Globalstar
partnership interests equating to 16.8 million shares of
Globalstar Telecommunications Limited ("GTL") and the subsequent
sale of 8.4 million shares of GTL common stock to the Soros
funds. (6) The three and nine months ended September 30, 1999, include a
non-recurring benefit of $33.6 million relating to a tax law
change affecting the utilization of Loral Orion's pre-acquisition
loss carryforwards.
LORAL SPACE & COMMUNICATIONS LTD.
Supplemental Financial Data
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
BOOKINGS
Satellite manufacturing
and technology $ 110.1 $ 8.6 $ 633.1 $ 890.6
Fixed satellite
services(1) 395.4 145.1 728.8 362.4
Data services(2) 33.2 27.2 87.8 41.9
-------- --------- --------- ------
Total bookings 538.7 180.9 1,449.7 1,294.9
Intercompany and
affiliate
eliminations (219.6) (86.5) (640.2) (275.5)
-------- --------- --------- ------
Net bookings $ 319.1 $ 94.4 $ 809.5 $ 1,019.4
======== ========= ========= =======
September 30, 1999 September 30, 1998
------------------ ------------------
FUNDED BACKLOG
Satellite
manufacturing and
technology $ 1,081.5 $ 1,328.1
Fixed satellite
services(3) 1,314.2 909.7
Data services 178.0 133.9
---------- --------
Total funded backlog(3) 2,573.7 2,371.7
Intercompany and
affiliate eliminations (577.5) (360.0)
========== ========
Net funded backlog(3) $ 1,996.2 $ 2,011.7
========== ========
September 30, 1999 September 30, 1998
------------------ ------------------
CASH (4) $463.1 $721.1
TOTAL DEBT (5) $2,066.0 $1,519.4
EQUITY $2,811.9 $2,963.8
(1) Includes Loral Orion's transponder leasing business from April 1,
1998 and 100% of SatMex for all periods (for the three and nine
months ended September 30, 1999 SatMex's results includes $8.5
million and $25.5 million in bookings from the sale of
transponders to Loral Skynet). (2) Includes Loral Orion's data services business from April 1, 1998. (3) Backlog as of
September 30, 1999, includes $87.5 million of
backlog from Loral's acquistion of Apstar IIR's existing customer
leases. (4) Includes Loral Orion's restricted cash of $50.0 million and $71.8
million as of September 30, 1999 and 1998, respectively, for
interest payments on Loral Orion senior debt and Loral Orion's
segregated cash of $147.5 million as of September 30, 1999 held
for satellite payments. (5) Total debt includes $957.2 million and $910.6 million of Loral
Orion debt as of September 30, 1999 and 1998, respectively, which
is non-recourse to Loral.
Contact:
Loral Space & Communications
Jeanette Clonan
(212) 338-5658 |
