Loral Reports 2006 Fourth Quarter and Full Year Results
NEW YORK, March 15 /PRNewswire-FirstCall/ — Loral Space & Communications Inc. today reported its financial results for the periods ended December 31, 2006.
Loral’s 2006 results reflect a strong year of bookings and performance at its satellite manufacturing unit, Space Systems/Loral (SS/L), as well as continued steady performance at Loral Skynet, the company’s fixed satellite services (FSS) business.
Highlights * Led by strong results at SS/L, Loral’s 2006 full year revenue was $797 million, a 27 percent increase from $626 million in 2005. Fourth quarter revenue was $206 million, compared to $197 million reported in the fourth quarter of 2005. * Loral’s 2006 Adjusted EBITDA(1) increased to $101 million versus Adjusted EBITDA of $37 million in 2005. In the fourth quarter of 2006, Loral’s Adjusted EBITDA was $37 million, compared to Adjusted EBITDA of $11 million for the fourth quarter of 2005. * Loral’s 2006 operating income increased to $30 million versus an operating loss of $72 million in 2005. In the fourth quarter of 2006, Loral’s operating income was $19 million, compared to an operating loss of $5 million for the fourth quarter of 2005. * In the fourth quarter of 2006, Loral reported net income of $3 million versus a net loss of $15 million in the fourth quarter of 2005. Loral’s net loss for 2006 was $23 million, compared to a net loss of $74 million in 2005.(2) * Loral ended 2006 with $293 million in available cash and short term investments. On February 27, 2007, Loral completed its $300 million of preferred stock financing with MHR Fund Management LLC. Loral intends to utilize its cash and short term investments primarily for working capital requirements and facilities upgrades at SS/L, for the continued construction of Loral Skynet’s newest satellite, Telstar 11N, and to complete the Telesat Canada transaction. * Loral’s total consolidated backlog increased to $1.347 billion at December 31, 2006 from $1.248 billion at December 31, 2005.
“2006 was a watershed year for Loral in terms of implementing our growth and profitability strategy,” said Michael B. Targoff, Loral’s chief executive officer. “A strong commercial satellite manufacturing market and SS/L’s excellent on-orbit performance and reliability, coupled with its schedule integrity and superior customer service, led to seven new satellite awards for the unit, driving revenues and profitability.
“In satellite services, our agreement to acquire Telesat Canada and combining it with Loral Skynet is transformational, creating a strong platform for value creation. Upon closing, the new Telesat company will be the fourth largest satellite operator in the world, with a large, high-quality backlog, international scope and access to high growth FSS and direct-to-home markets.”
Loral emerged from bankruptcy on November 21, 2005, and its financial statements reflect fresh-start accounting effective October 1, 2005. Comparisons to 2005 financial information throughout this release refer to the combined results of Loral prior to and after its emergence.
Business Unit Review Satellite Manufacturing
With continued strength in booking new orders and good cost, schedule and quality performance in our manufacturing business, Space Systems/Loral’s 2006 revenues before eliminations increased 42 percent to $697 million, compared to $491 million in 2005. Adjusted EBITDA for the unit rose to $66 million for the year, compared to Adjusted EBITDA of $27 million in 2005.
In the fourth quarter of 2006, SS/L had revenues before eliminations of $203 million, versus $162 million in the fourth quarter of 2005. SS/L Adjusted EBITDA in the fourth quarter was $32 million, up from Adjusted EBITDA of $12 million in the year-ago quarter. SS/L’s 2006 results include one-time gains of $9 million from a litigation settlement in the third quarter and $19 million from Loral’s settlement with Satmex in the fourth quarter.
As a result of seven new construction awards in 2006, backlog at SS/L at December 31, 2006 rose to $1.118 billion, including intercompany backlog of $116 million. Year-end 2005 backlog was $815 million, including intercompany backlog of $0.3 million.
In 2006, SS/L delivered five satellites: SPAINSAT, Satmex-6, Galaxy 16, DIRECTV 9S and WildBlue-1. In 2007, there are four SS/L-built satellites scheduled for delivery.
Satellite Services
Loral Skynet had 2006 revenues before eliminations of $164 million, up from $152 million; increases primarily driven by $10 million of one-time items in the third quarter. Adjusted EBITDA for Loral Skynet in 2006 totaled $68 million, compared to $51 million in 2005.
Loral Skynet’s fourth quarter 2006 revenues before eliminations totaled $38 million, versus $37 million in the same period a year ago. Adjusted EBITDA for Skynet in the fourth quarter was $13 million, versus $12 million in the fourth quarter of 2005.
After accounting for Connexion by Boeing’s cancellation of $37 million in backlog in the third quarter, satellite services backlog on December 31, 2006, was $355 million, including intercompany backlog of $10 million. Satellite services backlog on December 31, 2005 was $453 million, including intercompany backlog of $20 million.
At the end of 2006, utilization on Loral Skynet’s satellite fleet was 68 percent.
Telesat Canada Update
On December 16, 2006, the joint venture company formed by Loral and its Canadian partner, PSP Investments, entered into a definitive agreement with BCE Inc. (TSX/NYSE: BCE) to acquire 100 percent of the stock of Telesat Canada from BCE for approximately US $2.8 billion (CAD 3.25 billion). Loral expects to close the transaction in mid-2007.
Telesat Canada had 2006 revenues of CAD 479 million and Adjusted EBITDA of CAD 261 million. Telesat Canada had a year-end 2006 backlog of CAD 5.2 billion. This backlog includes the benefit of three satellites under construction where the majority of the capacity has already been leased for the entire life of the satellites.
A comprehensive integration plan for Loral Skynet and Telesat is being developed and the new Telesat will benefit in a number of areas where redundancies exist, including overhead and support functions, and both space and ground segment facilities. The integration plan also will result in improved operational and competitive abilities, while providing our customers with expanded satellite and terrestrial coverage and superior service.
Regulatory activities regarding the acquisition of Telesat are proceeding smoothly, with the transaction already receiving U.S. and Canadian anti-trust approval. The transaction is proceeding through other required U.S. and Canadian regulatory approvals, including approvals from the Federal Communications Commission (FCC) and Industry Canada.
A full discussion of Loral’s results is contained in the company’s Form 10-K, 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/.
Conference Call
Loral’s chief executive officer Michael B. Targoff will host a conference call and simultaneous web cast tomorrow, March 16th, at 11:00 am EDT to discuss the company’s 2006 results.
Participants should dial (719) 457-2729 approximately 10 minutes before the call’s start. The listen-only web cast may be accessed on Loral’s web site (http://www.loral.com/) under “Events & Presentations” in the Investor Relations section.
A replay of the call will be available beginning at 2:00 pm EDT on March 16 through 11:59 pm on March 23, by dialing (719) 457-0820, access code 3418505. The web cast will be available on Loral’s web site for 30 days.
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.
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 the company’s annual report on Form 10-K for the fiscal year ended December 31, 2006. 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 us and 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 us and 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 us and 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-K, available on the company’s web site at http://www.loral.com/ or on the SEC’s EDGAR service at http://www.sec.gov/. (2) Loral’s net loss in 2005 excludes a $1.104 billion gain on the discharge of pre-petition obligations and fresh-start adjustments. LORAL SPACE & COMMUNICATIONS INC. Statements of Operations (In millions) Revenues Three Months For the Period Ended October 2 to Twelve Months Ended December 31, December 31, December 31, 2006 2005 2006 2005 Satellite Manufacturing $202.9 $161.8 $696.5 $491.3 Satellite Services 37.5 37.0 163.8 151.5 Segment revenues 240.4 198.8 860.3 642.8 Eliminations (34.8) (1.6) (63.0) (16.4) Revenues as reported $205.6 $197.2 $797.3 $626.4 Adjusted EBITDA Three Months For the Period Ended October 2 to Twelve Months Ended December 31, December 31, December 31, 2006 2005 2006 2005 Satellite Manufacturing $32.5 $11.8 $65.9 $27.0 Satellite Services 13.2 11.5 68.0 51.3 Corporate expenses(1) (4.9) (11.0) (26.8) (28.3) Segment Adjusted EBITDA before eliminations 40.8 12.3 107.1 50.0 Eliminations (3.5) (1.2) (6.0) (13.5) Adjusted EBITDA $37.3 $11.1 $101.1 $36.5 Reconciliation of Adjusted EBITDA to Net Income (Loss) (in millions) Three Months For the Period Ended October 2 to Twelve Months Ended December 31, December 31, December 31, 2006 2005 2006 2005 Adjusted EBITDA $37.3 $11.1 $101.1 $36.5 Depreciation and amortization (18.3) (16.0) (71.3) (77.3) Reorganization expenses due to bankruptcy(1) – – – (31.2) Operating income (loss) from continuing operations 19.0 (4.9) 29.8 (72.0) Gain on discharge of pre-petition obligations and fresh-start adjustments(2) – – – 1,101.5 Interest and investment income 15.1 4.1 31.5 10.5 Interest expense (4.7) (4.4) (23.4) (21.6) Other income (expense) (8.8) (0.2) (7.8) (1.1) Income tax provision (9.4) (1.8) (20.8) 9.1 Equity in net losses of affiliates (1.3) (5.4) (7.2) (8.2) Minority interest(3) (6.5) (2.7) (24.8) (2.6) Income (loss) from continuing operations 3.4 (15.3) (22.7) 1,015.6 Income from discontinued operations – – – 14.0 Net income (loss) $3.4 $(15.3) $(22.7) $1,029.6 (1) Reorganization expenses due to bankruptcy only reflects 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 matters are included in Corporate expenses and totaled $1.2 million for the year ended December 31, 2006, $(2.8) million for the three months ended December 31, 2006 and $3.9 million for the period October, 2 to December 31, 2005. The three months and the year ended December 31, 2006 include the benefit of a $3 million reimbursement related to the settlement of professional fees previously paid. (2) In connection with our emergence from Chapter 11 and our adoption of fresh-start accounting on October 1, 2005 we recognized a gain on discharge of pre-petition obligations and fresh-start adjustments of $1.101 billion, related interest expense of $13.2 million and a tax benefit of $15.4 million, each of which is reflected separately on our Statement of Operations. (3) Represents the dividend accrual for the Loral Skynet Series A non convertible preferred stock. LORAL SPACE & COMMUNICATIONS INC. Supplemental Financial Data (In millions) Three Months Ended Twelve Months Ended December 31, December 31, 2006 2005(a) 2006 2005(b) BOOKINGS – Satellite manufacturing and technology $156.8 $74.9 $1,008.2 $828.8 Fixed satellite services 61.5 27.7 149.8 154.2 Intercompany eliminations (3.2) 9.0 (176.0) 7.9 Total bookings 215.1 111.6 982.0 990.9 Debookings (21.3) (39.2) (85.1) (98.4) NET BOOKINGS – $193.8 $72.4 $896.9 $892.5 December 31, December 31, 2006 2005 FUNDED BACKLOG Satellite manufacturing and technology $1,118.2 $815.0 Fixed satellite services 355.0 453.4 Total funded backlog 1,473.2 1,268.4 Intercompany eliminations (125.7) (20.4) NET FUNDED BACKLOG $1,347.5 $1,248.0 Condensed Balance Sheets (In millions) December 31, December 31, 2006 2005 Cash and equivalents $186.5 $275.8 Short-term investments 106.6 – Accounts receivable, net and Contracts-in-process 116.9 132.9 Other current assets 137.7 83.0 Total current assets 547.7 491.7 Property, plant & equipment, net 558.9 520.5 Goodwill 305.7 340.1 Other assets 317.6 326.7 Total assets $1,729.9 $1,679.0 Customer advances and billings in excess of costs and profits $242.7 $173.0 Other current liabilities 176.9 147.2 Total current liabilities 419.6 320.2 Long-term debt 128.1 128.2 Other long-term liabilities 320.9 403.4 Total liabilities 868.6 851.8 Minority interest 214.3 200.0 Shareholders’ equity 647.0 627.2 Total liabilities and shareholders’ equity $1,729.9 $1,679.0 (a) Represents the period from October 2, 2005 to December 31, 2005. (b) Represents a combination of the period from October 2, 2005 to December 31, 2005 and the period January 1, 2005 to October 1, 2005.
Loral Space & Communications Inc.
CONTACT: John McCarthy of Loral Space & Communications Inc.,+1-212-338-5345
Web site: http://www.loral.com/