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May 9, 2011
Loral Space & Communications Inc. announced its financial results for the three months ended March 31, 2011. Revenues and Adjusted EBITDA at both Telesat and Space Systems/Loral (SS/L) showed continued improvement when compared to the first quarter of 2010.
Combined segment revenues and Adjusted EBITDA for the quarter were $486.4 million and $194.6 million, respectively, which compared to $422.3 million and $151.6 million, respectively, in the first quarter of 2010. All of Telesat's revenue and Adjusted EBITDA are included in these segment results. Loral's income statement, however, reflects its 64 percent economic interest in Telesat only under the equity method of accounting.
Loral's revenues and Adjusted EBITDA for the quarter after eliminations were $279.9 million and $35.4 million, respectively, compared to $228.9 million and $8.5 million respectively, in the first quarter of 2010. The eliminations include all of Telesat's results, as well as the impact of Loral's portion of the ViaSat-1 construction contract on SS/L's results.
Loral reported income, before equity in net income of affiliates, of $21.6 million in the current quarter compared to a loss, before equity in net income of affiliates, of $15.2 million for the first quarter of 2010. Equity in net income of affiliates, comprised substantially of Loral's share of Telesat's net income and reflecting foreign exchange changes during the period, was $46.2 million in the current quarter compared to $44.6 million in the first quarter of 2010. As a result, Loral reported net income of $67.8 million in the current quarter compared to net income of $29.4 million for the first quarter of 2010.
Diluted earnings per share for the first quarter of 2011 were $2.10 compared to diluted earnings per share of $0.97 in the first quarter of 2010. Loral's liquidity remained strong with cash of $106.5 million on March 31, 2011 compared to $165.8 million on December 31, 2010. There were no drawings against the $150 million revolving credit facility at SS/L.
"Both Telesat and SS/L continue to focus on operating efficiencies and growth strategies," said Michael Targoff, chief executive officer of Loral Space & Communications. "The steady improvement of our results over the last several years reflects the ongoing success of this strategy."
Business Unit Review
Satellite Manufacturing
In the first quarter of 2011, SS/L reported revenue before eliminations of $280.7 million, up $50 million from $230.8 million reported in the first quarter of 2010. Adjusted EBITDA for the first quarter of 2011 was $40.5 million, which triples the Adjusted EBITDA of $12.7 million for the first quarter of 2010. Backlog at SS/L continues to be strong at $1.5 billion.
"The results at SS/L continue to be bolstered by excellent factory performance," said Mr. Targoff. "While we don't expect the growth trend to continue at this rate, the ongoing improvements to operations and the benefits of a full factory do have a sustainable positive impact on our financial results."
In the first quarter, SS/L was awarded a contract to manufacture a spacecraft for Australian telecommunications service provider, SingTel Optus. The satellite, Optus 10, will be used to augment the existing fleet of SingTel Optus satellites and demonstrates SS/L's flexibility to provide a smaller satellite with unique technical capabilities.
SS/L also announced that it delivered Telstar 14R/Estrela do Sul, a satellite that it built for Telesat, to launch base ahead of schedule. This marks the fourth consecutive satellite that SS/L has completed in advance of the scheduled contract delivery date.
Satellite Services
Reflecting increased fleet utilization, ongoing cost efficiencies, and positively impacted by the stronger Canadian dollar, Telesat revenue for the quarter was $205.7 million and Adjusted EBITDA was $158.9 million. This shows improvement over revenue and Adjusted EBITDA for the first quarter of 2010 of $191.5 million and $142.8 million, respectively. The impact of changes in exchange rates between the Canadian dollar and the U.S. dollar in the first quarter increased Telesat revenue by $6.4 million and Adjusted EBITDA by $3.8 million.
Telesat's net income of $78.7 million for the three months ended March 31, 2011 includes a net foreign exchange gain of $53.6 million related primarily to Telesat's U.S. dollar denominated debt, as a result of the weakening of the U.S dollar against the Canadian dollar during the quarter. In the comparable quarter in 2010, net income of $76.9 million included a net foreign exchange gain of $65.9 million.
First quarter financial metrics at Telesat continue to be strong. Backlog at $5.8 billion is robust, cash, including short-term investments, was $253.8 million, and there were no borrowings against the revolving credit facility. Telesat's leverage as measured by Consolidated Debt to Adjusted EBITDA, based on the last four quarters, continued to decrease, reaching 4.4 times, a level significantly improved from more than eight times at the end of 2007 when Loral acquired its interest in Telesat.
In April 2011, Telesat acquired the Canadian payload on ViaSat-1 from Loral. The satellite, which is expected to be launched later this year, is already contracted to Barrett Xplore for broadband services in rural Canada for the life of the satellite.
Both the purchase of the ViaSat-1 capacity and the commencement of service of Telstar 14R/Estrela do Sul are expected to increase future revenues. Growth will also be driven by the Nimiq 6 satellite, which is anticipated to be launched in the first half of 2012 and the Anik G1 satellite, which Telesat anticipates will be launched in the second half of 2012.
Strategic Initiatives
"The previously announced process to explore strategic alternatives for Telesat and SS/L is ongoing," said Mr. Targoff. "The operating strength and prospects of both Telesat and SS/L provide us with a number of favorable alternatives ranging from sale or public offerings to staying the course with or without an SS/L spinoff or Telesat recapitalization or other internal restructuring. We would hope to have more clarity this quarter and will provide updates as events warrant."
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