Segments

6 Months Ended

Jun. 30, 2011

Segments [Abstract]

Segments

17. Segments

Loral has two segments: satellite manufacturing and satellite services. Our segment reporting data includes unconsolidated affiliates that meet the reportable segment criteria. The satellite services segment includes 100% of the results reported by Telesat for the three and six months ended June 30, 2011 and 2010. Although we analyze Telesat’s revenue and expenses under the satellite services segment, we eliminate its results in our consolidated financial statements, where we report our 64% share of Telesat’s results as equity in net income of affiliates. Our ownership interest in XTAR, for which we use the equity method of accounting, is included in Corporate.

The common definition of EBITDA is “Earnings Before Interest, Taxes, Depreciation and Amortization.” In evaluating financial performance, we use revenues and operating income before depreciation, amortization and stock-based compensation (excluding stock-based compensation from SS/L Phantom SARs expected to be settled in cash), gain on disposition of net assets and directors’ indemnification expense (“Adjusted EBITDA”) as the measure of a segment’s profit or loss. Adjusted EBITDA is equivalent to the common definition of EBITDA before: gains on disposition of net assets, directors’ indemnification expense, gains or losses on litigation not related to our operations; other (expense) income; and equity in net income (loss) of affiliates.

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, gain on disposition of net assets, directors’ indemnification expense, gains or losses on litigation not related to our operations, other (expense) income and equity in net income (loss) of affiliates. 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, the effects of other (expense) income, which are typically for non-recurring transactions not related to the on-going business, 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.

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.

Intersegment revenues primarily consists of satellites under construction by satellite manufacturing for satellite services and the leasing of transponder capacity by satellite manufacturing from satellite services. Summarized financial information concerning the reportable segments is as follows:

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2011			2010			2011			2010
	(In thousands)						(In thousands)
Revenues
Satellite manufacturing:
External revenues	$	218,832		$	256,689		$	456,487		$	463,428
Intersegment revenues(1)		33,590			24,503			76,664			48,618
Satellite manufacturing revenues		252,422			281,192			533,151			512,046
Satellite services revenues(2)		207,139			199,593			412,861			391,112
Operating segment revenues before eliminations		459,561			480,785			946,012			903,158
Intercompany eliminations(3)		—			(1,230	)		(830	)		(3,170	)
Affiliate eliminations(2)		(207,139	)		(199,593	)		(412,861	)		(391,112	)
Total revenues as reported	$	252,422		$	279,962		$	532,321		$	508,876
Segment Adjusted EBITDA(4)
Satellite manufacturing	$	28,097		$	37,040		$	68,613		$	49,770
Satellite services(2)		160,098			153,225			319,045			296,058
Corporate(5)		(3,396	)		(2,870	)		(8,195	)		(6,771	)
Adjusted EBITDA before eliminations		184,799			187,395			379,463			339,057
Intercompany eliminations(3)		—			(194	)		(279	)		(512	)
Affiliate eliminations(2)		(160,098	)		(153,225	)		(319,045	)		(296,058	)
Adjusted EBITDA		24,701			33,976			60,139			42,487
Reconciliation to Operating Income
Depreciation, Amortization and Stock-Based Compensation(4)
Satellite manufacturing		(7,853	)		(9,998	)		(15,544	)		(19,503	)
Satellite services(2)		(62,768	)		(62,225	)		(124,959	)		(123,533	)
Corporate		(277	)		(880	)		(572	)		(1,796	)
Segment depreciation before affiliate eliminations		(70,898	)		(73,103	)		(141,075	)		(144,832	)
Affiliate eliminations(2)		62,768			62,225			124,959			123,533
Depreciation, amortization and stock-based compensation as reported		(8,130	)		(10,878	)		(16,116	)		(21,299	)
Gain on disposition of net assets(6)		6,913			—			6,913			—
Directors’ indemnification expense(7)		—			—			—			(14,357	)
Operating income as reported	$	23,484		$	23,098		$	50,936		$	6,831

	June 30,			December 31,
	2011			2010
	(In thousands)
Total Assets(8)
Satellite manufacturing	$	971,440		$	920,647
Satellite services(2) (9)		5,933,749			5,605,239
Corporate(4)		548,471			538,464
Total assets before affiliate eliminations		7,453,660			7,064,350
Affiliate eliminations(2)		(5,574,872	)		(5,309,441	)
Total assets as reported	$	1,878,788		$	1,754,909

(1)	Intersegment revenues include $33.6 million and $23.3 million for the three months ended June 30, 2011 and 2010, respectively and $75.8 million and $45.5 million for the six months ended June 30, 2011 and 2010, respectively, of revenue from affiliates.
(2)	Satellite services represents Telesat. Affiliate eliminations represent the elimination of amounts attributable to Telesat whose results are reported under the equity method of accounting in our condensed consolidated statements of operations (see Note 9).
(3)	Represents the elimination of intercompany sales and intercompany Adjusted EBITDA for a satellite under construction by SS/L for Loral.

(4)	Compensation expense related to SS/L Phantom SARs and restricted stock units paid in cash or expected to be paid in cash is included in Adjusted EBITDA. Compensation expense related to SS/L Phantom SARs and restricted stock units paid in Loral common stock or expected to be paid in Loral common stock is included in depreciation, amortization and stock-based compensation.
(5)	Includes corporate expenses incurred in support of our operations and includes our equity investments in XTAR and Globalstar service providers.
(6)	Represents the gain on the sale of Loral’s portion of the payload on the ViaSat-1 satellite and related net assets to Telesat adjusted for elimination of Loral’s 64% ownership interest in Telesat (see Note 18).
(7)	Represents indemnification expense, in connection with defense costs incurred by MHR affiliated directors in the Delaware Shareholder derivative case (see Note 15).
(8)	Amounts are presented after the elimination of intercompany profit.
(9)	Includes $2.5 billion and $2.4 billion of satellite services goodwill related to Telesat as of June 30, 2011 and December 31, 2010, respectively.