16. 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 years ended December 31, 2011, 2010 and 2009. 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 investment 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; and equity in net income 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, gains on disposition of net assets, directors' indemnification expense, gains or losses on litigation not related to our operations, other expense and equity in net income 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, 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:

Segment Information

(In thousands)

		September 30,			September 30,			September 30,
	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Revenues
Satellite manufacturing:
External revenues	$	967,432		$	1,021,768		$	901,283
Intersegment revenues⁽¹⁾		140,763			143,318			107,401

Satellite manufacturing revenues		1,108,195			1,165,086			1,008,684
Satellite services revenues⁽²⁾		817,269			797,283			691,566

Operating segment revenues before eliminations		1,925,464			1,962,369			1,700,250
Intercompany eliminations⁽³⁾		(830	)		(6,101	)		(15,284	)
Affiliate eliminations⁽²⁾		(817,269	)		(797,283	)		(691,566	)

Total revenues as reported	$	1,107,365		$	1,158,985		$	993,400

Segment Adjusted EBITDA⁽⁴⁾
Satellite manufacturing	$	137,659		$	143,076		$	90,565
Satellite services⁽²⁾		629,150			606,651			488,149
Corporate⁽⁵⁾		(17,170	)		(17,866	)		(21,371	)

Adjusted EBITDA before eliminations		749,639			731,861			557,343
Intercompany eliminations⁽³⁾		(279	)		(1,465	)		(1,673	)
Affiliate eliminations⁽²⁾		(629,150	)		(606,651	)		(488,149	)

Adjusted EBITDA		120,210			123,745			67,521

Reconciliation to Operating Income
Depreciation, Amortization and Stock-Based Compensation⁽⁴⁾
Satellite manufacturing		(32,514	)		(34,675	)		(44,203	)
Satellite services⁽²⁾		(248,010	)		(249,318	)		(230,176	)
Corporate		(1,175	)		(1,605	)		(3,107	)

Segment depreciation before affiliate eliminations		(281,699	)		(285,598	)		(277,486	)
Affiliate eliminations⁽²⁾		248,010			249,318			230,176

Depreciation, amortization and stock-based compensation as reported		(33,689	)		(36,280	)		(47,310	)
Gain on disposition of net assets⁽⁶⁾		6,913			—			—
Directors' indemnification expense ⁽⁷⁾		—			(6,857	)		—

Operating income as reported	$	93,434		$	80,608		$	20,211

Capital Expenditures
Satellite manufacturing	$	36,615		$	35,378		$	26,426
Satellite services⁽²⁾		390,641			254,020			231,654
Corporate		350			18,679			17,131

Segment capital expenditures before affiliate eliminations⁽⁸⁾		427,606			308,077			275,211
Affiliate eliminations⁽²⁾		(390,641	)		(254,020	)		(231,654	)

Capital expenditures as reported	$	36,965		$	54,057		$	43,557

		September 30,			September 30,
	As of December 31,
	2011			2010
	(In thousands)
Total Assets⁽⁸⁾
Satellite manufacturing	$	929,408		$	920,647
Satellite services⁽⁹⁾		5,724,418			5,605,239
Corporate		529,501			538,464

Total assets before affiliate eliminations		7,183,327			7,064,350
Affiliate eliminations⁽²⁾		(5,347,174	)		(5,309,441	)

Total assets as reported	$	1,836,153		$	1,754,909

⁽¹⁾	Intersegment revenues include $140 million, $137 million and $92 million for the years ended December 31, 2011, 2010 and 2009, 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 consolidated statements of operations (see Note 7).

⁽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 17).

⁽⁷⁾	Represents indemnification expense, net of insurance recovery, 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 $2.4 billion of satellite services goodwill related to Telesat as of December 31, 2011 and 2010, respectively.

Revenue by Customer Location

The following table presents our revenues by country based on customer location for the years ended December 31, 2011, 2010 and 2009 (in thousands):

		September 30,		September 30,		September 30,
	For the Year Ended December 31,
	2011		2010		2009
United States	$	397,389	$	645,769	$	534,294
Canada		137,610		137,195		92,094
Spain		113,546		85,161		85,499
Bermuda		83,600		—		—
Mexico		82,657		49,157		22
France		80,923		24,657		344
People's Republic of China (including Hong Kong)		47,967		44,135		54,677
United Kingdom		40,741		57,976		101,499
Australia		40,067		—		—
Luxembourg		31,107		70,678		61,673
Norway		29,809		—		—
The Netherlands		18,501		26,721		59,509
Other		3,448		17,536		3,789

	$	1,107,365	$	1,158,985	$	993,400

During 2011, three of our customers accounted for approximately 13%, 12% and 10% of our consolidated revenues. During 2010, five of our customers accounted for approximately 19%, 13%, 12%, 12% and 11% of our consolidated revenues. During 2009, three of our customers accounted for approximately 22%, 16% and 10% of our consolidated revenues.