18. 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 months ended March 31, 2012 and 2011. 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) and expense related to amounts payable to executives and certain employees of Telesat in connection with the special cash distribution paid to Telesat's shareholders ("Adjusted EBITDA") as the measure of a segment's profit or loss. Adjusted EBITDA is equivalent to the common definition of EBITDA before: gains or losses on litigation not related to our operations; expense related to amounts payable to executives and certain employees of Telesat in connection with the special cash distribution paid to Telesat's shareholders; other expense; and equity in net income of affiliates.

Adjusted EBITDA allows us and investors to compare our operating results with those of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, gains or losses on litigation not related to our operations, expense related to amounts payable to executives and certain employees of Telesat in connection with the special cash distribution paid to Telesat's shareholders, 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 expenses, 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 consist 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 (in thousands):


	Three Months Ended March 31,
	2012			2011
Revenues
Satellite manufacturing:
External revenues	$	262,496		$	237,655
Intersegment revenues⁽¹⁾		24,217			43,074

Satellite manufacturing revenues		286,713			280,729
Satellite services revenues⁽²⁾		196,023			205,722

Operating segment revenues before eliminations		482,736			486,451
Intercompany eliminations⁽³⁾		—			(830	)
Affiliate eliminations⁽²⁾		(196,023	)		(205,722	)

Total revenues as reported	$	286,713		$	279,899

Segment Adjusted EBITDA⁽⁴⁾
Satellite manufacturing	$	10,293		$	40,515
Satellite services⁽²⁾		149,408			158,947
Corporate⁽⁵⁾		(4,338	)		(4,798	)

Adjusted EBITDA before eliminations		155,363			194,664
Intercompany eliminations⁽³⁾		—			(279	)
Affiliate eliminations⁽²⁾		(149,408	)		(158,947	)

Adjusted EBITDA		5,955			35,438

Reconciliation to Operating Income
Depreciation, Amortization and Stock-Based Compensation⁽⁴⁾
Satellite manufacturing		(7,936	)		(7,691	)
Satellite services⁽²⁾		(60,488	)		(62,191	)
Corporate		(272	)		(295	)

Segment depreciation before affiliate eliminations		(68,696	)		(70,177	)
Affiliate eliminations⁽²⁾		60,488			62,191

Depreciation, amortization and stock-based compensation as reported		(8,208	)		(7,986	)

Operating (loss) income as reported	$	(2,253	)	$	27,452


	March 31, 2012			December 31, 2011
Total Assets⁽⁶⁾
Satellite manufacturing	$	973,496		$	929,408
Satellite services^{(2) (7)}		5,429,855			5,724,418
Corporate		890,803			529,501

Total assets before affiliate eliminations		7,294,154			7,183,327
Affiliate eliminations⁽²⁾		(5,420,132	)		(5,347,174	)

Total assets as reported	$	1,874,022		$	1,836,153

⁽¹⁾	Intersegment revenues include $24.2 million and $42.2 million for the three months ended March 31, 2012 and 2011, 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⁾	Amounts are presented after the elimination of intercompany profit.

⁽⁷⁾	Includes $2.4 billion of satellite services goodwill related to Telesat as of March 31, 2012 and December 31, 2011.