5. Investments in Affiliates

Investments in affiliates consist of (in thousands):


	June 30,		December 31,
	2019		2018
Telesat	$	94,406	$	24,574

Equity in net income (loss) of affiliates consists of (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Telesat	$	41,278	$	(3,455)	$	83,282	$	1,639

Telesat

As of June 30, 2019 and December 31, 2018, we held a 62.7% economic interest and a 32.6% voting interest in Telesat. We use the equity method of accounting for our majority economic interest in Telesat because we own 32.6% of the voting stock and do not exercise control by other means to satisfy the U.S. GAAP requirement for treatment as a consolidated subsidiary. We have also concluded that Telesat is not a variable interest entity for which we are the primary beneficiary. Loral’s equity in net income or loss of Telesat is based on our proportionate share of Telesat’s results in accordance with U.S. GAAP and in U.S. dollars. Our proportionate share of Telesat’s net income or loss is based on our economic interest as our holdings consist of common stock and non-voting participating preferred shares that have all the rights of common stock with respect to dividends, return of capital and surplus distributions, but have no voting rights.

In addition to recording our share of equity in net income of Telesat, we also recorded our share of equity in other comprehensive loss of Telesat of $13.5 million for the six months ended June 30, 2019.

On January 1, 2019, Telesat adopted ASC 842, Leases, for its U.S. GAAP reporting which we use to record our equity income in Telesat. Telesat adopted the new guidance using the modified retrospective approach with the cumulative effect of initially applying the standard being recorded on the balance sheet. As a result, on January 1, 2019, Telesat recognized a right-of-use asset of $19.6 million and lease liability of $20.0 million on its condensed consolidated balance sheet. Comparative summary financial information of Telesat presented below has not been restated and continues to be reported under the accounting standards in effect for those periods presented.

The ability of Telesat to pay dividends or certain other restricted payments in cash to Loral is governed by applicable covenants in Telesat’s debt and shareholder agreements. Telesat’s credit agreement governing its senior secured credit facilities limits, among other items, Telesat’s ability to incur debt and make dividend payments if the total leverage ratio (“Total Leverage Ratio”) is above 4.50:1.00, with certain exceptions. As of June 30, 2019, Telesat’s Total Leverage Ratio was 4.75:1.00. Telesat is, however, permitted to pay annual consulting fees of $5.0 million to Loral in cash (see Note 14).

The following table presents summary financial data for Telesat in accordance with U.S. GAAP as of June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018 (in thousands):


	June 30,		December 31,
	2019		2018
Balance Sheet Data:
Current assets	$	741,714	$	628,125
Total assets		4,068,167		3,942,847
Current liabilities		118,201		139,401
Long-term debt, including current portion		2,756,055		2,764,599
Total liabilities		3,464,565		3,474,504
Shareholders’ equity		603,602		468,343


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Statement of Operations Data:
Revenues	$	172,995	$	164,114	$	340,639	$	348,980
Operating expenses		(30,405)		(26,933)		(68,384)		(57,536)
Depreciation, amortization and stock-based compensation		(54,093)		(48,287)		(107,891)		(96,786)
Other operating expense		(10)		(15)		(65)		(13)
Operating income		88,487		88,879		164,299		194,645
Interest expense		(46,492)		(42,520)		(93,335)		(87,608)
Foreign exchange gain (loss)		45,946		(45,777)		98,415		(109,078)
(Loss) gain on financial instruments		(21,263)		(1,767)		(36,375)		30,616
Other income		4,272		2,973		8,106		4,591
Income tax provision		(6,481)		(7,815)		(11,036)		(31,585)
Net income (loss)	$	64,469	$	(6,027)	$	130,074	$	1,581

Other

We own 56% of XTAR, a joint venture between us and Hisdesat Servicios Estrategicos, S.A. (“Hisdesat”) of Spain. We account for our ownership interest in XTAR under the equity method of accounting because we do not control certain of its significant operating decisions. We have also concluded that XTAR is not a variable interest entity for which we are the primary beneficiary. As of June 30, 2019 and December 31, 2018, the carrying value of our investment in XTAR was zero. Beginning January 1, 2016, we discontinued providing for our allocated share of XTAR’s net losses as our investment was reduced to zero and we have no commitment to provide further financial support to XTAR.

XTAR owns and operates an X-band satellite, XTAR-EUR, located at 29° E.L., which is designed to provide X-band communications services exclusively to United States, Spanish and allied government users throughout the satellite’s coverage area, including Europe, the Middle East and Asia. XTAR also leases 7.2 72MHz X-band transponders on the Spainsat satellite located at 30° W.L., owned by Hisdesat. These transponders, designated as XTAR-LANT, provide capacity to XTAR for additional X-band services and greater coverage and flexibility.

As of June 30, 2019 and December 31, 2018, the Company also held an indirect ownership interest in a foreign company that currently serves as the exclusive service provider for Globalstar service in Mexico. The Company accounts for this ownership interest using the equity method of accounting. As of June 30, 2019 and December 31, 2018, the carrying value of this investment was zero. Because Loral has written-off its investment in this company and has no future funding requirements relating to this investment, there is no requirement for us to provide for our allocated share of this company’s net losses.