þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New York, New York 10016
(Address of principal executive offices)
Telephone:(212) 697-1105
Title of each class | Name of each exchange on which registered | |
Common stock, $.01 par value | NASDAQ |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Part and Item Number of | ||
Document | Form 10-K into which incorporated | |
Loral Notice of Annual Meeting of Stockholders and Proxy Statement for the Annual Meeting of Stockholders to be held May 20, 2008 | Part II, Item 5 (d) Part III, Items 11 through 14 |
Item 1. | Business |
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Successor Registrant | Predecessor Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
For the Year | For the Year | October 2, | January 1, | ||||||||||||||
Ended | Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
(In millions) | |||||||||||||||||
Total segment revenues | $ | 814 | $ | 697 | $ | 162 | $ | 330 | |||||||||
Eliminations | (53 | ) | (60 | ) | (1 | ) | (11 | ) | |||||||||
Revenues from satellite manufacturing as reported | $ | 761 | $ | 637 | $ | 161 | $ | 319 | |||||||||
Segment Adjusted EBITDA before eliminations(1) | $ | 35 | $ | 66 | $ | 12 | $ | 15 | |||||||||
(1) | See Consolidated Operating Results in Management’s Discussion and Analysis of Financial Condition and Results of Operations for significant items that affect comparability between the periods presented (see Note 18 to the consolidated financial statements for the definition of Adjusted EBITDA). |
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Expected | ||||||||||||||||||||||||
Orbital Location | Manufacturer’s | End-of- | ||||||||||||||||||||||
Regions | Launch | End-of-Service- | Commercial- | Transponders(1) | ||||||||||||||||||||
Covered | Date | Life | Service Life(1) | C-band(2) | Ku-band(2) | Ka-band | L-band(3) | Model | ||||||||||||||||
Nimiq 1 | 91.0o WL Canada, Continental United States | May 1999 | 2011 | 2024 | — | 32@24MHz | — | — | A2100 AX (Lockheed Martin) | |||||||||||||||
Nimiq 2(4) | 82.0o WL Canada, Continental United States | December 2002 | 2015 | 2023 | — | 20@24MHz | 2@500/100MHz | — | A2100 AX (Lockheed Martin) | |||||||||||||||
Nimiq 3(5) | 82o WL Canada Continental United States | June 1995 | 2007 | 2010 | — | 16@24MHz | — | — | BSS 601 (Boeing) | |||||||||||||||
Nimiq 4iR(5) | 91o WL Canada Continental United States | December 1993 | 2006 | 2009 | — | 16@24MHz | — | — | BSS 601 (Boeing) | |||||||||||||||
Anik F1(6) | 107.3o WL Canada, Continental United States, South America | November 2000 | 2016 | 2013 | 12@36MHz (S. America) | 16@27MHz (S. America) | — | — | BSS702 (Boeing) | |||||||||||||||
Anik F2 | 111.1o WL Canada, Continental United States | July 2004 | 2019 | 2028 | 24@36MHz | 32@27MHz | 31@56/112 MHz 6@500MHz 1@56/112MHz | — | BSS702 (Boeing) | |||||||||||||||
Anik F1-R(3) | 107.3o WL North America | September 2005 | 2020 | 2023 | 24@36MHz | 32@27MHz | — | 2@20MHz | E3000 (EADS Astrium) | |||||||||||||||
Anik F3(7) | 118.7o WL Canada, Continental United States | April 2007 | 2022 | 2026 | 24@36MHz | 32@27MHz | 2@75MHz (500MHz) | — | E3000 (EADS Astrium) | |||||||||||||||
Telstar 10(8) | 76.5o EL Asia and Portions of Europe, Africa and Australia | October 1997 | 2009 | 2012 | 1@30MHz 26@36MHz | 9@54MHz | — | — | SS/L 1300 | |||||||||||||||
Telstar 12(9) | 15o WL Eastern United States, SE Canada, Europe, Russia, Middle East, North Africa, portions of South and Central America | October 1999 | 2012 | 2016 | — | 37@54MHz | — | — | SS/L 1300 | |||||||||||||||
Telstar 14/ Estrela do Sul(10) | 63o WL Brazil And portions of Latin America, North America, Atlantic Ocean | January 2004 | 2019 | 2011 | — | 9@72MHz 10@36MHz 2@28MHz 1@56MHz | — | — | SS/L 1300 | |||||||||||||||
Telstar 18(11)(12) | 138o EL India, South East Asia, China, Australia And Hawaii | June 2004 | 2017 | 2018 | 14@36MHz 1@54MHz | 3@54MHz 1@40MHz | — | — | SS/L 1300 |
(1) | The number of available transponders and expected end of life shown in this table reflect Telesat Canada’s current estimate of each satellite’s capacity and useful life, taking account of anomalies and malfunctions the satellites have experienced and other factors such as remaining |
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fuel levels and consumption rates and other available engineering data. Telesat Canada periodically reviews and updates these estimates based on a satellite’s performance. Accordingly, these estimates are subject to change and it is possible that the actual commercial life of any of these satellites will be shorter than that indicated in the table. See Item 1A — “Risk Factors — After launch, satellites remain vulnerable to in-orbit failures which may result in reduced revenues and profits and other financial consequences.” | ||
(2) | Includes extended C-band and extended Ku-band in certain cases. | |
(3) | Telesat Canada has contracted the L-band capacity on Anik F1-R to Lockheed Martin. This L-band spectrum is not Telesat Canada’s; it is a United States spectrum licensed to Lockheed Martin. | |
(4) | Due to malfunctions affecting available power on Nimiq 2, not all transponders are operational. | |
(5) | These satellites are leased from DIRECTV, but are in Telesat Canada orbital positions. DIRECTV can terminate its lease agreement with Telesat Canada with respect to Nimiq 4iR if DIRECTV experiences one or more catastrophic failures with its other satellites. With respect to Nimiq 3, DIRECTV can terminate its lease agreement if it experiences two or more catastrophic failures with its other satellites. In the event of such termination, Telesat Canada may lose the revenues associated with these satellites if it cannot redeploy that capacity to other satellites. | |
(6) | Due to a gradual decrease in power on Anik Fl, this satellite will experience a premature end-of-life. | |
(7) | Telesat Canada has contracted for the sale of all of the Ku-band capacity of Anik F3 to EchoStar. | |
(8) | Telstar 10 does not include 1 transponder @ 36MHz and 6 transponders @ 54MHz which have been turned off for satellite power management, and does not include 1 transponder @ 36MHz owned by APT. | |
(9) | Telstar 12 has38-54MHz transponders. Four of these transponders were given to Eutelsat to settle coordination issues, and Telesat Canada leases back three of these transponders. | |
(10) | Telstar 14 has substantially reduced transponder capacity and a limited expected life due to the failure of a solar array to fully deploy upon launch. | |
(11) | Includes 16.6MHz of C-band capacity provided to the Government of Tonga in lieu of a cash payment for the use of the orbital location. | |
(12) | Additional transponders will be purchased from APT, four in 2008 and two in 2009. |
• | Satmex 5: 3-36MHz Ku transponders; | |
• | Satmex 6: 2-36MHz C-band transponders; 2-36MHz Ku transponders; and | |
• | Agila (Mabuhay): 3-36MHz C-band transponders |
Nimiq 4 | Nimiq 5 | Telstar 11N | ||||
Orbital Location | 82.0o WL | 72.7o WL | 37.55o WL | |||
Regions Covered | Canada | Canada, Continental United States | North and Central America, Europe, Africa and the maritime Atlantic Ocean region | |||
Planned In-Service Date | 2008(1) | 2009(1) | 2009 | |||
Manufacturer’s End-of- Service-Life | 15 Years | 15 Years | 15 Years | |||
Customer Committed Capacity | 15 Years/Fixed | 15 Years/Fixed | — | |||
Transponders: | ||||||
C-band | — | — | — | |||
Ku-band | 32@24MHz | 32@24MHz | 39@54MHz | |||
Ka-band | 8@54MHz | — | — | |||
Model | E-3000 (EADS Astrium) | SS/L 1300 | SS/L 1300 |
(1) | The March 14, 2008 failure of a Proton rocket to lift its satellite payload to the appropriate orbit will cause a delay in the planned launch of the Nimiq 4 satellite, originally scheduled to be launched on a Proton rocket in mid-2008. The launch of Nimiq 5, which had been planned for the second half of 2009, may likewise also be delayed as a result of this launch failure. These launch delays will adversely affect Telesat Canada’s financial performance for 2008 and potentially 2009 and 2010 and will defer the backlog run-off previously anticipated. It is not possible to quantify the impact of these delays until more information about the Proton failure and the resumption of the launch schedule becomes available. |
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Successor Registrant | Predecessor Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
For The Year | For The Year | October 2, | January 1, | ||||||||||||||
Ended | Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
(in millions) | |||||||||||||||||
Revenue: | |||||||||||||||||
Total segment revenues | $ | 241 | $ | 164 | $ | 37 | $ | 115 | |||||||||
Eliminations | (2 | ) | (3 | ) | (1 | ) | (4 | ) | |||||||||
Affiliate eliminations(2) | (118 | ) | — | — | — | ||||||||||||
Revenues from satellite services as reported | $ | 121 | $ | 161 | $ | 36 | $ | 111 | |||||||||
Adjusted EBITDA: | |||||||||||||||||
Total segment Adjusted EBITDA | $ | 118 | $ | 68 | $ | 12 | $ | 40 | |||||||||
Eliminations | (2 | ) | (3 | ) | (1 | ) | (10 | ) | |||||||||
Affiliate eliminations(2) | (65 | ) | — | — | — | ||||||||||||
Adjusted EBITDA from satellite services after eliminations(1) | $ | 51 | $ | 65 | $ | 11 | $ | 30 | |||||||||
(1) | See Consolidated Operating Results in Management’s Discussion and Analysis of Financial Condition and Results of Operations for significant items that affect comparability between the periods presented (see Note 18 to the consolidated financial statements for the definition of Adjusted EBITDA). | |
(2) | Affiliate eliminations represent the elimination of amounts attributable to Telesat Canada. |
Telesat Canada | ||||||||||||
For the period from | ||||||||||||
January 1, | For The Year | For The Year | ||||||||||
2007 to | Ended | Ended | ||||||||||
October 30, | December 31, | December 31, | ||||||||||
2007 | 2006 | 2005 | ||||||||||
(in millions) | ||||||||||||
Total operating revenues | CAD 457.8 | CAD 479.0 | CAD 474.7 | |||||||||
Adjusted EBITDA | CAD 263.2 | CAD 261.0 | CAD 268.1 |
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Item 1A. | Risk Factors |
I. | Financial and Telesat Canada Investment Risk Factors |
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II. | Segment Risk Factors |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
(a) | Market Price and Dividend Information |
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High | Low | |||||||
Year ended December 31, 2007 | ||||||||
Quarter ended December 31, 2007 | $ | 45.27 | $ | 31.67 | ||||
Quarter ended September 30, 2007 | 50.42 | 34.83 | ||||||
Quarter ended June 30, 2007 | 51.82 | 44.50 | ||||||
Quarter ended March 31, 2007 | 53.10 | 39.00 | ||||||
Year ended December 31, 2006 | ||||||||
Quarter ended December 31, 2006 | $ | 41.65 | $ | 25.96 | ||||
Quarter ended September 30, 2006 | 29.60 | 24.16 | ||||||
Quarter ended June 30, 2006 | 29.55 | 25.74 | ||||||
Quarter ended March 31, 2006 | 29.01 | 23.76 |
(b) | Approximate Number of Holders of Common Stock |
(c) | Dividends |
(d) | Securities Authorized for Issuance under Equity Compensation Plans |
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(e) | Comparison of Cumulative Total Returns |
![](https://capedge.com/proxy/10-K/0000950123-08-004856/y52600y5260001.gif)
Item 6. | Selected Financial Data |
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(In thousands, except per share data)
Successor Registrant | Predecessor Registrant | ||||||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||||||
October 2, | January 1, | ||||||||||||||||||||||||
2005 to | 2005 to | ||||||||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | Year Ended December 31, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||||||
Statement of operations data: | |||||||||||||||||||||||||
Revenues | $ | 882,454 | $ | 797,333 | $ | 197,165 | $ | 429,183 | $ | 522,127 | $ | 392,043 | |||||||||||||
Operating income (loss) from continuing operations(1) | 45,256 | 29,818 | (4,945 | ) | (67,095 | ) | (214,345 | ) | (388,873 | ) | |||||||||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments | — | — | — | 1,101,453 | (2) | — | — | ||||||||||||||||||
Income (loss) from continuing operations before income taxes, equity in net losses of affiliates and minority interest(3) | 157,786 | 30,117 | (5,395 | ) | 1,022,651 | (207,852 | ) | (368,355 | ) | ||||||||||||||||
Income tax (provision) benefit | (83,457 | ) | (20,880 | ) | (1,752 | ) | 10,901 | (13,284 | )(4) | 6,330 | |||||||||||||||
Income (loss) from continuing operations before equity in net losses of affiliates and minority interest | 74,329 | 9,237 | (7,147 | ) | 1,033,552 | (221,136 | ) | (362,025 | ) | ||||||||||||||||
Equity in net (losses) income of affiliates(5) | (21,430 | ) | (7,163 | ) | (5,447 | ) | (2,796 | ) | 46,654 | (51,153 | ) | ||||||||||||||
Minority interest | (23,240 | ) | (24,794 | ) | (2,667 | ) | 126 | 135 | 20 | ||||||||||||||||
Income (loss) from continuing operations | 29,659 | (22,720 | ) | (15,261 | ) | 1,030,882 | (174,347 | ) | (413,158 | ) | |||||||||||||||
(Loss) income from discontinued operations, net of taxes | — | — | — | — | (2,348 | ) | 18,803 | ||||||||||||||||||
Gain on sale of discontinued operations, net of taxes | — | — | — | 13,967 | — | — | |||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle and extraordinary gain on acquisition of minority interest | 29,659 | (22,720 | ) | (15,261 | ) | 1,044,849 | (176,695 | ) | (394,355 | ) | |||||||||||||||
Cumulative effect of change in accounting principle, net of taxes | — | — | — | — | — | (1,970 | ) | ||||||||||||||||||
Extraordinary gain on acquisition of minority interest | — | — | — | — | — | 13,615 | |||||||||||||||||||
Net income (loss) | 29,659 | (22,720 | ) | (15,261 | ) | 1,044,849 | (176,695 | ) | (382,710 | ) | |||||||||||||||
Preferred dividends | (19,379 | ) | — | — | — | — | (6,719 | ) | |||||||||||||||||
Beneficial conversion feature related to the issuance of LoralSeries A-1 Preferred Stock | (25,685 | ) | — | — | — | — | — | ||||||||||||||||||
Net (loss) income applicable to common shareholders | (15,405 | ) | (22,720 | ) | (15,261 | ) | 1,044,849 | (176,695 | ) | (389,429 | ) |
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Successor Registrant | Predecessor Registrant | ||||||||||||||||||||||||
For the Period | For the Period | ||||||||||||||||||||||||
October 2, | January 1, | ||||||||||||||||||||||||
2005 to | 2005 to | ||||||||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | Year Ended December 31, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||||||
Basic and diluted (loss) earnings per share: | |||||||||||||||||||||||||
Continuing operations | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.37 | $ | (3.96 | ) | $ | (9.58 | ) | ||||||||
Discontinued operations | — | — | — | 0.32 | (0.05 | ) | 0.43 | ||||||||||||||||||
Before cumulative effect of change in accounting principle and extraordinary gain on acquisition of minority interest | $ | (0.77 | ) | (1.14 | ) | (0.76 | ) | 23.69 | (4.01 | ) | (9.15 | ) | |||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | — | (0.05 | ) | ||||||||||||||||||
Extraordinary gain on acquisition of minority interest | — | — | — | — | — | 0.31 | |||||||||||||||||||
(Loss) earnings per share | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.69 | $ | (4.01 | ) | $ | (8.89 | ) | ||||||||
Deficiency of earnings to cover fixed charges | $ | 28,875 | $ | 13,377 | $ | 8,062 | $ | 65,570 | $ | 208,809 | $ | 389,218 | |||||||||||||
Cash flow data: | |||||||||||||||||||||||||
Provided by (used in) operating activities(6) | 27,123 | 88,002 | (38,531 | ) | (143,827 | ) | 66,129 | 232,653 | |||||||||||||||||
Provided by (used in) by investing activities(7) | 61,519 | (175,978 | ) | (5,089 | ) | 194,707 | 906,887 | (157,484 | ) | ||||||||||||||||
Provided by (used in) by financing activities | 39,510 | (1,278 | ) | 120,763 | — | (966,887 | ) | 539 | |||||||||||||||||
Predecessor Registrant | Successor Registrant | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004(8) | 2003(8) | |||||||||||||||||
Balance sheet data: | |||||||||||||||||||||
Cash and cash equivalents | $ | 314,694 | $ | 186,542 | $ | 275,796 | $ | 147,773 | $ | 141,644 | |||||||||||
Short-term investments | — | 106,588 | — | — | — | ||||||||||||||||
Total assets | 1,702,939 | 1,729,911 | 1,678,977 | 1,218,733 | 2,463,813 | ||||||||||||||||
Debt, including current portion | — | 128,084 | 128,191 | — | — | ||||||||||||||||
Non-current liabilities and minority interest | 289,602 | 535,271 | 603,374 | 84,677 | 72,932 | ||||||||||||||||
Liabilities subject to compromise | — | — | — | 1,916,000 | 2,921,680 | ||||||||||||||||
Shareholders’ equity (deficit) | 973,558 | 647,002 | 627,164 | (1,044,101 | ) | (855,670 | ) | ||||||||||||||
(1) | In connection with the Telesat Canada transaction, which closed on October 31, 2007, we recognized a gain of $104.9 million on the contribution of substantially all of the assets and related liabilities of Loral Skynet to Telesat Canada. See Note 8 to the consolidated financial statements. | |
(2) | In connection with our emergence from Chapter 11 and our adoption of fresh-start accounting on October 1, 2005, we recognized a gain on discharge of pre-petition obligations and fresh-start adjustments of $1.101 billion, related interest expense of $13.2 million related to the holders of claims to be paid in cash and a tax benefit of $15.4 million, each of which is reflected separately in our statement of operations (see Note 4 to the consolidated financial statements). | |
(3) | In connection with the Telesat Canada transaction, we recognized a gain on foreign exchange contracts of $89.4 million (see Note 16 to the consolidated financial statements). | |
(4) | 2004 includes an $11 million increase to the deferred tax valuation allowance relating to the reversal of deferred tax liabilities arising from the write-off of our investment in Globalstar, L.P.’s $500 million credit facility, upon Globalstar, L.P.’s dissolution in June 2004. | |
(5) | Beginning October 31, 2007, our principal affiliate is Telesat Canada. Loral also has investments in XTAR and joint ventures providing Globalstar service, which are accounted for under the equity method. On December 21, 2007 Loral agreed to sell its interest in Globalstar do Brazil S.A. which resulted in Loral recording a charge of $11.3 million (see Note 8 to the consolidated financial statements). During 2004, we recorded $47 million of equity income on the reversal of vendor financing liabilities that were non-recourse to SS/L in the event of non-payment by Globalstar, L.P. During 2003, we wrote off our remaining investment of $29 million in Satelites Mexicanos, S.A. de C.V. See Note 8 to the consolidated financial statements. | |
(6) | Cash flow provided by (used in) operating activities includes cash flow from operating activities provided by discontinued operations in 2004. | |
(7) | Cash flow provided by (used in) investing activities includes cash flow provided by (used in) investing activities of discontinued operations for the period January 1, 2005 to October 1, 2005 and 2004. | |
(8) | As a result of our Chapter 11 filing, Old Loral’s debt obligations, preferred stock obligations and certain other liabilities existing at July 15, 2003, were classified as liabilities subject to compromise on our balance sheets at December 31, 2004 and 2003. These obligations were extinguished as of the Effective Date. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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For the Period | For the Period | |||||||||||||||||||
October 2, | January 1, | |||||||||||||||||||
2005 to | 2005 to | |||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2005 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Satellite Manufacturing | $ | 814.3 | $ | 696.5 | $ | 491.3 | $ | 161.8 | $ | 329.5 | ||||||||||
Satellite Services | 241.2 | 163.8 | 151.5 | 37.0 | 114.5 | |||||||||||||||
Segment revenues | 1,055.5 | 860.3 | 642.8 | 198.8 | 444.0 | |||||||||||||||
Eliminations(1) | (55.2 | ) | (63.0 | ) | (16.4 | ) | (1.6 | ) | (14.8 | ) | ||||||||||
Affiliate eliminations(2) | (117.8 | ) | — | — | — | — | ||||||||||||||
Revenues as reported(3) | $ | 882.5 | $ | 797.3 | $ | 626.4 | $ | 197.2 | $ | 429.2 | ||||||||||
For the Period | For the Period | |||||||||||||||||||
October 2, | January 1, | |||||||||||||||||||
2005 to | 2005 to | |||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2005 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Satellite Manufacturing | $ | 34.5 | $ | 65.9 | $ | 27.0 | $ | 11.8 | $ | 15.2 | ||||||||||
Satellite Services | 118.4 | 68.0 | 51.3 | 11.5 | 39.8 | |||||||||||||||
Corporate expenses(4) | (37.9 | ) | (26.8 | ) | (28.3 | ) | (11.0 | ) | (17.3 | ) | ||||||||||
Segment Adjusted EBITDA before eliminations | 115.0 | 107.1 | 50.0 | 12.3 | 37.7 | |||||||||||||||
Eliminations(1) | (6.1 | ) | (6.0 | ) | (13.5 | ) | (1.2 | ) | (12.3 | ) | ||||||||||
Affiliate eliminations(2) | (65.3 | ) | — | — | — | — | ||||||||||||||
Adjusted EBITDA | $ | 43.6 | $ | 101.1 | $ | 36.5 | $ | 11.1 | $ | 25.4 | ||||||||||
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For the Period | For the Period | |||||||||||||||||||
October 2, | January 1, | |||||||||||||||||||
2005 to | 2005 to | |||||||||||||||||||
Year Ended December 31, | December 31, | October 1, | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2005 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Adjusted EBITDA | $ | 43.6 | $ | 101.1 | $ | 36.5 | $ | 11.1 | $ | 25.4 | ||||||||||
Depreciation and amortization | (103.3 | ) | (71.3 | ) | (77.3 | ) | (16.0 | ) | (61.3 | ) | ||||||||||
Gain on contribution of Loral Skynet(5) | 104.9 | — | — | — | — | |||||||||||||||
Reorganization expenses due to bankruptcy | — | — | (31.2 | ) | — | (31.2 | ) | |||||||||||||
Operating income (loss) from continuing operations | 45.2 | 29.8 | (72.0 | ) | (4.9 | ) | (67.1 | ) | ||||||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments(6) | — | — | 1,101.5 | — | 1,101.5 | |||||||||||||||
Interest and investment income | 39.3 | 31.5 | 10.5 | 4.1 | 6.4 | |||||||||||||||
Interest expense | (2.3 | ) | (23.4 | ) | (21.6 | ) | (4.4 | ) | (17.2 | ) | ||||||||||
Gain (loss) on foreign exchange contracts | 89.4 | (5.8 | ) | — | — | — | ||||||||||||||
Loss on extinguishment of debt | (16.2 | ) | — | — | — | — | ||||||||||||||
Other income (expense) | 2.4 | (2.0 | ) | (1.1 | ) | (0.2 | ) | (0.9 | ) | |||||||||||
Income tax (provision) benefit | (83.5 | ) | (20.8 | ) | 9.1 | (1.8 | ) | 10.9 | ||||||||||||
Equity losses in affiliates | (21.4 | ) | (7.2 | ) | (8.2 | ) | (5.4 | ) | (2.8 | ) | ||||||||||
Minority interest | (23.2 | ) | (24.8 | ) | (2.6 | ) | (2.7 | ) | 0.1 | |||||||||||
Income (loss) from continuing operations | 29.7 | (22.7 | ) | 1,015.6 | (15.3 | ) | 1,030.9 | |||||||||||||
Income from discontinued operations, net of taxes | — | — | 14.0 | — | 14.0 | |||||||||||||||
Net income (loss) | $ | 29.7 | $ | (22.7 | ) | $ | 1,029.6 | $ | (15.3 | ) | $ | 1,044.9 | ||||||||
(a) | The combination of the period January 1, 2005 to October 1, 2005 and the period October 2, 2005 to December 31, 2005 represents non-GAAP financial information. Management believes that presenting the financial information in this way is the most relevant and useful method for making comparisons. | |
(1) | Represents the elimination of intercompany sales and intercompany Adjusted EBITDA, primarily for satellites under construction by SS/L for wholly owned subsidiaries. | |
(2) | Represents the elimination of amounts attributable to Telesat Canada whose results are reported in our consolidated statement of operations as equity in net loss of affiliates. | |
(3) | Includes revenues from affiliates of $22.0 million, $11.3 million, $4.1 million and $10.0 million for the years ended December 31, 2007 and 2006, for the period October 2, 2005 to December 31, 2005 and for the period January 1, 2005 to October 1, 2005, respectively. | |
(4) | Represents corporate expenses incurred in support of our operations and for the years ended December 31, 2007 and 2006 and the period October 2, 2005 to December 31, 2005 includes $0.3 million, $1.2 million and $3.9 million, respectively, of continuing expenses for bankruptcy related matters, which after the adoption of fresh-start accounting are classified as corporate general and administrative expenses. |
40
(5) | In connection with the Telesat Canada transaction, which closed on October 31, 2007, we recognized a gain on the contribution of substantially all of the assets and related liabilities of Loral Skynet to Telesat Canada (see Note 8 to the financial statements). | |
(6) | In connection with our emergence from Chapter 11 and our adoption of fresh-start accounting on October 1, 2005, we recognized a gain on discharge of pre-petition obligations and fresh-start adjustments of $1.101 billion, related interest expense of $13.2 million and a tax benefit of $15.4 million, each of which is reflected separately in our statement of operations (see Note 4 to the financial statements). |
(a) | The combination of the period January 1, 2005 to October 1, 2005 and the period October 2, 2005 to December 31, 2005 represents non-GAAP financial information. Management believes that presenting the financial information in this way is the most relevant and useful method for making comparisons. |
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
Year Ended | 2007 | 2006 | ||||||||||||||||||
December 31, | vs. | vs. | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2006 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues from Satellite Manufacturing | $ | 814 | $ | 697 | $ | 491 | 17 | % | 42 | % | ||||||||||
Eliminations | (53 | ) | (60 | ) | (11 | ) | (12 | )% | 445 | % | ||||||||||
Revenues from Satellite Manufacturing as reported | $ | 761 | $ | 637 | $ | 480 | 20 | % | 33 | % | ||||||||||
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
Year Ended | 2007 | 2006 | ||||||||||||||||||
December 31, | vs. | vs. | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2006 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues from Satellite Services before specific items | $ | 126 | $ | 149 | $ | 147 | (17 | )% | 2 | % | ||||||||||
Customer termination payment | — | 15 | — | |||||||||||||||||
Cash basis customer payments | (3 | ) | — | 5 | ||||||||||||||||
Eliminations | (2 | ) | (3 | ) | (5 | ) | (26 | )% | (35 | )% | ||||||||||
Revenues from Satellite Services as reported | $ | 121 | $ | 161 | $ | 147 | (25 | )% | 10 | % | ||||||||||
41
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
2007 | 2006 | |||||||||||||||||||
Year Ended December 31, | vs. | vs. | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2006 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cost of Satellite Manufacturing includes: | ||||||||||||||||||||
Cost of Satellite Manufacturing before specific identified charges | $ | 657 | $ | 537 | $ | 394 | 23 | % | 39 | % | ||||||||||
Depreciation and amortization | 36 | 23 | 15 | 56 | % | 55 | % | |||||||||||||
Transponder rights provided to SS/L in the Satmex settlement agreement | — | (19 | ) | — | ||||||||||||||||
Accrued warranty obligations | (4 | ) | 8 | 17 | (53 | )% | ||||||||||||||
Provisions for inventory obsolescence | — | 2 | 4 | (54 | )% | |||||||||||||||
Cost of Satellite Manufacturing | $ | 689 | $ | 551 | $ | 430 | 25 | % | 28 | % | ||||||||||
Cost of Satellite Manufacturing as a % of Satellite Manufacturing revenues as reported | 90 | % | 87 | % | 90 | % |
42
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
Year Ended | 2007 | 2006 | ||||||||||||||||||
December 31, | vs. | vs. | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2006 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cost of Satellite Services includes: | ||||||||||||||||||||
Cost of Satellite Services before specific identified charges | $ | 42 | $ | 53 | $ | 59 | (21 | )% | (10 | )% | ||||||||||
Depreciation and amortization | 44 | 46 | 61 | (3 | )% | (25 | )% | |||||||||||||
Cost of Satellite Services | $ | 86 | $ | 99 | $ | 120 | (13 | )% | (18 | )% | ||||||||||
Cost of Satellite Services as a % of Satellite Services revenues as reported | 71 | % | 61 | % | 82 | % |
% Increase | ||||||||||||||||||||
(Decrease) | ||||||||||||||||||||
2007 | 2006 | |||||||||||||||||||
Year Ended December 31, | vs. | vs. | ||||||||||||||||||
2007 | 2006 | 2005 (a) | 2006 | 2005 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Selling, general and administrative expenses includes: | ||||||||||||||||||||
Selling, general and administrative expenses before specific charges | $ | 133 | $ | 118 | $ | 108 | 12 | % | 9 | % | ||||||||||
Litigation costs | 11 | 6 | 4 | 90 | % | 50 | % | |||||||||||||
Stock based compensation | 23 | 2 | — | |||||||||||||||||
Continuing expenses for bankruptcy related matters | — | 1 | 4 | |||||||||||||||||
Selling, general and administrative expenses as reported | $ | 167 | $ | 127 | $ | 116 | ||||||||||||||
% of revenues as reported | 19 | % | 16 | % | 19 | % | 31 | % | 9 | % |
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Consideration received for the contribution of Loral Skynet to Telesat Holdco: | ||||
Cash and marketable securities | $ | 61.5 | ||
Fair value of equity in Telesat Holdco | 670.5 | |||
Total consideration | 732.0 | |||
Book value of contributed net assets of Loral Skynet | 440.5 | |||
Consideration in excess of book value | $ | 291.5 | ||
Gain recognized | $ | 104.9 | ||
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 (a) | ||||||||||
(in millions) | ||||||||||||
Reorganization Expenses Due to Bankruptcy | $ | — | $ | — | $ | 31 |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 (a) | ||||||||||
(in millions) | ||||||||||||
Interest and investment income | $ | 39 | $ | 32 | $ | 11 |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 (a) | ||||||||||
(in millions) | ||||||||||||
Interest cost before capitalized interest | $ | 12 | $ | 26 | $ | 9 | ||||||
Interest expense in connection with our Plan of Reorganization | — | — | 13 | |||||||||
Capitalized interest | (10 | ) | (3 | ) | — | |||||||
Interest expense | $ | 2 | $ | 23 | $ | 22 | ||||||
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 (a) | ||||||||||
(in millions) | ||||||||||||
Telesat Canada | $ | (1.8 | ) | $ | — | $ | — | |||||
XTAR | (10.6 | ) | (7.4 | ) | (8.1 | ) | ||||||
Other | (9.0 | ) | 0.2 | (0.1 | ) | |||||||
$ | (21.4 | ) | $ | (7.2 | ) | $ | (8.2 | ) | ||||
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For the Period | ||||
October 31, | ||||
2007 | ||||
to December 31, | ||||
2007 | ||||
Statement of Operations Data: | ||||
Revenues | $ | 117.8 | ||
Operating expenses | (93.7 | ) | ||
Operating income | 24.1 | |||
Net loss | (1.3 | ) |
December 31, 2007 | ||||
Balance Sheet Data: | ||||
Current assets | $ | 143.7 | ||
Total assets | 5,610.0 | |||
Current liabilities | 229.5 | |||
Total liabilities | 4,156.7 | |||
Redeemable preferred stock | 143.1 | |||
Shareholders’ equity | 1,310.2 |
48
2007 | 2006 | |||||||
Satellite Manufacturing | $ | 1,025 | $ | 1,118 | ||||
Satellite Services | 5,251 | 355 | ||||||
Total backlog before eliminations | 6,276 | 1,473 | ||||||
Satellite Manufacturing eliminations | — | (116 | ) | |||||
Satellite Services eliminations | (5,251 | ) | (10 | ) | ||||
Total backlog | $ | 1,025 | $ | 1,347 | ||||
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50
51
52
53
54
55
56
57
58
Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
Operating leases(1) | $ | 32,765 | $ | 8,589 | $ | 14,624 | $ | 7,573 | $ | 1,979 | ||||||||||
Unconditional purchase obligations(2) | 567,910 | 495,241 | 70,889 | 1,780 | — | |||||||||||||||
Liability to PSP(3) | 9,306 | 9,306 | — | — | — | |||||||||||||||
Other long-term obligations(4) | 30,541 | 16,138 | 14,403 | — | — | |||||||||||||||
Total contractual cash obligations(5) | $ | 640,522 | $ | 529,274 | $ | 99,916 | $ | 9,353 | $ | 1,979 | ||||||||||
Total | Amount of Commitment Expiration Per Period | |||||||||||||||||||
Amounts | Less than | More than | ||||||||||||||||||
Committed | 1 Year | 1-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
Standby letters of credit(6) | $ | 6,127 | $ | 6,127 | $ | — | $ | — | $ | — | ||||||||||
(1) | Represents future minimum payments under operating leases with initial or remaining terms of one year or more, net of sub-lease rentals of $0.7 million. | |
(2) | SS/L has entered into various purchase commitments with suppliers due to the long lead times required to produce purchased parts. | |
(3) | Represents the final equitytrue-up payment to PSP in connection with the Telesat Canada transaction. | |
(4) | Primarily represents vendor financing amounts owed to subcontractors and commitments under employment arrangements. | |
(5) | Does not include our commitment of approximately $54.2 million in connection with an agreement entered into between SS/L and ViaSat for the construction by SS/L for ViaSat of a high capacity broadband satellite called ViaSat-1 and our FIN 48 liabilities for uncertain tax positions of $68.0 million. On January 11, 2008, we entered into certain agreements (see Note 19 to the financial statements), pursuant to which we are investing in the Canadian coverage portion of the ViaSat-1 Satellite and granting to Telesat Canada an option to acquire our rights to the Canadian payload. Because the timing of future cash outflows associated with our FIN 48 liabilities for uncertain tax positions is highly uncertain, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. | |
(6) | Letters of credit have a maturity of one year and are renewed annually. |
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60
Successor Registrant | Predecessor Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | 2005 to | 2005 to | |||||||||||||||
December 31, | December 31, | October 1, | |||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
(In millions) | |||||||||||||||||
Revenues | $ | 22.0 | $ | 11.3 | $ | 4.1 | $ | 10.0 | |||||||||
Elimination of Loral’s proportionate share of (profits) losses relating to affiliate transactions | 1.9 | 0.4 | (2.9 | ) | 0.6 | ||||||||||||
Profits (losses) relating to affiliate transactions not eliminated | (1.1 | ) | (0.3 | ) | 2.3 | (0.5 | ) |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Foreign Currency | U.S. $ | |||||||
Future revenues — Japanese Yen | ¥ | 84 | $ | 0.7 | ||||
Future expenditures — Japanese Yen | ¥ | 4,222 | $ | 37.6 | ||||
Future expenditures — EUROs | E | 3.7 | $ | 5.5 |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
61
Item 9A. | Controls and Procedures |
62
63
64
65
Item 9B. | Other Information |
Item 10. | Directors and Executive Officers of the Registrant |
Name | Age | Position | ||||
Michael B. Targoff | 63 | Chief Executive Officer since March 1, 2006, President since January 2008 and Vice Chairman of the Board of Directors since November 2005. Prior to that, founder of Michael B. Targoff & Co. | ||||
C. Patrick DeWitt | 61 | Senior Vice President since January 2008. Vice President from November 2005 to January 2008. Vice President of Old Loral from January 2002 to November 2005. Chief Executive Officer of SS/L since June 2006. President of SS/L from November 2001 to June 2006. | ||||
Avi Katz | 49 | Senior Vice President, General Counsel and Secretary since January 2008. Vice President, General Counsel and Secretary from November 2005 to January 2008. Vice President, General Counsel and Secretary of Old Loral from November 1999 to November 2005. | ||||
Richard P. Mastoloni | 43 | Senior Vice President of Finance and Treasurer since January 2008. Vice President and Treasurer from November 2005 to January 2008. Vice President and Treasurer of Old Loral from February 2002 to November 2005. Vice President of Old Loral from September 2001 to February 2002. | ||||
Harvey B. Rein | 54 | Senior Vice President and Chief Financial Officer since January 2008. Vice President and Controller from November 2005 to January 2008. Vice President and Controller of Old Loral from April 1996 to November 2005. | ||||
John Capogrossi | 54 | Vice President and Controller since January 2008. Executive Director, Financial Planning and Analysis, from October 2006 to January 2008. Assistant Controller from November 2005 to October 2006. Assistant Controller of Old Loral from January 2001 to November 2005. |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
66
Item 13. | Certain Relationships and Related Transactions |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
F-1 | ||||
Loral Space & Communications Inc. and Subsidiaries: | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
(a) 2. Financial Statement Schedules | ||||
F-76 | ||||
Separate Financial Statements of Subsidiaries not consolidated Pursuant toRule 3-09 ofRegulation S-X | ||||
Telesat Holdings Inc. and Subsidiaries: | ||||
F-77 | ||||
F-78 | ||||
F-79 | ||||
F-80 | ||||
F-81 | ||||
F-82 | ||||
F-83 |
67
Exhibit | ||||
Number | Description | |||
2 | .1 | Debtors’ Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated June 3, 2005(2) | ||
2 | .2 | Modification to Debtors’ Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated August 1, 2005(3) | ||
2 | .3 | Letter Agreement among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, 4363205 Canada Inc. and 4363213 Canada Inc. dated December 14, 2006(9) | ||
2 | .4 | Share Purchase Agreement among 4363213 Canada Inc., BCE Inc. and Telesat Canada dated December 16, 2006(9) | ||
2 | .5 | Letter Agreement among Loral Space & Communications Inc., Public Sector Pension Investment Board and BCE Inc. dated December 16, 2006(9) | ||
2 | .6 | Asset Transfer Agreement, dated as of August 7, 2007, by and among 4363205 Canada Inc., Loral Skynet Corporation and Loral Space & Communications Inc.(15) | ||
2 | .7 | Amendment No. 1 to Asset Transfer Agreement, dated as of September 24, 2007, by and among 4363205 Canada Inc., Loral Skynet Corporation and Loral Space & Communications Inc.(18) | ||
2 | .8 | Asset Purchase Agreement, dated as of August 7, 2007, by and among Loral Skynet Corporation, Skynet Satellite Corporation and Loral Space & Communications Inc.(15) | ||
3 | .1 | Restated Certificate of Incorporation of Loral Space & Communications Inc. dated November 21, 2005(4) | ||
3 | .2 | Loral Space & Communications Inc. Amended and Restated Bylaws dated December 17, 2007(20) | ||
4 | .1 | Certificate of Designation ofSeries A-1 Cumulative 7.50% Convertible Preferred Stock andSeries A-2 Convertible Preferred Stock of Loral Space & Communications Inc.(10) | ||
4 | .2 | Certificate of Designation ofSeries B-1 Cumulative 7.50% Convertible Preferred Stock andSeries B-2 Convertible Preferred Stock of Loral Space & Communications Inc.(10) | ||
10 | .1 | Consent Agreement among the United States Department of State, Loral Space & Communications Ltd. and Space Systems/Loral, Inc. dated January 9, 2002(1) | ||
10 | .2 | Amended and Restated Letter of Credit Reimbursement Agreement between Space Systems/Loral, Inc. and JP Morgan Chase Bank, N.A. dated November 21, 2005(4) | ||
10 | .3 | Amended and Restated Cash Collateral Agreement dated November 21, 2005(4) | ||
10 | .4 | Amended and Restated Customer Credit Agreement, dated as of July 30, 2007, by and between Sirius Satellite Radio Inc. and Space Systems/Loral, Inc.(14) | ||
10 | .5 | Ancillary Agreement, dated as of August 7, 2007, by and among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, 4363205 Canada Inc. and 4363230 Canada Inc.(15) | ||
10 | .6 | Adjustment Agreement, dated as of October 29, 2007, between Telesat Interco Inc. (formerly 4363213 Canada Inc.), BCE Inc. and Telesat Canada(19) | ||
10 | .7 | Omnibus Agreement, dated as of October 30, 2007, by and among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, Red Isle Private Investments Inc. and Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(19) | ||
10 | .8 | Shareholders Agreement, dated as of October 31, 2007, between Public Sector Pension Investment Board, Red Isle Private Investments Inc., Loral Space & Communications Inc., Loral Space & Communications Holdings Corporation, Loral Holdings Corporation, Loral Skynet Corporation, John P. Cashman, Colin D. Watson, Telesat Holdings Inc. (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Canada and MHR Fund Management LLC(19) | ||
10 | .9 | Consulting Services Agreement, dated as of October 31, 2007, by and between Loral Space & Communications Inc. and Telesat Canada(19) | ||
10 | .10 | Indemnity Agreement, dated as of October 31, 2007, by and among Loral Space & Communications Inc., Telesat Canada, Telesat Holdings Inc., Telesat Interco Inc. and Henry Gerard (Hank) Intven(19) |
68
Exhibit | ||||
Number | Description | |||
10 | .11 | Acknowledgement and Indemnity Agreement, dated as of October 31, 2007, between Loral Space & Communications Inc., Telesat Canada, Telesat Holdings Inc. (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly 4363213 Canada Inc.) and McCarthy Tétrault LLP(19) | ||
10 | .12 | Securities Purchase Agreement dated October 17, 2006, as amended and restated on February 27, 2007, by and between Loral Space & Communications Inc. and MHR Fund Management LLC(10) | ||
10 | .13 | Amended and Restated Registration Rights Agreement dated February 27, 2007 by and among Loral Space & Communications Inc., Loral Skynet Corporation and the Persons Affiliated with MHR Fund Management LLC Listed on the Signature Pages Thereof(10) | ||
10 | .14 | Memorandum of Understanding, dated March 21, 2007 relating to Babus v. Targoff, et al.(11) | ||
10 | .15 | Letter Agreement dated April 25, 2007 between Loral Space & Communications Inc. and MHR Fund Management LLC(12) | ||
10 | .16 | Letter Agreement dated August 8, 2007 between Loral Space & Communications Inc. and MHR Fund Management LLC(16) | ||
10 | .17 | Letter Agreement, dated August 29, 2007, by and among Loral Space & Communications, Inc. and the holders of the outstanding Series A Cumulative 7.50% Convertible Preferred Stock and Series B Cumulative 7.50% Convertible Preferred Stock of Loral Space & Communications Inc.(17) | ||
10 | .18 | Letter Agreement dated April 28, 2008 between Loral Space & Communications Inc. and MHR Fund Management LLC† | ||
10 | .19 | Partnership Interest Purchase Agreement dated December 21, 2007 by and among GSSI, LLC, Globalstar, Inc., Loral/DASA Globalstar, LP, Globalstar do Brasil, SA., Loral/DASA do Brasil Holdings Ltda., Loral Holdings LLC, Global DASA LLC, LGP (Bermuda) Ltd., Mercedes-Benz do Brasil Ltda. (f/k/a DaimlerChrysler do Brasil Ltda.) and Loral Space & Communications Inc.(20) | ||
10 | .20 | Beam Sharing Agreement, dated as of January 11, 2008, by and between Loral Space & Communications Inc. and ViaSat Inc.(22) | ||
10 | .21 | Option Agreement, dated as of January 11, 2008, by and between Loral Space & Communications Inc. and Telesat Canada(22) | ||
10 | .22 | Employment Agreement between Loral Space & Communications Inc. and Michael B. Targoff dated March 28, 2006(5)‡ | ||
10 | .23 | Form of Officers’ and Directors’ Indemnification Agreement between Loral Space & Communications Inc. and Loral Executives(4)‡ | ||
10 | .24 | Officers’ and Directors’ Indemnification Agreement between Space Systems/Loral, Inc. and C. Patrick DeWitt dated November 21, 2005(4)‡ | ||
10 | .25 | Loral Space & Communications Inc. 2005 Stock Incentive Plan (Amended and Restated as of April 16, 2007) (13)‡ | ||
10 | .26 | Form of Non-Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005 Stock Incentive Plan for Senior Management(4)‡ | ||
10 | .27 | Non-Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005 Stock Incentive Plan between Loral Space & Communications Inc. and Michael B. Targoff dated March 28, 2006(5)‡ | ||
10 | .28 | Non Qualified Stock Option Agreement under Loral Space & Communications Inc. 2005 Stock Incentive Plan between Loral Space & Communications Inc. and Richard J. Townsend dated June 19, 2006(7)‡ | ||
10 | .29 | Form of Director 2006 Restricted Stock Agreement (13)‡ | ||
10 | .30 | Form of Director 2007 Restricted Stock Agreement (13)‡ | ||
10 | .31 | Form of Employee Restricted Stock Agreement (13)‡ | ||
10 | .32 | Space Systems/Loral, Inc. Supplemental Executive Retirement Plan dated January 7, 2003(5)‡ | ||
10 | .33 | Amendment to the Space Systems/Loral, Inc. Supplemental Executive Retirement Plan dated November 21, 2005(4)‡ | ||
10 | .34 | Loral Space & Communications Inc. Severance Policy for Corporate Officers(6)‡ | ||
10 | .35 | General Release and Separation Agreement dated January 4, 2008 between Loral Space & Communications Inc. and Richard J. Townsend (21) ‡ |
69
Exhibit | ||||
Number | Description | |||
10 | .36 | Letter dated March 28, 2008 to Richard J. Townsend(23)‡ | ||
10 | .37 | General Release and Separation Agreement dated January 10, 2008 between Loral Space & Communications Inc. and Dean A. Olmstead (22) ‡ | ||
10 | .38 | General Release and Separation Agreement dated January 11, 2008 between Loral Space & Communications Inc. and Eric J. Zahler (22) ‡ | ||
10 | .39 | Consulting Agreement dated January 4, 2008 between Loral Space & Communications Inc. and Richard J. Townsend (21) ‡ | ||
12 | .1 | Statement Re: Computation of Ratios† | ||
14 | .1 | Code of Conduct, Revised as of August 1, 2006(8) | ||
21 | .1 | List of Subsidiaries of the Registrant† | ||
23 | .1 | Consent of Deloitte & Touche LLP† | ||
23 | .2 | Consent of Deloitte & Touche LLP† | ||
31 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002† | ||
31 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002† | ||
32 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002† | ||
32 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002† | ||
99 | .1 | Credit Agreement, dated as of October 31, 2007, among Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205 Canada Inc.), 4363230 Canada Inc., Telesat LLC, certain subsidiaries of Telesat Holdings Inc., as guarantors, the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as administrative agent, and Morgan Stanley & Co. Incorporated, as collateral agent for the lenders, UBS Securities LLC, as syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia, as issuing bank, and Citibank, N.A., Canadian Branch or any of its lending affiliates, as co-documentation agents, and Morgan Stanley & Co. Incorporated, UBS Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and joint book running managers(19) | ||
99 | .2 | Senior Bridge Loan Agreement, dated as of October 31, 2007, among Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205 Canada Inc.), 4363230 Canada Inc., Telesat LLC, certain subsidiaries of Telesat Holdings Inc., as guarantors, the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as administrative agent for the lenders, UBS Securities LLC, as syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Jefferies Finance LLC, as co-documentation agents, and Morgan Stanley & Co. Incorporated, UBS Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and joint book running managers(19) | ||
99 | .3 | Senior Subordinated Bridge Loan Agreement, dated as of October 31, 2007, among Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205 Canada Inc.), 4363230 Canada Inc., Telesat LLC, certain subsidiaries of Telesat Holdings Inc., as guarantors, the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as administrative agent for the lenders, UBS Securities LLC, as syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Jefferies Finance LLC, as co-documentation agents, and Morgan Stanley & Co. Incorporated, UBS Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and joint book running managers(19) | ||
99 | .4 | Articles of Incorporation of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(19) | ||
99 | .5 | By-Law No. 1 of Telesat Holdings Inc. (formerly 4363205 Canada Inc.)(19) | ||
99 | .6 | Letter Agreement dated March 28, 2008 among Loral Space & Communications Inc., Loral Skynet Corporation, Public Sector Pension Investment Board, Red Isle Private Investment Inc. and Telesat Holdings Inc.(23) |
(1) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on January 9, 2002. |
70
(2) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on June 8, 2005. | |
(3) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 5, 2005. | |
(4) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on November 23, 2005. | |
(5) | Incorporated by reference from the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2005. | |
(6) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on June 20, 2006. | |
(7) | Incorporated by reference from the Company’s Current Report onForm 8-K/A filed by the Company on June 26, 2006. | |
(8) | Incorporated by reference from the Company’s Current Quarterly Report onForm 10-Q filed on August 8, 2006. | |
(9) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on December 21, 2006. | |
(10) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on February 28, 2007. | |
(11) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on March 21, 2007. | |
(12) | Incorporated by reference from the Company’s Current Report onForm 10-Q filed on May 10, 2007. | |
(13) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on May 29, 2007. | |
(14) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 2, 2007. | |
(15) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 9, 2007. | |
(16) | Incorporated by reference from the Company’s Current Report onForm 10-Q filed on August 9, 2007. | |
(17) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on August 31, 2007. | |
(18) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on September 27, 2007. | |
(19) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on November 2, 2007. | |
(20) | Incorporated by reference from the Company’s Current Report onForm 8-K filed December 21, 2007. | |
(21) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on January 10, 2008. | |
(22) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on January 16, 2008. | |
(23) | Incorporated by reference from the Company’s Current Report onForm 8-K filed on March 31, 2008. | |
† | Filed herewith. | |
‡ | Management compensation plan. |
71
By: | /s/ MICHAEL B. TARGOFF |
Signatures | Title | Date | ||||
/s/ MICHAEL B. TARGOFF Michael B. Targoff | Vice Chairman of the Board, Chief Executive Officer and President | April 29, 2008 | ||||
/s/ MARK H. RACHESKY, M.D. Mark H. Rachesky, M.D. | Director, Non-Executive Chairman of the Board | April 29, 2008 | ||||
/s/ SAI S. DEVABHAKTUNI Sai S. Devabhaktuni | Director | April 29, 2008 | ||||
/s/ HAL GOLDSTEIN Hal Goldstein | Director | April 29, 2008 | ||||
/s/ JOHN D. HARKEY, JR. John D. Harkey, Jr. | Director | April 29, 2008 | ||||
/s/ ARTHUR L. SIMON Arthur L. Simon | Director | April 29, 2008 | ||||
/s/ JOHN P. STENBIT John P. Stenbit | Director | April 29, 2008 | ||||
/s/ HARVEY B. REIN Harvey B. Rein | Senior Vice President and CFO (Principal Financial Officer) | April 29, 2008 | ||||
/s/ JOHN CAPOGROSSI John Capogrossi | Vice President and Controller (Principal Accounting Officer) | April 29, 2008 |
72
Loral Space & Communications Inc. and Subsidiaries | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2007 and 2006 | F-4 | |||
Consolidated Statements of Operations for the years ended December 31, 2007 and 2006 and for the periods October 2, 2005 to December 31, 2005 (Successor Registrant) and January 1, 2005 to October 1, 2005 (Predecessor Registrant) | F-5 | |||
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007 and 2006 and for the periods October 2, 2005 to December 31, 2005 (Successor Registrant) and January 1, 2005 to October 1, 2005 (Predecessor Registrant) | F-6 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2007 and 2006 and for the periods October 2, 2005 to December 31, 2005 (Successor Registrant) and January 1, 2005 to October 1, 2005 (Predecessor Registrant) | F-7 | |||
Notes to Consolidated Financial Statements | F-8 | |||
Schedule II | F-76 | |||
Separate Financial Statements of Subsidiaries not consolidated Pursuant toRule 3-09 ofRegulation S-X | ||||
Telesat Holdings Inc. and Subsidiaries: | ||||
Report of Independent Registered Accountants | F-77 | |||
Consolidated Statement of Earnings for the period October 31, 2007 to December 31, 2007 | F-78 | |||
Consolidated Statement of Comprehensive Loss for the period October 31, 2007 to December 31, 2007 | F-79 | |||
Consolidated Statement of Shareholders’ Equity for the period October 31, 2007 to December 31, 2007 | F-80 | |||
Consolidated Balance Sheet as of December 31, 2007 | F-81 | |||
Consolidated Statement of Cash Flow for the period October 31, 2007 to December 31, 2007 | F-82 | |||
Notes to Consolidated Financial Statements | F-83 |
F-1
F-2
F-3
December 31, | ||||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 314,694 | $ | 186,542 | ||||
Short-term investments | — | 106,588 | ||||||
Accounts receivable, net | — | 76,420 | ||||||
Contracts-in-process | 109,376 | 40,433 | ||||||
Inventories | 96,968 | 82,183 | ||||||
Other current assets | 48,850 | 55,534 | ||||||
Total current assets | 569,888 | 547,700 | ||||||
Property, plant and equipment, net | 147,828 | 558,879 | ||||||
Long-term receivables | 132,400 | 81,164 | ||||||
Investments in affiliates | 566,196 | 97,202 | ||||||
Goodwill | 227,058 | 305,691 | ||||||
Intangible assets, net | 42,854 | 111,749 | ||||||
Other assets | 16,715 | 27,526 | ||||||
Total assets | $ | 1,702,939 | $ | 1,729,911 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 69,205 | $ | 67,604 | ||||
Accrued employment costs | 42,890 | 43,797 | ||||||
Customer advances and billings in excess of costs and profits | 251,954 | 242,661 | ||||||
Income taxes payable | 31,239 | 2,567 | ||||||
Accrued interest and preferred dividends | 4,979 | 20,097 | ||||||
Other current liabilities | 39,512 | 42,828 | ||||||
Total current liabilities | 439,779 | 419,554 | ||||||
Pension and other postretirement liabilities | 152,341 | 167,987 | ||||||
Long-term debt | — | 128,084 | ||||||
Long-term liabilities | 137,261 | 153,028 | ||||||
Total liabilities | 729,381 | 868,653 | ||||||
Minority interest | — | 214,256 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Series A-1 Cumulative 7.5% convertible preferred stock, $0.01 par value 2,200,000 shares authorized, 141,953 shares issued and outstanding in 2007 | 41,873 | — | ||||||
Series B-1 Cumulative 7.5% convertible preferred stock, $0.01 par value 2,000,000 shares authorized, 900,821 shares issued and outstanding in 2007 | 265,777 | — | ||||||
Common stock, $.01 par value; 40,000,000 shares authorized, 20,292,746 and 20,000,000 shares issued and outstanding | 203 | 200 | ||||||
Paid-in capital | 663,127 | 644,708 | ||||||
Accumulated deficit | (33,939 | ) | (37,981 | ) | ||||
Accumulated other comprehensive income | 36,517 | 40,075 | ||||||
Total shareholders’ equity | 973,558 | 647,002 | ||||||
Total liabilities and shareholders’ equity | $ | 1,702,939 | $ | 1,729,911 | ||||
F-4
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Revenues from satellite manufacturing | $ | 761,363 | $ | 636,632 | $ | 161,069 | $ | 318,587 | |||||||||
Revenues from satellite services | 121,091 | 160,701 | 36,096 | 110,596 | |||||||||||||
Total revenues | 882,454 | 797,333 | 197,165 | 429,183 | |||||||||||||
Cost of satellite manufacturing | 688,991 | 550,821 | 138,882 | 291,454 | |||||||||||||
Cost of satellite services | 86,213 | 98,614 | 26,386 | 94,169 | |||||||||||||
Selling, general and administrative expenses | 166,936 | 127,080 | 36,842 | 79,419 | |||||||||||||
Gain on contribution of Loral Skynet | (104,942 | ) | — | — | — | ||||||||||||
Gain on litigation settlement | — | (9,000 | ) | — | — | ||||||||||||
Operating income (loss) from continuing operations before reorganization expenses due to bankruptcy | 45,256 | 29,818 | (4,945 | ) | (35,859 | ) | |||||||||||
Reorganization expenses due to bankruptcy | — | — | — | (31,236 | ) | ||||||||||||
Operating income (loss) from continuing operations | 45,256 | 29,818 | (4,945 | ) | (67,095 | ) | |||||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments | — | — | — | 1,101,453 | |||||||||||||
Interest and investment income | 39,279 | 31,526 | 4,128 | 6,438 | |||||||||||||
Interest expense (contractual interest was $36,610 for the period ended October 1, 2005) | (2,312 | ) | (23,449 | ) | (4,408 | ) | (17,214 | ) | |||||||||
Gain (loss) on foreign exchange contracts | 89,364 | (5,750 | ) | — | — | ||||||||||||
Loss on extinguishment of debt | (16,155 | ) | |||||||||||||||
Other income (expense) | 2,354 | (2,028 | ) | (170 | ) | (931 | ) | ||||||||||
Income (loss) from continuing operations before income taxes, equity in net losses of affiliates and minority interest | 157,786 | 30,117 | (5,395 | ) | 1,022,651 | ||||||||||||
Income tax (provision) benefit | (83,457 | ) | (20,880 | ) | (1,752 | ) | 10,901 | ||||||||||
Income (loss) from continuing operations before equity in net losses of affiliates and minority interest | 74,329 | 9,237 | (7,147 | ) | 1,033,552 | ||||||||||||
Equity in net losses of affiliates | (21,430 | ) | (7,163 | ) | (5,447 | ) | (2,796 | ) | |||||||||
Minority interest | (23,240 | ) | (24,794 | ) | (2,667 | ) | 126 | ||||||||||
Income (loss) from continuing operations | 29,659 | (22,720 | ) | (15,261 | ) | 1,030,882 | |||||||||||
Gain on sale of discontinued operations, net of taxes | — | — | — | 13,967 | |||||||||||||
Net income (loss) | 29,659 | $ | (22,720 | ) | $ | (15,261 | ) | $ | 1,044,849 | ||||||||
Preferred dividends | (19,379 | ) | — | — | — | ||||||||||||
Beneficial conversion feature related to the issuance of LoralSeries A-1 Preferred Stock | (25,685 | ) | — | — | — | ||||||||||||
Net (loss) income applicable to common shareholders | $ | (15,405 | ) | $ | (22,720 | ) | $ | (15,261 | ) | $ | 1,044,849 | ||||||
Basic and diluted earnings (loss) per share: | |||||||||||||||||
Continuing operations | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.37 | ||||||
Discontinued operations | — | — | — | 0.32 | |||||||||||||
(Loss) earnings per share | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.69 | ||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic and diluted | 20,087 | 20,000 | 20,000 | 44,108 | |||||||||||||
F-5
Series A-1 | Series B-1 | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
Convertible | Convertible | Other | Total | |||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Unearned | Comprehensive | Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||
Shares | Shares | Shares | Paid-In | Treasury | Compen- | Accumulated | Income | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Issued | Amount | Issued | Amount | Issued | Amount | Capital | Stock | sation | Deficit | (Loss) | Equity | |||||||||||||||||||||||||||||||||||||
Predecessor Registrant | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2005 | 44,125 | $ | 4,413 | $ | 3,392,825 | $ | (3,360 | ) | $ | (87 | ) | $ | (4,348,231 | ) | $ | (89,661 | ) | $ | (1,044,101 | ) | ||||||||||||||||||||||||||||
Amortization of unearned compensation | 60 | 60 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | 1,044,849 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (808 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 1,044,041 | |||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of Predecessor Registrant common stock | (44,125 | ) | (4,413 | ) | 4,413 | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock to creditors | 20,000 | 200 | 642,068 | 642,268 | ||||||||||||||||||||||||||||||||||||||||||||
Fresh-start adjustment | (3,397,238 | ) | 3,360 | 27 | 3,303,382 | 90,469 | — | |||||||||||||||||||||||||||||||||||||||||
Balance, October 1, 2005 | 20,000 | 200 | 642,068 | — | — | — | — | 642,268 | ||||||||||||||||||||||||||||||||||||||||
Successor Registrant | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (15,261 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 15 | |||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss | (15,246 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock option compensation | 142 | 142 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2005 | 20,000 | 200 | 642,210 | — | — | (15,261 | ) | 15 | 627,164 | |||||||||||||||||||||||||||||||||||||||
Adjustment to initially apply SFAS 158, net of tax, as restated | 29,951 | 29,951 | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (22,720 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, as restated | 10,109 | |||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss, as restated | (12,611 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 2,498 | 2,498 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 20,000 | 200 | 644,708 | — | — | (37,981 | ) | 40,075 | 647,002 | |||||||||||||||||||||||||||||||||||||||
Cumulative effect related to adoption of FIN48 | (6,238 | ) | (6,238 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income | 29,659 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | (3,558 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 26,101 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance ofSeries A-1 preferred stock | 137 | $ | 40,237 | (1,218 | ) | 39,019 | ||||||||||||||||||||||||||||||||||||||||||
Issuance ofSeries B-1 preferred stock | 859 | $ | 253,013 | (7,646 | ) | 245,367 | ||||||||||||||||||||||||||||||||||||||||||
Issuance ofSeries A-1 preferred stock as payment for dividend | 5 | 1,636 | 1,636 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance ofSeries B-1 preferred stock as payment for dividend | 42 | 12,764 | 12,764 | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 108 | 1 | 1,920 | 1,921 | ||||||||||||||||||||||||||||||||||||||||||||
Restricted shares surrendered to fund withholding taxes | (20 | ) | — | (982 | ) | (982 | ) | |||||||||||||||||||||||||||||||||||||||||
Stock based compensation | 205 | 2 | 26,345 | 26,347 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | (19,379 | ) | (19,379 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 142 | $ | 41,873 | 901 | $ | 265,777 | 20,293 | $ | 203 | $ | 663,127 | $ | — | $ | — | $ | (33,939 | ) | $ | 36,517 | $ | 973,558 | ||||||||||||||||||||||||||
F-6
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
Year Ended | Year Ended | For the Period | For the Period | ||||||||||||||
December 31, | December 31, | October 2, 2005 to | January 1, 2005 to | ||||||||||||||
2007 | 2006 | December 31, 2005 | October 1, 2005 | ||||||||||||||
Operating activities: | |||||||||||||||||
Net income (loss) | $ | 29,659 | $ | (22,720 | ) | $ | (15,261 | ) | $ | 1,044,849 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||
Non-cash items | (35,971 | ) | 108,584 | 29,366 | (1,051,330 | ) | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Accounts receivable | 64,828 | (9,129 | ) | 1,855 | 557 | ||||||||||||
Contracts-in-process | (60,884 | ) | 5,551 | 42,459 | (76,464 | ) | |||||||||||
Inventories | (15,872 | ) | (31,990 | ) | (7,899 | ) | (10,212 | ) | |||||||||
Long-term receivables | (266 | ) | (2,214 | ) | (13,833 | ) | (22,361 | ) | |||||||||
Deposits | — | 9,085 | (35 | ) | — | ||||||||||||
Other current assets and other assets | 6,369 | (1,121 | ) | (9,914 | ) | 11,981 | |||||||||||
Accounts payable | 6,041 | (12,812 | ) | (13,250 | ) | (1,285 | ) | ||||||||||
Accrued expenses and other current liabilities | 15,866 | 17,756 | (64,039 | ) | 21,573 | ||||||||||||
Customer advances | (17,751 | ) | 50,634 | 5,739 | (62,212 | ) | |||||||||||
Income taxes payable | 28,719 | 391 | 1,389 | 3,079 | |||||||||||||
Pension and other postretirement liabilities | 8,663 | (20,453 | ) | 3,077 | (3,650 | ) | |||||||||||
Long-term liabilities | (2,282 | ) | (3,725 | ) | 335 | 1,844 | |||||||||||
Other | 4 | 165 | 1,480 | (196 | ) | ||||||||||||
Net cash provided by (used in) operating activities | 27,123 | 88,002 | (38,531 | ) | (143,827 | ) | |||||||||||
Investing activities: | |||||||||||||||||
Capital expenditures | (95,761 | ) | (82,157 | ) | (4,972 | ) | (4,649 | ) | |||||||||
(Increase) decrease in restricted cash in escrow | (19,709 | ) | (323 | ) | (54 | ) | 1,566 | ||||||||||
Insurance proceeds received | — | — | — | 205,000 | |||||||||||||
Proceeds received for the contribution of Loral Skynet net of cash contributed | 57,591 | — | — | — | |||||||||||||
Proceeds received from disposition of orbital slot | — | 5,742 | — | — | |||||||||||||
Proceeds from the sale of assets, net of expenses | — | — | — | 144 | |||||||||||||
Distribution from an equity investment | 2,955 | 250 | — | — | |||||||||||||
Proceeds from the sale of short-term investments and available-for-sale securities | 468,571 | 7,098 | — | — | |||||||||||||
Purchase of short-term investments | (350,895 | ) | (106,588 | ) | — | — | |||||||||||
Investments in and advances to affiliates | (1,233 | ) | — | (63 | ) | (7,354 | ) | ||||||||||
Net cash provided by (used in) investing activities | 61,519 | (175,978 | ) | (5,089 | ) | 194,707 | |||||||||||
Financing activities: | |||||||||||||||||
Proceeds from term loan (Loral Skynet Notes refinancing facility) | 141,050 | — | — | — | |||||||||||||
Repayment of Loral Skynet Notes | (126,000 | ) | — | — | — | ||||||||||||
10% redemption fee on extinguishment of Loral Skynet Notes | (12,600 | ) | — | — | — | ||||||||||||
Preferred stock issuance costs | (8,864 | ) | — | — | — | ||||||||||||
Proceeds from the sale of Series-1 preferred stock | 293,250 | — | — | — | |||||||||||||
Redemption of Loral Skynet Preferred Stock | (237,599 | ) | — | — | — | ||||||||||||
Proceeds from the exercise of stock options | 2,097 | ||||||||||||||||
Proceeds from Loral Skynet Notes | — | — | 120,763 | — | |||||||||||||
Cash dividends paid on Loral Skynet Preferred Stock | (11,824 | ) | (1,278 | ) | — | — | |||||||||||
Net cash provided by (used in) financing activities | 39,510 | (1,278 | ) | 120,763 | — | ||||||||||||
Increase (decrease) in cash and cash equivalents | 128,152 | (89,254 | ) | 77,143 | 50,880 | ||||||||||||
Cash and cash equivalents — beginning of period | 186,542 | 275,796 | 198,653 | 147,773 | |||||||||||||
Cash and cash equivalents — end of period | $ | 314,694 | $ | 186,542 | $ | 275,796 | $ | 198,653 | |||||||||
F-7
1. | Organization and Principal Business |
F-8
2. | Bankruptcy Filings and Reorganization |
• | 20 million shares of New Loral common stock were issued to our distribution agent on the Effective Date, 19.9 million of which have been distributed to creditors as of December 31, 2007. The remaining undistributed shares of New Loral common stock have been reserved to cover disputed claims and will be distributed quarterly in accordance with the Plan of Reorganization upon resolution of those claims. | |
• | $200 million of Loral Skynet preferred stock was issued to our distribution agent on the Effective Date, $199.2 million of which has been distributed to creditors. This preferred stock was redeemed in connection with the Telesat Canada transaction. As for the remaining $0.8 million that had not been distributed as of the redemption date, upon resolution of disputed claims, the redemption amount plus accrued interest through the redemption date corresponding to such undistributed shares will be distributed to creditors in accordance with the Plan of Reorganization. | |
• | Pursuant to a rights offering, Loral Skynet issued on the Effective Date, $126 million, principal amount, of senior secured notes (the “Loral Skynet Notes”, see Note 10) to certain creditors who subscribed for the notes and to certain creditors who committed to purchase any unsubscribed notes (i.e., “backstopped” the offering). These notes were redeemed in connection with the Telesat Canada transaction. |
3. | Basis of Presentation |
F-9
F-10
Years | ||||
Land improvements | 20 | |||
Buildings and building improvements | 10 to 45 | |||
Leasehold improvements | 2 to 17 | |||
Equipment, furniture and fixtures | 5 to 10 |
F-11
F-12
F-13
F-14
F-15
F-16
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Non-cash operating items: | |||||||||||||||||
Gain on contribution of Loral Skynet | $ | (104,942 | ) | $ | — | $ | — | $ | — | ||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments | — | — | — | (1,101,453) | |||||||||||||
Gain on sale of discontinued operations, net of tax | — | — | — | (13,967) | |||||||||||||
Equity in net losses of affiliates | 21,430 | 7,163 | 5,447 | 2,796 | |||||||||||||
Satmex settlement | — | (18,605 | ) | — | — | ||||||||||||
Minority interest | 23,240 | 24,794 | 2,667 | (126) | |||||||||||||
Deferred taxes | 32,205 | 9,105 | — | (16,134) | |||||||||||||
Depreciation and amortization | 76,910 | 68,300 | 16,024 | 61,277 | |||||||||||||
Stock based compensation | 26,347 | 2,997 | — | — | |||||||||||||
Impairment of cost basis investment | — | 3,000 | — | — | |||||||||||||
Provisions for inventory obsolescence | 543 | 1,678 | 1,525 | 2,127 | |||||||||||||
Warranty expense accruals (accrual reversals) | (18,879 | ) | 12,180 | 2,704 | 11,850 | ||||||||||||
(Recoveries of) provisions for bad debts on billed receivables | (1,917 | ) | 356 | 953 | (2,880) | ||||||||||||
Adjustment to revenue straightlining assessment | (204 | ) | — | 46 | 1,031 | ||||||||||||
Write-off of construction in process | 2,164 | ||||||||||||||||
Loss on equipment disposals | — | — | — | 3,456 | |||||||||||||
Loss on extinguishment of debt | 16,155 | — | — | — | |||||||||||||
Curtailment gain | (1,686 | ) | — | — | — | ||||||||||||
Amortization of prior service credit and actuarial gains | (3,285 | ) | — | — | — | ||||||||||||
Gain on disposition of an orbital slot | (3,600 | ) | (1,149 | ) | — | — | |||||||||||
Gain on disposition of available for sale securities | (11,088 | ) | (7,098 | ) | — | — | |||||||||||
Non-cash net interest and (gain) loss on foreign currency transactions and contracts | (89,364 | ) | 5,863 | — | 693 | ||||||||||||
Net non-cash operating items | $ | (35,971 | ) | $ | 108,584 | $ | 29,366 | $ | (1,051,330) | ||||||||
F-17
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Non-cash financing activities: | |||||||||||||||||
Issuance of Preferred stock by subsidiary as payment for dividend | $ | 23,343 | $ | 14,260 | $ | — | $ | — | |||||||||
Issuance of Loral Series-1 Preferred Stock as payment for dividend | $ | 14,400 | $ | — | $ | — | $ | — | |||||||||
Accrued dividend onSeries A-1 andSeries B-1 Preferred Stock | $ | 4,979 | $ | — | $ | — | $ | — | |||||||||
Increase in restricted cash related to debt proceeds | $ | — | $ | — | $ | — | $ | 98,736 | |||||||||
Supplemental information: | |||||||||||||||||
Interest paid | $ | 24,891 | $ | 17,921 | $ | 15,548 | $ | — | |||||||||
Taxes paid, net of refunds | $ | 5,292 | $ | 6,365 | $ | (418 | ) | $ | 2,166 | ||||||||
Cash (paid) received for reorganization items: | |||||||||||||||||
Professional fees | $ | (160 | ) | $ | (9,581 | ) | $ | (9,650 | ) | $ | (17,533) | ||||||
Employee retention costs | $ | (4,790 | ) | ||||||||||||||
Restructuring costs | $ | (740 | ) | $ | (55) | ||||||||||||
Interest income | $ | 2,536 | |||||||||||||||
Vendor settlement | $ | (432 | ) | ||||||||||||||
F-18
4. | Fresh-Start Accounting |
F-19
Predecessor | Plan | Fresh-Start | Successor | |||||||||||||
October 1, | Reorganization | Valuation | October 1, | |||||||||||||
2005 | Adjustments | Adjustments(e) | 2005 | |||||||||||||
(in millions) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 198.7 | $ | — | $ | — | $ | 198.7 | ||||||||
Accounts receivable, net | 14.4 | — | — | 14.4 | ||||||||||||
Contracts-in-process | 91.4 | — | (14.3 | ) | 77.1 | |||||||||||
Inventories | 45.5 | — | — | 45.5 | ||||||||||||
Other current assets | 41.3 | 97.5 | (b) | 3.4 | 142.2 | |||||||||||
Total current assets | 391.3 | 97.5 | (10.9 | ) | 477.9 | |||||||||||
Property, plant and equipment, net | 536.5 | (3.5 | )(i) | 0.2 | 533.2 | |||||||||||
Long-term receivables | 67.6 | — | (23.8 | ) | 43.8 | |||||||||||
Investments in and advances to affiliates | 53.7 | — | 56.3 | 110.0 | ||||||||||||
Deposits | 9.8 | — | — | 9.8 | ||||||||||||
Goodwill | — | — | 340.1 | (g) | 340.1 | |||||||||||
Other assets | 42.1 | 2.1 | (b)(j) | 126.7 | 170.9 | |||||||||||
$ | 1,101.0 | $ | 96.1 | $ | 488.6 | $ | 1,685.7 | |||||||||
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 36.1 | $ | 45.1 | (c)(h) | $ | 1.2 | $ | 82.4 | |||||||
Accrued employment costs | 33.9 | 0.5 | (c) | — | 34.4 | |||||||||||
Customer advances and billings in excess of costs and profits | 108.4 | 24.9 | (c)(h) | (3.2 | ) | 130.1 | ||||||||||
Interest payable | — | 19.1 | (c)(h) | — | 19.1 | |||||||||||
Vendor financing payable | — | 37.1 | (c)(h) | — | 37.1 | |||||||||||
Income taxes payable | — | 0.8 | (c) | — | 0.8 | |||||||||||
Other current liabilities | 25.5 | 17.9 | (c)(h) | (1.7 | ) | 41.7 | ||||||||||
Total current liabilities | 203.9 | 145.4 | (3.7 | ) | 345.6 | |||||||||||
Pension and other postretirement liabilities | — | 156.6 | (c) | 78.2 | 234.8 | |||||||||||
Long-term liabilities | 84.5 | 34.6 | (c) | 40.5 | 159.6 | |||||||||||
Long-term debt | — | 103.4 | (b) | — | 103.4 | |||||||||||
Total liabilities | 288.4 | 440.0 | 115.0 | 843.4 | ||||||||||||
Liabilities subject to compromise | 1,914.0 | (1,914.0 | )(c) | — | — | |||||||||||
Minority interest | 2.3 | 200.0 | (b) | (2.3 | ) | 200.0 | ||||||||||
Shareholders’ equity: | ||||||||||||||||
Common stock, par value $.01 and Paid-in capital | 3,397.2 | 642.3 | (d) | (3,397.2 | )(f) | 642.3 | ||||||||||
Other | (93.8 | ) | — | 93.8 | (f) | — | ||||||||||
Accumulated (deficit) retained earnings | (4,407.1 | ) | 727.8 | (c)(d) | 3,679.3 | (f) | — | |||||||||
Total shareholders’ (deficit) equity | (1,103.7 | ) | 1,370.1 | 375.9 | 642.3 | |||||||||||
$ | 1,101.0 | $ | 96.1 | $ | 488.6 | $ | 1,685.7 | |||||||||
F-20
(a) | The Condensed Consolidated Balance Sheet reflects a reorganization enterprise value of $970 million based on the Bankruptcy Court’s determination (see Note 2), which, after reduction for the fair value of the Loral Skynet Notes and Loral Skynet Preferred Stock (see Notes 10 and 13), results in a reorganization equity value of approximately $642 million. This results in goodwill equal to the excess of reorganization equity value over fair value of identifiable net assets. | |
(b) | Reflects $98.7 million of proceeds from the rights offering of Loral Skynet Notes held in escrow as of October 1, 2005, and the related deferred debt issuance costs of $4.7 million and $200 million of Loral Skynet Preferred Stock issued pursuant to the Plan of Reorganization (see Notes 10 and 13). | |
(c) | Reflects the discharge of pre-petition liabilities in accordance with the Plan of Reorganization and the reclassification of the remaining liabilities subject to compromise to the appropriate liability accounts in accordance with the Plan of Reorganization. Discharge of Loral’s pre-petition liabilities is summarized as follows (in millions): |
Exchanged for stock | $ | 1,298.0 | ||
Cancelled | 292.2 | |||
Reinstated and/or paid in cash | 323.8 | |||
$ | 1,914.0 | |||
(d) | Reflects the issuance of New Loral common stock to pre-petition creditors and the gain on the discharge of liabilities subject to compromise. | |
(e) | Reflects changes to carrying values of assets and liabilities to reflect estimated fair values. | |
(f) | Reflects the revaluation gain and the elimination of the retained deficit and other equity balances. | |
(g) | Reflects goodwill equal to the excess of reorganization equity value over the estimated fair value of identifiable net assets. | |
(h) | Amounts payable upon emergence are included in current liabilities. | |
(i) | Reflects agreement to return certain fixed assets in settlement of certain pre-petition obligations. | |
(j) | Reflects elimination of deferred charges related to the Old Loral debt and preferred stock, which were discharged in accordance with the Plan of Reorganization. |
Gain on discharge of pre-petition obligations | $ | 727.8 | ||
Gain on fresh-start valuation adjustments | 375.9 | |||
Total gain on discharge of pre-petition obligations and fresh-start adjustments | 1,103.7 | |||
Add interest expense to holders of claims paid in cash | 13.2 | |||
Less tax benefit on Plan of Reorganization and fresh-start valuation adjustments | (15.4 | ) | ||
Total gain on discharge of pre-petition obligations and fresh-start adjustments excluding interest expense and income tax benefit | $ | 1,101.5 | ||
F-21
5. | Accumulated Other Comprehensive Income (Loss) |
Accumulated Other Comprehensive | Other Comprehensive Income (loss) | |||||||||||||||||||||||||
Income (Loss) | Predecessor | |||||||||||||||||||||||||
Successor Registrant | Successor Registrant | Registrant | ||||||||||||||||||||||||
For the Period | For the Period | |||||||||||||||||||||||||
October 2, | January 1, | |||||||||||||||||||||||||
2005 to | 2005 to | |||||||||||||||||||||||||
December 31, | Year Ended December 31, | December 31, | October 1, | |||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2005 | 2005 | |||||||||||||||||||||
Cumulative translation adjustment | $ | 498 | $ | 287 | $ | 211 | $ | 272 | $ | 15 | $ | (222 | ) | |||||||||||||
Derivatives classified as cash flow hedges, net of taxes: | ||||||||||||||||||||||||||
Reclassifications into revenues, cost of sales and income taxes from other comprehensive income | (487 | ) | ||||||||||||||||||||||||
Unrealized net gains (losses) on derivatives | (487 | ) | ||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale securities, net of taxes | 6,987 | 9,837 | (2,850 | ) | 9,837 | (99 | ) | |||||||||||||||||||
Reclassification adjustment for gains included in net income | (6,546 | ) | (6,546 | ) | ||||||||||||||||||||||
Pension actuarial gains and prior service credit, net of taxes | 40,072 | 10,121 | ||||||||||||||||||||||||
Reclassification due to amortization and contribution of Loral Skynet | (4,494 | ) | — | (4,494 | ) | — | — | — | ||||||||||||||||||
Adjustment to initially apply SFAS 158, net of tax | 29,951 | |||||||||||||||||||||||||
Total | $ | 36,517 | $ | 40,075 | $ | (3,558 | ) | $ | 10,109 | $ | 15 | $ | (808 | ) | ||||||||||||
F-22
6. | Contracts-in-Process and Long-Term Receivables |
December 31, | ||||||||
2007 | 2006 | |||||||
U.S. government contracts: | ||||||||
Amounts billed | $ | 193 | $ | 983 | ||||
Unbilled receivables | 1,166 | 1,544 | ||||||
1,359 | 2,527 | |||||||
Commercial contracts: | ||||||||
Amounts billed | 60,355 | 17,306 | ||||||
Unbilled receivables | 47,662 | 20,600 | ||||||
108,017 | 37,906 | |||||||
$ | 109,376 | $ | 40,433 | |||||
Long-Term | ||||
Receivables | ||||
2008 | $ | 2,250 | ||
2009 | 2,640 | |||
2010 | 8,168 | |||
2011 | 10,347 | |||
2012 | 9,853 | |||
Thereafter | 101,392 | |||
134,650 | ||||
Less, current portion included incontracts-in-process | (2,250 | ) | ||
Long-term receivables | $ | 132,400 | ||
F-23
7. | Property, Plant and Equipment (see Note 3) |
December 31, | ||||||||
2007 | 2006 | |||||||
Land and land improvements | $ | 26,799 | $ | 27,533 | ||||
Buildings | 49,917 | 53,572 | ||||||
Leasehold improvements | 8,691 | 6,434 | ||||||
Satellites in-orbit, including satellite transponder rights of $136.7 million in 2006 | — | 386,196 | ||||||
Satellite under construction | — | 59,085 | ||||||
Earth stations | — | 18,141 | ||||||
Equipment, furniture and fixtures | 94,844 | 76,787 | ||||||
Other construction in progress | 18,552 | 18,167 | ||||||
198,803 | 645,915 | |||||||
Accumulated depreciation and amortization | (50,975 | ) | (87,036 | ) | ||||
$ | 147,828 | $ | 558,879 | |||||
F-24
8. | Investments in Affiliates |
December 31, | ||||||||
2007 | 2006 | |||||||
Telesat Holdings Inc. | $ | 479,579 | $ | — | ||||
XTAR, LLC | 86,617 | 97,202 | ||||||
$ | 566,196 | $ | 97,202 | |||||
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Telesat Holdings Inc. | $ | (1,792 | ) | $ | — | $ | — | $ | — | ||||||||
XTAR, LLC | (10,585 | ) | (7,413 | ) | (5,384 | ) | (2,796 | ) | |||||||||
Globalstar, L.P. and Globalstar service provider partnerships | (9,053 | ) | 250 | — | — | ||||||||||||
Other | — | — | (63 | ) | — | ||||||||||||
$ | (21,430 | ) | $ | (7,163 | ) | $ | (5,447 | ) | $ | (2,796 | ) | ||||||
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Revenues | $ | 21,968 | $ | 11,262 | $ | 4,148 | $ | 10,025 | |||||||||
Elimination of Loral’s proportionate share of (profits) losses relating to affiliate transactions | 1,935 | 412 | (2,949 | ) | 593 | ||||||||||||
Profits (losses) relating to affiliate transactions not eliminated | (1,082 | ) | (324 | ) | 2,318 | (466 | ) | ||||||||||
F-25
Current assets | $ | 25.4 | ||
Property, plant and equipment, net | 443.8 | |||
Foreign currency contracts | 83.6 | |||
Goodwill | 42.2 | |||
Intangible assets, net | 50.4 | |||
Other assets | 3.2 | |||
Total assets | $ | 648.6 | ||
Current liabilities | $ | 181.1 | ||
Long-term liabilities | 27.0 | |||
Total liabilities | $ | 208.1 | ||
F-26
Consideration received for the contribution of Loral Skynet to Telesat Holdco: | ||||
Cash and marketable securities | $ | 61.5 | ||
Fair value of equity in Telesat Holdco | 670.5 | |||
Total consideration | 732.0 | |||
Book value of contributed net assets of Loral Skynet | 440.5 | |||
Consideration in excess of book value | $ | 291.5 | ||
Gain recognized | $ | 104.9 | ||
For the Period | ||||
October 31, | ||||
2007 | ||||
to December 31, | ||||
Statement of Operations Data: | 2007 | |||
Revenues | $ | 117.8 | ||
Operating expenses | (93.7 | ) | ||
Operating income | 24.1 | |||
Net loss | (1.3 | ) |
Balance Sheet Data: | December 31, 2007 | |||
Current assets | $ | 143.7 | ||
Total assets | 5,610.0 | |||
Current liabilities | 229.5 | |||
Total liabilities | 4,156.7 | |||
Redeemable preferred stock | 143.1 | |||
Shareholders’ equity | 1,310.2 |
F-27
F-28
Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Revenues | $ | 19.4 | $ | 15.3 | $ | 9.4 | ||||||
Operating expenses | (5.0 | ) | (6.7 | ) | (4.0 | ) | ||||||
Operating loss | (14.4 | ) | (8.6 | ) | (5.4 | ) | ||||||
Net loss | (18.4 | ) | (12.6 | ) | (9.6 | ) |
December 31, | ||||||||
2007 | 2006 | |||||||
Current assets | $ | 8.9 | $ | 6.4 | ||||
Total assets | 124.9 | 132.1 | ||||||
Current liabilities | 29.6 | 20.1 | ||||||
Total liabilities | 64.4 | 53.2 | ||||||
Members’ equity | 60.5 | 78.9 |
F-29
9. | Goodwill and Other Intangible Assets |
F-30
Goodwill — December 31, 2005 | $ | 340,094 | ||
Adjustments due to the completion of the fair valuation process: | ||||
Deferred revenues — fair value | 6,070 | |||
Fixed assets — fair value | 502 | |||
Intangibles — fair value | (212 | ) | ||
Contracts-in-process — fair value | (171 | ) | ||
Reversal of excess valuation allowance on deferred tax assets | (36,367 | ) | ||
Release of tax contingency liability | (4,225 | ) | ||
Goodwill — December 31, 2006 | 305,691 | |||
Cumulative effect of adopting FIN 48 | 7,542 | |||
Settlement of FIN 48 liabilities | (2,000 | ) | ||
Reversal of excess valuation allowance on deferred tax assets | (35,088 | ) | ||
Reversal of Old Loral deferred state tax liabilities | (6,840 | ) | ||
Contribution of Loral Skynet to Telesat Canada | (42,247 | ) | ||
Goodwill — December 31, 2007 | $ | 227,058 | ||
Weighted Average | ||||||||||||||||||||
Remaining | December 31, 2007 | December 31, 2006 | ||||||||||||||||||
Amortization Period | Gross | Accumulated | Gross | Accumulated | ||||||||||||||||
(Years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
Internally developed software and technology | 3 | $ | 59.0 | $ | (24.3 | ) | $ | 59.0 | $ | (13.5 | ) | |||||||||
Orbital slots | — | — | — | 10.8 | (1.8 | ) | ||||||||||||||
Trade names | 18 | 9.2 | (1.0 | ) | 13.2 | (0.8 | ) | |||||||||||||
Customer relationships | — | — | — | 20.0 | (1.7 | ) | ||||||||||||||
Customer contracts | — | — | — | 33.0 | (8.3 | ) | ||||||||||||||
Other intangibles | — | — | — | 2.7 | (0.8 | ) | ||||||||||||||
Total | $ | 68.2 | $ | (25.3 | ) | $ | 138.7 | $ | (26.9 | ) | ||||||||||
F-31
2008 | $ | 11.3 | ||
2009 | 11.3 | |||
2010 | 9.2 | |||
2011 | 2.9 | |||
2012 | 2.3 |
10. | Debt Obligations |
December 31, | ||||||||
2007 | 2006 | |||||||
Loral Skynet 14.0% Senior Secured Notes due 2015 (principal amount $126 million) | $ | — | $ | 128,084 |
F-32
11. | Reorganization Expenses Due to Bankruptcy |
For the Period | ||||
January 1, | ||||
2005 to | ||||
October 1, | ||||
2005 | ||||
Professional fees | $ | 32,240 | ||
Employee retention costs | (917 | ) | ||
Severance costs | 972 | |||
Lease rejection claims (gains) | (265 | ) | ||
Vendor settlement losses (gains) | 289 | |||
Restructuring costs | 1,503 | |||
Interest income | (2,586 | ) | ||
Total reorganization expenses due to bankruptcy | $ | 31,236 | ||
F-33
12. | Income Taxes |
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Current: | |||||||||||||||||
U.S. Federal | $ | (31,142 | ) | $ | (4,018 | ) | $ | (532 | ) | $ | (1,235 | ) | |||||
State and local | (19,712 | ) | (2,467 | ) | (429 | ) | (2,339 | ) | |||||||||
Foreign | (398 | ) | (5,290 | ) | (791 | ) | (1,659 | ) | |||||||||
Total current | (51,252 | ) | (11,775 | ) | (1,752 | ) | (5,233 | ) | |||||||||
Deferred: | |||||||||||||||||
U.S. Federal | (47,209 | ) | (7,342 | ) | 325 | (259,373 | ) | ||||||||||
State and local | 31,291 | (1,763 | ) | 97 | (45,737 | ) | |||||||||||
Valuation allowance | (16,287 | ) | — | (422 | ) | 321,244 | |||||||||||
Total deferred | (32,205 | ) | (9,105 | ) | — | 16,134 | |||||||||||
Total income tax (provision) benefit | $ | (83,457 | ) | $ | (20,880 | ) | $ | (1,752 | ) | $ | 10,901 | ||||||
Unrecognized tax benefits | $ | (12,652 | ) | |
Interest expense | (4,186 | ) | ||
Interest income | 41 | |||
Penalties | (303 | ) | ||
Total | $ | 17,100 | ||
F-34
F-35
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Tax (provision) benefit at U.S. Statutory Rate of 35% | $ | (55,225 | ) | $ | (10,541 | ) | $ | 1,888 | $ | (357,928 | ) | ||||||
Permanent adjustments which change statutory amounts: | |||||||||||||||||
State and local income taxes, net of federal income tax | 5,101 | (2,749 | ) | (216 | ) | (31,249 | ) | ||||||||||
Additional tax imposed on foreign source income | (94 | ) | (3,438 | ) | (847 | ) | (6,308 | ) | |||||||||
Reorganization expenses due to bankruptcy | — | — | (94 | ) | (9,944 | ) | |||||||||||
Plan of Reorganization and Fresh-Start valuation adjustments | — | — | — | 94,206 | |||||||||||||
Equity in net losses of affiliates | 7,162 | 2,585 | — | — | |||||||||||||
Tax gain on transfer of Loral Skynet assets to Telesat Canada | (16,419 | ) | — | — | — | ||||||||||||
Provision for unrecognized tax benefits | (8,370 | ) | — | — | — | ||||||||||||
Nondeductible expenses | (2,682 | ) | (3,065 | ) | (1,410 | ) | (1,122 | ) | |||||||||
Change in valuation allowance | (16,287 | ) | — | (422 | ) | 321,244 | |||||||||||
Other, net | 3,357 | (3,672 | ) | (651 | ) | 2,002 | |||||||||||
Total income tax (provision) benefit | $ | (83,457 | ) | $ | (20,880 | ) | $ | (1,752 | ) | $ | 10,901 | ||||||
F-36
Total | ||||
Balance at January 1, 2007 | $ | 42,484 | ||
Increases related to prior year tax positions | 157 | |||
Decreases related to prior year tax positions | (342 | ) | ||
Decrease as a result of tax settlements | (1,508 | ) | ||
Increases related to current year tax positions | 21,707 | |||
Decrease for indemnified liabilities transferred to Telesat Canada and recorded in other long term liabilities | (2,595 | ) | ||
Balance at December 31, 2007 | $ | 59,903 | ||
F-37
F-38
December 31, | ||||||||
2007 | 2006 | |||||||
Deferred tax assets: | ||||||||
Postretirement benefits other than pensions | $ | 31,591 | $ | 33,641 | ||||
Inventoried costs | 17,943 | 37,836 | ||||||
Net operating loss and tax credit carryforwards | 205,209 | 376,202 | ||||||
Compensation and benefits | 22,802 | 9,236 | ||||||
Deferred research & development costs | 18,948 | 20,734 | ||||||
Income recognition on long-term contracts | 26,707 | 19,787 | ||||||
Other, net | 7,086 | 5,980 | ||||||
Federal benefit of uncertain tax positions | 3,610 | — | ||||||
Pension costs | 35,612 | 33,451 | ||||||
Total deferred tax assets before valuation allowance | 369,508 | 536,867 | ||||||
Less valuation allowance | (241,228 | ) | (304,884 | ) | ||||
Net deferred tax asset | 128,280 | 231,983 | ||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | 18,653 | 144,794 | ||||||
Intangible assets | 18,569 | 47,869 | ||||||
Investments in and advances to affiliates | 87,704 | 50,914 | ||||||
Total deferred tax liability | 124,926 | 243,577 | ||||||
Net deferred tax asset (liability) | $ | 3,354 | $ | (11,594 | ) | |||
13. | Shareholders’ Equity and Minority Interest |
F-39
F-40
F-41
Cash | PIK Dividends | Total | ||||||||||||||||||
Payment Date | Dividend Period | Dividends | Shares | Amount | Dividends | |||||||||||||||
November 5, 2007 | 7/14/07 to 11/05/07 | $ | 8.79 | — | $ | — | $ | 8.79 | ||||||||||||
July 13, 2007 | 1/14/07 to 7/13/07 | 1.26 | 61,282 | 12.26 | 13.52 | |||||||||||||||
January 12, 2007 | 7/14/06 to 1/13/07 | 1.77 | 55,434 | 11.09 | 12.86 | |||||||||||||||
July 14, 2006 | 11/21/05 to 7/13/06 | 1.27 | 71,281 | 14.26 | 15.53 |
F-42
Year Ended | For the Period | |||||||||||
December 31, | October 2, 2005 | |||||||||||
2007 | 2006 | to December 31, 2005 | ||||||||||
Risk — free interest rate | 4.5 | % | 4.3 | % | 4.4 | % | ||||||
Expected life (years) | 2.80 | 4.75 | 4.75 | |||||||||
Estimated volatility | 32.8 | % | 27.4 | % | 27.4 | % | ||||||
Expected dividends | None | None | None |
F-43
Weighted | ||||||||||||||||
Weighted | Average | Aggregate | ||||||||||||||
Average | Remaining | Intrinsic | ||||||||||||||
Exercise | Contractual | Value | ||||||||||||||
Shares | Price | Term | (in millions) | |||||||||||||
Outstanding at October 2, 2005 | — | — | — | |||||||||||||
Granted (weighted average grant date fair value $6.82 per share) | 746,952 | $ | 28.44 | 7 years | ||||||||||||
Exercised | — | |||||||||||||||
Forfeited | — | |||||||||||||||
Outstanding at December 31, 2005 | 746,952 | $ | 28.44 | 7 years | ||||||||||||
Granted (weighted average grant date fair value $7.66 per share) | 643,500 | $ | 28.44 | |||||||||||||
Exercised | — | |||||||||||||||
Forfeited | (80,000 | ) | $ | 28.44 | ||||||||||||
Outstanding at December 31, 2006 | 1,310,452 | $ | 28.44 | 5.8 years | $ | 16.1 | ||||||||||
Granted (weighted average grant date fair value $23.46 per share) | 965,000 | $ | 26.95 | |||||||||||||
Exercised | (208,750 | ) | $ | 27.82 | $ | 2.9 | ||||||||||
Forfeited | (15,000 | ) | $ | 27.57 | ||||||||||||
Outstanding at December 31, 2007 | 2,051,702 | $ | 27.81 | 4.2 years | $ | 13.2 | ||||||||||
Vested and expected to vest at December 31, 2007 | 2,043,659 | $ | 27.81 | 4.2 years | $ | 13.2 | ||||||||||
Exercisable at December 31, 2007 | 1,376,214 | $ | 27.89 | 4.3 years | $ | 8.8 | ||||||||||
Weighted Average | ||||||||
Grant- Date | ||||||||
Shares | Fair Value | |||||||
Non-vested restricted stock at January 1, 2007 | — | |||||||
Granted | 206,700 | $ | 46.65 | |||||
Vested (intrinsic value of $3,016,000) | (62,777 | ) | $ | 46.65 | ||||
Forfeited | (1,919 | ) | $ | 46.65 | ||||
Non-vested restricted stock at December 31, 2007 | 142,004 | $ | 46.65 | |||||
F-44
14. | Earnings (Loss) Per Share |
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
For the Year | For the Year | October 2, | January 1, | ||||||||||||||
Ended | Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Numerator for basic and diluted loss per share: | |||||||||||||||||
(Loss) income applicable to common shareholders from continuing operations | $ | (15,405 | ) | $ | (22,720 | ) | $ | (15,261 | ) | $ | 1,030,882 | ||||||
Gain on sale of discontinued operations, net of taxes | — | — | — | 13,967 | |||||||||||||
Net (loss) income applicable to common stockholders | $ | (15,405 | ) | $ | (22,720 | ) | $ | (15,261 | ) | $ | 1,044,849 | ||||||
Denominator: | |||||||||||||||||
Weighted average common shares outstanding | 20,087 | 20,000 | 20,000 | 44,108 | |||||||||||||
Basic and diluted (loss) earnings per share: | |||||||||||||||||
Continuing operations | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.37 | ||||||
Discontinued operations | — | — | — | 0.32 | |||||||||||||
(Loss) earnings per share | $ | (0.77 | ) | $ | (1.14 | ) | $ | (0.76 | ) | $ | 23.69 | ||||||
F-45
15. | Pensions and Other Employee Benefits |
F-46
Pension Benefits | Other Benefits | |||||||||||||||
For The Year Ended December 31, | For The Year Ended December 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Reconciliation of benefit obligation | ||||||||||||||||
Obligation at beginning of period | $ | 371,883 | $ | 406,906 | $ | 85,652 | $ | 81,176 | ||||||||
Service cost | 10,145 | 10,926 | 1,607 | 1,482 | ||||||||||||
Interest cost | 22,455 | 21,835 | 4,995 | 4,834 | ||||||||||||
Participant contributions | 1,612 | 1,051 | 1,827 | 1,569 | ||||||||||||
Amendments | — | (35,849 | ) | (2,815 | ) | (2,154 | ) | |||||||||
Actuarial (gain) loss | (15,492 | ) | (12,423 | ) | (3,125 | ) | 3,519 | |||||||||
Benefit payments | (21,382 | ) | (20,563 | ) | (5,008 | ) | (4,774 | ) | ||||||||
Curtailment gain | (1,351 | ) | — | (1,169 | ) | — | ||||||||||
Transfer of liability due to Telesat Canada transaction | — | — | (8,176 | ) | — | |||||||||||
Obligation at December 31, | $ | 367,870 | $ | 371,883 | $ | 73,788 | $ | 85,652 | ||||||||
Reconciliation of fair value of plan assets | ||||||||||||||||
Fair value of plan assets at beginning of period | $ | 284,275 | $ | 247,728 | $ | 866 | $ | 1,028 | ||||||||
Actual return on plan assets | 18,936 | 27,762 | 89 | 38 | ||||||||||||
Employer contributions | — | 27,460 | 3,181 | 3,005 | ||||||||||||
Participant contributions | 1,612 | 1,051 | 1,827 | 1,569 | ||||||||||||
Benefit payments | (20,540 | ) | (19,726 | ) | (5,008 | ) | (4,774 | ) | ||||||||
Fair value of plan assets at December 31, | $ | 284,283 | $ | 284,275 | $ | 955 | $ | 866 | ||||||||
Funded status at end of period | $ | (83,587 | ) | $ | (87,608 | ) | $ | (72,833 | ) | $ | (84,786 | ) | ||||
F-47
Pension Benefits | Other Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Actuarial gain (loss) | $ | 26,477 | $ | 16,033 | $ | (2,103 | ) | $ | (2,893 | ) | ||||||
Amendments-prior service credit | 30,829 | 34,450 | 3,446 | 1,915 | ||||||||||||
$ | 57,306 | $ | 50,483 | $ | 1,343 | $ | (978 | ) | ||||||||
Pension Benefits | Other Benefits | |||||||
Actuarial gain during the period | $ | 10,660 | $ | 3,178 | ||||
Prior service credit during the period | — | 2,815 | ||||||
Amortization of actuarial gain | (59 | ) | 111 | |||||
Amortization of prior service credit | (2,784 | ) | (553 | ) | ||||
Recognition due to curtailment | (994 | ) | (693 | ) | ||||
Recognition due to Telesat Canada transaction | — | (2,537 | ) | |||||
Total recognized in other comprehensive income | $ | 6,823 | $ | 2,321 | ||||
Pension Benefits | Other Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Current Liabilities | $ | 892 | $ | 797 | $ | 3,187 | $ | 3,610 | ||||||||
Long-Term Liabilities | 82,695 | 86,811 | 69,646 | 81,176 | ||||||||||||
$ | 83,587 | $ | 87,608 | $ | 72,833 | $ | 84,786 | |||||||||
F-48
Pension Benefits | Other Benefits | |||||||||||||||||||||||||||||||||
Predecessor | Predecessor | |||||||||||||||||||||||||||||||||
Successor Registrant | Registrant | Successor Registrant | Registrant | |||||||||||||||||||||||||||||||
For the Period | For the Period | For the Period | For the Period | |||||||||||||||||||||||||||||||
For The Year | October 2, | January 1, | For The Year | October 2, | January 1, | |||||||||||||||||||||||||||||
Ended | 2005 to | 2005 to | Ended | 2005 to | 2005 to | |||||||||||||||||||||||||||||
December 31, | December 31, | October 1, | December 31, | December 31, | October 1, | |||||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2007 | 2006 | 2005 | 2005 | |||||||||||||||||||||||||||
Service cost | $ | 10,145 | $ | 10,926 | $ | 2,896 | $ | 7,787 | $ | 1,607 | $ | 1,482 | $ | 255 | $ | 680 | ||||||||||||||||||
Interest cost | 22,455 | 21,835 | 5,760 | 17,601 | 4,995 | 4,834 | 1,157 | 3,407 | ||||||||||||||||||||||||||
Expected return on plan assets | (23,768 | ) | (22,229 | ) | (5,545 | ) | (15,343 | ) | (36 | ) | (52 | ) | (23 | ) | (78 | ) | ||||||||||||||||||
Amortization of prior service credit | (2,784 | ) | (1,399 | ) | — | (27 | ) | (553 | ) | (239 | ) | — | (1,443 | ) | ||||||||||||||||||||
Amortization of net actuarial loss(gain) | (59 | ) | — | — | 4,976 | 111 | 127 | — | 1,843 | |||||||||||||||||||||||||
Curtailment gain | (2,345 | ) | — | — | — | (1,862 | ) | — | — | — | ||||||||||||||||||||||||
Net periodic cost | $ | 3,644 | $ | 9,133 | $ | 3,111 | $ | 14,994 | $ | 4,262 | $ | 6,152 | $ | 1,389 | $ | 4,409 | ||||||||||||||||||
Predecessor | |||||||||
Successor Registrant | Registrant | ||||||||
For the Period | For the Period | ||||||||
For The Year | October 2, | January 1, | |||||||
Ended | 2005 to | 2005 to | |||||||
December 31 | December 31, | October 1, | |||||||
2007 | 2006 | 2005 | 2005 | ||||||
Discount rate | 6.00%/6.50% | 5.75% | 5.75% | 6.00% | |||||
Expected return on plan assets | 8.50% | 9.00% | 9.00% | 9.00% | |||||
Rate of compensation increase | 4.25% | 4.25% | 4.25% | 4.25% | |||||
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
December 31, | October 1, | ||||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Discount rate | 6.50 | % | 6.00 | % | 5.75 | % | 5.75 | % | |||||||||
Rate of compensation increase | 4.25 | % | 4.25 | % | 4.25 | % | 4.25 | % | |||||||||
F-49
December 31, | ||||||||
2007 | 2006 | |||||||
Equity investments | 54 | % | 55 | % | ||||
Fixed income investments | 46 | % | 45 | % | ||||
100 | % | 100 | % | |||||
1% Increase | 1% Decrease | |||||||
Effect on total of service and interest cost components of net periodic postretirement health care benefit cost | $ | 474 | $ | (390 | ) | |||
Effect on the health care component of the accumulated postretirement benefit obligation | $ | 5,944 | $ | (4,993 | ) |
Other Benefits | ||||||||||||
Gross | Medicare | |||||||||||
Pension | Benefit | Subsidy | ||||||||||
Benefits | Payments | Receipts | ||||||||||
2008 | $ | 23,527 | $ | 4,558 | $ | 284 | ||||||
2009 | 24,191 | 4,835 | 314 | |||||||||
2010 | 24,844 | 5,114 | 342 | |||||||||
2011 | 25,618 | 5,396 | 369 | |||||||||
2012 | 25,771 | 5,650 | 400 | |||||||||
2013 to 2017 | 140,187 | 30,600 | 2,375 |
F-50
16. | Financial Instruments and Foreign Currency |
Foreign Currency | U.S. $ | |||||||
Future revenues — Japanese Yen | ¥ | 84 | $ | 0.7 | ||||
Future expenditures — Japanese Yen | ¥ | 4,222 | $ | 37.6 | ||||
Future expenditures — EUROs | E | 3.7 | $ | 5.5 |
F-51
17. | Commitments and Contingencies |
Balance of deferred amounts at January 1, 2005 | $ | 27.2 | ||
Accruals for deferred amounts issued during the period | 1.3 | |||
Accruals relating to pre-existing contracts (including changes in estimates) | 10.5 | |||
Balance of deferred amounts at October 1, 2005 | 39.0 | |||
Accruals for deferred amounts issued during the period | — | |||
Accruals relating to pre-existing contracts (including changes in estimates) | 2.7 | |||
Balance of deferred amounts at December 31, 2005 | 41.7 | |||
Accruals for deferred amounts issued during the period | 4.8 | |||
Accruals relating to pre-existing contracts (including changes in estimates) | 7.4 | |||
Balance of deferred amounts at December 31, 2006 | 53.9 | |||
Warranty costs incurred including payments | (10.8 | ) | ||
Accruals relating to pre-existing contracts (including changes in estimates) | (8.1 | ) | ||
Balance of deferred amounts at December 31, 2007 | $ | 35.0 | ||
F-52
F-53
F-54
Gross | Sublease | |||||||||||
Rent | Income | Net Rent | ||||||||||
Year ended December 31, 2007 | $ | 26,302 | $ | (76 | ) | $ | 26,226 | |||||
Year ended December 31, 2006 | $ | 27,317 | $ | (20 | ) | $ | 27,297 | |||||
October 2, 2005 to December 31, 2005 | $ | 6,536 | $ | (38 | ) | $ | 6,498 | |||||
January 1, 2005 to October 1, 2005 | $ | 20,057 | $ | (261 | ) | $ | 19,796 |
2008 | $ | 8,589 | ||
2009 | 7,671 | |||
2010 | 6,953 | |||
2011 | 4,922 | |||
2012 | 2,651 | |||
Thereafter | 1,979 | |||
$ | 32,765 | |||
F-55
F-56
F-57
F-58
F-59
F-60
F-61
F-62
18. | Segments |
F-63
F-64
(in millions)
Satellite | Satellite | |||||||||||||||||||
Manufacturing | Services(1) | Corporate(2) | Total | |||||||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||||||
Revenues(3) | $ | 739.9 | $ | 238.9 | $ | 978.8 | ||||||||||||||
Intersegment revenues(3) | 74.4 | 2.3 | 76.7 | |||||||||||||||||
Operating segment revenues | $ | 814.3 | $ | 241.2 | 1,055.5 | |||||||||||||||
Intercompany eliminations(4) | (55.2 | ) | ||||||||||||||||||
Affiliate eliminations(1) | (117.8 | ) | ||||||||||||||||||
Revenues as reported | $ | 882.5 | ||||||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 34.5 | $ | 118.4 | $ | (37.9 | ) | $ | 115.0 | |||||||||||
Intercompany eliminations(4) | (6.1 | ) | ||||||||||||||||||
Affiliate eliminations(1) | (65.3 | ) | ||||||||||||||||||
Adjusted EBITDA | 43.6 | |||||||||||||||||||
Depreciation and amortization(7) | (103.3 | ) | ||||||||||||||||||
Gain on the contribution of Loral Skynet to Telesat Canada | 104.9 | |||||||||||||||||||
Operating income from continuing operations | 45.2 | |||||||||||||||||||
Interest and investment income | 39.3 | |||||||||||||||||||
Interest expense | (2.3 | ) | ||||||||||||||||||
Unrealized gain on foreign exchange contracts | 89.4 | |||||||||||||||||||
Loss on extinguishment of debt | (16.2 | ) | ||||||||||||||||||
Other expense | 2.4 | |||||||||||||||||||
Income tax provision | (83.5 | ) | ||||||||||||||||||
Equity loss in affiliates | $ | (1.8 | ) | $ | (19.6 | ) | (21.4 | ) | ||||||||||||
Minority interest | (23.2 | ) | ||||||||||||||||||
Income from continuing operations | $ | 29.7 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||
Segment depreciation and amortization(7) | $ | 36.3 | $ | 85.9 | $ | 22.3 | $ | 144.5 | ||||||||||||
Affiliate eliminations(1) | — | (41.2 | ) | — | (41.2 | ) | ||||||||||||||
Depreciation and amortization as reported | $ | 36.3 | $ | 44.7 | $ | 22.3 | $ | 103.3 | ||||||||||||
Segment capital expenditures(7) | $ | 37.5 | $ | 88.7 | $ | — | $ | 126.2 | ||||||||||||
Affiliate eliminations(1) | — | (30.4 | ) | — | (30.4 | ) | ||||||||||||||
Capital expenditures as reported | $ | 37.5 | $ | 58.3 | $ | — | $ | 95.8 | ||||||||||||
Segment total assets | $ | 963.4 | $ | 6,221.4 | $ | 128.1 | $ | 7,312.9 | ||||||||||||
Affiliate eliminations(1) | — | (5,610.0 | ) | — | (5,610.0 | ) | ||||||||||||||
Total assets as reported(7) | $ | 963.4 | $ | 611.4 | $ | 128.1 | $ | 1,702.9 | ||||||||||||
F-65
(in millions)
Satellite | Satellite | |||||||||||||||
Manufacturing | Services | Corporate(2) | Total | |||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||
Revenues(3) | $ | 636.6 | $ | 160.7 | $ | 797.3 | ||||||||||
Intersegment revenues | 59.9 | 3.1 | 63.0 | |||||||||||||
Operating segment revenues | $ | 696.5 | $ | 163.8 | 860.3 | |||||||||||
Intercompany eliminations(4) | (63.0 | ) | ||||||||||||||
Revenues as reported | $ | 797.3 | ||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 65.9 | $ | 68.0 | $ | (26.8 | ) | $ | 107.1 | |||||||
Intercompany eliminations(4) | (6.0 | ) | ||||||||||||||
Adjusted EBITDA | 101.1 | |||||||||||||||
Depreciation and amortization(7) | (71.3 | ) | ||||||||||||||
Operating income from continuing operations | 29.8 | |||||||||||||||
Interest and investment income | 31.5 | |||||||||||||||
Interest expense | (23.4 | ) | ||||||||||||||
Other expense | (7.8 | ) | ||||||||||||||
Income tax provision | (20.8 | ) | ||||||||||||||
Equity loss in affiliates | (7.2 | ) | ||||||||||||||
Minority interest | (24.8 | ) | ||||||||||||||
Loss from continuing operations | $ | (22.7 | ) | |||||||||||||
Other Data: | ||||||||||||||||
Depreciation and amortization as reported(7) | $ | 23.3 | $ | 45.9 | $ | 2.1 | $ | 71.3 | ||||||||
Capital Expenditures as reported | $ | 18.4 | $ | 63.7 | $ | 0.1 | $ | 82.2 | ||||||||
Total assets as reported(7) | $ | 944.6 | $ | 750.4 | $ | 34.9 | $ | 1,729.9 | ||||||||
F-66
(in millions)
Satellite | Satellite | |||||||||||||||
Manufacturing | Services | Corporate(2) | Total | |||||||||||||
Revenues and Adjusted EBITDA: | ||||||||||||||||
Revenues(3) | $ | 161.0 | $ | 36.1 | $ | 197.1 | ||||||||||
Intersegment revenues | 0.8 | 0.9 | 1.7 | |||||||||||||
Operating segment revenues | $ | 161.8 | $ | 37.0 | 198.8 | |||||||||||
�� | ||||||||||||||||
Intercompany eliminations(4) | (1.6 | ) | ||||||||||||||
Revenues as reported | $ | 197.2 | ||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 11.8 | $ | 11.5 | $ | (11.0 | ) | $ | 12.3 | |||||||
Intercompany eliminations(4) | (1.2 | ) | ||||||||||||||
Adjusted EBITDA | 11.1 | |||||||||||||||
Depreciation and amortization(7) | (16.0 | ) | ||||||||||||||
Operating loss from continuing operations | (4.9 | ) | ||||||||||||||
Interest and investment income | 4.1 | |||||||||||||||
Interest expense | (4.4 | ) | ||||||||||||||
Other expense | (0.2 | ) | ||||||||||||||
Income tax provision | (1.8 | ) | ||||||||||||||
Equity loss in affiliates | (5.4 | ) | ||||||||||||||
Minority interest | (2.7 | ) | ||||||||||||||
Loss from continuing operations | $ | (15.3 | ) | |||||||||||||
Other Data: | ||||||||||||||||
Depreciation and amortization as reported | $ | 3.2 | $ | 12.4 | $ | 0.4 | $ | 16.0 | ||||||||
Capital Expenditures as reported | $ | 3.0 | $ | 2.0 | $ | — | $ | 5.0 | ||||||||
Total assets as reported | $ | 871.5 | $ | 741.4 | $ | 66.1 | $ | 1,679.0 | ||||||||
F-67
(in millions)
Satellite | Satellite | ||||||||||||||||
Manufacturing | Services | Corporate(2) | Total | ||||||||||||||
Revenues and Adjusted EBITDA: | |||||||||||||||||
Revenues(3) | $ | 318.6 | $ | 111.3 | $ | 429.9 | |||||||||||
Intersegment revenues | 10.9 | 3.2 | 14.1 | ||||||||||||||
Operating segment revenues | $ | 329.5 | $ | 114.5 | 444.0 | ||||||||||||
Intercompany eliminations(4) | (14.8 | ) | |||||||||||||||
Revenues as reported | $ | 429.2 | |||||||||||||||
Segment Adjusted EBITDA before eliminations(5)(6) | $ | 15.2 | $ | 39.8 | $ | (17.3 | ) | $ | 37.7 | ||||||||
Intercompany eliminations(4) | (12.3 | ) | |||||||||||||||
Adjusted EBITDA | 25.4 | ||||||||||||||||
Depreciation and amortization(7) | (61.3 | ) | |||||||||||||||
Reorganization expenses due to bankruptcy | (31.2 | ) | |||||||||||||||
Operating loss from continuing operations | (67.1 | ) | |||||||||||||||
Gain on discharge of pre-petition obligations and fresh-start adjustments(8) | 1,101.5 | ||||||||||||||||
Interest and investment income | 6.4 | ||||||||||||||||
Interest expense(7) | (17.2 | ) | |||||||||||||||
Other expense | (0.9 | ) | |||||||||||||||
Income tax benefit(7) | 10.9 | ||||||||||||||||
Equity loss in affiliates | (2.8 | ) | |||||||||||||||
Minority interest | 0.1 | ||||||||||||||||
Income from continuing operations | $ | 1,030.9 | |||||||||||||||
Other Data: | |||||||||||||||||
Depreciation and amortization as reported | $ | 11.9 | $ | 48.8 | $ | 0.6 | $ | 61.3 | |||||||||
Capital Expenditures as reported | $ | 2.4 | $ | 2.2 | $ | — | $ | 4.6 | |||||||||
Total assets as reported(7) | $ | 510.7 | $ | 521.5 | $ | 68.8 | $ | 1,101.0 | |||||||||
(1) | Satellite Services for 2007 include Loral Skynet for the period January 1, 2007 to October 30, 2007 and Telesat Canada for the period October 31, 2007 to December 31, 2007. Affiliate eliminations represent the elimination of amounts attributable to Telesat Canada whose results are reported in our consolidated statement of operations as equity in net income of affiliates and in our consolidated balance sheet as investment in affiliates. | |
(2) | Includes corporate expenses incurred in support of our operations and for the years ended December 31, 2007 and 2006 and the period October 2, 2005 to December 31, 2005 includes $0.3 million, $1.2 million and $3.9 million, respectively, of continuing expenses for bankruptcy related matters, which after the adoption of fresh-start accounting are classified as corporate general and administrative expenses. Corporate for 2007 includes our equity investments in XTAR and Globalstar service providers. |
F-68
(3) | Includes revenues from affiliates of $0.5 million for 2007, $11.3 million in 2006 and $4.1 million for the period October 2, 2005 to December 31, 2005, and $10.0 million for the period January 1, 2005 to October 1, 2005, respectively. In 2007 intersegment revenues include $21.5 million of revenue from affiliates. | |
(4) | Represents the elimination of intercompany sales and intercompany Adjusted EBITDA, primarily for satellites under construction by SS/L for wholly owned subsidiaries. | |
(5) | Satellite manufacturing includes (in millions): |
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
Adjusted EBITDA before specific identified charges | $ | 27.3 | $ | 56.8 | $ | 20.5 | $ | 27.4 | |||||||||
Transponders rights provided to SS/L in the Satmex settlement agreement | — | 19.0 | — | — | |||||||||||||
Accrued warranty obligations | 6.7 | (8.2 | ) | (7.2 | ) | (10.1 | ) | ||||||||||
Provisions for inventory obsolescence | 0.5 | (1.7 | ) | (1.5 | ) | (2.1 | ) | ||||||||||
Satellite manufacturing segment Adjusted EBITDA before eliminations | $ | 34.5 | $ | 65.9 | $ | 11.8 | $ | 15.2 | |||||||||
(6) | Satellite Services Revenue and EBITDA include $14.9 million resulting from receipt of a customer termination payment for the year ended December 31, 2006. | |
(7) | Amounts are presented after the elimination of intercompany profit and include goodwill of $227 million for Satellite Manufacturing, as of December 31, 2007. In addition, total assets as reported excludes $2.5 billion of satellite services goodwill related to Telesat Canada as of December 31, 2007. | |
(8) | In connection with our emergence from Chapter 11 and our adoption of fresh-start accounting on October 1, 2005 we recognized a gain on discharge of pre-petition obligations and fresh-start adjustments of $1.101 billion, related interest expense of $13.2 million and a tax benefit of $15.4 million (see Note 4). |
Predecessor | |||||||||||||||||
Successor Registrant | Registrant | ||||||||||||||||
For the Period | For the Period | ||||||||||||||||
October 2, | January 1, | ||||||||||||||||
Year Ended | Year Ended | 2005 to | 2005 to | ||||||||||||||
December 31, | December 31, | December 31, | October 1, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | ||||||||||||||
United States | $ | 702,605 | $ | 691,986 | $ | 170,103 | $ | 350,622 | |||||||||
People’s Republic of China (including Hong Kong) | 47,591 | 26,607 | 2,411 | 4,498 | |||||||||||||
United Kingdom | 45,596 | 11,943 | 2,612 | 8,374 | |||||||||||||
Japan | 4,795 | 6,758 | 4,193 | 13,486 | |||||||||||||
Thailand | 69 | 997 | 2,711 | 6,010 | |||||||||||||
Spain | 385 | 5,682 | 3,418 | 7,483 | |||||||||||||
Mexico | 117 | 7,735 | 1,327 | 7,122 | |||||||||||||
Other | 81,296 | 45,625 | 10,390 | 31,588 | |||||||||||||
$ | 882,454 | $ | 797,333 | $ | 197,165 | $ | 429,183 | ||||||||||
F-69
19. | Related Party Transactions |
F-70
F-71
F-72
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
Loral Series-1 Preferred Stock | ||||||||
Dividends paid in cash | $ | — | $ | — | ||||
Dividends paid in the form of additional shares | ||||||||
— Number of shares | 47,762 | — | ||||||
— Amount | $ | 14.4 | $ | — | ||||
Loral Skynet Preferred Stock | ||||||||
Dividends paid in cash | $ | 4.5 | $ | 0.5 | ||||
Dividends paid in the form of additional shares | ||||||||
— Number of shares | 44,539 | 27,011 | ||||||
— Amount | $ | 8.9 | $ | 5.4 | ||||
Loral Skynet Notes | ||||||||
Interest payments paid in cash | $ | 9.0 | $ | 5.1 | ||||
Redemption premium paid in cash | $ | 5.6 | $ | — | ||||
F-73
F-74
20. | Selected Quarterly Financial Information (unaudited, in thousands, except per share amounts) |
Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Year ended December 31, 2007 | ||||||||||||||||
Revenues | $ | 220,532 | $ | 226,000 | $ | 235,640 | $ | 200,282 | ||||||||
Operating income (loss), | (11,798 | ) | (15,121 | ) | 66 | 72,109 | ||||||||||
Income (loss) before income taxes, equity in net losses of affiliates and minority interest | (4,011 | ) | 54,990 | 58,441 | 48,366 | |||||||||||
Minority interest | (6,986 | ) | (6,487 | ) | (7,078 | ) | (2,689 | ) | ||||||||
Net income (loss) | (16,823 | ) | 20,627 | 25,929 | (74 | ) | ||||||||||
Basic and diluted loss per share(1): | ||||||||||||||||
Basic income (loss) per share | (2.16 | ) | 0.70 | 0.99 | (0.30 | ) | ||||||||||
Diluted income (loss) per share | (2.16 | ) | 0.67 | 0.96 | (0.30 | ) |
Quarter Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
Year ended December 31, 2006 | ||||||||||||||||
Revenues | $ | 171,976 | $ | 192,883 | $ | 226,794 | $ | 205,680 | ||||||||
Operating income (loss) | (6,216 | ) | (520 | ) | 17,566 | 18,988 | ||||||||||
Income (loss) before income taxes, equity in net losses of affiliates and minority interest | (5,826 | ) | (1,088 | ) | 16,472 | 20,559 | ||||||||||
Minority interest | (6,000 | ) | (6,000 | ) | (6,366 | ) | (6,428 | ) | ||||||||
Net income (loss) | (15,840 | ) | (11,395 | ) | 1,186 | 3,329 | ||||||||||
Basic and diluted loss per share(1): | ||||||||||||||||
Income (loss) per share | (0.79 | ) | (0.57 | ) | 0.06 | 0.16 |
(1) | The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share amounts may differ from the total for the year. |
F-75
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 2007, 2006 and 2005
(in thousands)
Additions | ||||||||||||||||||||
Balance at | Charged to | Charged to | Deductions | Balance at | ||||||||||||||||
Beginning | Costs and | Other | From | End of | ||||||||||||||||
Description | of Period | Expenses | Accounts(1) | Reserves(2) | Period | |||||||||||||||
Predecessor Registrant: | ||||||||||||||||||||
January 1, 2005-October 1, 2005 | ||||||||||||||||||||
Allowance for billed receivables | $ | 6,445 | $ | (2,880 | ) | $ | 2 | $ | 942 | $ | 4,509 | |||||||||
Inventory allowance | $ | 34,000 | $ | 2,127 | $ | — | $ | (2,207 | ) | $ | 33,920 | |||||||||
Deferred tax valuation allowance | $ | 659,783 | $ | (321,244 | ) | $ | (1,615 | ) | $ | — | $ | 336,924 | ||||||||
Successor Registrant: | ||||||||||||||||||||
October 2,2005-December 31, 2005 | ||||||||||||||||||||
Allowance for billed receivables | $ | 4,509 | $ | 953 | $ | — | $ | — | $ | 5,462 | ||||||||||
Inventory allowance | $ | 33,920 | $ | 1,525 | $ | — | $ | (1,703 | ) | $ | 33,742 | |||||||||
Deferred tax valuation allowance | $ | 336,924 | $ | 422 | $ | — | $ | — | $ | 337,346 | ||||||||||
Year ended 2006 | ||||||||||||||||||||
Allowance for billed receivables | $ | 5,462 | $ | (307 | ) | $ | 1 | $ | (3,532 | ) | $ | 1,624 | ||||||||
Inventory allowance | $ | 33,742 | $ | 1,678 | $ | — | $ | (5,822 | ) | $ | 29,598 | |||||||||
Deferred tax valuation allowance | $ | 337,346 | $ | — | $ | 3,905 | $ | (36,367 | ) | $ | 304,884 | |||||||||
Year ended 2007 | ||||||||||||||||||||
Allowance for billed receivables | $ | 1,624 | $ | (620 | ) | $ | 20 | $ | (1,024 | ) | $ | — | ||||||||
Inventory allowance | $ | 29,598 | $ | (543 | ) | $ | — | $ | (609 | ) | $ | 28,446 | ||||||||
Deferred tax valuation allowance | $ | 304,884 | $ | 16,287 | $ | (34,749 | ) | $ | (45,194 | ) | $ | 241,228 | ||||||||
(1) | Allowance for long-term receivables recorded as a reduction to revenues. Deferred tax valuation allowance against Old Loral deferred tax assets recorded to goodwill and adjustments from adoption of FIN 48 in 2007. | |
(2) | Receivable allowance reflects write-offs of uncollectible accounts. Inventory allowance was primarily reduced as a result of disposals of the related inventory. Reversal of excess deferred tax valuation allowance recorded as a reduction to goodwill. |
F-76
F-77
October 31 to | ||||||||
December 31, | ||||||||
Notes | 2007 | |||||||
Operating revenues | ||||||||
Service revenues | $ | 103,509 | ||||||
Equipment sales revenues | 7,907 | |||||||
Sales-type lease revenues | ||||||||
Operating revenues | (4 | ) | 111,416 | |||||
Amortization | 40,046 | |||||||
Operations and administration | 43,276 | |||||||
Cost of equipment sales | 6,485 | |||||||
Cost of sales-type lease | ||||||||
Total operating expenses | 89,807 | |||||||
Earnings from operations | 21,609 | |||||||
Interest expense | (5 | ) | (43,861 | ) | ||||
Other expense | (6 | ) | (43,969 | ) | ||||
Loss before income taxes | (66,221 | ) | ||||||
Income tax recovery | (7 | ) | (62,170 | ) | ||||
Net loss | $ | (4,051 | ) | |||||
F-78
(In thousands of Canadian dollars)
October 31 to | ||||
December 31, | ||||
2007 | ||||
Net loss | $ | (4,051 | ) | |
Other comprehensive loss, net of tax: | ||||
Unrealized loss on translation of financial statements of self sustaining foreign operations | (665 | ) | ||
Related tax | 66 | |||
Comprehensive loss | $ | (4,650 | ) | |
F-79
Accumulated | ||||||||||||||||||||||||||
Deficit and | ||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||
Other | Other | Total | ||||||||||||||||||||||||
Common | Preferred | Accumulated | Comprehensive | Comprehensive | Shareholders’ | |||||||||||||||||||||
Notes | Shares | Shares | Deficit | Loss | Loss | Equity | ||||||||||||||||||||
Balance at October 31, 2007 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Common shares issued as part of the sale transaction | (3),(16) | 756,414 | 756,414 | |||||||||||||||||||||||
Preferred shares issued as part of the sale transaction | (3),(16) | 541,764 | 541,764 | |||||||||||||||||||||||
Net loss | (4,051 | ) | (4,051 | ) | (4,051 | ) | ||||||||||||||||||||
Unrealized losses on translation of financial statements of self sustaining foreign operations | (599 | ) | (599 | ) | (599 | ) | ||||||||||||||||||||
Balance at December 31, 2007 | $ | 756,414 | $ | 541,764 | $ | (4,051 | ) | $ | (599 | ) | $ | (4,650 | ) | $ | 1,293,528 | |||||||||||
F-80
December 31, | ||||||||
Notes | 2007 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 42,203 | ||||||
Accounts and notes receivable | (8 | ) | 53,875 | |||||
Current future tax asset | (7 | ) | 2,594 | |||||
Assets held for sale | (9 | ) | 4,037 | |||||
Other current assets | (10 | ) | 57,777 | |||||
Total current assets | 160,486 | |||||||
Satellites, property and other equipment, net | (11 | ) | 1,818,612 | |||||
Other long-term assets | (10 | ) | 27,368 | |||||
Intangible assets, net | (12 | ) | 1,092,359 | |||||
Goodwill | (12 | ) | 2,446,603 | |||||
Total assets | $ | 5,545,428 | ||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 61,599 | ||||||
Other current liabilities | (13 | ) | 152,375 | |||||
Debt due within one year | (14 | ) | 18,419 | |||||
Total current liabilities | 232,393 | |||||||
Debt financing | (14 | ) | 2,775,944 | |||||
Future tax liability | (7 | ) | 439,641 | |||||
Other long-term liabilities | (13 | ) | 662,487 | |||||
Senior preferred shares | (15 | ) | 141,435 | |||||
Total liabilities | 4,251,900 | |||||||
Shareholders’ equity | ||||||||
Common shares (74,252,460 common shares issued) | (16 | ) | 756,414 | |||||
Preferred shares | (16 | ) | 541,764 | |||||
Accumulated deficit | (4,051 | ) | ||||||
Accumulated other comprehensive loss | (599 | ) | ||||||
Total shareholders’ equity | 1,293,528 | |||||||
Total liabilities and shareholders’ equity | $ | 5,545,428 | ||||||
F-81
October 31 to | ||||||
December 31, | ||||||
Notes | 2007 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (4,051 | ) | |||
Adjustments to reconcile net loss to cash flows from operating activities: | ||||||
Amortization | 40,046 | |||||
Future income taxes | (60,653 | ) | ||||
Unrealized foreign exchange | 43,066 | |||||
Other | (317 | ) | ||||
Operating assets and liabilities | (17) | 207,185 | ||||
225,276 | ||||||
Cash flows from investing activities | ||||||
Satellite programs | (15,496 | ) | ||||
Property additions | (14,019 | ) | ||||
Business acquisitions | (3) | (3,229,194 | ) | |||
Proceeds on disposals of assets | 25 | |||||
(3,258,684 | ) | |||||
Cash flows from financing activities | ||||||
Debt financing and bank loans | 2,767,716 | |||||
Repayment of bank loans and debt financing | (44,899 | ) | ||||
Capitalized debt issuance costs | (83,585 | ) | ||||
Note repayment | (129,334 | ) | ||||
Common shares issued | (16) | 311,124 | ||||
Preferred shares issued | (15, 16) | 258,833 | ||||
Capital lease payments | (1,306 | ) | ||||
Satellite performance incentive payments | (4,196 | ) | ||||
Preferred dividends paid | 3,074,353 | |||||
Effect of changes in exchange rates on cash and cash equivalents | 1,258 | |||||
Increase in cash and cash equivalents | 42,203 | |||||
Cash and cash equivalents, beginning of period | — | |||||
Cash and cash equivalents, end of period | (17) | $ | 42,203 | |||
Supplemental disclosure of cash flow information | ||||||
Interest paid | $ | 18,339 | ||||
Income taxes paid | 343 | |||||
$ | 18,682 | |||||
F-82
1. | Basis of Presentation |
2. | Summary of Significant Accounting Policies |
F-83
F-84
Years | ||||
Satellites | 6 to 15 | |||
Transponders under capital lease | 12 to 15 | |||
Earth stations | 5 to 30 | |||
Office buildings | 30 | |||
Leasehold improvements | 1 | |||
Equipment, furniture and fixtures | 5 to 10 |
F-85
Years | ||||
Backlog | 4 to 17 | |||
Customer relationships | 11 to 21 | |||
Favourable leases | 3 to 4 | |||
Patents | 18 |
F-86
• | the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes | |
• | the benefit of unutilized tax losses that will more likely than not be realized and carried forward to future years to reduce income taxes. |
F-87
3. | Business Acquisitions |
F-88
Total | ||||
Cash paid (net of cash acquired) | 3,229,194 | |||
Shares issued (note 16) | 869,656 | |||
Transaction costs | 32,692 | |||
Purchase price | 4,131,542 | |||
Current assets | 101,317 | |||
Satellites, property and other equipment | 1,826,047 | |||
Other long term assets | 19,219 | |||
Intangible assets | 1,099,965 | |||
Assumed debt | (171,620 | ) | ||
Current liabilities, less current portion of debt | (285,016 | ) | ||
Future income tax liability | (497,419 | ) | ||
Other long term liabilities | (407,554 | ) | ||
Total net assets acquired | 1,684,939 | |||
Goodwill | 2,446,603 | |||
Purchase price | 4,131,542 | |||
F-89
4. | Segmented Information |
• | Broadcast — distribution or collection of video and audio signals in the North American and International markets which include television transmit and receive services, occasional use, bundled Digital Video Compression and radio services. | |
• | Enterprise — provision of satellite capacity and ground network services for voice, data, and image transmission and internet access around the world. | |
• | Consulting and Other — all consulting services related to space and earth segments, government studies, satellite control services, R&D. |
Broadcast | 52,771 | |||
Enterprise | 53,758 | |||
Consulting and Other | 4,887 | |||
Total operating revenues | 111,416 | |||
Revenues — Canada | 60,085 | |||
Revenues — United States | 34,352 | |||
Revenues — Europe | 6,108 | |||
Revenues — Asia | 5,588 | |||
Revenues — South America | 4,586 | |||
Revenues — all others | 697 | |||
Total operating revenues | 111,416 | |||
F-90
Satellites, property and other equipment — Canada | 1,373,513 | |||
Satellites, property and other equipment — United States | 434,596 | |||
Satellites, property and other equipment — all others | 10,503 | |||
Total satellites, property and other equipment | 1,818,612 | |||
5. | Interest Expense |
December 31, | ||||
2007 | ||||
Debt service costs | 47,535 | |||
Dividends on senior preferred shares | 1,695 | |||
Capitalized interest | (5,369 | ) | ||
43,861 | ||||
6. | Other Expense |
December 31, 2007 | ||||
Foreign exchange loss | (118,034 | ) | ||
Gain on financial instruments | 75,098 | |||
Interest income | 301 | |||
Performance incentive payments and milestone interest expense | (499 | ) | ||
Other | (835 | ) | ||
(43,969 | ) | |||
7. | Income Taxes |
December 31, 2007 | ||||
Statutory income tax rate | 35.3 | % | ||
Permanent differences | (32.7 | )% | ||
Adjustment for tax rate changes | 83.4 | % | ||
Resolution of uncertain tax positions | 2.2 | % | ||
Other | 5.7 | % | ||
Effective income tax rate | 93.9 | % | ||
F-91
Future | (60,653 | ) | ||
Current | (1,517 | ) | ||
Total income tax expense | (62,170 | ) | ||
December 31, 2007 | ||||
Future Tax Assets | ||||
Capital assets | 7,912 | |||
Intangible assets | 5,353 | |||
Investments | 8,256 | |||
Loss carry forwards | 12,610 | |||
Derivative assets | 17,895 | |||
Other | 3,560 | |||
Less: valuation allowance | (34,358 | ) | ||
Total future tax assets | 21,228 | |||
December 31, 2007 | ||||
Future Tax Liabilities | ||||
Capital assets | (170,276 | ) | ||
Intangibles | (276,005 | ) | ||
Derivative liabilities | (7,398 | ) | ||
Other | (4,596 | ) | ||
Total future tax liabilities | (458,275 | ) | ||
Total future income taxes — net | (437,047 | ) | ||
Net future income tax asset — current portion | 2,594 | |||
Net future income tax liability — long-term portion | (439,641 | ) | ||
Total future income taxes — net | (437,047 | ) | ||
8. | Accounts and Notes Receivable |
December 31, 2007 | ||||
Trade receivables — net of allowance for doubtful accounts | 54,114 | |||
Less: long-term portion of trade receivables | 239 | |||
53,875 | ||||
F-92
9. | Assets Held for Sale |
10. | Other Assets |
December 31, 2007 | ||||||||||||
Current portion | Long term portion | Total | ||||||||||
Net investment in leases(a) | 16,747 | 3,395 | 20,142 | |||||||||
Income taxes recoverable | 12,847 | — | 12,847 | |||||||||
Accrued pension benefit (see note 20) | — | 9,911 | 9,911 | |||||||||
Prepaid expenses and deposits(b) | 15,236 | 712 | 15,948 | |||||||||
Deferred charges(c) | 4,808 | 8,637 | 13,445 | |||||||||
Inventories(d) | 7,239 | — | 7,239 | |||||||||
Other assets(e) | 900 | 4,713 | 5,613 | |||||||||
57,777 | 27,368 | 85,145 | ||||||||||
(a) | The net investment in leases is classified on the balance sheet in other current assets and other long-term assets, and includes the following: |
December 31, | ||||
Net investment in leases as at | 2007 | |||
Total minimum lease payments | 21,383 | |||
Unearned finance income | (1,241 | ) | ||
20,142 | ||||
Current portion | (16,747 | ) | ||
Long-term portion | 3,395 | |||
Unearned finance income is allocated to income over the term of the lease in a manner that produces a constant rate of return on the investment in the leases. The investment in the leases for purposes of income recognition is composed of net minimum lease payments and unearned finance income. Future minimum lease payments receivable under the sales-type leases are $18.0 million in 2008, and $3.4 million in 2009. | ||
(b) | Prepaid expenses and deposits includes mainly prepaid insurance for in-orbit satellites, prepaid interest on banker’s acceptances, and deposits related to foreign taxes. | |
(c) | Deferred charges include deferred costs related to deferred revenue, as well as deferred financing charges related to the revolving credit facility and the Canadian Term Loan (note 14). | |
(d) | Inventories are valued at lower of cost or market and consist of $5.7 million of finished goods and $1.5 million of work in process. Cost for substantially all network equipment inventories is determined on an average cost basis. Cost for work in process and certain one-of-a-kind finished goods is determined using specific identification. | |
(e) | Other assets includes: tax indemnifications receivable from Loral of $2.3 million (note 22), other deposits of $2.1 million, investments of $0.6 million, derivative assets of $0.4 million and long term trade receivables of $0.2 million. |
Investments are recorded at cost. No impairments were recorded as no events or changes in circumstances were identified during the period that may have a significant adverse effect on the carrying value of the investments. Telesat has a portfolio interest in Hellas-Sat Consortium Limited. The consortium has one satellite which provides regional coverage to Greece, Cyprus and the Balkans. Telesat also holds a |
F-93
nominal portfolio interest in Anik-Colombia. Telesat’s wholly-owned subsidiary Infosat has a 22% interest in Pakistan’s Comstar ISA Ltd., a satellite service provider. | ||
Derivative assets relate to a foreign currency forward contract that matures in January 2008. |
11. | Satellites, Property and Other Equipment |
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
Satellites | 1,285,583 | (26,324 | ) | 1,259,259 | ||||||||
Earth stations | 120,210 | (4,546 | ) | 115,664 | ||||||||
Transponders under capital lease | 67,085 | (1,411 | ) | 65,674 | ||||||||
Office buildings and other | 32,619 | (1,544 | ) | 31,075 | ||||||||
Construction in progress | 346,940 | — | 346,940 | |||||||||
1,852,437 | (33,825 | ) | 1,818,612 | |||||||||
12. | Goodwill and Intangible Assets |
Accumulated | Net Book | |||||||||||
Cost | Amortization | Value | ||||||||||
Finite life intangible assets: | ||||||||||||
Revenue backlog | 274,487 | (5,316 | ) | 269,171 | ||||||||
Customer relationships | 207,704 | (2,072 | ) | 205,632 | ||||||||
Favourable leases | 4,368 | (218 | ) | 4,150 | ||||||||
Patents | 59 | — | 59 | |||||||||
486,618 | (7,606 | ) | 479,012 | |||||||||
Indefinite life intangible assets: | ||||||||||||
Orbital slots | 596,347 | — | 596,347 | |||||||||
Trade name | 17,000 | — | 17,000 | |||||||||
Intangible assets | 1,099,965 | (7,606 | ) | 1,092,359 | ||||||||
Goodwill | 2,446,603 | — | 2,446,603 | |||||||||
Goodwill and intangible assets | 3,546,568 | (7,606 | ) | 3,538,962 | ||||||||
F-94
13. | Other Liabilities |
Current | Long term | December 31, 2007 | ||||||||||
portion | portion | Total | ||||||||||
Deferred revenues and deposits(a) | 54,652 | 257,256 | 311,908 | |||||||||
Derivative liabilities(b) | 14,811 | 271,061 | 285,872 | |||||||||
Capital lease liabilities(c) | 29,008 | 44,344 | 73,352 | |||||||||
Deferred satellite performance incentive payments(d) | 7,533 | 35,791 | 43,324 | |||||||||
Interest payable | 40,146 | — | 40,146 | |||||||||
Dividends payable on senior preferred shares (note 15) | 1,695 | — | 1,695 | |||||||||
Pension and other post retirement liabilities (note 20) | — | 24,313 | 24,313 | |||||||||
Other liabilities(e) | 4,530 | 29,722 | 34,252 | |||||||||
152,375 | 662,487 | 814,862 | ||||||||||
(a) | Deferred revenues represent the Company’s liability for the provision of future services. The prepaid amount is brought into income over the period of service to which the prepayment applies. The net amount outstanding at December 31, 2007 will be reflected in the Statement of Earnings as follows: $54.7 million in 2008, $27 million in 2009, $25.9 million in 2010, $25 million in 2011, $24.9 million in 2012, and $154.4 million thereafter. | |
(b) | Derivative liabilities comprise the following: |
Derivative liability | Maturity | December 31, 2007 | ||||||
Foreign currency forward contracts | January 1, 2008 to December 1, 2009 | 17,545 | ||||||
Cross currency basis swap | October 31, 2014 | 261,974 | ||||||
Interest rate swaps | January 31, 2010 to November 28, 2011 | 6,353 | ||||||
285,872 | ||||||||
(c) | The obligation under the capital lease is classified on the balance sheet in other current liabilities and other long-term liabilities. |
Capital lease obligations | December 31, 2007 | |||
Total minimum lease payments | 90,025 | |||
Amount representing interest (9)% | (16,673 | ) | ||
73,352 | ||||
Current portion | (29,008 | ) | ||
Long-term portion | 44,344 | |||
Future minimum lease payments payable under all capital leases are $34 million in 2008, $17.9 million in 2009, $7.8 million in 2010, $7.8 million in 2011, $7.8 million in 2012 and $14.7 million thereafter. |
(d) | Deferred satellite performance incentive payments are payable over the lives of the Nimiq 1, Anik F1, Anik F2, Anik F3 and Anik F1R satellites. The present value of the payments is capitalized as part of the cost of the satellite, recorded as a liability, and charged against operations as part of the normal amortization of the satellite. The amounts payable on the successful operation of the transponders are $7.5 million in 2008, $3.1 million in 2009, $3.4 million in 2010, $2.8 million in 2011, $2.1 million in 2012, and $24.4 million thereafter. | |
(e) | Other liabilities includes: tax indemnifications payable to Loral of $6.9 million (note 22), potential income tax liabilities of $1.8 million, unfavourable leases of $2.2 million, unfavourable customer revenue backlog of $15.2 million, income taxes payable of $0.9 million, and other liabilities of $7.3 million at December 31, 2007. |
F-95
14. | Debt Financing |
December 31, 2007 | ||||
Senior secured credit facilities(a): | ||||
Revolving facility | 20,000 | |||
The Canadian term loan facility | 200,000 | |||
The U.S. term loan facility | 1,687,652 | |||
The U.S. term loan II facility | 5,842 | |||
Senior bridge loan(b) | 667,806 | |||
Senior subordinated bridge loan(c) | 209,324 | |||
Other debt financing(d) | 3,739 | |||
2,794,363 | ||||
Current portion | (18,419 | ) | ||
Long-term portion | 2,775,944 | |||
(a) | The senior secured credit facilities are secured by substantially all of Telesat’s assets. Under the terms of these facilities, Telesat is required to comply with certain covenants including financial reporting, maintenance of certain financial covenant ratios for leverage and interest coverage, a requirement to maintain minimum levels of satellite insurance, restrictions on capital expenditures, a restriction on fundamental business changes or the creation of subsidiaries, restrictions on investments, restrictions on dividend payments, restrictions on the incurrence of additional debt, restrictions on asset dispositions, and restrictions on transactions with affiliates. The financial covenant ratios include total debt to EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA to interest expense. Both financial covenant ratios become tighter over the term of the credit facility. At December 31, 2007 Telesat was in compliance with all of the required covenants. |
(i) | A revolving Canadian dollar denominated credit facility (the “Revolving Facility”) of up to the Canadian dollar equivalent of $153 million (US$154.8 million) is available to Telesat. This Revolving Facility matures on October 31, 2012 and is available to be drawn at any time. The drawn loans will bear interest at the prime rate or LIBOR or Bankers’ Acceptance plus an applicable margin of 175 to 275 basis points per annum. The average interest rate was 7.53% for the two months ended December 31, 2007. Undrawn amounts under the facility are subject to a commitment fee. As at December 31, 2007, $20 million was drawn under this facility. |
(ii) | The Canadian Term Loan Facility is a $200 million loan facility denominated in Canadian dollars, bears interest at a floating rate of the Bankers’ Acceptance rate plus an applicable margin of 275 basis points per annum, and has a maturity of October 31, 2012. There are no required repayments on the |
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Canadian Term Loan facility until the third quarter of 2008. The average interest rate was 7.55% for the two months ended December 31, 2007. This facility was fully drawn at December 31, 2007. |
(iii) | The U.S. Term Loan Facility is a $1,755 million loan facility denominated in US dollars ($1,733.7 million CAD), bears interest at LIBOR plus an applicable margin of 300 basis points per annum, and has a maturity of October 31, 2014. The average interest rate was 7.92% for the two months ended December 31, 2007. This facility was fully drawn at December 31, 2007. |
(iv) | The U.S. Term Loan II Facility is a $150 million delayed draw facility denominated in US dollars ($148.2 million CAD), bears interest at LIBOR plus an applicable margin of 300 basis points per annum, and has a maturity of October 31, 2014. The average interest rate was 8.0% for the two months ended December 31, 2007. The U.S. Term Loan II Facility is available to be drawn for 12 months after the closing of the acquisition described in Note 3 to fund capital expenditures. The undrawn amount of the Term loan B-2 is subject to a commitment fee. As at December 31, 2007, US$10 million ($9.9 million CAD) of the facility was drawn. |
(b) | Senior Bridge Loan is a $692.8 million loan facility denominated in US dollars ($684.6 million CAD). The Bridge Loan is unsecured but is guaranteed by certain Telesat subsidiary entities. This facility has a maturity of October 31, 2008, and an initial interest rate per annum equal to the greater of 9% or three-month LIBOR plus the applicable margin. The applicable margin increases over time subject to an interest rate cap of 11%. The average interest rate was 9.0% for the two months ended December 31, 2007. This facility was fully drawn at December 31, 2007. The lenders under the Bridge Loan have a right, as early as April 28, 2008, to make a Securities Demand whereby Telesat would issue high yield notes subject to registration rights at an interest rate at or below the 11% cap in exchange for the Bridge Loan. If the Senior Bridge Loan is not repaid in full before October 31, 2008, the Senior Bridge Loan is automatically converted into a rollover loan which matures on October 31, 2015 and has escalating interest rates which are capped at 11%. |
(c) | Senior Subordinated Bridge Loan is a $217.2 million loan facility denominated in US dollars ($214.6 million CAD). The Senior Subordinated Bridge Loan is unsecured but is guaranteed by certain Telesat subsidiary entities. This facility has a maturity of October 31, 2008 and an initial interest rate per annum equal to the greater of 10.5% or three-month LIBOR plus the applicable margin. The average interest rate was 10.5% for the two months ended December 31, 2007. The applicable margin increases over time subject to an interest rate cap of 12.5%. This facility was fully drawn at December 31, 2007. The lenders under the Senior Subordinated Bridge Loan have a right, as early as April 28, 2008, to make a Securities Demand whereby Telesat would issue high yield notes subject to registration rights at an interest rate at or below the 12.5% cap in exchange for the Senior Subordinated Bridge Loan. If the Senior Bridge Loan is not repaid in full before October 31, 2008, the Senior Subordinated Bridge Loan is automatically converted into a rollover loan which matures on October 31, 2015 and has escalating interest rates which are capped at 12.5%. |
(d) | Other debt financing includes the financing for the Company’s headquarters building. With respect to the headquarters building, the Company shares equally with the developer, the ownership, cost and debt of the building. The Company has leased the developer’s share for twenty years beginning January 25, 1989 for an annual rent, excluding operating costs, of $1.8 million. Total headquarters financing of $3.7 million includes the amount owing under this capital lease of $1.8 million at December 31, 2007. The imputed interest rate for the capital lease is 10.69% per annum. |
Mortgage financing for the Company’s share of the facility has been arranged by the developer for a twenty-year term coincident with the lease with interest at 11% per annum and with annual payments of principal and interest of $1.8 million. |
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2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||
$25.9 | $27.7 | $32.4 | $107.5 | $117.4 | $2,556.0 | $2,866.9 |
15. | Senior Preferred Shares |
16. | Capital Stock |
F-98
Common Shares | ||||||||
Value | ||||||||
Number | ($) | |||||||
Opening balance, October 31, 2007 | 1 | — | ||||||
Issued for cash (notes 1 and 3) | 35,172,218 | 311,124 | ||||||
Issued in exchange for contributed assets (notes 1 and 3) | 39,080,241 | 445,290 | ||||||
Ending balance, December 31, 2007 | 74,252,460 | 756,414 | ||||||
• | The holders of Voting Participating Preferred Shares are not entitled to vote at meetings of the shareholders of the Company on resolutions electing directors. | |
• | For all other meetings of the shareholders of the Company, the holders of Voting Participating Preferred Shares are entitled to a variable number of votes per Voting Participating Preferred Share based on the number of Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares and Redeemable Non-Voting Participating Preferred Shares outstanding on the record date of the given meeting of the shareholders of the Company. | |
• | The Voting Participating Preferred Shares are convertible, at any time, at the holders’ option into Common Shares or Non-Voting Participating Preferred Shares on a one-for-one basis as long as the result of such conversion does not cause the Company to cease to be a “qualified corporation” within the meaning of the Canadian Telecommunication Common Carrier Ownership and Control Regulations pursuant to the Telecommunications Act (Canada). |
• | The holders of Non-Voting Participating Preferred Shares are not entitled to vote on any matter at meetings of the shareholders of the Company, except in respect of a class vote applicable only to the Non-Voting Participating Preferred Shares. | |
• | The Non-Voting Participating Preferred Shares are convertible, at any time, at the holders’ option into Common Shares or Voting Participating Preferred Shares on a one-for-one basis as long as the result of such conversion does not cause the Company to cease to be a “qualified corporation” within the meaning of the Canadian Telecommunication Common Carrier Ownership and Control Regulations pursuant to the Telecommunications Act (Canada). |
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• | The holders of Director Voting Preferred Shares are entitled to receive notice of and to attend all meetings of the shareholders of the Company at which directors of the Company are to be elected. The holders of the Director Voting Preferred Shares are not entitled to attend meetings of the shareholders of the Company and have no right to vote on any matter other than the election of directors of the Company. | |
• | The holders of Director Voting Preferred Shares are entitled to receive annual non-cumulative dividends of $10 per share if declared by the board of directors of the Company, in priority to the payment of dividends on the Common Shares, Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares, Redeemable Common Shares, and Redeemable Non-Voting Participating Preferred Shares, but after payment of any accrued dividends on the Senior Preferred Shares. | |
• | In the event of liquidation,wind-up or dissolution, the holders of Director Voting Preferred Shares are entitled to receive $10 per share in priority to the payment of dividends on the Common Shares, Voting Participating Preferred Shares, Non-Voting Participating Preferred Shares, Redeemable Common Shares, and Redeemable Non-Voting Participating Preferred Shares, but after payment of any accrued dividends on the Senior Preferred Shares. | |
• | The Director Voting Preferred Shares are redeemable at the option of the Company, at any time, at a redemption price of $10 per share. |
Voting Participating | Non-Voting Participating | Director Voting | Total | |||||||||||||||||||||||||||||
Value | Value | Value | Value | |||||||||||||||||||||||||||||
Number | ($) | Number | ($) | Number | ($) | Number | ($) | |||||||||||||||||||||||||
Opening balance, | ||||||||||||||||||||||||||||||||
October 31, 2007 | — | — | — | — | — | — | ||||||||||||||||||||||||||
Issued for cash (note 3) | 7,034,444 | 117,388 | 1,000 | 10 | 7,035,444 | 117,398 | ||||||||||||||||||||||||||
Issued in exchange for contributed assets (note 3) | 25,794,025 | 304,449 | 25,794,025 | 304,449 | ||||||||||||||||||||||||||||
Issued in exchange for the novation of forward contracts from Loral Skynet (note 3) | 10,159,799 | 119,917 | 10,159,799 | 119,917 | ||||||||||||||||||||||||||||
Ending balance, December 31, 2007 | 7,034,444 | 117,388 | 35,953,824 | 424,366 | 1,000 | 10 | 42,989,268 | 541,764 | ||||||||||||||||||||||||
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17. | Cash Flow Information |
December 31, 2007 | ||||
Cash and cash equivalents is comprised of: | ||||
Cash | 32,737 | |||
Short term investments, original maturity 90 days or less | 9,466 | |||
42,203 | ||||
Changes in operating assets and liabilities are comprised of: | ||||
Receivables | (4,718 | ) | ||
Other assets | 132,768 | |||
Accounts payable | 72,380 | |||
Income taxes payable | (749 | ) | ||
Other liabilities | 7,504 | |||
207,185 | ||||
Non-cash investing and financing activities are comprised of: | ||||
Purchase of satellites, property and other equipment | 4,767 | |||
Shares issued in exchange for assets contributed (note 3) | 869,656 |
18. | Financial Instruments |
Carrying Value | ||||||||||||||||||||
Loans & | ||||||||||||||||||||
HFT | AFS | Receivables | Total | Fair Value | ||||||||||||||||
Financial Assets | ||||||||||||||||||||
Cash and cash equivalents | 42,203 | — | — | 42,203 | 42,203 | |||||||||||||||
Accounts and notes receivable | — | — | 55,299 | 55,299 | 55,299 | |||||||||||||||
Derivative financial instruments | 354 | — | — | 354 | 354 | |||||||||||||||
Other assets | 7,203 | — | — | 7,203 | 7,203 | |||||||||||||||
49,760 | — | 55,299 | 105,059 | 105,059 | ||||||||||||||||
Carrying Value | ||||||||||||||||
HFT | Other | Total | Fair Value | |||||||||||||
Financial Liabilities | ||||||||||||||||
Accounts payable and accrued liabilities | — | 81,221 | 81,221 | 81,221 | ||||||||||||
Customer and other deposits | — | 6,291 | 6,291 | 6,291 | ||||||||||||
Debt | — | 2,792,575 | 2,792,575 | 2,865,116 | ||||||||||||
Derivative financial instruments | 285,872 | — | 285,872 | 285,872 | ||||||||||||
Other liabilities | — | 80,928 | 80,928 | 80,928 | ||||||||||||
285,872 | 2,961,015 | 3,246,887 | 3,319,428 | |||||||||||||
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F-102
19. | Stock-Based Compensation Plans |
Number | Weighted-Average | |||||||
of Shares | Exercise Price ($) | |||||||
December 31, 2007 | ||||||||
Outstanding, beginning of period | 411,047 | 34 | ||||||
Granted | — | — | ||||||
Exercised | — | — | ||||||
Expired/forfeited | (4,139 | ) | 30 | |||||
Outstanding, end of period | 406,908 | 34 | ||||||
Exercisable, end of period | 406,908 | 34 | ||||||
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Number of DSUs | ||||
December 31, 2007 | ||||
Outstanding, beginning of period | 6,772 | |||
Granted | — | |||
Dividends credited | — | |||
Exercised | — | |||
Outstanding, end of period | 6,772 | |||
20. | Employee Benefit Plans |
F-104
Telesat Canada | Skynet | |||||||||||||||
Pension | Other | Other | ||||||||||||||
Benefits | Benefits | Benefits | Total | |||||||||||||
December 31, 2007 | ||||||||||||||||
Change in benefit obligations | ||||||||||||||||
Benefit obligation, October 31, 2007 | 159,392 | 16,631 | 8,079 | 184,102 | ||||||||||||
Current service cost | 774 | 79 | — | 853 | ||||||||||||
Interest cost | 1,513 | 146 | — | 1,659 | ||||||||||||
Benefit payments | (722 | ) | (70 | ) | (24 | ) | (816 | ) | ||||||||
Plan amendment (early retirement program) | 5,703 | — | 5 | 5,708 | ||||||||||||
Employee contributions | 145 | — | 87 | 232 | ||||||||||||
Restructuring | (3,259 | ) | (562 | ) | (58 | ) | (3,879 | ) | ||||||||
Benefit obligation, December 31, 2007 | 163,546 | 16,224 | 8,089 | 187,859 | ||||||||||||
Telesat Canada | Skynet | |||||||||||||||
Pension | Other | Other | ||||||||||||||
Benefits | Benefits | Benefits | Total | |||||||||||||
December 31, 2007 | ||||||||||||||||
Change in fair value of plan assets | ||||||||||||||||
Fair value of plan assets, October 31, 2007 | 176,595 | — | — | 176,595 | ||||||||||||
Return on plan assets | (2,596 | ) | — | — | (2,596 | ) | ||||||||||
Benefit payments | (722 | ) | (70 | ) | (24 | ) | (816 | ) | ||||||||
Employee contributions | 145 | — | 5 | 150 | ||||||||||||
Employer contributions | 35 | 70 | 19 | 124 | ||||||||||||
Fair value of plan assets, December 31, 2007 | 173,457 | — | — | 173,457 | ||||||||||||
Funded status | 9,911 | (16,224 | ) | (8,089 | ) | (14,402 | ) | |||||||||
December 31, 2007 | ||||
Equity securities | 60 | % | ||
Fixed income instruments | 38 | % | ||
Short-term investments | 2 | % | ||
Total | 100 | % | ||
F-105
Telesat Canada | Skynet | |||||||||||
Pension | Other | Other | ||||||||||
Benefits | Benefits | Benefits | ||||||||||
December 31, 2007 | ||||||||||||
Accrued benefit obligation | ||||||||||||
Discount rate | 5.5 | % | 5.5 | % | 6.5 | % | ||||||
Rate of compensation increase | 3.5 | % | 3.5 | % | 4.3 | % | ||||||
Benefit costs for the period ended | ||||||||||||
Discount rate | 5.5 | % | 5.5 | % | 6.5 | % | ||||||
Expected long-term rate of return on plan assets | 7.5 | % | 7.5 | % | 8.5 | % | ||||||
Rate of compensation increase | 3.5 | % | 3.5 | % | 4.3 | % |
Telesat Canada | Skynet | |||||||||||||||
Pension | Other | Other | ||||||||||||||
Benefits | Benefits | Benefits | Total | |||||||||||||
October 31, 2007 to December 31, 2007 | ||||||||||||||||
Current service cost | 774 | 79 | — | 853 | ||||||||||||
Interest cost | 1,513 | 146 | 87 | 1,746 | ||||||||||||
Expected return on plan assets | (2,206 | ) | — | — | (2,206 | ) | ||||||||||
Net benefit expense | 81 | 225 | 87 | 393 | ||||||||||||
21. | Commitments and Contingent Liabilities |
2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||||||||||||||||||
Off balance sheet commitments | 192,402 | 96,537 | 23,073 | 14,749 | 10,648 | 55,024 | 392,433 |
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22. | Related Party Transactions |
F-107
December 31, 2007 | ||||
Service revenues | 440 | |||
Operations and administration expenses | 825 | |||
Capital expenditures — Satellites | 12,318 |
December 31, 2007 | ||||
Receivables at year end | 3,389 | |||
Payables at year end | 9,682 |
23. | Reconciliation to US GAAP |
December 31, 2007 | ||||
Canadian GAAP — Net loss | (4,051 | ) | ||
Gains on embedded derivatives(a) | 774 | |||
Sales type lease — operating lease for US GAAP(b) | 2,748 | |||
Capital lease — operating lease for US GAAP(b) | (78 | ) | ||
Dividends on senior preferred shares(c) | 1,695 | |||
Tax effect of above adjustments(d) | (976 | ) | ||
Uncertainty in income taxes(e) | (2,648 | ) | ||
Impact of future tax rate reduction(d) | 1,251 | |||
United States GAAP — Net loss | (1,285 | ) | ||
Other comprehensive loss items | ||||
Change in currency translation adjustment | (599 | ) | ||
United States GAAP — Comprehensive loss | (1,884 | ) | ||
December 31, 2007 | ||||
Cumulative translation adjustment | (599 | ) | ||
Accumulated other comprehensive loss | (599 | ) | ||
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December 31, 2007 | ||||
Canadian GAAP | 1,293,528 | |||
Adjustments | ||||
Gains on embedded derivatives(a) | 774 | |||
Sales type lease — operating lease for US GAAP(b) | 2,748 | |||
Capital lease — operating lease for US GAAP(b) | (78 | ) | ||
Tax effect of above adjustments(d) | (976 | ) | ||
Uncertainty in income taxes(e) | (2,648 | ) | ||
Impact of future tax rate reduction(d) | 1,251 | |||
United States GAAP | 1,294,599 | |||
(a) | Embedded Derivatives |
(b) | Sales-Type and Capital Leases |
F-109
(c) | Senior Preferred Shares |
(d) | Income Taxes |
(e) | Uncertainty in Income Taxes |
24. | Subsequent Events |
F-110