EXHIBIT 99.10
LORAL CYBERSTAR UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
The following unaudited consolidated pro forma financial statements present
the effects of the exchange offer (based on the approximately 91% of the
aggregate principal amount outstanding of the Senior Notes and Senior Discount
Notes that were exchanged for New Notes), the transfer of CyberStar's data
services business to Dataco, the cancellation of the existing $79.7 million note
payable to SpaceCom and the issuance of a new $29.7 million subordinated note
payable to SpaceCom, as if such transactions occurred as of the beginning of the
respective periods for the unaudited consolidated pro forma statements of
operations and other data and as if such transactions occurred as of September
30, 2001 for the unaudited consolidated pro forma balance sheet. Under U.S.
generally accepted accounting principles applicable to debt restructurings, we
will record the New Notes for financial reporting purposes at a carrying value
substantially in excess of their actual principal amount. In addition, we will
recognize a gain on the exchange only to the extent that the historic carrying
value reduced by the value of the warrants issued in the exchange exceeds the
sum of the actual principal amount of the new notes and the amount of future
interest payments on that amount. As a result, we will not record interest
expense on the new notes, even though cash interest will be payable on them.
The carrying value of the Senior Notes and Senior Discount Notes, plus
accrued interest, at September 30, 2001 is $1,028 million. Based on the
approximately 91% of the aggregate principal amount outstanding of the Senior
Notes and Senior Discount Notes accepted for exchange in connection with the
exchange offer, $933 million of this carrying value is attributable to the New
Notes, which will be reduced by approximately $5 million (the estimated fair
value of the warrants issued in the exchange) and by approximately $24 million
(the estimated pre-tax gain on the exchange offer before expenses), calculated
as described above, resulting in a carrying value for the New Notes of
approximately $904 million. We will amortize the excess of the resulting
carrying value over the actual $613 million principal amount of the New Notes
over the life of the New Notes as a non-cash credit to interest expense. This
credit will fully offset the $61.3 million of annual cash interest payable on
the new notes, so that we will not record interest expense with respect to the
New Notes in our statements of operations.
The estimated after-tax gain on the exchange offer of approximately $13
million, net of expenses, is reflected in the unaudited consolidated pro forma
balance sheet but has not been reflected in the unaudited consolidated pro forma
statements of operations and other data.
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LORAL CYBERSTAR, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
TRANSFER OF
DATA SERVICES EXCHANGE OF
BUSINESS SENIOR NOTES
PRO FORMA PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED(2)
----------- -------------- -------- ------------ --------------
Revenues......................... $146,148 $(48,767)(3) $ 97,381 $ -- $ 97,381
Operating expenses:
Direct......................... 41,375 (30,027) 11,348 -- 11,348
Sales and marketing............ 15,443 (11,968) 3,475 -- 3,475
Engineering and technical
services.................... 9,202 (9,202) -- -- --
General and administrative..... 15,079 (11,936) 3,143 -- 3,143
Depreciation and
amortization................ 82,737 (15,716) 67,021 -- 67,021
-------- -------- -------- ------- --------
Total operating expenses......... 163,836 (78,849) 84,987 -- 84,987
-------- -------- -------- ------- --------
(Loss) income from operations.... (17,688) 30,082 12,394 -- 12,394
Interest income................ 945 (832) 113 -- 113
Interest expense............... (75,121) 2,547(4) (72,574) 61,394(5) (11,180)
Other income................... 294 (7) 287 -- 287
-------- -------- -------- ------- --------
(Loss) income before income
taxes.......................... (91,570) 31,790 (59,780) 61,394 1,614
Income tax expense............... (779) 779(6) -- (4,636)(7) (4,636)
-------- -------- -------- ------- --------
Net (loss) income................ $(92,349) $ 32,569 $(59,780) $56,758 $ (3,022)
======== ======== ======== ======= ========
OTHER DATA:
Deficiency of earnings to cover
fixed charges............... $(91,570) -- -- -- $(44,339)
</Table>
2
LORAL CYBERSTAR, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)
<Table>
<Caption>
TRANSFER OF EXCHANGE OF
DATA SERVICES BUSINESS SENIOR NOTES
PRO FORMA PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED(2)
----------- ---------------------- -------- ------------ --------------
Revenues....................... $ 187,190 $ (77,807)(3) $109,383 $ -- $109,383
Operating expenses:
Direct....................... 64,887 (46,634) 18,253 -- 18,253
Sales and marketing.......... 25,824 (18,835) 6,989 -- 6,989
Engineering and technical
services.................. 10,894 (10,894) -- -- --
General and administrative... 21,344 (19,118) 2,226 -- 2,226
Depreciation and
amortization.............. 107,733 (17,757) 89,976 -- 89,976
--------- --------- -------- ------- --------
Total operating expenses....... 230,682 (113,238) 117,444 -- 117,444
--------- --------- -------- ------- --------
Loss from operations........... (43,492) 35,431 (8,061) -- (8,061)
Interest income.............. 4,157 (1,401) 2,756 -- 2,756
Interest expense............. (97,223) 4,071(4) (93,152) 78,890(5) (14,262)
Other income................. 270 15 285 -- 285
--------- --------- -------- ------- --------
Loss before income taxes....... (136,288) 38,116 (98,172) 78,890 (19,282)
Income tax (expense) benefit... (1,130) 1,130(6) -- 1,321(7) 1,321
--------- --------- -------- ------- --------
Net loss....................... $(137,418) $ 39,246 $(98,172) $80,211 $(17,961)
========= ========= ======== ======= ========
OTHER DATA:
Deficiency of earnings to
cover fixed charges....... $(136,288) -- -- -- $(80,552)
</Table>
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LORAL CYBERSTAR, INC.
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
TRANSFER OF
DATA SERVICES EXCHANGE OF
BUSINESS SENIOR NOTES
PRO FORMA PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED
----------- -------------- ---------- ------------- -------------
Current assets:
Cash and cash equivalents.... $ 6,745 $ (1,000) $ 5,745 $ -- $ 5,745
Accounts receivable, net..... 25,987 (10,262) 15,725 -- 15,725
Other current assets......... 6,727 (2,655) 4,072 -- 4,072
Due from Loral companies..... 8,945 (8,693) 252 -- 252
---------- --------- ---------- -------- ----------
Total current assets........... 48,404 (22,610) 25,794 -- 25,794
Property and equipment, net.... 638,664 (36,403) 602,261 -- 602,261
Costs in excess of net assets
acquired..................... 566,079 -- 566,079 -- 566,079
Deferred income taxes.......... 40,966 -- 40,966 (7,093)(8) 33,873
Other assets, net.............. 26,470 (6,732) 19,738 -- 19,738
---------- --------- ---------- -------- ----------
Total assets................... $1,320,583 $ (65,745) $1,254,838 $ (7,093) $1,247,745
========== ========= ========== ======== ==========
Current liabilities:
Current portion of long-term
debt...................... $ 2,919 $ (47) $ 2,872 $ -- $ 2,872
Accounts payable............. 6,858 (3,256) 3,602 5,000 8,602
Accrued and other current
liabilities............... 13,131 (13,131) -- -- --
Customer deposits............ 5,711 (4,892) 819 -- 819
Deferred revenue............. 6,375 (3,979) 2,396 -- 2,396
Interest payable............. 10,384 (1) 10,383 (9,425) 958
Note payable to Loral
SpaceCom.................. 79,669 (79,669) -- -- --
Due to Loral companies....... -- -- -- -- --
---------- --------- ---------- -------- ----------
Total current liabilities...... 125,047 (104,975) 20,072 (4,425) 15,647
Long-term debt(9).............. 1,026,134 -- 1,026,134 (19,839) 1,006,295
Subordinated note payable to
Loral SpaceCom............... -- 29,669 29,669 -- 29,669
Deferred revenue............... 2,154 -- 2,154 -- 2,154
Customer deposits.............. 4,588 -- 4,588 -- 4,588
Stockholders' equity:
Common stock, $.01 par
value..................... -- -- -- -- --
Capital in excess of par
value..................... 588,197 7,935(10) 596,132 4,000 600,132
Accumulated deficit.......... (423,911) -- (423,911) 13,171 (410,740)
Accumulated other
comprehensive (loss)
income.................... (1,626) 1,626 -- -- --
---------- --------- ---------- -------- ----------
Total stockholders' equity..... 162,660 9,561 172,221 17,171 189,392
---------- --------- ---------- -------- ----------
Total liabilities and
stockholders' equity......... $1,320,583 $ (65,745) $1,254,838 $ (7,093) $1,247,745
========== ========= ========== ======== ==========
</Table>
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NOTES TO LORAL CYBERSTAR UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(1) These pro forma adjustments result from the transfer of CyberStar's data
services segment to Dataco in exchange for the cancellation of the $79.7
million intercompany note payable to SpaceCom and the issuance of a new
$29.7 million subordinated note to SpaceCom, which bears interest at 10%
per annum, in connection with the exchange offer. The adjustments primarily
relate to removing the historical results of operations of the data
services business and the related assets and liabilities as of and for the
respective periods.
(2) The pro forma financial statements do not include the anticipated $3
million to $4 million annual management fee, which is expected to be
implemented following the exchange offer.
(3) Includes an adjustment to include intercompany sales from CyberStar's fixed
satellite services segment to CyberStar's data services segment of
approximately $16 million and $26 million for the nine months ended
September 30, 2001 and the year ended December 31, 2000, respectively.
(4) Includes an adjustment to reduce interest expense for the cancellation of
the existing intercompany note due to SpaceCom and the issuance of the new
$29.7 million subordinated note to SpaceCom. The reduction was
approximately $3 million and $4 million for the nine months ended September
30, 2001 and the year ended December 31, 2000, respectively.
(5) Reflects an adjustment to reduce interest expense on approximately 91% of
the existing Senior Notes and Senior Discount Notes to zero in connection
with accounting for the exchange of such existing Senior Notes and Senior
Discount Notes for the New Notes.
(6) Amount determined in accordance with CyberStar's tax sharing agreement.
(7) Represents income taxes at the statutory rate of 35% after adjusting for
the non-deductible amortization of cost in excess of net assets acquired.
(8) Represents the tax effect of the gain recognized for book purposes on the
exchange. In addition, CyberStar has established a valuation allowance
against its net deferred tax assets in the amount of $175 million and $199
million at December 31, 2000 and September 30, 2001, respectively. Upon
completion of the exchange, CyberStar will reassess the need for this
valuation allowance. Any change to the valuation allowance upon
reassessment has not been reflected in the unaudited consolidated pro forma
balance sheet.
(9) Includes aggregate principal amount of the existing Senior Notes and Senior
Discount Notes at maturity of $927 million as reported; and also includes
the aggregate principal amount of the existing Senior Notes and Senior
Discount Notes not exchanged in the exchange offer and New Notes issued in
connection with the exchange offer equal to $698 million pro forma as
adjusted.
(10) Represents the difference between the historical value of the net assets of
the data services segment and the negotiated value of the net assets, in
connection with transfer of the data services business, which has been
presented as a capital contribution by Loral Space to CyberStar.
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