SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
For the quarterly period ended September 30, 2003
Commission File Number 1-14180
Loral Space & Communications Ltd.
c/o Loral SpaceCom Corporation
Jurisdiction of incorporation: Bermuda
IRS identification number: 13-3867424
The registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o
As of October 31, 2003, there were 44,125,202 shares of Loral Space & Communications Ltd. common stock outstanding.
PART 1.
LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION
| September 30, | December 31, | ||||||||||
| 2003 | 2002 | ||||||||||
| (In thousands, except | |||||||||||
| par values) | |||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
|
Current assets:
|
|||||||||||
|
Cash and cash equivalents
|
$ | 102,805 | $ | 65,936 | |||||||
|
Accounts receivable, net
|
21,995 | 28,893 | |||||||||
|
Contracts-in-process
|
74,534 | 113,154 | |||||||||
|
Vendor financing receivables
|
— | 38,016 | |||||||||
|
Inventories
|
61,384 | 95,733 | |||||||||
|
Insurance proceeds receivable
|
122,770 | — | |||||||||
|
Other current assets
|
43,328 | 48,695 | |||||||||
|
Total current assets
|
426,816 | 390,427 | |||||||||
|
Property, plant and equipment, net
|
1,797,795 | 1,878,137 | |||||||||
|
Long-term receivables
|
57,062 | 163,191 | |||||||||
|
Investments in and advances to affiliates
|
75,982 | 95,443 | |||||||||
|
Deposits
|
12,000 | 58,250 | |||||||||
|
Other assets
|
84,540 | 107,354 | |||||||||
|
Total assets
|
$ | 2,454,195 | $ | 2,692,802 | |||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | |||||||||||
|
Liabilities not subject to compromise:
|
|||||||||||
|
Current liabilities:
|
|||||||||||
|
Current portion of long-term debt
|
$ | — | $ | 130,167 | |||||||
|
Accounts payable
|
16,882 | 58,323 | |||||||||
|
Accrued employment costs
|
14,115 | 34,531 | |||||||||
|
Customer advances
|
34,072 | 114,080 | |||||||||
|
Accrued interest and preferred dividends
|
6,477 | 37,370 | |||||||||
|
Income taxes payable
|
80 | 37,936 | |||||||||
|
Other current liabilities
|
7,635 | 48,736 | |||||||||
|
Total current liabilities
|
79,261 | 461,143 | |||||||||
|
Pension and other postretirement liabilities
|
2,682 | 124,193 | |||||||||
|
Long-term liabilities
|
174,217 | 214,132 | |||||||||
|
Long-term debt
|
— | 2,106,330 | |||||||||
|
Total liabilities not subject to compromise
|
256,160 | 2,905,798 | |||||||||
|
Liabilities subject to compromise (Note 11)
|
2,901,394 | — | |||||||||
|
Minority interest
|
2,470 | 16,150 | |||||||||
|
Convertible redeemable preferred stock:
|
|||||||||||
|
6% Series C ($106,009 redemption value),
$.01 par value
|
— | 104,582 | |||||||||
|
6% Series D ($21,122 redemption value), $.01
par value
|
— | 20,499 | |||||||||
|
Commitments and contingencies (Notes 2, 10,
11 and 14)
|
|||||||||||
|
Shareholders’ deficit:
|
|||||||||||
|
Convertible redeemable preferred stock:
|
|||||||||||
|
6% Series C ($81,265 redemption value), $.01
par value
|
— | 80,171 | |||||||||
|
6% Series D ($15,585 redemption value), $.01
par value
|
— | 15,125 | |||||||||
|
Common stock, $.10 par value
|
4,413 | 4,293 | |||||||||
|
Paid-in capital
|
3,392,867 | 3,389,035 | |||||||||
|
Treasury stock
|
(3,360 | ) | (3,360 | ) | |||||||
|
Unearned compensation
|
(188 | ) | (151 | ) | |||||||
|
Retained deficit
|
(4,060,669 | ) | (3,782,107 | ) | |||||||
|
Accumulated other comprehensive loss
|
(38,892 | ) | (57,233 | ) | |||||||
|
Total shareholders’ deficit
|
(705,829 | ) | (354,227 | ) | |||||||
|
Total liabilities and shareholders’ deficit
|
$ | 2,454,195 | $ | 2,692,802 | |||||||
See notes to condensed consolidated financial statements.
1
LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| As Restated | As Restated | ||||||||||||||||
| (See Note 4) | (See Note 4) | ||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
|
Revenues from satellite sales (see Note 14
regarding revenue reversal in the third quarter of 2003)
|
$ | (23,568 | ) | $ | 119,425 | $ | 162,676 | $ | 532,475 | ||||||||
|
Revenues from satellite services
|
70,891 | 91,557 | 225,529 | 303,043 | |||||||||||||
|
Total revenues
|
47,323 | 210,982 | 388,205 | 835,518 | |||||||||||||
|
Cost of satellite sales (see Note 14
regarding cost of sales reversal in the third quarter of 2003)
|
14,993 | 124,647 | 298,410 | 513,965 | |||||||||||||
|
Cost of satellite services
|
59,969 | 65,102 | 172,979 | 193,820 | |||||||||||||
|
Selling, general and administrative expenses
|
40,859 | 37,038 | 115,189 | 120,158 | |||||||||||||
|
Operating (loss) income before reorganization
expenses due to bankruptcy
|
(68,498 | ) | (15,805 | ) | (198,373 | ) | 7,575 | ||||||||||
|
Reorganization expenses due to bankruptcy
|
(8,760 | ) | — | (8,760 | ) | — | |||||||||||
|
Operating (loss) income
|
(77,258 | ) | (15,805 | ) | (207,133 | ) | 7,575 | ||||||||||
|
Interest and investment income
|
675 | 1,076 | 11,516 | 10,937 | |||||||||||||
|
Interest expense
|
(9,931 | ) | (19,510 | ) | (45,664 | ) | (56,465 | ) | |||||||||
|
Gain on investment
|
— | — | 17,900 | — | |||||||||||||
|
Loss before income taxes, equity in net losses of
affiliates, minority interest, cumulative effect of change in
accounting principle and extraordinary gain on acquisition of
minority interest
|
(86,514 | ) | (34,239 | ) | (223,381 | ) | (37,953 | ) | |||||||||
|
Income tax (provision) benefit
|
(676 | ) | 7,685 | (4,525 | ) | (1,886 | ) | ||||||||||
|
Loss before equity in net losses of affiliates,
minority interest, cumulative effect of change in accounting
principle and extraordinary gain on acquisition of minority
interest
|
(87,190 | ) | (26,554 | ) | (227,906 | ) | (39,839 | ) | |||||||||
|
Equity in net losses of affiliates, net of taxes
|
(38,808 | ) | (22,009 | ) | (55,646 | ) | (51,159 | ) | |||||||||
|
Minority interest, net of taxes
|
89 | (149 | ) | 65 | (143 | ) | |||||||||||
|
Loss before cumulative effect of change in
accounting principle and extraordinary gain on acquisition of
minority interest
|
(125,909 | ) | (48,712 | ) | (283,487 | ) | (91,141 | ) | |||||||||
|
Cumulative effect of change in accounting
principle, net of taxes of $13,809 in 2002
|
(1,970 | ) | — | (1,970 | ) | (876,500 | ) | ||||||||||
|
Extraordinary gain on acquisition of minority
interest, net of taxes
|
— | — | 13,615 | — | |||||||||||||
|
Net loss
|
(127,879 | ) | (48,712 | ) | (271,842 | ) | (967,641 | ) | |||||||||
|
Preferred dividends
|
— | (8,607 | ) | (6,720 | ) | (67,380 | ) | ||||||||||
|
Net loss applicable to common shareholders
|
$ | (127,879 | ) | $ | (57,319 | ) | $ | (278,562 | ) | $ | (1,035,021 | ) | |||||
|
Basic and diluted loss per share:
|
|||||||||||||||||
|
Before cumulative effect of change in accounting
principle and extraordinary gain on acquisition of minority
interest
|
$ | (2.86 | ) | $ | (1.53 | ) | $ | (6.64 | ) | $ | (4.45 | ) | |||||
|
Cumulative effect of change in accounting
principle
|
(0.04 | ) | — | (0.04 | ) | (24.60 | ) | ||||||||||
|
Extraordinary gain on acquisition of minority
interest
|
— | — | 0.31 | — | |||||||||||||
|
Loss per share
|
$ | (2.90 | ) | $ | (1.53 | ) | $ | (6.37 | ) | $ | (29.05 | ) | |||||
|
Weighted average shares outstanding:
|
|||||||||||||||||
|
Basic and diluted
|
44,107 | 37,374 | 43,723 | 35,632 | |||||||||||||
See notes to condensed consolidated financial statements.
2
LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION
| Nine Months Ended | |||||||||
| September 30, | |||||||||
| 2003 | 2002 | ||||||||
| As Restated | |||||||||
| (See Note 4) | |||||||||
| (In thousands) | |||||||||
| (Unaudited) | |||||||||
|
Operating activities:
|
|||||||||
|
Net loss
|
$ | (271,842 | ) | $ | (967,641 | ) | |||
|
Non-cash items:
|
|||||||||
|
Equity in net losses of affiliates, net of taxes
|
55,646 | 59,357 | |||||||
|
Minority interest, net of taxes
|
(65 | ) | 143 | ||||||
|
Cumulative effect of change in accounting
principle, net of taxes
|
1,970 | 876,500 | |||||||
|
Extraordinary gain on acquisition of minority
interest, net of taxes
|
(13,615 | ) | — | ||||||
|
Deferred taxes
|
3,656 | 6,313 | |||||||
|
Depreciation and amortization
|
132,377 | 141,632 | |||||||
|
Provisions for inventory obsolescence
|
35,107 | 14,013 | |||||||
|
Loss on cancellation of deposit
|
23,500 | — | |||||||
|
Loss on acceleration of receipt of long-term
receivables
|
10,893 | — | |||||||
|
Charge on conversion of sales arrangement to
lease arrangement (Note 14)
|
10,098 | — | |||||||
|
Charge on vendor financing receivables
|
10,008 | 11,190 | |||||||
|
Accrual for Alcatel settlement
|
8,000 | — | |||||||
|
Provisions for bad debts
|
7,714 | 2,196 | |||||||
|
Loss on equipment disposals
|
— | 1,977 | |||||||
|
Gain on investment
|
(17,900 | ) | — | ||||||
|
Interest
|
(916 | ) | (931 | ) | |||||
|
Changes in operating assets and liabilities:
|
|||||||||
|
Accounts receivable
|
(816 | ) | 230 | ||||||
|
Contracts-in-process
|
26,331 | 74,982 | |||||||
|
Inventories
|
(758 | ) | (3,023 | ) | |||||
|
Long-term receivables
|
75,612 | 4,172 | |||||||
|
Deposits
|
22,750 | 30,700 | |||||||
|
Other current assets and other assets
|
31,241 | 27,012 | |||||||
|
Accounts payable
|
11,429 | (24,906 | ) | ||||||
|
Accrued expenses and other current liabilities
|
(2,666 | ) | (32,178 | ) | |||||
|
Customer advances
|
(58,713 | ) | 239 | ||||||
|
Income taxes payable
|
(598 | ) | (443 | ) | |||||
|
Pension and other postretirement liabilities
|
8,016 | 6,638 | |||||||
|
Long-term liabilities
|
(11,447 | ) | (9,587 | ) | |||||
|
Other
|
234 | 251 | |||||||
|
Net cash provided by operating activities
|
95,246 | 218,836 | |||||||
|
Investing activities:
|
|||||||||
|
Capital expenditures
|
(86,263 | ) | (141,709 | ) | |||||
|
Proceeds from sale of investment
|
45,908 | — | |||||||
|
Investments in and advances to affiliates
|
(18,591 | ) | (41,321 | ) | |||||
|
Net cash used in investing activities
|
(58,946 | ) | (183,030 | ) | |||||
|
Financing activities:
|
|||||||||
|
Borrowings under revolving credit facilities
|
71,400 | 118,000 | |||||||
|
Repayments under term loans
|
(32,500 | ) | (48,750 | ) | |||||
|
Repayments under revolving credit facilities
|
— | (99,000 | ) | ||||||
|
Interest payments on 10% senior notes
|
(30,635 | ) | (45,952 | ) | |||||
|
Repayments of export-import facility
|
(6,434 | ) | (1,073 | ) | |||||
|
Repayments of other long-term obligations
|
— | (16 | ) | ||||||
|
Payment of bank amendment costs
|
(5,131 | ) | — | ||||||
|
Preferred dividends
|
— | ||||||||