Loral Space and Communications, which exited Chapter 11 bankruptcy in November, reported increased sales and reduced losses for 2005 on the strength of its resurgent satellite-manufacturing arm and higher utilization of its four commercial telecommunications satellites.
In a March 28 annual report filed with the U.S. Securities and Exchange Commission (SEC), New York-based Loral also provided details of its XTAR LLC affiliate, which is pioneering the commercialization of X-band capacity for U.S., Spanish and other government customers.
Loral owns 56 percent of XTAR and concedes it is too early to say whether XTAR will be a success. The company has access to two recently launched satellites and is waiting for its biggest prospective customer, the U.S. Department of Defense, to contract for capacity. Loral also has financial obligations involving those same satellites.
XTAR, which is 44-percent owned by Hisdesat of Spain, sells capacity on the XTAR-Eur satellite launched in early 2005 and the Spainsat spacecraft launched in March. The two satellites provide coverage stretching from Denver to Singapore.
In addition to its XTAR-Eur satellite, XTAR is committed to leasing eight 72-megahertz transponders on Spainsat for the life of the satellite.
XTAR is paying the Spanish owners $6.2 million a year for transponder leases, and the price rises to $23 million a year starting in 2008.
The U.S. State Department in May 2005 agreed to lease capacity on XTAR in a contract whose potential value could be up to $137 million. But so far, the confirmed booking totals just one transponder for three years, for a total price of $13.5 million. The contract permits the State Department to add two years to the contract, in which case the price over five years would be $22.5 million, according to the Loral SEC filing.
XTAR reported a net loss of $9.6 million on sales of $9.4 million in 2005. It owes a portion of its future revenues to Arianespace of Evry, France, as payment for the launch of XTAR-Eur on a newly redesigned Ariane 5 ECA rocket.
Loral has made a total equity investment of $104.6 million in XTAR.
Loral Skynet, the satellite-services division of Loral Space and Communications, reported increased revenues, gross profit and utilization rates of its four satellites in 2005, but also a drop in backlog.
Skynet, which has one satellite under construction and also has four transponders — two C-band and two Ku-band — available to it on the Satmex 6 satellite set for launch in May, emerged from bankruptcy with the rest of New York-based Loral in November.
The Skynet division reported revenues of $151.5 million for 2005, up 7 percent from 2004 in large part because the Telstar 18, launched in 2004, posted its first full year’s operations. Skynet said its satellites were 70-percent full at the end of 2005, compared to 60 percent a year earlier.
Skynet’s North Atlantic fleet was sold to Intelsat in 2004 to pay off Loral debt. It was the key move that permitted Loral to emerge, smaller but intact, from Chapter 11 protection after more than two years under the bankruptcy court’s protection .
Skynet’s adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, was $51 million in 2005, compared to $16 million in 2004.
But backlog was down nearly 17 percent, to $453.4 million, despite the increased revenues and fill rate. Loral’s annual report to the SEC , filed March 28, did not explain the backlog decline.
Loral spokesman John McCarthy said March 29 that the reduction was due to “a number of variables, including shorter contract lengths and some things that came out of backlog in 2005.”
One contract that was revised downward in 2005 is with in-flight Internet service provider Connexion by Boeing, which had signed a long-term lease for capacity on Loral Skynet’s Telstar 14/Estrela do Sul satellite, located at 63 degrees west longitude.
One of Estrela do Sul’s solar arrays failed to fully deploy after launch in January 2004. Loral subsequently received a $205 million insurance settlement. The satellite continues to function, but with only 15 of its 41 transponders, and it is expected to be retired in 2010 — after just six years’ service, rather than the 15 years that had been planned.
As expected, the star of Loral’s 2005 financial report was Space Systems/Loral, the Palo Alto, Calif., satellite builder that booked four new orders in 2005 after a five-satellite year in 2004.
Space Systems/Loral reported revenues of $491 million in 2005, up 12 percent over 2004 as the backlog flowed onto the revenue line. Space Systems/Loral’s backlog at the end of 2005 stood at $815 million, a 69-percent increase from a year earlier.
Four Loral-built satellites are scheduled for launch in 2006 — the long-built Satmex 6, whose owner, Satmex, is in Mexican bankruptcy proceedings; the Galaxy 16 for PanAmSat; DirecTV Group’s DirecTV 9S; and WildBlue-1 for consumer-broadband services provider WildBlue Communications.
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