Loral's results for the periods continue on track to meet company guidance for the full year 2002 issued in early July:

• Loral's reported revenue for the first half of the year totaled $625 million; guidance for the year is $1.2 billion.

• Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first six months was $128 million; guidance for the year is approximately $210-$215 million.

• Net loss for the first half was $95 million or $0.27 per share (before the previously reported first-quarter goodwill charge); guidance for the year is for a net loss of approximately $190 million or $0.50 per share on the same basis.

• At June 30, 2002, Loral had $181 million in cash and available credit after capital expenditures and investments of $121 million in the first half. The company continues to expect to end 2002 with $80-$90 million, consistent with earlier guidance. Loral expects to have sufficient resources in 2003 to meet its obligations and to continue to invest in SS/L technology and Skynet's fleet expansion.

• Skynet's first half revenues were $183 million and its EBITDA was $127 million; guidance for the year is approximately $340 million in revenue and from $230 to $235 million in EBITDA.

• Space Systems/Loral's revenues for the first half totaled $493 million and EBITDA was $28 million; company guidance for SS/L calls for $970-$980 million in revenues and more than $40 million in EBITDA for the full year.

Financial Results for the Quarter and Six Months Ended June 30, 2002

• Compared to the year-earlier periods, Loral's reported revenue climbed 15 percent to $316 million in the second quarter, and 17 percent in the first half to $625 million. The increase was driven by gains in the satellite manufacturing segment, offset by revenue declines in the fixed satellite services and data services segments.

• Reported EBITDA was $66 million, up six percent over last year's second quarter, as an improvement in the data services segment, lower corporate expenses and lower inter-company eliminations were offset in part by an EBITDA decline in the company's fixed satellite services operations. For the first half, EBITDA rose six percent over the first half of 2001, to $128 million.

• Quarterly pretax income improved to $4 million compared to last year's $33 million loss. The improvement was driven primarily by significantly lower interest expense and the elimination of goodwill amortization in 2002. For the first half of the year, pretax income was $5 million compared to a loss of $71 million in 2001.

• Loral's second quarter net loss applicable to common shareholders improved to $64 million, or $0.18 per share, compared to $95 million, or $0.29 per share in the prior year's second quarter. Both second quarters included non-cash charges for preferred stock exchanges: $38 million, or $0.11 per share, in 2002 and $29 million, or $0.09 per share, in 2001. Absent the non-cash charges, the second quarter 2002 loss per share was $0.07, about one-third the $0.20 loss in 2001. The first-half net loss (excluding the goodwill write-off) improved to $95 million, or $0.27 per share, versus $169 million, or $0.54 per share, in 2001.

• Per share calculations for the second quarter and first half of 2002 are based on 358 million and 348 million weighted average shares of common stock outstanding, respectively, versus 327 million and 313 million shares in 2001. The increases were attributable primarily to the issuance of common shares in connection with the preferred stock exchanges.

• Loral's net funded backlog at June 30, 2002, was $2.2 billion, compared to $2.7 billion at year-end 2001. Loral's net bookings for the second quarter were $81 million, compared to negative bookings of $25 million in the year ago quarter; first half net bookings totaled $112 million versus $184 million last year. De-bookings totaled $17 million in the quarter versus $296 million in the second quarter of 2001.

• During the second quarter the company continued to make progress on balance sheet improvements, reducing its fixed obligations with several preferred stock exchange transactions.

B u s i n e s s U n i t R e v i e w

Fixed Satellite Services (FSS)

Skynet revenues for the quarter were $89 million versus $98 million last year; for the first half of the year revenues were $183 million versus $191 million last year. Reflecting the lower sales level, second quarter EBITDA at Skynet was $61 million, compared to $70 million in the second quarter of 2001, and the EBITDA margin was 68 percent versus 72 percent. EBITDA for the first half was $127 million compared to $135 million last year, and the first-half EBITDA margin was 69 percent versus 71 percent.

As previously announced, a number of factors, in particular delayed demand for new applications, have led the company to lower its near-term expectations for growth in its FSS segment. Skynet's substantial base of existing customers, however, remains in place under long-term leases. Backlog at the end of the period was $1.4 billion - equal to the backlog at the end of 2001 -- and approximately four times projected 2002 revenue. Skynet's de-bookings during the quarter were $16 million versus $260 million in the second quarter of 2001.

As expected, Skynet's capacity utilization at the end of the second quarter was 65 percent down, three percentage points from 2001's second quarter as well as from the end of this year's first quarter. In Asia, supply and demand are relatively balanced as the appetite in that region for Internet-based services increases. The markets in North America, Europe and Latin America are experiencing near-term sluggish demand and overcapacity. The company expects demand to pick up in these markets as the economy improves. Recently, Skynet reported an increase in new customer inquiries, particularly from the cable sector and from Ku-band customers in Brazil.

The company plans to add three new satellites by the middle of next year to increase the robustness of its fleet and to grow its market share in its served markets. Telstar 13, scheduled for launch in the fourth quarter of 2002, is a "condo sat" with Loral owning the C-band capacity and EchoStar owning the Ku-band capacity. The satellite will enhance Skynet's ability to increase its market share by reinforcing its presence in the US cable arc and provide the in-orbit redundancy customers seek. Estrela do Sul, scheduled for launch in early 2003, will be the first high-power Ku-band capacity over Brazil, a high growth potential market where Skynet has developed a strong sales funnel. In Brazil, current C-band capacity does not provide a solution to the growing need for high-speed broadband applications, creating demand for Estrela do Sul's all Ku-band payload. In addition, the anchor tenant on Estrela do Sul, Connexion by Boeing™, will use the satellite's capacity over the North Atlantic Ocean for real-time, in-flight passenger communications services.

Telstar 8, currently scheduled for launch in the first half of 2003, will permit Skynet to solidify its leadership in the North American broadcast community with new high-powered capacity. It will also be the first satellite to offer a Ka-band payload for two-way broadband communications. Telstar 8 will replace Telstar 4, which will be moved to Loral's 77° West orbital slot, where it will provide revenue service as well as on-orbit back-up, in particular for video broadcast customers.

As noted in early July, while the average annual transponder rates are expected to decline slightly from $1.6 million to $1.5 million at the end of this year, new and renewal pricing is down about ten percent on average from last year.

Satellite Manufacturing and Technology

Space Systems/Loral revenues rose 18 percent to $250 million in the second quarter; for the first half, revenues totaled $493 million, a 19 percent improvement over last year's first half.

SS/L's EBITDA was $17 million in the second quarter versus $16 million in last year's second quarter. For the first half, EBITDA was $28 million versus $35 million last year.

Manufacturing backlog at June 30, 2002, was approximately $1 billion. As previously reported, only one order for a new commercial GEO satellite has been placed industry-wide in the last nine months. SS/L, which has not booked any orders for new satellites this year, has reported an increase in requests for proposals (RFPs) and new inquiries from customers. SS/L expects to book orders for seven new satellites over the next 18 months, at least two of them in 2002. In response to the slowdown in the satellite manufacturing industry, Space Systems/Loral has reduced its workforce and has cut overtime and other costs without jeopardizing reliability or schedules, or compromising the company's critical skills.

During the quarter, SS/L delivered the DIRECTV-5 and INTELSAT 905 satellites, both of which were successfully launched. SS/L is scheduled to deliver four more geosynchronous satellites by the end of the year, for a total of eight, an SS/L record.

Originally scheduled for June 22, the launch of EchoStar VIII was delayed when the complete functionality of one of the satellite's components could not be confirmed. SS/L engineers at the launch base in Kazakhstan have replaced and completed testing the vendor-supplied component and, subject to customer approval, are preparing the satellite for launch when the next appropriate launch slot becomes available this year.

Data Services

As expected, Loral CyberStar achieved near break-even EBITDA for the quarter and the first half, a direct result of CyberStar management's rigorous cost containment efforts. These results compare to a $4 million loss in last year's second quarter and a $14 million loss in the first half of 2001. Revenues declined to $17 million for the quarter, compared to $26 million a year ago; net bookings rose to $12 million, from $9 million in the second quarter of 2001. For the first half, revenues were $38 million versus $55 million last year, and net bookings totaled $23 million compared to $14 million. Backlog at the quarter's end was $84 million.

Other Events

During the second quarter Loral completed several privately negotiated preferred stock exchanges. In total, they eliminated about $225 million in mandatory redemptions in 2006 and 2007, and about $63 million in future dividend payments. About 31 million shares of common stock were issued in the transactions. Since the beginning of 2001, the company has successfully reduced the principal amount of its debt and preferred obligations by approximately $860 million, and intends to continue to pursue its debt reduction strategy.

Loral Space & Communications is a high technology company that concentrates primarily on satellite manufacturing and satellite-based services.

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, from time to time, Loral Space & Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but are not limited to, various filings made by the company with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions. These factors and conditions have been described in the section of the company's annual report on Form 10-K for the fiscal year ended December 31, 2001, entitled "Certain Factors That May Affect Future Results," and the company's other filings with the Securities and Exchange Commission. With regard to forward-looking statements concerning Loral Orion, Inc. and its business, financial condition, results of operations and prospects, the factors and conditions which could materially affect these statements are described in the section of Loral Orion's annual report on Form 10-K for the fiscal year ended December 31, 2001, entitled "Certain Factors That May Affect Future Results" and Loral Orion's other filings with the SEC. The reader is specifically referred to these documents regarding the factors and conditions that may affect future results.