Loral's earnings and cash performance remains on track with its previously issued guidance for the full year despite the prolonged downturn in the economy and the telecommunications industry. At the same time, Loral continued its strategy to reduce its leverage by concluding an exchange of preferred stock for common stock, retiring 61 percent of the outstanding preferred stock. From the beginning of 2001 to date, Loral has reduced its principal amount of debt and preferred obligations by more than $1.2 billion and has eliminated over $95 million in annual dividends and interest payments.

Continued on-track earnings results and cash management will result in cash flow in excess of operating costs, interest and scheduled debt payments in 2002 and 2003, even if the expected economic recovery is not realized until after 2003. Further, after satellite construction expenditures of approximately $175 million this year, the cash balance at year end is expected to exceed $100 million, in line with prior guidance.

Reflecting the unprecedented low rate of orders for satellite construction worldwide, Space Systems/Loral has recorded no satellite bookings so far this year. The company continues to expect up to seven new orders by the end of 2003. The impact on SS/L, however, is cushioned by the strong backlog of 21 satellites it had in the factory at the beginning of 2002. SS/L is currently working on 13 satellites in the factory, with a backlog of $781 million at September 30, 2002.

Highlights

• Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first nine months was $166 million; guidance for the year remains at $210-215 million.
  
  
• Loral's reported revenue for the first nine months totaled $836 million, compared to $797 million for the same period last year. Skynet's revenue, however, declined $28 million compared to the first nine months of 2001. New guidance for Loral revenue for the year is approximately $1.1 billion versus the earlier forecast of $1.2 billion.
  
  
• Net loss applicable to common shareholders for the nine months was $110 million or $0.31 per share (before the first-quarter goodwill charge and the non-cash impact of the second quarter preferred exchanges). Guidance for the year, before the goodwill charge and the non-cash impact of the preferred exchanges in the second and fourth quarters, remains at a net loss of $0.40 to $0.50 per share.
  
  
• Net cash provided by operating activities for the nine months rose to $264 million from $95 million in the prior nine-month period.
  
  
• After capital expenditures and investments of $226 million (including $25 million in capitalized interest) in the first nine months, cash and available credit at September 30, 2002 was $165 million, compared to $181 million at the end of June 2002.
  
  
• The company completed a preferred stock exchange after the end of the quarter that reduced the principal amount of mandatory preferred stock obligations by $350 million, and eliminated $21 million in annual dividends. Had the transaction closed on September 30, 2002, pro forma shareholders' equity after considering the exchange would have been $219 million compared to the reported $105 million deficit.

Loral's reported revenue for the third quarter was $211 million, down 19 percent due primarily to the expected lower revenues at Skynet and data services, offset by improved revenues at SS/L; for the first nine months Loral revenue rose five percent to $836 million. Reported EBITDA declined as expected during the quarter to $38 million from $49 million; for the first nine months it declined three percent to $166 million. Reported revenue and EBITDA were reduced by higher intercompany eliminations during the periods, primarily arising from the company's September 2002 agreement to purchase 50 percent of the APSTAR-V satellite, currently under construction at SS/L. As a result, intercompany eliminations for revenue and EBITDA were increased by $29 million and $4 million, respectively.

Loral's net loss available to common shareholders for the third quarter improved to $52 million or $0.14 per share, compared to $64 million, or $.19 per share. For the first nine months (excluding the first-quarter goodwill write-off and the non-cash impact of the second quarter preferred exchanges), the net loss improved to $110 million, or $0.31 per share, compared to $205 million, or $0.64 per share.

Per share calculations for the third quarter and first nine months of 2002 are based on 374 million and 356 million weighted average shares of common stock outstanding, respectively, versus 334 million and 320 million for the same periods in 2001. Not included in these figures is approximately 46 million common shares issued in connection with the preferred stock exchange completed after the end of the third quarter this year.

The persistent slowdown in the telecommunications industry has dramatically reduced awards for new satellites in 2002 and has delayed the launch of new fixed satellite service applications, resulting in a decline over the first nine months in both backlog and bookings at Loral. Loral's net funded backlog at September 30, 2002, was $2.0 billion, compared to $2.7 billion at year-end 2001. Loral's net bookings for the third quarter were $51 million - before an intercompany elimination of $59 million relating to Loral's APSTAR-V ownership - compared to net bookings of $145 million in the 2001 third quarter.

Loral Skynet generated gross bookings of $66 million in the third quarter compared to $37 million a year ago. Skynet has maintained its funded backlog at $1.4 billion, or four years' current revenues. SS/L ended the quarter with a backlog of $781 million, equivalent to nearly a year's revenue and, as previously cited, did not record any substantial bookings.

Fixed Satellite Services (FSS)

Consistent with company forecasts and in line with guidance for the year, Skynet's revenues for the third quarter were $80 million versus $100 million last year; for the first nine months revenues were $263 million versus $291 million last year. Skynet EBITDA for the quarter was $52 million, down from $71 million; for the nine months, EBITDA was $178 million as compared to $206 million last year. Utilization of Skynet's fleet of seven satellites was 63 percent at the end of the period, down from 65 percent at the end of the second quarter. As previously announced, Skynet expects capacity utilization of approximately 62 percent at year-end 2002.

Skynet's debookings were substantially reduced in the third quarter and first nine months of 2002. Further, its contract renewals continued at a rate of 80 percent. Renewal pricing is down about 10 percent from last year. At September 30, Skynet's backlog was $1.4 billion - equivalent to backlog at the end of the previous quarter and at the end of 2001.

During the third quarter, Loral announced the combination of its Skynet and CyberStar units to form a unique satellite services business that offers a complete portfolio of satellite transponder, networking, Internet protocol (IP) and professional services. The combination is expected to quickly produce benefits, as CyberStar's value-added services will become a more direct differentiator and competitive advantage of our FSS offerings. This combination adds valuable resources to each unit while allowing its customers the benefit of using one source for all their communication needs.

Skynet signed a number of new contracts during the quarter, including deals with Hearst-Argyle, GlobeCast, Bonneville and a renewal by NBC.

Skynet is seeing mixed demand for services, varying by region. Asian C-band demand, where Loral's Telstar 10 satellite has a capacity utilization rate in excess of 75 percent, continues to be steady. Ku-band in North America also remains steady, driven primarily by new direct-to-home and direct-to-business applications. In the Middle East there is increased demand for commercial Internet and video connectivity as well as for government applications. C-band in North America and C- and Ku-band in Latin American markets continue to be weak. Skynet's average annual transponder pricing is now approximately $1.5 million.

Telstar 13, a "condo sat" owned with EchoStar, is nearing completion at SS/L and is expected to launch in the first quarter of 2003. The Telstar 8 tri-band satellite is scheduled for completion by mid-2003. Its launch schedule will be finalized in the first half of 2003 when the company can better assess market requirements. Estrela do Sul's launch remains planned for the first half of 2003. It will be the first high-power Ku-band capacity over Brazil, an under-served and high growth potential market. Estrela do Sul's anchor tenant, Connexion by Boeing, will use the satellite's capacity over the North Atlantic Ocean for real-time, in-flight passenger communications services. APSTAR-V, co-owned by Loral and APT Satellite, is scheduled for launch in the second half of 2003. It will serve the Asian region, from India to Australia and Hawaii.

Satellite Manufacturing and Technology

Space Systems/Loral posted revenue of $208 million in the third quarter, an increase of 14 percent over last year's third quarter. For the nine months, SS/L revenues were $701 million up 18 percent and EBITDA rose 5 percent to $38 million versus last year's first nine months. SS/L's EBITDA was $11 million in the third quarter compared to $1 million in the prior year quarter. Both the three and nine month periods in 2002 include a non-cash charge of $11 million in connection with SS/L's agreement with a customer to exchange its vendor financing receivable for common shares to be issued upon completion of the customer's offer to creditors, of which SS/L is one. Full year EBITDA for SS/L is expected to be approximately $50 million, an improvement over prior guidance.

During the quarter, SS/L delivered the EchoStar VIII and INTELSAT 906 satellites, for a total of seven satellite deliveries in 2002. The company expects to ship eight to ten satellites in 2003. SS/L is in active discussions with several customers and, while it continues to expect to receive orders for as many as seven new satellites by the end of 2003, it is not likely that any orders will be placed before the end of 2002.

During the quarter, SS/L was selected, as a member of a Raytheon-led team, as one of only two finalist teams to compete for the Mobile User Objective System (MUOS), a U.S. Navy multi-satellite program valued at an expected $6 billion. SS/L's team was awarded a $40 million contract for developmental work on MUOS.

Data Services

Data services revenues declined year over year due to a general weakness in the demand for new or expanded data transport services and to competition from fiber. EBITDA, however, improved substantially this year versus last, as a result of aggressive cost management. Revenues from the data services unit in the third quarter were $15 million, versus $22 million in the third quarter of 2001; revenues for the nine months were $53 million versus $77 million last year. Segment EBITDA was a negative $2.4 million in the quarter, versus a loss of $2.6 million in the year-ago quarter. For the nine months, the EBITDA loss improved to $2.5 million, compared to a loss of $16.2 million last year.

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, Loral Space & Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing which 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 which are 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. The reader is specifically referred to these documents.