Document/Exhibit Description Pages Size
1: 8-K Current Report 21 109K
2: EX-99.A Consolidatedfinancialsmarch 31, 95 26 144K
3: EX-99.B Consolidatedfinancialsdec 31, 95 12 56K
4: EX-99.J Consentofcoopers & Lybrand 1 8K
5: EX-99.K Certificateofincorporation/Merger 21 54K
EXHIBIT 99(B)
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
INDEX
[Download Table]
PAGE
----
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... B-2
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statements of Operations ............. B-5
Unaudited Condensed Consolidated Balance Sheets........................ B-6
Unaudited Condensed Consolidated Statements of Changes in Net Assets... B-7
Unaudited Condensed Consolidated Statements of Cash Flows.............. B-8
Notes to Unaudited Condensed Consolidated Financial Statements......... B-9
B-1
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NINE MONTHS ENDED DECEMBER 31, 1995
On January 7, 1996, Loral Corporation and Lockheed Martin Corporation
("Lockheed Martin") entered into a definitive Agreement and Plan of Merger
(the "Merger Agreement") among Loral Corporation, Lockheed Martin and LAC
Acquisition Corporation ("LAC"), a wholly-owned subsidiary of Lockheed Martin,
providing for the transactions that will result in the defense electronics and
systems integration businesses of Loral Corporation becoming a subsidiary of
Lockheed Martin. Concurrently with the execution of the Merger Agreement,
Loral Corporation, certain wholly-owned subsidiaries of Loral Corporation and
Lockheed Martin, entered into the Restructuring, Financing and Distribution
Agreement (the "Distribution Agreement"), which provides, among other things,
for (i) the transfer of Loral Corporation's space and communications
businesses including its direct and indirect interests in Globalstar, Space
Systems/Loral, Inc. and other affiliated businesses, as well as certain other
assets, to Loral Space & Communications Ltd., a Bermuda company ("Loral
SpaceCom"), (ii) the distribution of all of the shares of Loral SpaceCom
common stock to holders of Loral Corporation common stock and persons entitled
to acquire shares of Loral Corporation common stock on a one-for-one basis
(the "Spin-Off") each as of a record date (the "Spin-Off Record Date") to be
declared by the Board of Directors of Loral Corporation and to be a date on or
immediately prior to the consummation of the tender offer, and (iii) the
contribution by Lockheed Martin of $712.4 million to Loral SpaceCom, of which
$344 million represents payment for preferred stock, convertible into a 20%
equity interest in Loral SpaceCom, to be retained by Lockheed Martin following
the Spin-Off and the Merger. (See Note 6 to Condensed Consolidated Financial
Statements.)
Management's discussion and analysis of results of operations and financial
condition addresses the portion of Loral Corporation that will become a
subsidiary of Lockheed Martin (the "Company" or "the Retained Business").
On May 5, 1995, the Company acquired the Defense Systems operations of
Unisys Corporation. Unisys Defense Systems ("Loral UDS"), headquartered in
McLean, Virginia, is a leading systems integrator and software developer for
defense and non-defense government agencies worldwide, as well as a supplier
of electronic countermeasures, navigation and communication subsystems for
surface ships and submarines. Historical operating results of Loral UDS for
the fiscal year ended December 31, 1994 include sales of $1.431 billion, net
income of $77.5 million, funded backlog at December 31, 1994 of $1.098 billion
and approximately 8,600 employees. The results of operations of Loral UDS are
included from the effective date of acquisition. (See Note 2 to Condensed
Consolidated Financial Statements.)
FINANCIAL CONDITION
The Loral UDS purchase price was financed through additional commercial
paper borrowings which are supported by the Company's $1.2 billion revolving
credit facility. In June 1995, to take advantage of a decline in interest
rates and to fix interest costs and lengthen maturities, the Company issued
$150 million 7 5/8% Senior Debentures due 2025 utilizing the balance of the
Company's existing shelf registration statement. The proceeds were used to
reduce the Company's outstanding commercial paper borrowings. (See Note 4 to
Condensed Consolidated Financial Statements.)
The majority of the Company's foreign currency hedges are entered into at
the direction of the customer pursuant to contractual requirements. Any gain
or loss on the hedges accrues to the benefit or detriment of the customer and
does not expose the Company to risk. The remaining foreign currency hedges are
not material.
The Company's current ratio increased to 1.6:1 at December 31, 1995,
compared with 1.5:1 at March 31, 1995. The debt (net of cash) to net assets
ratio grew to .96:1 at December 31, 1995 from .83:1 at March 31, 1995 due
primarily to the acquisition of Loral UDS.
B-2
In October 1995, the Company agreed to guarantee $250 million of bank debt
of one of the Company's affiliates, Globalstar, L.P. ("Globalstar"). In
exchange for the guarantee, the Company will be issued warrants to purchase up
to an 8% equity interest in Globalstar on a fully diluted basis. Subject to
the approval of its shareholders, the warrants will be issued by Globalstar
Telecommunications Limited ("GTL"), a general partner of Globalstar, and upon
such approval, GTL will be issued additional warrants representing an
approximate 2% equity interest in Globalstar. If GTL shareholder approval is
not obtained, Globalstar will issue to the Company warrants to purchase
partnership interests representing up to an 8% equity interest in Globalstar
and no warrants will be issued to GTL. Globalstar has also agreed to pay the
Company a fee equal to 1.5% per annum of the guaranteed amount outstanding
under the bank financing. Such fee will be deferred and will be paid with
interest commencing 90 days after the expiration of the bank financing. It is
expected that Globalstar's other strategic partners will assume a portion of
the guarantee. On December 15, 1995, Globalstar entered into a five-year $250
million credit agreement with a group of banks.
Under the terms of the Merger Agreement, Lockheed Martin agreed to assume
the obligations of the Company as guarantor under the above-described Credit
Agreement and receive up to 60% of such warrants. In addition, Loral SpaceCom
has agreed to (i) indemnify Lockheed Martin, under certain circumstances, for
up to $100 million for its guarantee of Globalstar's obligations under the
Credit Agreement; and (ii) use its reasonable efforts to cause Globalstar's
partners to assume up to $150 million of the obligations as guarantor under
the Credit Agreement. To the extent the Loral SpaceCom indemnity is
applicable, Loral SpaceCom will receive the pro-rata portion of the warrants
in respect thereof. To the extent Globalstar's partners agree to assume the
obligations as guarantor, rights to a proportionate amount of such warrants
will be transferred to them, and the Lockheed Martin guarantee and the Loral
SpaceCom indemnification will be reduced accordingly. (See Notes 5 and 6 to
Condensed Consolidated Financial Statements.)
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
DECEMBER 31, 1995 AND DECEMBER 31, 1994
Sales for the nine months ended December 31, 1995 increased to $4.720
billion from $4.025 billion in the prior year. Net income for the nine months
ended December 31, 1995 increased to $258.0 million compared with $195.2
million in the prior year. The results of operations of Loral UDS contributed
$9.9 million to the current period's earnings.
The sales increase was attributable primarily to the sales of the acquired
Loral UDS business which amounted to $661.5 million. Sales also include higher
volume of $73.0 million for the Patriot Advanced Capability (PAC-3) missile,
formerly known as Extended Range Interceptor (ERINT), $62.9 million for the
United Kingdom's EH-101 Merlin ASW helicopter and $46.5 million for various
U.S. Postal Service automation systems; offset by lower volume of $42.4
million for the U.S. Navy's Light Airborne Multipurpose System (LAMPS) MK III
ASW helicopter, $38.6 million for the Multiple Launch Rocket System (MLRS),
$37.5 million for the ALR-56 radar warning systems and $30.0 million for the
Army Tactical Missile System (ATACMS). The Company has a diverse base of
programs, none of which is expected to account for more than 7% of fiscal 1996
revenues. The change in sales from period to period also includes increases
and decreases on a variety of other programs which individually are not
significant to the overall sales change.
Operating income increased to $502.2 million from $381.9 million in the
prior year. The operating income increase includes $58.3 million attributable
to the results of the acquired Loral UDS business. Operating income as a
percentage of sales increased to 10.6% for the nine months ended December 31,
1995 from 9.5% in the prior year. Excluding the effect of the acquired Loral
UDS business, operating income as a percentage of sales increased to 10.9% in
the nine months ended December 31, 1995 from 9.5% in the prior year as a
result of improved margins due to operating efficiencies particularly at the
Loral Federal Systems business acquired effective January 1994; offset by
higher pension cost in the current period as a result of the prior year's
asset performance.
B-3
Interest expense, net of interest and investment income, increased to $85.9
million from $67.1 million in the prior year. This increase was primarily due
to the $42.2 million impact of debt incurred to finance the acquisition of
Loral UDS. Excluding the impact of the Loral UDS acquisition, interest
expense, net, decreased by $23.4 million, primarily as a result of strong Free
Cash Flow, offset by an increase in the weighted average interest rate of
debt. The Company's Free Cash Flow (net cash from operating activities, less
capital expenditures, plus proceeds of stock purchases by employee benefit
plans and exercises of stock options) was $617.6 million for the twelve months
ended December 31, 1995, of which $482.7 million was generated in the nine
months ended December 31, 1995. The Company's weighted average interest rate
of debt was 7.41% for the nine months ended December 31, 1995, compared with
6.63% for the nine months ended December 31, 1994.
The Company's effective tax rate was 38% in the nine months ended December
31, 1995 and 1994.
B-4
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
[Download Table]
NINE MONTHS ENDED
DECEMBER 31,
---------------------
1995 1994
---------- ----------
Sales.................................................... $4,719,541 $4,025,035
Costs and expenses....................................... 4,217,329 3,643,162
---------- ----------
Operating income......................................... 502,212 381,873
Interest and investment income........................... 9,602 6,821
Interest expense......................................... 95,481 73,956
---------- ----------
Income before income taxes............................... 416,333 314,738
Income taxes............................................. 158,326 119,513
---------- ----------
Net income............................................... $ 258,007 $ 195,225
========== ==========
See notes to unaudited condensed consolidated financial statements.
B-5
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
[Download Table]
DECEMBER 31, MARCH 31,
1995 1995
------------ ----------
ASSETS:
Current assets:
Cash and cash equivalents........................... $ 226,723 $ 125,674
Contracts in process................................ 1,375,837 1,147,233
Deferred income taxes............................... 120,374 138,374
Other current assets................................ 176,354 141,846
---------- ----------
Total current assets.............................. 1,899,288 1,553,127
Property, plant and equipment, net.................... 1,286,970 1,141,525
Cost in excess of net assets acquired, less
amortization......................................... 1,774,279 1,265,932
Deferred income taxes................................. 7,486 6,486
Prepaid pension cost and other assets................. 613,403 591,217
---------- ----------
$5,581,426 $4,558,287
========== ==========
LIABILITIES AND NET ASSETS:
Current liabilities:
Current portion of debt............................. $ 960 $ 958
Accounts payable, trade............................. 200,697 169,743
Billings and estimated earnings in excess of cost... 445,417 313,379
Accrued employment costs............................ 256,267 235,260
Income taxes........................................ 92,228 80,642
Other current liabilities........................... 201,224 216,585
---------- ----------
Total current liabilities......................... 1,196,793 1,016,567
Postretirement benefits............................... 603,415 611,911
Other liabilities..................................... 195,971 178,798
Long-term debt........................................ 1,869,263 1,315,530
Net assets............................................ 1,715,984 1,435,481
---------- ----------
$5,581,426 $4,558,287
========== ==========
See notes to unaudited condensed consolidated financial statements.
B-6
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
[Download Table]
NINE MONTHS ENDED
DECEMBER 31,
----------------------
1995 1994
---------- ----------
Balance, April 1....................................... $1,435,481 $1,222,054
Shares issued:
Exercise of stock options and related tax benefits,
net of shares tendered.............................. 13,330 5,750
Employee benefit plans............................... 59,440 29,150
Amortization of restricted options..................... 2,244 2,602
Shares earned under Restricted Stock Purchase Plan..... 737 4,100
Net income............................................. 258,007 195,225
Dividends.............................................. (40,350) (36,916)
Changes in net assets applicable to Space and
Communications Operations............................. (11,044) (10,901)
Foreign currency translation adjustment................ (1,861) (1,669)
---------- ----------
Balance, December 31................................... $1,715,984 $1,409,395
========== ==========
See notes to unaudited condensed consolidated financial statements.
B-7
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
[Download Table]
NINE MONTHS ENDED
DECEMBER 31,
----------------------
1995 1994
--------- -----------
Operating activities:
Net income........................................... $ 258,007 $ 195,225
Deferred income taxes................................ 62,000 69,251
Depreciation and amortization........................ 201,497 197,091
Changes in assets and liabilities:
Contracts in process............................... (42,877) 15,166
Other current assets............................... (4,774) 45,807
Other assets....................................... (9,525) (10,938)
Accounts payable and accrued liabilities........... 33,354 (40,715)
Income taxes....................................... 11,556 19,331
Postretirement benefits and other liabilities...... (16,544) (5,122)
Other.............................................. (1,556) (1,858)
--------- -----------
Net cash provided by operating activities.............. 491,138 483,238
--------- -----------
Investing activities:
Acquisition of businesses, net of cash acquired...... (879,669) (3,750)
Capital expenditures, net............................ (81,227) (79,994)
--------- -----------
(960,896) (83,744)
--------- -----------
Financing activities:
Net borrowings (payments) under revolving credit
facilities and commercial paper..................... 399,431 (1,026,322)
Proceeds from borrowings............................. 150,000 650,000
Seller financing in connection with acquisition of
business............................................ (50,357)
Distributions to Space and Communication Operations.. (11,044) (10,901)
Dividends paid....................................... (40,350) (36,916)
Proceeds from common stock issuance for stock options
and employee benefit plans.......................... 72,770 34,900
--------- -----------
570,807 (439,596)
--------- -----------
Net increase (decrease) in cash and cash equivalents... 101,049 (40,102)
Cash and cash equivalents, beginning of period......... 125,674 238,498
--------- -----------
Cash and cash equivalents, end of period............... $ 226,723 $ 198,396
========= ===========
Supplemental information:
Interest paid during the period...................... $ 112,475 $ 72,675
========= ===========
Income taxes paid during the period, net of refunds.. $ 65,180 $ 30,216
========= ===========
See notes to unaudited condensed consolidated financial statements.
B-8
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
On January 7, 1996, Loral Corporation ("Loral") and Lockheed Martin
Corporation ("Lockheed Martin") entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement") among Loral, Lockheed Martin and LAC
Acquisition Corporation ("LAC"), a wholly-owned subsidiary of Lockheed Martin,
providing for the transactions that will result in Loral becoming a subsidiary
of Lockheed Martin and the spin-off by Loral of its direct and indirect
interests in Globalstar, L.P. ("Globalstar"), Space Systems/Loral, Inc.
("SS/L") and K & F Industries, Inc. ("K & F"), to Loral Corporation's
shareholders (the "Space & Communications Operations") (See Note 6).
The accompanying unaudited condensed consolidated financial statements
reflect the portion of Loral that will become a subsidiary of Lockheed Martin
(the "Retained Business" or the "Company"). However, the financial position and
results of operations, as presented herein may not have been the same as would
have occurred had Retained Business and the Space & Communications Operations
been independent entities.
All significant intercompany balances and transactions have been eliminated.
Certain other assets of Loral will also be distributed to Space &
Communications Operations as of the closing date of the merger. These assets,
consisting of certain fixed assets and other miscellaneous assets, have been
included in the accompanying financial statements since they have been used
principally by the Retained Business.
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules of the Securities and
Exchange Commission ("SEC") and, in the opinion of the Company, include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules. The Company believes
that the disclosures made are adequate to make the information presented not
misleading. The condensed consolidated statements of income for the nine months
ended December 31, 1995 are not necessarily indicative of the results to be
expected for the full year. It is suggested that these financial statements be
read in conjunction with the audited financial statements and notes thereto
included elsewhere herein.
Allocation of Certain Expenses
The financial statements reflect the allocations of certain expenses to Space
& Communications Operations based upon estimates of actual services performed
by the Company. The amount of corporate office expenses allocated to Space &
Communications Operations have been estimated based primarily on the allocation
methodology prescribed by government regulations pertaining to government
contractors, which management believes to be a reasonable allocation method.
Interest Expense
The financial statements exclude interest of $7,563,000 and $6,972,000 for
the nine months ended December 31, 1995, and 1994, respectively, which has been
allocated to Space & Communications Operations based upon the Company's
historical weighted average debt cost applied to the Company's average
investment in affiliates for each period, which management believes to be a
reasonable allocation method.
B-9
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACQUISITIONS:
On May 5, 1995, the Company acquired substantially all the assets and
liabilities of the Defense Systems operations of Unisys Corporation ("Loral
UDS"). The previously reported effective purchase price of$803,400,000 was
adjusted to $862,609,000, net of cash acquired, as a result of receiving
additional net assets. Additionally, acquisition expenses of $6,000,000 have
been recorded. The assets and liabilities recorded in connection with the
purchase price allocation are based upon preliminary estimates of fair values.
The acquisition was financed through commercial paper borrowings.
This acquisition has been accounted for as a purchase. As such, the condensed
consolidated financial statements reflect the results of operations of the
acquired entity from the date of acquisition. Had this acquisition occurred on
April 1, 1994, the unaudited pro forma sales and net income for the nine months
ended December 31, 1994 would have been: $5,070,500,000 and $211,500,000;
respectively. The unaudited pro forma results, which are based on various
assumptions, are not necessarily indicative of what would have occurred had the
acquisition been consummated as of April 1, 1994. The pro forma effect of the
acquisition of Loral UDS on the results of operations for the nine months ended
December 31, 1995, is not material.
The Company has acquired other businesses in the nine months ended December
31, 1995. These acquisitions did not have a material effect on the operations
of the Company.
Performance under acquired contracts in process of Loral UDS and prior
acquisitions contributed after-tax income of $16,416,000 and $36,091,000, net
of after-tax interest cost on debt related to the acquisitions and incremental
amortization of cost in excess of net assets acquired, of $67,991,000 and
$60,836,000 for the nine months ended December 31, 1995 and 1994, respectively.
The decline in after-tax income reflects a reduction in sales from acquired
contracts in process of Loral Federal Systems, acquired effective January 1,
1994, and Loral Vought Systems, acquired on August 31, 1992.
3. CONTRACTS IN PROCESS:
Billings and accumulated costs and profits on long-term contracts,
principally U.S. Government, comprise the following:
[Download Table]
DECEMBER 31, MARCH 31,
1995 1995
------------ -----------
(IN THOUSANDS)
Billed contract receivables....................... $ 459,965 $ 380,240
Unbilled contract receivables..................... 1,667,280 1,702,967
Inventoried costs................................. 679,917 477,955
----------- -----------
2,807,162 2,561,162
Less, unliquidated progress payments.............. (1,431,325) (1,413,929)
----------- -----------
Net contracts in process.......................... $ 1,375,837 $ 1,147,233
=========== ===========
4. DEBT:
In June 1995, the Company issued $150,000,000 7 5/8% Senior Debentures due
2025 utilizing the balance of the Company's existing shelf registration
statement. These securities are not callable and are not subject to any sinking
fund provisions. The proceeds were used to reduce the Company's outstanding
commercial paper borrowings.
B-10
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. AFFILIATES:
In October 1995, the Company agreed to guarantee $250,000,000 of bank debt
of one of the Company's affiliates, Globalstar. In exchange for the guarantee,
the Company will be issued warrants to purchase up to an 8% equity interest in
Globalstar on a fully diluted basis. Subject to the approval of its
shareholders, the warrants will be issued by Globalstar Telecommunications
Limited ("GTL"), a general partner of Globalstar, and upon such approval, GTL
will be issued additional warrants representing an approximate 2% equity
interest in Globalstar. If GTL shareholder approval is not obtained,
Globalstar will issue to the Company warrants to purchase partnership
interests representing up to an 8% equity interest in Globalstar and no
warrants will be issued to GTL. Globalstar has also agreed to pay the Company
a fee equal to 1.5% per annum of the guaranteed amount outstanding under the
bank financing. Such fee will be deferred and will be paid with interest
commencing 90 days after the expiration of the bank financing. It is expected
that Globalstar's other strategic partners will assume a portion of the
guarantee. On December 15, 1995, Globalstar entered into a five-year
$250,000,000 credit agreement with a group of banks. (See Note 6).
6. SUBSEQUENT EVENT:
On January 7, 1996, Loral and Lockheed Martin entered into a Merger
Agreement among Loral, Lockheed Martin and LAC, providing for the transactions
that will result in the defense electronics and systems integration businesses
of Loral becoming a subsidiary of Lockheed Martin. Concurrently with the
execution of the Merger Agreement, Loral, certain wholly-owned subsidiaries of
Loral and Lockheed Martin, entered into the Distribution Agreement, which
provides, among other things, for (i) the transfer of Loral's space and
communications businesses, including its direct and indirect interests in
Globalstar, Space Systems/Loral, Inc. and other affiliated businesses, as well
as certain other assets, to Loral Space & Communications Ltd., a Bermuda
company ("Loral SpaceCom"), (ii) the distribution of all of the shares of
Loral SpaceCom common stock to holders of Loral common stock and persons
entitled to acquire shares of Loral common stock on a one-for-one basis (the
"Spin-Off") each as of a record date (the "Spin-Off Record Date") to be
declared by the Board of Directors of Loral and to be a date on or immediately
prior to the consummation of the tender offer, and (iii) the contribution by
Lockheed Martin of $712,400,000, subject to reduction, to Loral SpaceCom, of
which $344,000,000 represents payment for preferred stock, convertible into a
20% equity interest in Loral SpaceCom, to be retained by Lockheed Martin
following the Spin-Off and the Merger.
Under the terms of the Merger Agreement, LAC commenced a cash tender offer
on January 12, 1996 for all outstanding shares of common stock, par value $.25
per share, of Loral at a price of $38.00 per share. Consummation of the tender
offer is subject to, among other things, at least two-thirds of the shares of
Loral common stock, determined on a fully-diluted basis, being validly
tendered and not withdrawn prior to the expiration of the tender offer,
applicable regulatory approvals and the occurrence of the Spin-Off Record
Date.
Under the terms of the Merger Agreement, Lockheed Martin agreed to assume
the obligations of the Company as guarantor under the Credit Agreement
described in Note 5 and receive up to 60% of such warrants. In addition, Loral
SpaceCom has agreed to (i) indemnify Lockheed Martin, under certain
circumstances, for up to $100,000,000 for its guarantee of Globalstar's
obligations under the Credit Agreement; and (ii) use its reasonable efforts to
cause Globalstar's partners to assume up to $150,000,000 of the obligations as
guarantor under the Credit Agreement. To the extent the Loral SpaceCom
indemnity is applicable, Loral SpaceCom will receive the pro-rata portion of
the warrants in respect thereof. To the extent Globalstar's partners agree to
assume the obligations as guarantor, rights to a proportionate amount of such
warrants will be transferred to them, and the Lockheed Martin guarantee and
the Loral SpaceCom indemnification will be reduced accordingly.
B-11
LORAL CORPORATION AND SUBSIDIARIES--RETAINED BUSINESS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to the consummation of the merger, the Company will change its
fiscal year end from March 31 to December 31 to correspond to the Lockheed
Martin year end. For information purposes, the Company's results of operations
for the year ended December 31, 1995 have been calculated as follows (in
thousands):
[Download Table]
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED
MARCH 31, --------------------- DECEMBER 31,
1995 1995 1994 1995
---------- ---------- ---------- ------------
(ADD) (DEDUCT)
Sales........................ $5,484,401 $4,719,541 $4,025,035 $6,178,907
Costs and expenses........... 4,919,857 4,217,329 3,643,162 5,494,024
---------- ---------- ---------- ----------
Operating income............. 564,544 502,212 381,873 684,883
Interest and investment
income...................... 9,484 9,602 6,821 12,265
Interest expense............. 96,405 95,481 73,956 117,930
---------- ---------- ---------- ----------
Income before income taxes... 477,623 416,333 314,738 579,218
Income taxes................. 181,456 158,326 119,513 220,269
---------- ---------- ---------- ----------
Net income................... $ 296,167 $ 258,007 $ 195,225 $ 358,949
========== ========== ========== ==========
B-12
Dates Referenced Herein and Documents Incorporated by Reference
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