Company Quick10K Filing
Quick10K
Loral Space & Communications
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$36.22 31 $1,123
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-16 Shareholder Vote
8-K 2018-11-28 Enter Agreement, Exhibits
8-K 2018-09-06 Enter Agreement, Exhibits
8-K 2018-05-17 Shareholder Vote
QCOM Qualcomm 88,637
NOK Nokia 27,729
SATS Echostar 3,853
GILT Gilat Satellite Networks 445
KVHI KVH Industries De 234
CRNT Ceragon Networks 179
WATT Energous 103
SEAC SeaChange 68
DGLY Digital Ally 15
ERIC Ericsson Lm Telephone 0
LORL 2019-06-30
Part I
Item 1. Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Disclosure Controls and Procedures
Part II.
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 lorl-20190630ex311dd4bc7.htm
EX-31.2 lorl-20190630ex312a994e8.htm
EX-32.1 lorl-20190630ex3216e5dd4.htm
EX-32.2 lorl-20190630ex3221a97fd.htm

Loral Space & Communications Earnings 2019-06-30

LORL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 lorl-20190630x10q.htm 10-Q lorl_Current_Folio_10Q

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June  30, 2019

 

Commission file number 1-14180

 

Loral Space & Communications Inc.

 

600 Fifth Avenue

New York, New York 10020

Telephone: (212) 697-1105

 

Jurisdiction of incorporation: Delaware

 

IRS identification number: 87-0748324

 

Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer         

 

Accelerated filer

Non-accelerated filer           

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Act) Yes  No 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Voting Common Stock

LORL

Nasdaq Global Select Market

 

As of August 5, 2019, 21,427,078 shares of the registrant’s voting common stock and 9,505,673 shares of the registrant’s non-voting common stock were outstanding.

 

 

 

 

 

LORAL SPACE & COMMUNICATIONS INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended June  30, 2019

 

Page No.

 

 

PART I — FINANCIAL INFORMATION 

 

 

 

Item 1 Financial Statements (Unaudited) 

 

 

 

Condensed Consolidated Balance Sheets as of June  30, 2019 and December 31, 2018 

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June  30, 2019 and June  30, 2018 

4

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June  30, 2019 and 2018 

5

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June  30, 2019 and June 30, 2018 

6

 

 

Notes to Condensed Consolidated Financial Statements 

7

 

 

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 

24

 

 

Item 4 Disclosure Controls and Procedures  

37

 

 

PART II — OTHER INFORMATION 

 

 

 

Item 1 Legal Proceedings 

38

 

 

Item 1A Risk Factors 

38

 

 

Item 6 Exhibits 

38

 

 

Signatures 

39

 

 

 

 

2

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LORAL SPACE & COMMUNICATIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

June 30,

 

December 31,

 

2019

 

2018

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

257,686

 

$

256,947

Income tax refund receivable

 

905

 

 

3,903

Other current assets

 

1,913

 

 

3,232

Total current assets

 

260,504

 

 

264,082

Right-of-use asset

 

661

 

 

         —

Income tax refund receivable, non-current

 

774

 

 

774

Investments in affiliates

 

94,406

 

 

24,574

Deferred tax assets

 

37,109

 

 

40,520

Other assets

 

343

 

 

350

Total assets

$

393,797

 

$

330,300

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accrued employment costs

$

1,664

 

$

2,573

Other current liabilities

 

1,605

 

 

1,495

Total current liabilities

 

3,269

 

 

4,068

Pension and other postretirement liabilities

 

15,052

 

 

15,167

Other liabilities

 

14,219

 

 

13,499

Total liabilities

 

32,540

 

 

32,734

Commitments and contingencies

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares

 

         —

 

 

         —

issued and outstanding

 

 

 

 

 

Common Stock:

 

 

 

 

 

Voting common stock, $0.01 par value; 50,000,000 shares authorized,

 

 

 

 

 

21,581,572 issued

 

216

 

 

216

Non-voting common stock, $0.01 par value; 20,000,000 shares authorized

 

 

 

 

 

9,505,673 issued and outstanding 

 

95

 

 

95

Paid-in capital

 

1,019,988

 

 

1,019,988

Treasury stock (at cost), 154,494 shares of voting common stock

 

(9,592)

 

 

(9,592)

Accumulated deficit

 

(618,778)

 

 

(695,521)

Accumulated other comprehensive loss

 

(30,672)

 

 

(17,620)

Total shareholders' equity

 

361,257

 

 

297,566

Total liabilities and shareholders' equity

$

393,797

 

$

330,300

 

See notes to condensed consolidated financial statements

 

3

 

LORAL SPACE & COMMUNICATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

General and administrative expenses

$

(1,697)

 

$

(1,758)

 

$

(3,500)

 

$

(3,394)

Operating loss

 

(1,697)

 

 

(1,758)

 

 

(3,500)

 

 

(3,394)

Interest and investment income

 

1,566

 

 

1,189

 

 

3,168

 

 

2,077

Interest expense

 

(5)

 

 

(6)

 

 

(10)

 

 

(11)

Other expense

 

(755)

 

 

(554)

 

 

(1,971)

 

 

(1,188)

Loss from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

and equity in net income (loss) of affiliates

 

(891)

 

 

(1,129)

 

 

(2,313)

 

 

(2,516)

Income tax (provision) benefit

 

(2,160)

 

 

5,068

 

 

(4,226)

 

 

5,655

(Loss) income from continuing operations before

 

 

 

 

 

 

 

 

 

 

 

equity in net income (loss) of affiliates

 

(3,051)

 

 

3,939

 

 

(6,539)

 

 

3,139

Equity in net income (loss) of affiliates

 

41,278

 

 

(3,455)

 

 

83,282

 

 

1,639

Income from continuing operations

 

38,227

 

 

484

 

 

76,743

 

 

4,778

Loss from discontinued operations, net of tax

 

     —

 

 

(37)

 

 

     —

 

 

(37)

Net income

 

38,227

 

 

447

 

 

76,743

 

 

4,741

Other comprehensive (loss) income, net of tax

 

(6,646)

 

 

628

 

 

(13,052)

 

 

7,772

Comprehensive income

$

31,581

 

$

1,075

 

$

63,691

 

$

12,513

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

1.24

 

$

0.02

 

$

2.48

 

$

0.15

Loss from discontinued operations, net of tax

 

     —

 

 

     —

 

 

     —

 

 

     —

Net income

$

1.24

 

$

0.02

 

$

2.48

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

1.23

 

$

0.02

 

$

2.46

 

$

0.15

Loss from discontinued operations, net of tax

 

     —

 

 

     —

 

 

     —

 

 

     —

Net income

$

1.23

 

$

0.02

 

$

2.46

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

30,933

 

 

30,933

 

 

30,933

 

 

30,933

Diluted

 

31,008

 

 

31,008

 

 

31,008

 

 

31,008

 

See notes to condensed consolidated financial statements

 

 

4

 

LORAL SPACE & COMMUNICATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Common Stock

 

 

 

 

Treasury Stock

 

 

 

Accumulated

 

 

 

 

Voting

 

Non-Voting

 

 

 

 

Voting

 

 

 

Other

 

 

 

 

Shares

 

 

 

 

Shares

 

 

 

 

Paid-In

 

 

 

 

 

 

Accumulated

 

Comprehensive

 

Shareholders'

 

Issued

 

Amount

 

Issued

 

Amount

 

Capital

 

Shares 

 

Amount

 

Deficit

 

Loss

 

Equity

Balance, January 1, 2018

21,582

 

$

216

 

9,506

 

$

95

 

$

1,019,988

 

154

 

$

(9,592)

 

$

(682,831)

 

$

(37,278)

 

$

290,598

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,294

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,144

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,438

Cumulative effect adjustment attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment in Telesat

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,107)

 

 

 

 

 

(22,107)

Balance, March 31, 2018

21,582

 

 

216

 

9,506

 

 

95

 

 

1,019,988

 

154

 

 

(9,592)

 

 

(700,644)

 

 

(30,134)

 

 

279,929

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

447

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

628

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,075

Balance, June 30, 2018

21,582

 

 

216

 

9,506

 

 

95

 

 

1,019,988

 

154

 

 

(9,592)

 

 

(700,197)

 

 

(29,506)

 

 

281,004

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,873

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,059

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,932

Tax cuts and Jobs Act,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reclassification tax effect

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,173

 

 

(4,173)

 

 

        —

Cumulative effect adjustment attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment in Telesat

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,370)

 

 

 

 

 

(4,370)

Balance, December 31, 2018

21,582

 

 

216

 

9,506

 

 

95

 

 

1,019,988

 

154

 

 

(9,592)

 

 

(695,521)

 

 

(17,620)

 

 

297,566

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,516

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,406)

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,110

Balance, March 31, 2019

21,582

 

 

216

 

9,506

 

 

95

 

 

1,019,988

 

154

 

 

(9,592)

 

 

(657,005)

 

 

(24,026)

 

 

329,676

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,227

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,646)

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,581

Balance, June 30, 2019

21,582

 

$

216

 

9,506

 

$

95

 

$

1,019,988

 

154

 

$

(9,592)

 

$

(618,778)

 

$

(30,672)

 

$

361,257

 

See notes to condensed consolidated financial statements

 

 

5

 

LORAL SPACE & COMMUNICATIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Six Months Ended

 

June 30,

 

2019

 

2018

Operating activities:

 

 

 

 

 

Net income

$

76,743

 

$

4,741

Loss from discontinued operations, net of tax

 

         —

 

 

37

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Non-cash operating items (Note 2)

 

(79,449)

 

 

(8,139)

Changes in operating assets and liabilities:

 

 

 

 

 

Other current assets

 

(419)

 

 

(453)

Accrued employment costs and other current liabilities

 

(1,476)

 

 

(170)

Income tax refund receivable

 

2,998

 

 

278

Pension and other postretirement liabilities

 

(115)

 

 

(2,381)

Other liabilities

 

720

 

 

1,132

Net cash used in operating activities - continuing operations

 

(998)

 

 

(4,955)

Net cash provided by (used in) operating activities – discontinued operations

 

1,737

 

 

(47)

Net cash provided by (used in) operating activities

 

739

 

 

(5,002)

Cash, cash equivalents and restricted cash (Note 2) — period increase (decrease)

 

739

 

 

(5,002)

Cash, cash equivalents and restricted cash (Note 2) — beginning of year

 

257,251

 

 

255,443

Cash, cash equivalents and restricted cash — end of period

$

257,990

 

$

250,441

 

See notes to condensed consolidated financial statements

 

6

Table of Contents

LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Organization and Principal Business

 

Loral Space & Communications Inc., together with its subsidiaries (“Loral,” the “Company,” “we,” “our” and “us”) is a leading satellite communications company engaged, through our ownership interests in affiliates, in satellite-based communications services.

 

Description of Business

 

Loral has one operating segment consisting of satellite-based communications services. Loral participates in satellite services operations primarily through its ownership interest in Telesat Canada (“Telesat”), a leading global satellite operator. Loral holds a 62.7% economic interest and a 32.6% voting interest in Telesat. We use the equity method of accounting for our ownership interest in Telesat (see Note 5).

 

Telesat owns and leases a satellite fleet that operates in geostationary earth orbit approximately 22,000 miles above the equator. In this orbit, satellites remain in a fixed position relative to points on the earth’s surface and provide reliable, high-bandwidth services anywhere in their coverage areas, serving as the backbone for many forms of telecommunications. Telesat is also developing a global constellation of low earth orbit (“LEO”) satellites. LEO satellites operate in a circular orbit around the earth with an altitude typically between 500 and 870 miles. Unlike geostationary orbit satellites that operate in a fixed orbital location above the equator, LEO satellites travel around the earth at high velocities requiring antennas on the ground to track their movement. LEO satellite systems have the potential to offer a number of advantages over geostationary orbit satellites to meet growing requirements for broadband services, both consumer and commercial, by providing increased data speeds and capacity, global coverage, and latency on par with, or potentially better than, terrestrial services.

 

2. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and, in our opinion, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of results of operations, financial position and cash flows as of the balance sheet dates presented and for the periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules. We believe that the disclosures made are adequate to keep the information presented from being misleading. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.

 

The December 31, 2018 balance sheet has been derived from the audited consolidated financial statements at that date. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our latest Annual Report on Form 10-K filed with the SEC.

 

Investments in Affiliates

 

Our ownership interest in Telesat is accounted for using the equity method of accounting. Income and losses of Telesat are recorded based on our economic interest. The contribution of Loral Skynet, a wholly owned subsidiary of Loral prior to its contribution to Telesat in 2007, was recorded by Loral at the historical book value of our retained interest combined with the gain recognized on the contribution. However, the contribution was recorded by Telesat at fair value. Accordingly, the amortization of Telesat fair value adjustments applicable to the Loral Skynet assets and liabilities acquired by Telesat in 2007 is proportionately eliminated in determining our share of the net income of Telesat. Our equity in net income or loss of Telesat also reflects amortization of profits eliminated, to the extent of our economic interest in Telesat, on satellites we constructed for Telesat while we owned Space Systems/Loral, LLC (formerly known as Space Systems/Loral, Inc.) (“SSL”) and on Loral’s sale to Telesat in April 2011 of its portion of the payload on the ViaSat-1 satellite and related assets. Non-refundable cash distributions received from Telesat in excess of our initial investment and our share of cumulative equity in comprehensive income of Telesat, net of cash distributions received in prior periods, are recorded as equity in net income of Telesat (“Excess Cash Distribution”) since we have no obligation to provide future financial support to Telesat. After receiving an Excess Cash Distribution, we do not

7

Table of Contents

LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

record additional equity in net income of Telesat until our share of Telesat’s future net income exceeds the Excess Cash Distribution. Equity in losses of affiliates is not recognized after the carrying value of an investment, including advances and loans, has been reduced to zero, unless guarantees or other funding obligations exist. We had no guarantees or other funding obligations for our equity method investments as of June 30, 2019 and December 31, 2018. We use the nature of distribution approach to classify distributions from equity method investments on the statements of cash flows. The Company monitors its equity method investments for factors indicating other-than-temporary impairment. An impairment loss is recognized when there has been a loss in value of the affiliate that is other‑than-temporary.

 

Use of Estimates in Preparation of Financial Statements

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amount of income (loss) reported for the period. Actual results could materially differ from estimates.

 

Significant estimates also included the allowances for doubtful accounts, income taxes, including the valuation of deferred tax assets, the fair value of liabilities indemnified, the dilutive effect of Telesat stock options (see Note 10) and our pension liabilities.

 

Cash, Cash Equivalents and Restricted Cash

 

As of June 30, 2019, the Company had $257.7 million of cash and cash equivalents. Cash and cash equivalents include liquid investments, primarily money market funds, with maturities of less than 90 days at the time of purchase. Management determines the appropriate classification of its investments at the time of purchase and at each balance sheet date.

 

As of June 30, 2019 and December 31, 2018, other assets included restricted cash of $0.3 million which represents the amount pledged as collateral to the issuer of a standby letter of credit (the “LC”). The LC, which expires in August 2020, has been provided as a guaranty to the lessor of our corporate offices.

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows (in thousands):

 

 

 

 

 

 

 

 

June 30,

 

June 30,

 

2019

 

2018

Cash and cash equivalents

$

257,686

 

$

250,137

Restricted cash included in other assets

 

304

 

 

304

Cash, cash equivalents and restricted cash shown in the statement of cash flows

$

257,990

 

$

250,441

 

Concentration of Credit Risk

 

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and receivables. Our cash and cash equivalents are maintained with high-credit-quality financial institutions. As of June 30, 2019 and December 31, 2018, our cash and cash equivalents were invested primarily in several liquid Prime and Government AAA money market funds. Such funds are not insured by the Federal Deposit Insurance Corporation. The dispersion across funds reduces the exposure of a default at any one fund.  As a result, management believes that its potential credit risks are minimal.

 

8

Table of Contents

LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Fair Value Measurements

 

U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. U.S. GAAP also establishes a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are described below:

 

Level 1: Inputs represent a fair value that is derived from unadjusted quoted prices for identical assets or liabilities traded in active markets at the measurement date.

 

Level 2: Inputs represent a fair value that is derived from quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities, and pricing inputs, other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

Assets and Liabilities Measured at Fair Value

 

The following table presents our assets and liabilities measured at fair value on a recurring and non-recurring basis (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

December 31, 2018

 

Level 1

 

Level 2

 

Level 3

 

Level 1

 

Level 2

 

Level 3

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

255,722

 

$

         —

 

$

         —

 

$

254,552

 

$

         —

 

$

         —

Other current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indemnification - Sale of SSL

 

         —

 

 

         —

 

 

672

 

 

         —

 

 

         —

 

 

2,410

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indemnification - Globalstar do Brasil S.A.

$

         —

 

$

         —

 

$

167

 

$

         —

 

$

         —

 

$

184

 

The carrying amount of money market funds approximates fair value as of each reporting date because of the short maturity of those instruments.

 

The Company did not have any non-financial assets or non-financial liabilities that were recognized or disclosed at fair value as of June 30, 2019 and December 31, 2018.

 

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

 

We review the carrying values of our equity method investments when events and circumstances warrant and consider all available evidence in evaluating when declines in fair value are other-than-temporary. The fair values of our investments are determined based on valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow projections. An impairment charge is recorded when the carrying amount of the investment exceeds its current fair value and is determined to be other-than-temporary.

 

The asset resulting from the indemnification of SSL is for certain pre-closing taxes and reflects the excess of payments since inception over refunds and the estimated liability, which was originally determined using the fair value objective approach. The estimated liability for indemnifications relating to Globalstar do Brasil S.A. (“GdB”), originally determined using expected value analysis, is net of payments since inception.

 

9

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LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Contingencies

 

Contingencies by their nature relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss, if any. We accrue for costs relating to litigation, claims and other contingent matters when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties or on management’s judgment, as appropriate. Actual amounts paid may differ from amounts estimated, and such differences will be charged to operations in the period in which the final determination of the liability is made.

 

Income Taxes

Loral and its subsidiaries are subject to U.S. federal, state and local income taxation on their worldwide income and foreign taxation on certain income from sources outside the United States. Telesat is subject to tax in Canada and other jurisdictions, and Loral will provide in each period any additional U.S. current and deferred tax required on actual or deemed distributions from Telesat, including Global Intangible Low Taxed Income (“GILTI”). Deferred income taxes reflect the future tax effect of temporary differences between the carrying amount of assets and liabilities for financial and income tax reporting and are measured by applying anticipated statutory tax rates in effect for the year during which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent it is more likely than not that the deferred tax assets will not be realized.

The tax benefit of an uncertain tax position (“UTP”) taken or expected to be taken in income tax returns is recognized only if it is “more likely than not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income taxes in income tax expense on a quarterly basis.

The unrecognized tax benefit of a UTP is recognized in the period when the UTP is effectively settled. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination.

 

Earnings per Share

Basic earnings per share are computed based upon the weighted average number of shares of voting and non-voting common stock outstanding during each period. Shares of non-voting common stock are in all respects identical to and treated equally with shares of voting common stock except for the absence of voting rights (other than as provided in Loral’s Amended and Restated Certificate of Incorporation which was ratified by Loral’s stockholders on May 19, 2009). Diluted earnings per share are based on the weighted average number of shares of voting and non-voting common stock outstanding during each period, adjusted for the effect of unconverted restricted stock units. For diluted earnings per share, earnings are adjusted for the dilutive effect of Telesat stock options.

 

Recent Accounting Pronouncements

 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU No. 2018-13 eliminates, amends, and adds disclosure requirements to improve the effectiveness of fair value measurement disclosures. The new guidance is effective for the Company on January 1, 2020, with earlier application permitted in any interim or annual period. Companies may also choose to early adopt the eliminated and amended disclosures and wait to adopt the new disclosures until the effective date of the new guidance. While certain amendments are to be applied prospectively, all other amendments are to be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

 

10

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LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

In February 2016, the FASB amended the Accounting Standards Codification (“ASC”) by creating ASC Topic 842, Leases (“ASC 842”). ASC Topic 842 requires a lessee to record a right-of-use asset and a lease liability for all leases with a lease term greater than 12 months. The main difference between previous U.S. GAAP and ASC Topic 842 is the recognition under ASC 842 of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The new guidance was effective for the Company on January 1, 2019. We adopted ASC 842 in the first quarter of 2019 utilizing the modified retrospective method with a practical expedient through a cumulative-effect adjustment at the beginning of the first quarter of 2019. As a result, on January 1, 2019, we recognized a right-of-use asset and lease liability for an operating lease of approximately $0.3 million on our condensed consolidated balance sheet.

 

Additional Cash Flow Information

 

The following represents non-cash activities and supplemental information to the condensed consolidated statements of cash flows (in thousands):

 

 

 

 

 

 

 

Six Months Ended

 

June 30,

 

2019

 

2018

Non-cash operating items:

 

 

 

 

 

Equity in net income of affiliates

$

(83,282)

 

$

(1,639)

Deferred taxes

 

3,308

 

 

(7,043)

Depreciation and amortization

 

 8

 

 

11

Right-of-use asset, net of lease liability

 

16

 

 

         —

Amortization of prior service credit and actuarial loss

 

501

 

 

532

Net non-cash operating items

$

(79,449)

 

$

(8,139)

Supplemental information:

 

 

 

 

 

Interest paid

$

10

 

$

11

Income tax refunds

$

2,980

 

$

255

Income tax payments

$

163

 

$

138

 

 

0

 

3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Proportionate

 

 

 

 

 

 

 

Share of

 

Accumulated

 

 

 

 

Telesat Other

 

Other

 

Postretirement

 

Comprehensive

 

Comprehensive

 

Benefits

 

Income (Loss)

 

Loss

Balance, January 1, 2018

$

(16,454)

 

$

(20,824)

 

$

(37,278)

Other comprehensive income before reclassification

 

953

 

 

22,033

 

 

22,986

Amounts reclassified from accumulated other comprehensive loss

 

845

 

 

         —

 

 

845

Net current-period other comprehensive income

 

1,798

 

 

22,033

 

 

23,831

Tax Cuts and Jobs Act, reclassification of tax effect from

 

 

 

 

 

 

 

 

accumulated other comprehensive loss to accumulated deficit

 

         —

 

 

(4,173)

 

 

(4,173)

Balance, December 31, 2018

 

(14,656)

 

 

(2,964)

 

 

(17,620)

 

 

 

 

 

 

 

 

 

Other comprehensive loss before reclassification

 

         —

 

 

(13,447)

 

 

(13,447)

Amounts reclassified from accumulated other comprehensive loss

 

395

 

 

         —

 

 

395

Net current-period other comprehensive loss

 

395

 

 

(13,447)

 

 

(13,052)

Balance, June 30, 2019

$

(14,261)

 

$

(16,411)

 

$

(30,672)

 

11

Table of Contents

LORAL SPACE & COMMUNICATIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The components of other comprehensive income (loss) and related tax effects are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2019

 

 

2018

 

Before-Tax

 

Tax

 

Net-of-Tax

 

 

Before-Tax

 

Tax

 

Net-of-Tax

 

Amount

 

Provision

 

Amount

 

 

Amount

 

Provision

 

Amount

Amortization of prior service credits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and net actuarial loss

$

271

(a)

$

(58)

 

$

213

 

 

$

263

(a)

$

(56)

 

$

207

Equity in Telesat other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income

 

(6,861)

 

 

 2

 

 

(6,859)

 

 

 

532

 

 

(111)

 

 

421

Other comprehensive (loss) income

$

(6,590)

 

$

(56)

 

$

(6,646)

 

 

$

795

 

$

(167)

 

$

628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2019

 

 

2018

 

Before-Tax

 

Tax (Provision)

 

Net-of-Tax

 

 

Before-Tax

 

Tax

 

Net-of-Tax

 

Amount

 

Benefit

 

Amount

 

 

Amount

 

Provision

 

Amount

Amortization of prior service credits