Good day, everyone, and welcome to the Loral Space & Communications 2008 third quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) At this time, I would like to turn the conference over to Ms. Wendy Lewis, Director of Communications. Please go ahead, ma’am.

As we proceed with the call, some of the remarks we make about future expectations, plans and prospects will be forward-looking statements under the Private Securities Litigation Reform Act of 1995. As you know, actual results may differ materially from those discussed here as a result of a wide variety of factors and conditions. Please refer to the most recent 10-K and 10-Q forms that we have filed with the SEC for information on those factors and conditions. Now, I would like to turn the call over to Michael Targoff, Chief Executive Officer of Loral Space & Communications.

Thank you, Wendy, and good morning to all of you. With me this morning are some of Loral senior executives, including our Chief Financial Officer, Harvey Rein, our General Counsel, Avi Katz, our Treasurer, Richard Mastoloni and Assistant Treasurer, John stack, as well as our Vice President and Controller, John Capogrossi. Before we get started today, I would like to take a moment to recognize that it is Veterans Day here in the United States and on behalf of the whole Loral community, I would like to thank all of our veterans who have served our country so valiantly. Yesterday, we announced our third quarter earnings and filed our 10-Q for the quarter. I would like to take this opportunity to draw your attention to some of the important highlights and then we will take some questions. Given these economic times, I want to pay particular attention to our financial position and how we have bolstered our capability to withstand the impact of continued worldwide economic turmoil. Since we last talked, we had three notable achievements that I want to highlight. First, we saw the successful launch and in-service operations of Nimiq 4. Second, we had strong bookings at Space Systems/Loral and third, we closed a $100 million revolving credit facility, which improves liquidity at our manufacturing division. Regarding the importance of this credit facility, we are particularly gratified, not only by the availability of the financing on favorable terms in this troubled market, but also by the support of six world class banks. In terms of bookings, the strong results at SS/L not only reflect the company's capabilities, but also provide a healthy backlog of workflow for 2009 and 2010. In fact, the program backlog at SS/L at approximately $1.4 billion at September 30 is three times what it…

(Operator Instructions) We'll take our first question from Marti Murray with Babson Capital.

Hi, it's actually Nicole Torraco for Marti. Question, on the seven satellites that you mentioned to date, does that include [TopMax]?

No.

Okay. How many satellite orders are you expecting for 2008 globally? I think there was an estimate of around 20.

When we say satellite orders, let's remember that we're talking about full-size satellites of the kind that we are generally in a place to compete for and I would say that you're talking between 20 and 25 tops, including the orbital class of satellites might be 25 to 30, 27ish.

Okay. How do you see Loral's market share evolving in that?

Obviously, this is a very good year for us, and this is why we embarked upon the facility expansion have been spending the research and development money. All of us are wary about the impact of the economic times. We have pros and cons. As I've said in prior occasions, certainly to the extent customers have a rebuild requirement for replacing a productive satellite. We would expect that they would find where with all to go forward with that. On the other hand, customers who are in need of capital from the markets, we'll indeed find difficulty in justifying even on good business plans and justifying the raise of capital. So, I think time will tell, as we move in each quarter will give us more information.

On the spending, on the manufacturing side, given the amount that you have spent, has that business been performing the way you would have expected, or to ask the question in a different way, when and how do you see getting the returns on that capital that you've invested?

Well, it's almost a bit of apples and oranges, your question. Let me just say that we have not yet at a place where I can say that we're satisfied with the operating margin at SS/L. On the other hand, I am pleased with the investments we made. It's borne fruit in the awards we received in 2008 and our capability and our market position. We have expectations, hopes, but expectations that we will see the fruits of this, improve our results. Again, I have to temper everything with the potential impact of the financial situation.

With respect to your agreement with SIRIUS, have you begun construction on the satellite for them?

We have two satellites in construction with SIRIUS and they have been for sometime and we've announced each one. We have an XM satellite as well that's essentially complete.

Okay. Do you expect them to draw on the line?

As I think I've indicated in our Q, there are requirements in that credit agreement for them to satisfy and I don't think it's appropriate for me to talk about the conditions. I think it's probably disclosed, but I think I can say that right now the conditions are something that we're looking at closely.

One last question, can you give any update on the Northrop Grumman agreement, how you're doing with the government business?

No, just what we say in the Q, so far we haven't had any fruits of it that's worth talking about.

Okay.

Thank you.

Thanks.

(Operator Instructions) We'll go next to Tim Lash with Third Point.

On the seven orders for this year, up until last night you had publicly disclosed six, one unnamed. When did the seventh order come in? Was that earlier in the year?

It's in our backlog and bookings, but at this point, we're not disclosing the particulars of it, but we will shortly.

Okay. When did you receive the order? When did it hit backlog?

It hit backlog for the first time in the third quarter.

Got it, okay. With respect to the investment that you're making SS/L, in the 10-Q you hinted at another $25 million to $30 million for next-generation equipment investment that you were looking at. Why wasn't that considered last year when you brought up the capacity expansion to begin with?

They are two different things. The capability for growth is beyond the 5 to 6 satellites, and the other is equipment that has to be regularly upgraded to handle the new, complex satellites that we are actually in the forefront of and during the tight times in the bankruptcy, reorganization, obviously Loral was unable to keep pace with those requirements. So, it's catching up with new equipment and creating greater capabilities. So they are really two different things.

Got it. With respect to the customer advances and contracts and process items, contracts and process continue to ramp up, has there been some sort of shift in your policy in terms of billing customers? What are you doing there? Are you not getting bills out? What's going on? And then on customer advances, those have come way down, too. So have you changed your terms with customers in terms of upfront capital or?

No, there's really no change. It's a reflection of timing on events and bookings and it will go up and down. I think we indicated in the Q that we have about $60 million of receivables, unbilled receivables on some of the customers that give us some concern, but otherwise for the most part we are in regular course, would expect to get a host of small payments from customers that we have confidence, should deliver no problems to us.

Got it. In terms of long-term receivables, you've been investing in this for sometime and you have made note of it on multiple occasions. Obviously, the Board thinks this is a really good investment. Could you provide some insight given that you seem to think it is important as to how the long-term receivable values are arrived at? Is it a discounted cash, risk-adjusted discounted cash flow stream that you sort of factor in and as satellites get launched, that increases the NPV? Is that the risk judgment that you make those NPVs, is that how you calculate it?

It's a little more complex than that. But, first let me correct something I think in your question or at least clarify something. The nature of our business, whether it's Loral or any of our competitors, has historically been and I would not think it would be likely to change, that the customers expect to pay a portion of the contract price over the life of the satellite. This is not a voluntary decision of our management or our Board. It is a nature of our business. And if you want to be in this business, this is what we should expect. The calculation of the amounts on the balance sheet do reflect present values and also some reserve for collectibles.

Got it. Then with the pension liabilities that you…?

Right. I'm sorry?

With the pension liabilities, that's declined quite nicely over the last year. You've indicated you're going to continue to fund that. Can you kind of talk about, are there tax advantages to funding that and on and above your sort of ongoing payments? I mean what's driving you to be so aggressive in paying that down or covering that liability?

Basically, we honor our funding obligations under the law. It's not because we voluntarily are trying to take advantage of it, tax advantage. And maybe from time to time, we do some timing shifts, but for the most part, it is purely a reflection of what's required under the laws in the United States. We are, as I indicated in the Q, we are not immune from the market decline and we indicate our numbers in this sharp decline in our carrying values and that will have an impact on us as it will on the rest of corporate America and then in the ensuing what might be as many as seven years or it could change.

Got it. And one follow-up question with respect to that pension liability. How is that invested? Is that invested in Loral stock?

No, not at all.

Okay.

Standard.

Okay.

Okay, can we move on?

We'll go next to Eugene Fox with Cardinal Capital Management.

Okay, just a few questions. Can you talk about some of the factors such as increased R&D spending, as well as sales and marketing that have impacted SS/L margins, how you see them playing out over the course of the quarter and next year?

Yes, the sales and marketing increase this year, because our vision as to the opportunities this year, which turned out to be true, depending upon the outlook as we move quarter to quarter, we will either turn that faucet up or down, if we can capture the same awards that we did this year, we would be thrilled to spend the money. On the other hand, if the market is softer for any reason, we will certainly modulate that. R&D, we had a catch up, again, as I have mentioned with the research and development, our ongoing levels of R&D, we would expect the assumption that business in the ordinary course and we don't have to throttle it down, would stay in the mid-20 range. We would hope that we can justify spending that money because we're doing good things.

Could you give us a sense of what your target, near-term targets for EBITDA margins would be in that business?

No, we're not going to do that. We've declined to do that. I would like to be able to help you, but I think you will just have to gauge it from what we do disclose about our backlog and our quarterly results.

Well, let me ask it differently. Should we expect as a result of increased volumes to see higher margins?

Well, we would hope that with increased volumes, that would result in higher and better margins. I think I've talked in prior quarter calls about our disappointment and explained some of the factors, which I hope and trust are not ongoing that caused that and we would like to see and in each quarter we would hope to see improved margins.

Okay. You referenced earlier in the call that the order in the lawsuit had not been entered. Is that the primary reason of why it's not reflected in the current financials?

Yes, we can't reflect it in the financials until it's received.

Any sense as to when that's expected?

Towards the end of the year. It could be very late this year or very early next year.

Okay. I'll get back in queue. Thank you.

We'll take a follow-up from Marti Murray with Babson Capital.

What is the date by which the company has to decide to whether they are going to appeal a shareholder litigation?

Not sure about Delaware law, but generally its 30 days, I believe from the entry of the order.

Okay, so have you made a decision?

No, the order hasn't been entered. The company [remembers] the derivative plaintiff. So it's a complicated question. I don't think it's appropriate to talk about it.

Sorry?

I said, I don't think it's appropriate to discuss the legal strategy.

Okay.

(Operator Instructions) And we have no further questions at this time.

Okay. Thank you all very much. I appreciate your interest and look forward to seeing you and talking to you again soon. Thank you.

Ladies and gentlemen, that does conclude today's conference. We appreciate your participation.