4

Loral Corp.*

P> * Purchase by Lockheed Martin Corp. pending


Total Contracts $885,816,000

Corporate Headquarters: New York, N.Y.

Bernard Schwartz, one of the undisputed kings of defense electronics, has traded in his crown for a shot at building a new kingdom.

"We intend to create a major space-based telecommunications enterprise," said Schwartz, former chairman of New York-based Loral Corp. and future chairman of Loral Space and Communications Corp.

Loral Space was created following Lockheed Martin's Jan. 8 decision to buy Schwartz' empire for $9 billion. At that price tag, the country's top defense contractor got Loral's valuable defense electronics, space and systems integration units, which had been built during a decade of defense sector mergers.

Those mergers and acquisitions -- including the purchase of IBM Federal Systems Co., Bethesda, Md., in 1994, and the defense business of Unisys Corp., Blue Bell, Pa., last year -- helped generate $886 million in federal infotech contracts in 1995 out of Loral's $5.5 billion in total sales.

During 1995, Loral earned its $886 million in federal infotech through a variety of defense and civilian infotech contracts.

Among the defense-related infotech contracts were a U.S. Army contract to develop an armored battlefield command and control vehicle, and another to produce the U.S. Navy's unique AN/UYK-43 (V) shipboard computer. Loral is also developing the Global Transportation Network, which is intended to allow U.S. Transportation Command track its worldwide dispatch and delivery of supplies, and a $500 million global electronic mail system called the Defense Message System.

Civilian infotech contracts included the Federal Aviation Administration's program to develop a new air traffic control system under a $955 million Advanced Automation System contract. But the Federal Aviation Administration program -- originally spearheaded by the IBM unit later sold to Loral -- is way over budget and way behind schedule. Also, Loral led several programs for the U.S. Postal Service, the Internal Revenue Service and NASA.

Much of that federal infotech work will be transferred to Lockheed Martin's systems integration division, leaving Loral Space and Communications to forge a new space-age telecom business out of Loral Corp.'s space business and its affiliate, Space Systems/Loral, based in Palo Alto, Calif. The new Loral Space promises to be a very active commercial infotech company.

Most likely, Schwartz will try to grow the company by creating a complex net of joint ventures and international alliances, said Byron Callan, a securities analyst with Merrill Lynch & Co., New York.

The new company has several major advantages, including its chairman Schwartz, who grew Loral Corp.'s annual revenues to $5.5 billion by the end of 1995, up from $500 million in 1985. Schwartz may continue his Loral strategy -- expansion via mergers -- or he may try launching new projects or carving out new markets.

Whatever he chooses, Loral Space also will have no debt to worry about. It also has $700 million in cash and more than enough credibility on Wall Street to borrow billions more.

And Loral Space's order book is already fat. Loral owns 33 percent of Space Systems/Loral, which earns roughly $1 billion a year designing and building communications satellites for countries such as Japan and the Philippines. Space Systems/Loral is also building five direct broadcast satellites for PanAmSat, Greenwich, Conn.; Tele-Communications Inc./Tempo, Denver; and a consortium of MCI Communications Corp. and The News Corp.

Loral Space already has several promising projects underway, most importantly, a 31 percent share of the $2 billion Globalstar satellite-based phone network. The Globalstar project will use 48 satellites to provide worldwide wireless phone service beginning in 1998.

The venture is founded on a complex set of deals that link Loral with technology partner Qualcomm Inc., San Diego, and 10 other communications companies with established markets and political connections worldwide. For example, Loral has decided to launch 48 Globalstar satellites on rockets built by McDonnell Douglas, St. Louis; NPO Yuzhnoye, Kiev, Ukraine; and China Great Wall Industry Corp., Beijing, China.

Loral is also spearheading the development of CyberStar, a three-satellite communication network designed to provide companies with two-way, high-capacity worldwide data links via 26-inch antennas by 1999. The satellites will be built by Loral Space's production facility in Palo Alto, Calif.

Financial Highlights

(in thousands, except per share amounts)

For the years ending March 31 Increase 1995 over 1994199519941993

Sales 37$5,484,401$4,008,733$3,335,403

Operating income41564,551401,366296,254

Income26288,394228,268159,069

Earnings per share (fully diluted)243.382.722.02

Shareholder's equity221,687,540 1,381,306 1,187,853

Pro-forma combines with Space Systems/Loral*

Sales33$6,089,988$4,588,183$3,837,467

* Sales, bookings and backlog of Space Systems/Loral, an unconsolidated affiliate, are not included in Loral's results. Loral's proportionate share of SS/L's earnings is included.


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