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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1999
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COMMISSION FILE NUMBER 1-14180
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LORAL SAVINGS PLAN
-------------------------
LORAL SPACE & COMMUNICATIONS LTD.
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
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<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
LORAL SAVINGS PLAN
--------------------------------------
(Plan)
BY: STEPHEN L. JACKSON
-----------------------------------
Stephen L. Jackson
Committee Member
Date: June 16, 2000
<PAGE> 3
LORAL SAVINGS PLAN
TABLE OF CONTENTS
-------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 1
Financial Statements
Statements of Net Assets Available For Benefits as of
December 31, 1999 and 1998............................. 2
Statements of Changes in Net Assets Available For Benefits
for the years ended December 31, 1999 and 1998......... 3
Notes to Financial Statements............................... 4
Supplemental Schedules
Schedule of Assets Held for Investment Purposes as of
December 31, 1999...................................... 10
Schedule of Reportable Transactions for the year ended
December 31, 1999...................................... 11
Exhibit
Consent of Independent Accountants
</TABLE>
<PAGE> 4
INDEPENDENT ACCOUNTANTS' REPORT
To the Participants and
Plan Administrator of the
Loral Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Loral Savings Plan (the Plan) as of December 31, 1999 and 1998,
and the related statement of changes in net assets available for benefits for
the years ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1999 and 1998, and the changes in net assets available for
benefits for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules of
"Assets Held for Investment Purposes" and "Reportable Transactions" are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
June 16, 2000
1
<PAGE> 5
LORAL SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Assets:
Investments, at fair value:
Participant directed:
Mutual Funds......................................... $230,819 $201,613
Loral Stock Fund..................................... 123,512 91,635
Loans................................................ 5,443 5,818
Non-participant directed:
Loral Stock Fund..................................... 25,627 13,791
Globalstar Stock Fund................................ 2,310 583
Associates Stock Fund................................ 8,587 15,231
Ford Stock Fund...................................... 32,826 40,851
-------- --------
Total Investments................................. 429,124 369,522
-------- --------
Net assets available for benefits......................... $429,124 $369,522
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 6
LORAL SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments (Note
3).................................................. $ 50,005 $ 19,437
Net investment gain from registered investment
company (Note 3).................................... 2,020 8,884
Interest and dividends............................... 13,727 11,969
-------- --------
65,752 40,290
-------- --------
Contributions:
Participant.......................................... 20,506 19,056
Employer............................................. 7,003 6,610
Rollovers............................................ 2,252 2,776
-------- --------
29,761 28,442
-------- --------
Transfer from other plans, net......................... 23 5,485
-------- --------
Total additions................................... 95,536 74,217
-------- --------
Deductions:
Deductions from net assets attributed to:
Benefits paid to participants.......................... 35,884 32,225
Administrative expenses................................ 50 38
-------- --------
Total deductions.................................. 35,934 32,263
-------- --------
Net increase................................................ 59,602 41,954
Net assets available for benefits:
Beginning of year......................................... 369,522 327,568
-------- --------
End of year............................................... $429,124 $369,522
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 7
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION
General
The Loral Savings Plan (the "Plan") was established on April 23, 1996
following the spin-off and formation of Loral Space & Communications Ltd.
("Loral"). It was established for the benefit of employees of certain affiliates
of Loral (collectively referred to as the "Employer"), and is sponsored by Space
Systems/ Loral, Inc. ("SS/L").
On March 20, 1998, Loral acquired Orion Network Systems, Inc. ("Orion"). On
that date all Orion employees were eligible to become participants of the Plan.
On April 7, 1998, in accordance with the spin-off of Associates First
Capital Corporation ("Associates") from the Ford Motor Company ("Ford"), the
Associates Stock Fund was formed and the corresponding ownership interests
(valued at approximately $16.8 million) were transferred from the Ford Stock
Fund to the Associates Stock Fund.
On August 1, 1998 the Fidelity Blended Income Fund was merged into the
Fidelity Managed Income Portfolio II.
The Plan is a defined contribution plan designed to provide eligible
employees with systematic savings and tax-advantaged long-term savings for
retirement. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). Regular full-time and regular part-time
employees are eligible to participate in the Plan as of their date of hire.
As of December 31, 1999, there were approximately 4,700 participants in the
Plan. A complete description of the Plan's provisions is contained in the Plan
document.
Non-Participant Directed Investments
Loral Stock Fund -- Funds are primarily invested in Loral Space &
Communications Ltd. Common Stock ("Loral Common Stock"). Assets invested in the
Loral Stock Fund are expressed in units of participation rather than shares of
Loral Common Stock. Such units represent a proportionate interest in all assets
of the Loral Stock Fund, which includes Loral Common Stock and the Fidelity
Short Term Interest Fund. A net asset value per unit of participation is
determined daily for each outstanding unit of the Loral Stock Fund.
The Ford Stock Fund is a carry-over fund resulting from the transfer of
assets from a prior plan. Contributions and reinvestment of dividends into this
fund are not permitted. Dividends received on Ford common stock are invested in
the Fidelity Retirement Money Market Fund. Assets invested in the Ford Stock
Fund are expressed in units of participation rather than shares of Ford common
stock. Such units represent a proportionate interest in all assets of the Ford
Stock Fund, which includes Ford common stock and the Fidelity Short Term
Interest Fund. A net asset value per unit of participation is determined daily
for each outstanding unit of the Ford Stock Fund (see Associates Stock Fund
below).
Associates Stock Fund -- This fund was formed pursuant to the spin-off of
Associates from Ford (see Note 1 General). Contributions and reinvestment of
dividends into this fund are not permitted. Dividends received on Associates
common stock are invested in the Fidelity Retirement Money Market Fund. Assets
invested in the Associates Stock Fund are expressed in units of participation
rather than shares of Associates common stock. Such units represent a
proportionate interest in all assets of the Associates Stock Fund, which
includes Associates common stock and the Fidelity Short Term Interest Fund. A
net asset value per unit of participation is determined daily for each
outstanding unit of the Associates Stock Fund.
The Globalstar Stock Fund reflects the employer match for employees of
Globalstar L.P. ("Globalstar") only. Assets invested in the fund are expressed
in units of participation rather than shares of Globalstar
4
<PAGE> 8
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Telecommunications Ltd. common stock. Such units represent a proportionate
interest in all assets of the Globalstar Stock Fund, which includes Globalstar
common stock and the Fidelity Short Term Interest Fund.
Participant Accounts
A participant's account is credited with the participant's contribution;
the employer's matching contribution and an allocation of Plan earnings or
losses, net of certain investment management fees. Allocations are based on a
participant's account balance as a percentage of the sum of all participants'
account balances.
Vesting and Forfeitures
Participants are immediately vested in their contributions plus actual
earnings thereon. Generally, participants vest 100% in employer contributions
plus actual earnings thereon after completion of five years of service and,
thereafter, vest immediately in all future employer contributions. On
termination of service due to death, disability, or retirement, participants
become fully vested. Non-vested employer contributions are forfeited upon
termination or withdrawal and are used for certain Plan administrative expenses
or to reduce future employer contributions. Forfeitures for the years ended
December 31, 1999 and 1998 were approximately $500,000 and $389,000,
respectively.
Contributions
The Plan has both a Tax-Efficient Savings ("TES") and a Regular Savings
feature. Under the Plan, and subject to limits imposed by the Internal Revenue
Code ("IRC"), participants, except for Skynet participants, may elect a
reduction in eligible salary up to 15% with a corresponding TES contribution in
the same amount made to the Plan by the Employer on their behalf. Such
contributions are excluded from the participant's taxable income. Subject to
limits imposed by the IRC, participants may also contribute up to 10% of their
base salaries to the Regular Savings feature of the Plan on an after-tax basis.
Loral Skynet participants may elect to contribute from 2% to 16% of eligible
compensation which can be either on a TES or after-tax basis.
Participants' contributions are generally matched at a rate of $.60 for
each dollar of TES and/or Regular Savings contributions, up to 6% of a
participant's base salary, unless the Employer determines to make a different
contribution or no contribution. With the exception of Globalstar employees, all
employer matching contributions are generally invested in the Loral Stock Fund.
For Globalstar employees' the employer matching contributions are invested in
the Globalstar Stock Fund. Employer contributions related to Globalstar
employees may be transferred to any of the participant directed funds. All
employer-matching contributions remaining in the non-participant directed Loral
Stock Fund or the Globalstar Stock Fund is reflected as non-participant directed
in the accompanying financial statements. Participants who are 55 years old and
have 10 years of service may direct their employer matching contributions to any
available investment option except the Ford Stock Fund, the Associates Stock
Fund and the Globalstar Stock Fund.
Payment of Benefits
Upon termination, participants receive the vested portion of their account
balance as soon as practicable after termination. Terminated participants who
have an account balance in excess of $5,000 may elect to leave their account
balance in the Plan or withdraw it at any time up to age 65.
Assets in a participant's TES account may be withdrawn only for financial
hardship before termination of employment or before reaching age 59 and
one-half. Financial hardship is determined pursuant to provisions of the IRC.
Generally, a 10% penalty will be imposed on certain withdrawals of pre-tax
assets made before the participant reaches age 59 and one-half. After age 59 and
one-half, TES assets may be withdrawn in total or in part at any time.
5
<PAGE> 9
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Assets in a participant's Regular Savings account may be withdrawn in total
or in part at any time in accordance with the Plan provisions.
Withdrawals of employer contributions for active participants are available
at the end of the two-year period following the year in which the employer
contributions were made, if they are vested.
Payment of Administrative Expenses
Most administrative expenses are paid by the Plan. The Plan permits the
Employer to use forfeitures from participants' non-vested accounts to pay
certain administrative expenses. Expenses not paid by the Plan are the
responsibility of the Employer.
Participant Loans
The Plan permits active participants to borrow from the vested assets in
their TES accounts. The minimum loan amount is $1,000. The maximum loan
permitted is the lesser of: (1) $50,000 minus the highest outstanding loan
balance during the last twelve months, (2) 50% of the vested account balance, or
(3) the assets in the TES Account which are eligible for a loan. The amounts in
(2) and (3) are reduced by any loan balance outstanding. Participants may have
only one outstanding loan at a time. No new loans will be made until all
outstanding loans are repaid. The interest rate for a loan is the prime rate as
defined in the Plan document, and remains the same for the term of the loan.
Interest rates for outstanding loans range from 6% to 10 1/2%.
The term of a loan can be up to five years except for loans to purchase a
primary residence, which can have a term of up to 10 years. Loan repayment is
made through payroll deductions. Repayment of the entire loan balance is
permitted at any time. All loan repayments are allocated to the investment funds
elected by a participant for current TES Contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting. Participants and Employer contributions are recorded in the
period the Employer makes payroll deductions from participants' earnings.
Benefits are recorded when paid.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value.
Investments in Loral Stock Fund, Globalstar Stock Fund, Associates Stock
Fund and Ford Stock Fund are valued at quoted market prices and represent the
net asset value per unit of participation.
Shares of registered investment company funds are valued at quoted market
prices that represent the net asset value of shares held by the Plan at
year-end.
Loans receivable from participants are valued at cost which approximates
fair value.
The Plan presents in the statements of changes in net assets available for
benefits, the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) of those investments.
Investment transactions are accounted for on a trade date basis. Dividend
income is recorded on the ex-dividend date. Interest income is recorded when
earned.
6
<PAGE> 10
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain reclassifications have been made to conform prior year amounts to
the current year's presentation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
changes therein, and the disclosure of contingent assets and liabilities. Actual
results could differ from estimates.
Risks and Uncertainties
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds, and other investment
securities. Investment securities are exposed to various risks, such as interest
rate, market and credit risks. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to changes in the
value of investment securities, it is at least reasonably possible that changes
in risks in the near term would materially affect participants' account balances
and the amounts reported in the statement of net assets available for benefits
and the statements of changes in net assets available for benefits. As of June
16, 2000, plan assets have decreased in value since December 31, 1999 by
approximately $110 million due to market fluctuations.
Financial Instruments
Fidelity Management Trust Company ("Fidelity") is the Trustee of the Plan
and may enter into forward foreign currency contracts to protect securities and
related receivables and payables against fluctuations in future foreign currency
rates. A forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate. Risks associated with
such contracts include the movement in the value of the foreign currency
relative to the U.S. dollar and the ability of the counterparty to perform. The
market value of the contract will fluctuate with changes in currency exchange
rates.
Fidelity may invest in futures and option contracts solely for the purpose
of managing its exposure to the stock and bond markets and fluctuations in
interest rates. The use of futures and option transactions involves the risk of
imperfect correlation in movements in the price of futures and option contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the term of their contracts. When the contract is closed,
a realized gain or loss is recorded equal to the difference between the value of
the contract at the time it was opened and the value at the time it was closed.
New Pronouncement
In September 1999, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 99-3, "Accounting for and Reporting of Certain Defined Contribution
Benefit Plan Investments and Other Disclosure Matters." This SOP eliminates the
previous requirement for a defined contribution plan to disclose
participant-directed investment programs by fund. The Plan has adopted SOP 99-3
in its financial statements for the years ended December 31, 1999 and 1998.
7
<PAGE> 11
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS
The following presents investments that represent five percent or more of
the Plan's net assets as of December 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Loral Stock Fund*........................................... $149,139 $105,426
Fidelity Blue Chip Growth Fund.............................. 80,943 66,390
Fidelity Growth & Income Portfolio.......................... 37,188 38,993
Fidelity Retirement Money Market Portfolio.................. 43,438 41,833
Fidelity Managed Income Portfolio II........................ 18,603 20,463
Fidelity Magellan........................................... 26,730 16,962
Ford Stock Fund............................................. 32,826 40,851
</TABLE>
---------------
* Includes both participant directed and non-participant directed amounts.
During 1999 and 1998, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated in
value by $52 million and $28 million, respectively, as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Mutual Funds................................................ $18,923 $24,142
Loral Stock Fund............................................ 40,258 (19,312)
Globalstar Stock Fund....................................... 1,213 (40)
Associates Stock Fund....................................... (4,787) (25)
Ford Stock Fund............................................. (3,582) 23,556
------- -------
$52,025 $28,321
======= =======
</TABLE>
Information about the significant components of the changes in net assets
relating to the non-participant-directed investments for 1999 and 1998 were (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Contributions............................................... $ 7,003 $ 6,610
Net appreciation (depreciation)............................. (1,006) 21,248
Dividends................................................... 1,408 73
Benefits paid to participants and withdrawals............... (5,933) (4,268)
Transfers to participant-directed funds..................... (2,537) (2,244)
Loans....................................................... (41) (19)
------- -------
$(1,106) $21,400
======= =======
</TABLE>
4. PLAN TERMINATION
Although the Employer has not expressed an intent to do so, the Employer
can discontinue its contributions at any time and terminate the Plan subject to
the provisions of ERISA. In the event of a discontinuance and/or termination of
the Plan, participants will become 100% vested and the net assets of the Plan
will be allocated among the participants and their beneficiaries in accordance
with the provisions of ERISA.
8
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LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. TAX STATUS
The Employer intends to seek a determination from the Internal Revenue
Service that the Plan and related trust are designed in accordance with
applicable sections of the IRC.
Based upon present applicable laws and regulations, participants will not
be subject to Federal income tax on the TES contributions or Employer
contributions made on their behalf or on the earnings credited to their account
until such time as they are withdrawn.
6. CONCENTRATION OF CREDIT RISK
At December 31, 1999 and 1998, approximately 52% and 54%, respectively, of
the Plan's assets were invested in Fidelity Funds and 35% and 29%, respectively,
in the Loral Stock Fund.
7. RELATED PARTY TRANSACTIONS
Certain Plan investments are mutual funds managed by affiliates of the Plan
trustee, which qualify as party-in-interest transactions. All purchases and
sales of these funds are open market transactions at fair market value. Such
transactions are permitted under the provisions of the Plan and are exempt from
the prohibition of party-in-interest transactions under ERISA and applicable
exemptions promulgated thereunder.
9
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LORAL SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY CURRENT
LESSOR OR SIMILAR PARTY DATE, RATE OF INTEREST, COLLATERAL, PAR OR MATURITY VALUE COST VALUE
(a) (b) (c) (d) (e)
--- ---------------------------- --------------------------------------------------------- -------- --------
<C> <S> <C> <C> <C>
* Loral Stock Fund Common Stock $105,262 $149,139
Ford Stock Fund Common Stock 11,418 32,826
Associates Stock Fund Common Stock 5,488 8,587
* Globalstar Stock Fund Common Stock 1,134 2,310
* Fidelity Management Trust
Company Blue Chip Growth Fund 80,943
Growth & Income Fund 37,188
Asset Manager 6,245
Magellan Fund 26,730
Overseas Fund 7,114
Retirement Money Market Portfolio 43,438
Intermediate Bond Fund 4,162
Managed Income Portfolio II 18,603
Puritan Fund 445
Spartan U.S. Equity Index 4,387
Morgan Stanley-Dean Witter Global Equity Portfolio Class B 237
PIMCO Total Return Fund 551
Capital Appreciation Fund 198
Mid Cap Growth Fund 161
High Yield Fund 417
* Participant Loans Interest rates ranging from 6% to 10 1/2% 5,443
--------
$429,124
========
</TABLE>
---------------
* Party-in-interest
10
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LORAL SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION OF ASSET
IDENTITY OF (INCLUDE INTEREST RATE AND TOTAL NUMBER TOTAL NUMBER TOTAL VALUE TOTAL VALUE NET GAIN
PARTY INVOLVED MATURITY IN CASE OF LOAN) OF PURCHASES OF SALES OF PURCHASES OF SALES OR LOSS
(a) (b) (c) (d) (e) (f) (g)
------------------- -------------------------- ------------ ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
None
</TABLE>
---------------
* Party-in-interest
11
