LORAL CORP /NY/, 10-K, 1994-05-13

LORAL CORP /NY/
10-K, 1994-05-13
SEARCH, DETECTION, NAVAGATION, GUIDANCE, AERONAUTICAL SYS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1994

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Commission file number 1-4238

LORAL CORPORATION

600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105

State of incorporation: New York

IRS identification number: 13-1718360

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

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, $.25 par value...................................... New York Stock Exchange
7% Senior Debentures.............................................. New York Stock Exchange
8 3/8% Senior Debentures.......................................... New York Stock Exchange
</TABLE>

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

9 1/8% Senior Debentures

The registrant 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 and
has been subject to such filing requirements for the past 90 days.

No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.

As of April 29, 1994, 83,402,000 common shares were outstanding, and the
aggregate market value of such shares (based upon the closing price on the New
York Stock Exchange) held by non-affiliates of the registrant was approximately
$2,997,000,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's 1994 definitive proxy statement are
incorporated by reference into Part III.
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PART I

ITEM 1. BUSINESS

GENERAL DESCRIPTION OF BUSINESS

Loral Corporation (the "Company" or "Loral") was incorporated in New York
in 1948. Through its subsidiaries and divisions, the Company is a leading
supplier of defense electronics systems, components and services to U.S. and
allied defense departments. The Company's principal business areas are:
electronic combat; training and simulation; command, control, communications and
intelligence ("C3I")/reconnaissance; tactical weapons; systems integration; and
space systems. The Company has achieved an incumbent position on a wide range of
existing programs through internal growth and development and a series of
acquisitions focused on its core technologies. Loral's business strategy is to
emphasize upgrades of existing weapons systems, concentrate on further
developing its core of advanced technologies, generate an increasing proportion
of its sales from foreign customers and selectively extend the Company's
proprietary technologies into non-military applications, such as systems
integration, satellite-based telecommunications, medical diagnostic imaging
systems, network management, data archiving, and information systems and
services.

Effective January 1, 1994, Loral acquired Federal Systems Company, a
division of International Business Machines Corporation, for $1,503,500,000 in
cash, not including acquisition costs. Federal Systems is a leading systems
integrator and supplier of advanced information technology products and services
to defense and non-defense agencies worldwide.

BUSINESS SEGMENTS

The Company operates primarily in one industry segment, defense
electronics.

PRODUCTS

Electronic Combat

Loral is a leading producer of systems that detect, jam and deceive hostile
radars and radar and infrared guided weapons and detect and analyze surface and
submarine threats. Loral's electronic combat systems are used in the protection
of U.S. and allied aircraft and antisubmarine warfare, antisurface warfare,
airborne early warning, and for electronic support measures.

Loral manufactures the ALR-56 family of advanced, programmable radar
warning systems. The ALR-56C and ALR-56M are utilized aboard U.S. Air Force and
allied F-15 and F-16 jet fighter aircraft, respectively. Loral has sold its
Rapport II and III (ALQ-178) fully integrated airborne radar warning and
electronic jamming systems to Israel, Belgium and Turkey for the F-16, and has
developed an advanced version called the ALQ-202.

Loral supplies the Forward-Looking Infrared (FLIR) targeting and weapon
delivery pod aboard U.S. and allied F/A-18 strike jets. This system permits
aircrews to deliver smart weapons to selectively identified high value targets
through laser rangers and target designators.

Loral is the prime contractor for the U.S. Navy's LAMPS MK III helicopter
for antisubmarine warfare, antisurface warfare and airborne early warning, and
for a similar system, the EH101/Merlin, for the United Kingdom's Ministry of
Defence. The Company also produces the Electronic Support Measures system for
the U.S. Air Force's B-2 stealth bomber; a day/night adverse weather missions
system for the MC-130H Combat Talon II aircraft; and the central computer for
the F-15.

Loral's AAR-47 uses infrared sensing technologies to warn U.S. Navy and
Marine helicopters of hostile missile threats. Loral's ALQ-157, Matador and
Challenger infrared countermeasures systems emit infrared energy pulses that
counter heat-seeking missiles by directing them away from aircraft, naval
vessels and

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armored ground vehicles. Loral also produces antenna assemblies and systems for
airborne warning aboard tactical aircraft, such as the E-2C.

Training and Simulation

Loral's training systems provide simulated, realistic battlefield
environments that assist air, land and sea forces in achieving and maintaining
combat readiness as well as aiding in the establishment and validation of
requirements for new systems and upgrades. Loral produces a variety of
simulators, including weapons systems simulators, virtual reality simulators,
and distributed interactive simulators.

Loral's operational flight and weapons systems trainers simulate F-15 and
F-15E jet aircraft avionics under combat conditions. Loral is also developing a
comprehensive family of weapons systems trainers, courseware and mission
rehearsal devices for the Special Operations Forces Aircrew Training System
(SOF-ATS). The Company has a contract to assess pilot training requirements for
the U.S. Air Force's new F-22 fighter. Loral is developing full mission
simulators that combine flight weapon systems and mission training for Sweden's
JAS-39 multi-role combat aircraft.

Loral's Multiple Integrated Laser Engagement System (MILES) is at the
forefront of a family of laser-based training systems, including the
Air-to-Ground Engagement System (AGES), the Precision Gunnery Training System
(PGTS), Simulated Area Weapons Effect (SAWE), Precision Range Integrated
Maneuver Exercise (PRIME) and Mobile Automated Instrumentation Suite (MAIS).
These systems are used to train and evaluate ground combat troops and military
equipment. The equipment simulates the effect of weapons fire through eye-safe,
encoded laser beams. Detector cells and electronic decoding systems replicate
target vulnerability. Data is transmitted to a central station to allow review
of combat performance.

Loral is a principal developer of netted simulators for the U.S. Army.
Loral operates and maintains simulator networks for ground vehicle and airborne
platform training at Fort Knox and Fort Rucker under the Army's Advanced
Distributed Simulation Technology Program. These simulators are linked to each
other and to combat training ranges including ranges operated by the Company.

Loral's Close Combat Tactical Trainer (CCTT) provides the U.S. Army with a
computer-based trainer that simulates vehicles, weapon systems and dismounted
infantry in a virtual battlefield environment. The Company is prime contractor
for the MATBAT tank gunnery training system to provide realistic battlefield
conditions for the Israeli Defense Forces.

Loral has developed for the U.S. Navy a laser-guided training round, which
simulates the operation of the Paveway II bomb, providing live-fire training for
A-6 and F/A-18 aircrews at one-fifth the cost of an actual round.

Loral operates and maintains the U.S. Navy's and Air Force's primary pilot
training ranges and electronic warfare ranges, provides instructors for
classroom training, and supplies sophisticated avionics and undersea simulators.
Loral's Simulator Device Development Support program is upgrading electronic
warfare simulators at the Naval Weapons Center at China Lake.

Command, Control, Communications and Intelligence/Reconnaissance

Loral offers systems integration, operations management and engineering
services, post-deployment systems support, military satellite communication
terminals, information processing and display hardware, information management
software, secure tactical communications instruments and telemetry equipment to
address a broad spectrum of strategic and tactical C3I requirements.

Loral is the principal technical support contractor for the Space Defense
Operations Center at Cheyenne Mountain for the U.S. Space Command, which
monitors orbiting space systems to alert the U.S. and its allies to potential
attack. Loral is producing the Rapid Execution and Combat Targeting system,
which is modernizing the Minuteman missile launch control centers. Loral is also
providing engineering support, systems integration, and operations and
maintenance for the worldwide Air Force Satellite Control Network. Loral is
developing the communications element of the All-Source Analysis System, a
tactical intelligence

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fusion system that will receive, process and display battlefield information to
tactical commanders on a near real-time basis.

Loral provides hardware support, software maintenance, sustaining
engineering and on-site operational services in support of the U.S. Air Force's
Global Positioning System. Loral is also responsible for system development,
software maintenance, and engineering support for the U.S. Air Force's fixed and
mobile Launch Detection System.

Loral produces mil-spec and ruggedized general-purpose computers and
processors used in military systems, such as ground-launched and sea-launched
cruise missiles, the Trident AFLOAT System and the MILSTAR communications
programs. Loral also produces the Associative Processor (ASPRO), a parallel
processing computer for command and control aboard the E-2C aircraft and for
over-the-horizon targeting by U.S. submarines. Loral supplies antisubmarine
warfare and combat control systems for submarines and surface ships, including
the AN/BSY-1 combat system for the U.S. Navy's SSN 688 class attack submarines
and portions of the AN/BSY-2 combat control system for the Navy's SSN-21 attack
submarines, the Combat Control System MK3 for the Royal Australian Navy's Type
471 SSK submarines, and elements of the SQQ-89 surface ship ASW combat control
system.

Loral's information and graphics display systems provide interactive access
to real-time information on ground and shipboard platforms as well as aircraft,
such as the E-2C, P-3C, S-3, F-14 and other U.S. Navy aircraft. Loral's EMR and
instrumentation telemetry systems include airborne transmitters, receivers, data
links, transponders and signal encoders, which are used in tracking, ranging,
data acquisition and command and control for operations of space vehicles and
missiles. Loral's instrumentation products, primarily the System 500, provide
high-speed real-time processing in testing and analyzing data from advanced
avionics as well as from missile and satellite sources.

Loral's reconnaissance systems utilize advanced electronic imaging,
communications and information processing technologies to provide integrated
tactical battlefield information and navigation and targeting capability in
airborne platforms for the U.S. Air Force, Navy and Marines. Loral employs
mercury cadmium telluride, platinum silicide and charge-coupled device
technologies required for the infrared ("IR") and electro optical ("EO") focal
plane arrays that are at the heart of night vision and all-weather cameras.
Loral's sensing and imaging products are a major component of the Advanced
Tactical Air Reconnaissance System (ATARS), the Long-Range Oblique Photography
System (LOROPS), the F-3050 tactical reconnaissance pod and a tactical
reconnaissance system for German Tornado aircraft.

Loral also manufactures and sells commercial data and voice recorders, the
indestructible "black boxes" mandated by the FAA for commercial and general
aviation aircraft.

Loral is producing the Medical Diagnostic Imaging System which extends the
Company's high-volume data storage and retrieval technologies into the medical
marketplace for DoD, VA and commercial hospitals.

Tactical Weapons

Loral produces the Multiple Launch Rocket System (MLRS) for the U. S. Army.
This weapon system spreads submunitions over a one kilometer area and was used
extensively in Operation Desert Storm. Loral also produces the Army Tactical
Missile System (ATACMS). Fired from the MLRS launcher, ATACMS provides a long
range tactical missile. Loral will also test a long-range ship-fired version of
ATACMS so the U.S. Navy can evaluate the missile for fire support missions. MLRS
has substantial international markets, and has been purchased by France,
Germany, the United Kingdom, Italy, the Netherlands, Turkey, Bahrain and Japan.
The Company also expects an international market for ATACMS.

Loral has developed the Extended Range Intercepter missile (ERINT), a
kinetic energy, high-altitude anti-missile missile that destroys its target
through force of impact without explosives. The system has been selected by the
U.S. Army for its PAC-3 Theater Missile Defense upgrade of the Patriot Missile
System. Loral is also developing the LOSAT missile, a low-cost kinetic energy
antitank missile.

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Loral's EO and IR sensors, processing technologies and advanced algorithms
are employed in a wide range of tactical weapons and weapons guidance systems.
Loral's IR sensors have been selected for the Theater High-Altitude Area Defense
(THAAD) anti-tactical missile detection and interception system.

Loral's guidance programs include the Digital Scene Matching Area
Correlation (DSMAC) system, which permits Tomahawk cruise missiles to direct
themselves for long distances over enemy terrain, complete missile guidance
control units for air-defense systems and gyro-optic assemblies for thermal
imaging missiles, and air-to-ground weapons. Loral is also a prime contractor
for sales to certain U.S. allies of the Chaparral air-defense system, for which
it manufactures the entire missile and fire control system. Loral also produces
the Sidewinder air-to-air missile; the AIM 9M and the AIM 9P.

Loral is under contract from the U. S. Marine Corps to develop a
short-range antitank weapon, the Predator, which is a man-portable
fire-and-forget weapon system. The Company's Vertical Launch Antisubmarine
Rocket (VLA) is in production for the U. S. Navy and Japan.

Systems Integration

Loral is a leading provider of systems integration services focused on
integrating complex hardware and software systems. Loral serves the U.S.
Department of Defense and a broad range of federal and foreign government
organizations, including the Federal Aviation Administration, the U.S.
Department of Justice, the Internal Revenue Service, the U.S. Postal Service and
the United Kingdom's Civil Aviation Authority.

Among Loral's programs are the Advanced Automation System, the
next-generation air traffic control system for the Federal Aviation
Administration (see Note 8 to Consolidated Financial Statements), and the United
Kingdom's New En Route Centre air traffic control system. Loral is also under
contract to produce a number of systems for non-DoD government agencies,
including the Document Processing System that will image and store tax returns
and correspondence for the Internal Revenue Service, a bar code-based mail
sorting system for the U.S. Postal Service, network and database systems for the
administrative offices of the U.S. Courts and an image processing system for the
U.S. Environmental Protection Agency to allow its regional offices across the
country to convert paper documents into digitized data stored on optical disks.

Loral has developed systems for managing and tracking the nationwide real
estate inventory of the Resolution Trust Corporation (RTC) and is currently
supporting RTC's wide area networks and telecommunications efforts. Loral is the
prime contractor for the U.S. Army's Sustaining Base Information Services
program, which is a comprehensive information support system that will be used
for all Army base management information and administrative processing. This
includes personnel management, payroll, financial accounting and control,
authorization documentation, supply and services and medical records management.

Space Systems

Loral and Space Systems/Loral, Inc. ("SS/L"), an unconsolidated affiliate,
both participate in various aspects of space technology and systems. Loral
provides engineering services supporting mission control systems for both manned
and unmanned space flight and develops and manufactures scientific instruments,
sensors, cameras and power systems for space systems applications. SS/L produces
geosynchronous satellites and subsystems for telecommunications and earth
sensing and is the prime contractor for the Globalstar low-earth-orbit mobile
telecommunications system.

Loral designs, develops and integrates systems for the Space Shuttle's on
board hardware and flight control software. Loral also provides systems
engineering, safety engineering, reliability and engineering support to Johnson
Space Center, and is modernizing its Mission Systems Control in support of
manned space missions, including the Space Shuttle.

In space science, Loral is developing the Atmospheric Infrared Sounder
(AIRS), a scientific instrument that will fly on NASA's Earth Observing System
platform in the next century. At NASA's Goddard Space Flight Center, Loral is
developing the computer system to store, archive and distribute data collected
from the EOSDIS system.

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SS/L designs and fabricates geostationary and low-earth-orbiting satellites
for space communications and remote earth sensing. SS/L's INTELSAT VII satellite
will carry international telephone traffic for the International
Telecommunications Satellite consortium. The first of a series of nine
satellites was launched in October, 1993. SS/L is the prime contractor for a
series of Geostationary Operational Environmental Satellites (GOES), which are
being built to conduct imaging of clouds and the earth's surface and sounding of
water vapor fields, and to monitor the space environment, collect data from
terrestrial sensors and relay aircraft and maritime distress signals. The first
GOES satellite was launched in April 1994. SS/L has supplied Japan's Space
Communications Corporation with the Superbird communications satellites, and is
building two N-STAR satellites for Nippon Telegraph and Telephone of Japan. SS/L
also has a contract to supply two direct-to-home broadcast television satellites
to TEMPO, a subsidiary of Tele-Communications, Inc.

Loral has contracts to supply video systems and provide systems engineering
and integration for Space Station Freedom, and SS/L has contracts to supply
subsystems and components, including power systems, for Space Station Freedom.

Loral is the managing general partner of Globalstar L.P., an international
venture formed to design and operate a global satellite communications system in
conjunction with the following strategic partners, who have collectively
committed to invest $275 million of initial equity capital toward a total $1.8
billion funding requirement: Alcatel N.V.; Alenia Spazio, S.p.A.; DACOM
Corporation; Hyundai Electronics Industries Company; QUALCOMM Incorporated;
Vodafone Group; and AirTouch Communications (formerly PacTel). Globalstar will
deploy and operate a worldwide, low-earth-orbit mobile satellite-based
communications system using CDMA technology. The system, employing a
constellation of 48 satellites, subject to receiving local licensing authority
such as is pending before the Federal Communications Commission, is expected to
be operational in 1998 and will offer low-cost worldwide digital wireless
telecommunications services, including voice, data, paging, facsimile and
geolocation services, to telephones and data terminals in areas currently not
served or underserved by existing telecommunications systems. The system will
allow existing cellular carriers to extend and enhance their provision of
telecommunications services to new and current users.

CUSTOMERS

Substantially all of the Company's products are sold to agencies of the
United States Government, primarily the Department of Defense, to foreign
government agencies or to prime contractors or subcontractors thereof. In fiscal
1994, approximately 90% of the Company's sales was derived directly or
indirectly from defense contracts for end use by the United States and foreign
governments. Sales to domestic customers represented 86% of total revenue in
fiscal 1994 and 1993. Sales to the U.S. Army, Air Force and Navy accounted for
23%, 18% and 11%, respectively, of the Company's consolidated sales for fiscal
1994, and 21%, 22% and 9%, respectively, for fiscal 1993. The majority of the
Company's remaining domestic sales were to prime contractors for end use by the
U.S. Government and other U.S. Government agencies.

For information concerning international programs and sales to foreign
governments, see Foreign Sales below.

BACKLOG

Backlog at March 31, 1994, was approximately $6.5 billion, compared with
$3.9 billion at March 31, 1993. Approximately 55% of the backlog at March 31,
1994, is expected to be shipped during fiscal 1995.

Of the backlog at March 31, 1994, approximately $3.5 billion was directly
or indirectly for defense contracts for end use by the U.S. Government and an
additional $530 million for contracts to other U.S. Government agencies. Backlog
for the U.S. Army, Air Force and Navy accounted for 17%, 13% and 9%,
respectively, of total backlog at March 31, 1994.

Approximately $2.5 billion of the backlog consisted of orders by foreign
governments and contractors, primarily for defense contracts in various allied
nations, representing 38% of total backlog at March 31, 1994.

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COMPETITION

The Company faces intense competition in all its product areas. A number of
the Company's competitors are, or are controlled by, companies that are larger
and have greater financial resources than the Company.

The Company's position depends largely upon the quality, design and pricing
of its products and services and the timeliness of deliveries. The Company must
design products that meet or exceed rigid specifications and that are subjected
to stringent testing procedures. A substantial portion of the Company's business
is obtained through the submission of competitive proposals.

GOVERNMENT CONTRACTS

The Company's government contracts are normally for production, service or
development. Such contracts are typically of the fixed-price or cost-type
variety. Development contracts historically have been less profitable than
production contracts, and the Company has at times experienced cost overruns on
them.

Fixed-price contracts may provide for a firm fixed-price or they may be
fixed-price incentive contracts. Under the firm fixed-price contracts, the
Company agrees to perform for an agreed price and, accordingly, derives benefits
from cost savings, but bears the entire risk of cost overruns. Under the
fixed-price incentive contract, if actual costs incurred are less than estimated
costs for the contract, the savings are apportioned between the Government and
the Company. However, if actual costs under such a contract exceed estimated
costs, excess costs are apportioned between the Government and the Company up to
a ceiling. The Company bears all costs that exceed the ceiling. Some firm
fixed-price contracts and fixed-price incentive contracts also provide for price
adjustments in the event inflation differs from specified measurement indices,
or in the event performance exceeds specified objectives or schedules.

Some cost-type contracts provide for reimbursement of the Company's actual
costs, to the extent such costs are allowable, and additional compensation in
the form of a fixed, incentive or award fee. Under cost-sharing contracts, costs
are apportioned between the Government and the Company according to an agreed
formula. Cost-type contracts contain cost ceilings and the Company is not
obligated to incur costs in excess of such ceilings.

All domestic defense contracts and subcontracts to which the Company is a
party are subject to audit, various cost controls and standard provisions for
termination at the convenience of the Government. Multi-year Government
contracts and related orders are subject to cancellation if funds for contract
performance for any subsequent year become unavailable. Upon termination other
than for a contractor's default, the contractor is normally entitled to
reimbursement for allowable costs, but not necessarily all costs, and to an
allowance for the proportionate share of fees or earnings for the work
completed. Foreign defense contracts generally contain comparable provisions
relating to termination for the convenience of the government.

Companies engaged primarily in supplying defense-related equipment to the
Government are subject to certain business risks peculiar to the defense
industry. These risks include the ability of the Government to unilaterally
suspend the Company from receiving new contracts pending resolution of alleged
violations of procurement laws or regulations.

In addition, all defense businesses are subject to risks associated with
dependence on Government appropriations, changes in Government procurement
policies, obtaining required Government export licenses for international sales,
uncertain cost factors related to technologically scarce skills and exotic
components, the frequent need to bid on programs in advance of design completion
(which may result in unforeseen technological difficulties and, or cost
overruns), design complexity and rapid obsolescence, and the constant necessity
for design improvement.

United States Government expenditures for defense products are likely to
continue to decline. These reductions may or may not have an effect on the
Company's programs; however, in the event expenditures for products of the type
manufactured by the Company are reduced, and not offset by greater foreign sales
or other new programs or products, or acquisitions, there will be a reduction in
the volume of contracts or

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subcontracts awarded to the Company. Such reductions unless offset will have an
adverse effect upon the Company's earnings.

PATENTS AND LICENSES

Although the Company owns some patents and has filed applications for
additional patents, it does not believe that its operations depend upon its
patents. In addition, the Company's U.S. Government contracts generally license
it to use patents owned by others. Similar provisions in the U.S. Government
contracts awarded to other companies make it impossible for the Company to
prevent the use by other companies of its patents in most domestic defense work.

RESEARCH AND DEVELOPMENT

The Company employs scientific, engineering and other personnel to improve
its existing product lines and to develop new products and technologies in the
same or related fields. The largest portion of this work is performed under
specific U.S. Government contracts. At March 31, 1994, the Company employed
approximately 10,800 engineers (of whom 2,750 held advanced degrees), of which
approximately 1,230 (including 360 holding advanced degrees) devote all or part
of their effort to Company-sponsored research projects.

The amounts of research and development performed under customer-funded
contracts and Company-sponsored research projects, including bid and proposal
costs, for the three most recent fiscal years were as follows:

<TABLE>
<CAPTION>
CUSTOMER- COMPANY-
FUNDED SPONSORED TOTAL
--------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1994.............................................. $ 843,964 $172,604 $1,016,568
1993.............................................. 488,450 124,718 613,168
1992.............................................. 326,626 122,903 449,529
</TABLE>

PERSONNEL

At March 31, 1994, the Company employed approximately 32,600 persons. A
significant part of its operations is dependent upon professional, technical and
engineering personnel whose tenure is not generally secured by employment
contracts. The Company has agreements with labor organizations representing
certain hourly employees.

FOREIGN SALES

Loral products currently sold in the international marketplace include the
ALQ-178 Rapport, ALR-56C, ALR-56M, FLIR targeting and weapon delivery system for
the F/A-18 strike jet, EH 101/Merlin, AAR-47, Challenger, Matador, E-2C
displays, shipboard chaff and flare countermeasures, Romeo submarine sonar,
Multiple Launch Rocket System, Vertical Launch Antisubmarine Rocket, guidance
control systems for the Sidewinder missile, Chaparral air-defense system, F-3050
tactical reconnaissance pod, JAS-39 full mission simulator, MILES, TCM-620
tactical communications system and air traffic control systems. Through SS/L,
Loral is also supplying the INTELSAT VII, Superbird and N-Star satellites for
the international marketplace. Certain other Loral programs have export
potential, including ATACMS, the ASPRO computer, tactical displays, LOROPS and
AIRS.

Foreign sales accounted for approximately 14% of the Company's sales in
fiscal 1994 and 1993. Foreign sales and income are subject to changes in United
States and foreign government policies, regulations, embargoes and international
hostilities. Foreign sales generally require export licenses granted on a
case-by-case basis by the United States Department of State. The exchange risk
inherent in foreign contracts not denominated in U.S. dollars is mitigated by
currency hedging where deemed appropriate.

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Foreign sales comprise the following:

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Export sales:
Asia............................................. $227,312 $190,125 $151,435
Europe........................................... 106,546 128,707 148,295
Middle East...................................... 91,049 119,401 213,473
Other............................................ 28,289 26,733 75,831
-------- -------- --------
453,196 464,966 589,034
Foreign operations, principally Europe............. 111,416 12,535 5,779
-------- -------- --------
Total foreign sales................................ $564,612 $477,501 $594,813
-------- -------- --------
-------- -------- --------
</TABLE>

ITEM 2. PROPERTIES

The Company operates in a number of plants and office facilities in the
United States and abroad.

At March 31, 1994, the Company's manufacturing, engineering, research,
administrative, warehousing and sales facilities aggregated approximately 21.4
million square feet, of which 51% is owned and 49% is leased. Substantially all
the Company's facilities are located in the United States. Management believes
the Company's facilities are adequate for its current level of business.

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in a number of lawsuits or claims incidental to
its business including those related to environmental issues (see Note 8 to
Consolidated Financial Statements). In the opinion of management, the ultimate
liability on these matters, if any, will not have a material adverse effect on
the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

(a) MARKET PRICE AND DIVIDEND INFORMATION

The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol LOR. The following table sets forth the high and low
sales prices per share as reported on the NYSE Composite Tape, and the dividends
paid per share during those periods.

<TABLE>
<CAPTION>
DIVIDENDS
---------
PER
---
MARKET PRICE* SHARE*
-------------------- -------
HIGH LOW
------- -------
<S> <C> <C> <C>
FISCAL 1994 QUARTER ENDED
June 30............................................. $30 1/4 $25 7/16 $.125
September 30........................................ 32 3/4 29 .14
December 31......................................... 38 3/4 29 .14
March 31............................................ 42 3/4 35 7/8 .14
FISCAL 1993 QUARTER ENDED
June 30............................................. $17 13/16 $15 3/8 $.12
September 30........................................ 20 15 7/8 .125
December 31......................................... 23 11/16 18 5/16 .125
March 31............................................ 28 13/16 22 1/4 .125
</TABLE>

- - - ---------------
* Adjusted to reflect two-for-one stock split distributed on October 7, 1993.

(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK

As of April 29, 1994, there were approximately 4,500 holders of record of
the Company's common stock.

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<PAGE> 11

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data has been derived from, and should be read in
conjunction with, the related Consolidated Financial Statements.

<TABLE>
<CAPTION>
1994(A) 1993(B) 1992 1991(C) 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AND RATIO AMOUNTS)
OPERATING DATA:
Sales........................................ $4,008.7 $3,335.4 $2,881.8 $2,126.8 $1,274.3
Operating income............................. 401.4 296.3 292.2 215.5 148.7
Income from continuing operations before
extraordinary item and cumulative effect
of changes in accounting.................. 228.3 159.1 121.8 90.4 77.5
Net income (loss)............................ 228.3 (92.1) 121.8 90.4 78.2
Earnings per share (primary)(d):
Income from continuing operations before
extraordinary item and cumulative effect
of changes in accounting................ 2.72 2.06 2.00 1.78 1.54
Net income (loss)......................... 2.72 (1.20) 2.00 1.78 1.55
Weighted average shares
outstanding (primary)(d).................. 83.9 77.0 61.0 50.9 50.4
Ratio of earnings to fixed charges
(Unaudited)............................... 6.42x 4.74x 4.22x 3.30x 3.49x
CASH FLOW DATA:
Cash dividends paid per common share(d)...... $ .545 $ .495 $ .47 $ .43 $ .39
Depreciation and amortization................ 178.2 154.0 128.6 104.6 78.7
Capital expenditures, net.................... 96.5 89.0 74.1 86.1 59.5
BALANCE SHEET DATA:
Total assets................................. $5,176.2 $3,228.1 $2,685.5 $2,532.2 $1,544.8
Working capital.............................. 554.4 610.5 630.0 457.7 312.6
Total debt................................... 1,798.0 534.0 577.4 821.2 437.6
Shareholders' equity......................... 1,381.3 1,187.9 997.3 672.0 584.5
Book value per common share(d)............... $16.60 $14.44 $15.72 $13.14 $11.65
</TABLE>

- - - ---------------
(a) Reflects the acquisition of Federal Systems Company effective January 1,
1994, which had substantial effect on the balance sheet data in 1994.

(b) Reflects (i) the acquisition of the missile business of LTV Aerospace and
Defense Company effective August 31, 1992 and (ii) the acquisition of the
minority partners' equity interest in Loral Aerospace Holdings, Inc.
("LAH"), effective June 1, 1992, through the issuance of 12,313,810 shares
of the Company's common stock and 627.3 shares of Series S Preferred Stock
of LAH.

Effective April 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106") and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Prior years'
results have not been restated to reflect these accounting changes.

Net income (loss) includes (i) a non-operating extraordinary charge (loss
on extinguishment of debt) of $28.2 million pre-tax, $17.8 after-tax, or
$.23 per share, and (ii) a non-recurring charge of $330.5 million pre-tax,
$233.4 million after-tax, or $3.03 per share, as the cumulative effect of
the accounting change for SFAS 106.

(c) Reflects the acquisition of Ford Aerospace Corporation effective October 1,
1990, which had substantial effect on the operating and balance sheet data
in 1991.

(d) Adjusted to reflect two-for-one stock split distributed October 7, 1993.

See Management's Discussion and Analysis of Results of Operations and Financial
Condition and Notes to Consolidated Financial Statements.

10
<PAGE> 12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

BUSINESS ENVIRONMENT

Loral's core business areas are electronic combat, training and simulation,
C3I/reconnaissance, tactical weapons, systems integration and space systems. The
U.S. defense budget has been declining in real terms since the mid 1980s,
resulting in program delays, cancellations and scope reductions for defense
contractors generally. The U.S. defense budget for 1995 will again likely show a
decline versus the previous year. Loral's business areas focus primarily on U.S.
and allied essential defense requirements. Management believes that to the
extent a higher proportion of available funds will be allocated to the
improvement of existing weapons systems and electronics on military platforms,
rather than to new program starts, Loral is likely to benefit from its
substantial incumbency in existing weapons systems and its experience in systems
upgrades. Loral also believes its range of programs and systems are well suited
for, and provide growth opportunities in, the international market place. In
addition, Loral has a diverse base of programs, none of which is expected to
account for more than 7% of fiscal 1995 revenues. In light of these factors,
management believes Loral's program base is more resistant to declining U.S.
defense spending than other contractors with significant dependence on new
program starts or a less diverse program base.

In addition, the areas of the Company's expertise provide opportunities to
selectively apply the Company's proprietary technologies to non-military
applications; primary examples include systems integration programs for civilian
agencies such as the FAA, the U.S. Postal Service and the U.S. Treasury
Department and satellite based systems, particularly Globalstar, a
low-earth-orbit mobile telecommunications system.

RESULTS OF OPERATIONS

In fiscal 1993 and 1994, major acquisitions made by the Company
significantly affected results of operations. The acquisitions have been
accounted for as purchases and, as such, the results of operations are included
from the respective effective dates of acquisitions. (See Note 2 to Consolidated
Financial Statements.)

Effective January 1, 1994, the Company, through Loral Federal Systems
Company ("LFS"), acquired substantially all the assets and liabilities of the
Federal Systems Company, a division of International Business Machines
Corporation. LFS, headquartered in Bethesda, Maryland, is a leading systems
integrator and supplier of advanced information technology products and services
to defense and non-defense agencies worldwide and employs about 10,000 people.
Historical operating results of Federal Systems Company for its fiscal year
ended December 31, 1993 include sales of $2.292 billion, operating income of
$117.5 million and funded backlog at December 31, 1993 of $3.215 billion.

On August 31, 1992, the Company, through Loral Vought Systems Corporation
("LVS"), acquired the missile business of LTV Aerospace and Defense Company.
LVS, headquartered in Dallas, Texas, designs and manufactures missile systems
primarily for the U.S. Army and employs about 4,000 people. Historical operating
results of the missile business for its fiscal year ended December 31, 1991
include sales of $750.1 million, operating income of $36.2 million and acquired
funded backlog at August 31, 1992 of $1.134 billion.

On October 7, 1993, the Company completed a two-for-one stock split in the
form of a 100% stock distribution payable to stockholders of record on September
28, 1993. Accordingly, all share and per share amounts have been adjusted to
reflect the stock split. (See Note 7 to Consolidated Financial Statements.)

Effective April 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106"). (See Note 9 to Consolidated Financial
Statements.) The results of operations for the fiscal year ended March 31, 1992
have not been restated to reflect this accounting change.

11
<PAGE> 13

FISCAL YEAR ENDED MARCH 31, 1994 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1993

During fiscal 1994, sales increased to $4.009 billion from $3.335 billion
the prior year. Income increased to $228.3 million, or $2.72 per share, compared
with $159.1 million, or $2.06 per share in the prior year, before an
extraordinary item and the cumulative effect of adopting SFAS 106.

Earnings per share for fiscal 1994 is based on 83.9 million primary
weighted average shares outstanding, compared with 77.0 million in the prior
year.

The sales increase was attributable to the results of the acquired LFS and
LVS businesses from their respective dates of acquisition. Sales also include
higher volume on Vertical Launch Antisubmarine Rocket (VLA) and ALR-56M radar
warning systems; offset by lower volume on Simulated Area Weapons Effect (SAWE)
training system, Sidewinder air-to-air missiles, ALQ-178 radar warning and
electronic countermeasures systems for foreign F-16 aircraft and AN/BSY-2 combat
control system for the U.S. Navy's SSN-21 attack submarine.

Operating income increased to $401.4 million from $296.3 million in the
prior year. Operating income as a percentage of sales increased to 10.0% in
fiscal 1994 from 8.9% in fiscal 1993, due primarily to net improved margins of
the acquired LVS business, the full-year impact of lower pension costs resulting
from acquired pension plans and lower postretirement health care and life
insurance costs due to various plan amendments (see Note 9 to Consolidated
Financial Statements), offset by lower margins of the acquired LFS business.
Excluding the effect of the acquisitions of LFS and LVS, operating income, as a
percentage of sales increased to 9.6% in fiscal 1994 from 9.2% in fiscal 1993.

After the full-year impact of debt incurred as a result of the acquisition
of LVS and interest expense from the effective date of acquisition of LFS, net
interest expense decreased by $1.7 million from the prior year, due primarily to
the benefits from continued strong cash flow and lower overall interest costs as
a result of a series of debt reshaping steps in the second half of last year.
The Company's free cash flow (net cash from operating activities, less net
capital expenditures, plus proceeds of stock purchases by employee benefit plans
and exercises of stock options) was $284.3 million and $221.8 million in 1994
and 1993, respectively.

On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was
signed into law, including a provision that increased the Federal corporate
income tax rate by 1%, to 35%, effective January 1, 1993. This increase was
partially offset by the benefit resulting from revaluing deferred tax assets at
the higher rate. As a result the Company's effective tax rate increased to 37.3%
from 37% in the prior year. (See Note 6 to Consolidated Financial Statements.)

The minority interest charge was eliminated due to the Company's
acquisition, effective June 1, 1992, of the minority partners' interest in Loral
Aerospace Holdings, Inc. ("LAH"). (See Note 2 to Consolidated Financial
Statements.)

FISCAL YEAR ENDED MARCH 31, 1993 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1992

During fiscal 1993, sales increased to $3.335 billion from $2.882 billion
the prior year. Income, before extraordinary item and the cumulative effect of
adopting SFAS 106, increased to $159.1 million, or $2.06 per share, compared
with $121.8 million, or $2.00 per share, in the prior year.

Earnings per share for fiscal 1993 is based on 77.0 million primary
weighted average shares outstanding, compared with 61.0 million in the prior
year.

The sales increase was attributable to the results of the acquired LVS
business from the effective date of acquisition. Sales also include higher
volume on Simulated Area Weapons Effect (SAWE) training system, sonar systems
for Romeo class submarines, Rapid Execution and Combat Targeting (REACT) launch
control system, Vertical Launch Antisubmarine Rocket (VLA) and AN/BSY-2 combat
control system for the U.S. Navy's SSN-21 attack submarine; offset by lower
volume on F/A-18 Forward-Looking Infrared (FLIR) targeting and weapon delivery
system, Chaparral air-defense systems, ALQ-178 radar warning and electronic
countermeasures systems for foreign F-16 aircraft, Mk-48 antisubmarine
torpedoes, Automated Remote Tracking Station (ARTS) and Mk-30/Ex-30
antisubmarine training targets.

12
<PAGE> 14

Operating income increased to $296.3 million from $292.2 million in the
prior year. Operating income as a percentage of sales declined from 10.1% in
fiscal 1992 to 8.9% in fiscal 1993, due primarily to the current year effect of
adopting SFAS 106 and lower margins of the acquired LVS business, partially
offset by lower pension costs recorded in fiscal 1993 resulting from acquired
pension plans. (See Note 9 to Consolidated Financial Statements.) Excluding the
current year effect of adopting SFAS 106 and the effect of the acquisition of
LVS, operating income as a percentage of sales increased to 10.3% in fiscal 1993
from 10.1% in fiscal 1992.

Net interest expense decreased by $10.5 million from the prior year, due
primarily to the full-year effect of the long-term debt repayments from the
proceeds of the common stock issued in June 1991, strong cash flow and lower
overall interest costs due to lower market interest rates and a series of debt
reshaping steps, offset by the impact of debt incurred as a result of the
acquisition of LVS. The Company's free cash flow was $221.8 million and $187.3
million in 1993 and 1992, respectively.

The minority interest charge was reduced by $26.1 million, compared with
the prior year, due to the Company's acquisition, effective June 1, 1992, of the
minority partners' interest in LAH. (See Note 2 to Consolidated Financial
Statements.)

In March 1993, retroactive to April 1, 1992, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
did not have a material effect on the results of operations. The effective tax
rate remained constant at 37% in both fiscal years. (See Note 6 to Consolidated
Financial Statements.)

As a result of the early redemption of certain long-term debt issues and
the cancellation of an existing credit facility, the Company recorded an
extraordinary charge of $28.2 million pre-tax, $17.8 million after-tax, or $.23
per share. The extraordinary charge consisted of redemption premiums and the
write-off of unamortized discounts and financing costs. (See Note 5 to
Consolidated Financial Statements.)

As a result of adopting SFAS 106, the Company recorded charges for the
cumulative effect of the accounting change effective April 1, 1992 of $330.5
million pre-tax, $233.4 million after-tax, or $3.03 per share.

FINANCIAL CONDITION AND LIQUIDITY

CASH PROVIDED AND USED

NET CASH PROVIDED BY OPERATING ACTIVITIES: Cash provided by operating
activities was $360.0 million in fiscal 1994, an increase of $88.1 million or
32% over fiscal 1993. The increase was due primarily to higher earnings in
fiscal 1994. Earnings after adjustment for non-cash items provided $437.0
million, offset by changes in operating assets and liabilities which used $77.0
million.

Contracts in process, before reduction for unliquidated progress payments,
increased by $888.4 million to $2.88 billion at March 31, 1994, primarily due to
the acquisition of LFS. (See Notes 1, 2 and 3 to Consolidated Financial
Statements.) As is customary in the defense industry, unbilled contract
receivables and inventoried costs are partially financed by progress payments.
The unliquidated balance of such progress payments increased by $610.5 million
to $1.55 billion at March 31, 1994, compared with $943.5 million in the prior
year. As a result, net contracts in process increased to $1.33 billion in fiscal
1994 from $1.05 billion in the prior year.

The Company's current ratio declined to 1.4:1 at March 31, 1994, from 1.8:1
at March 31, 1993 as a result of the LFS acquisition. The Company expects the
current ratio to improve in the early part of fiscal 1995 based on its intent to
refinance in the capital markets a portion of the debt incurred for the LFS
acquisition, which will be used in part to repay the $173.5 million of
commercial paper borrowings that are classified as current portion of debt.

13
<PAGE> 15

NET CASH USED IN INVESTING ACTIVITIES: Cash used in investing activities
increased $1.18 billion to $1.53 billion in fiscal 1994. The acquisition cost,
net of cash acquired, was $1.40 billion in 1994 for LFS and $253.0 million in
1993 for LVS. Investment in affiliates in fiscal 1994 was $25.3 million,
reflecting the initial investment in Globalstar. (See Note 2 to Consolidated
Financial Statements.) Net fixed asset additions in fiscal 1994 totaled $96.5
million, compared with $89.0 million in fiscal 1993. Fixed asset additions were
primarily for manufacturing and test equipment, facility expansion and
renovation.

NET CASH PROVIDED BY FINANCING ACTIVITIES: Cash provided by financing
activities was $1.29 billion for fiscal 1994, due primarily to cash borrowed to
finance the acquisition of LFS.

The Company's debt (net of cash) to equity ratio increased to 1.13:1 at
March 31, 1994 from .35:1 at March 31, 1993, due primarily to the debt incurred
for the LFS acquisition, offset by strong cash flow during the year. The LFS
purchase price was initially financed through cash on hand and commercial paper
borrowings which are backed up by revolving credit facilities totaling $1.7
billion. It is the Company's intent to refinance a portion of this debt in order
to fix interest costs and lengthen maturities. (See Note 5 to Consolidated
Financial Statements.) Based on the financial condition of the Company following
the LFS acquisition, management believes that the internal cash flows of the
combined operations will be adequate to fund the future growth of the Company
while servicing the interest and retiring the principal of the debt.

BACKLOG

The Company's funded backlog at March 31, 1994, including the funded
backlog of LFS ($3.2 billion at the January 1, 1994 effective date of
acquisition), totalled $6.5 billion, compared with $3.9 billion at March 31,
1993. New orders in fiscal 1994 totalled $3.5 billion, compared with $3.1
billion in fiscal 1993. It is expected that 55% of the March 31, 1994 backlog
will be shipped in fiscal 1995. Approximately 53% of the total backlog was
directly or indirectly for defense contracts for end use by the U.S. Government
and an additional 8% for contracts to other U.S. Government agencies; foreign
customers account for about 38%. The exchange risk inherent in foreign contracts
not denominated in U.S. dollars is mitigated by currency hedging where deemed
appropriate.

RESEARCH AND DEVELOPMENT

Company-sponsored research and development, including bid and proposal
costs, increased to $172.6 million from $124.7 million the prior year. In
addition, customer-funded research and development was $844.0 million for fiscal
1994, compared with $488.5 million for the prior year. The increase in
customer-funded research and development is due primarily to the acquisition of
LFS.

ENVIRONMENTAL MATTERS

Management is continually assessing its obligations with respect to
applicable environmental protection laws. While it is difficult to determine the
timing and ultimate cost to be incurred by the Company in order to comply with
these laws, based upon available internal and external assessments, the Company
believes that even without considering potential insurance recoveries, if any,
there are no environmental loss contingencies that, individually or in the
aggregate, are material. The Company accrues for these contingencies when it is
probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. The Company has been named a Potentially Responsible Party
("PRP") at a number of sites. In several of these situations Loral acquired the
site pursuant to a purchase agreement which provided that the seller would
retain liability for environmental remediation and related costs arising from
occurrences prior to the sale. In other situations the Company is party to an
interim or final allocation plan that has been accepted by other PRPs whose size
and current financial condition make it probable that they will be able to pay
the environmental costs apportioned to them. The Company believes that it has
adequately accrued for future expenditures in connection with environmental
matters and that such expenditures will not have a material adverse effect on
its financial condition or results of operations.

14
<PAGE> 16

INFLATION

The effect of inflation on the Company's sales and earnings is minimal.
Although a majority of the Company's sales are made under long-term contracts,
the selling prices of such contracts, established for deliveries in the future,
generally reflect estimated costs to be incurred in these future periods. In
addition, some contracts provide for price adjustments through escalation
clauses.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements and Financial Statement Schedules beginning on
page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

15
<PAGE> 17

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

Information required for this item is set forth in the Company's 1994
definitive proxy statement which is incorporated herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bernard L. Schwartz...... 68 Chairman of the Board of Directors and Chief Executive
Officer.
Frank C. Lanza........... 62 President and Chief Operating Officer.
Michael P. DeBlasio...... 57 Senior Vice President - Finance.
Robert V. LaPenta........ 48 Senior Vice President and Controller, since May 1990; prior
thereto Vice President and Controller.
Michael B. Targoff....... 49 Senior Vice President and Secretary, since April 1992;
prior thereto Senior Vice President, General Counsel and
Secretary, since May 1990, and Vice President, General
Counsel and Secretary.
Hugh Bennett............. 62 Group Vice President, since May 1990; prior thereto
Director of Corporate Special Projects since 1986, and
President of Loral Conic.
Felix W. Fenter.......... 67 Group Vice President, since April 1993; prior thereto
President of Loral Vought Systems since 1987.
Bernard Leibowitz........ 64 Group Vice President, since May 1990; President of Loral
Microwave - Narda.
Jimmie V. Adams.......... 58 Vice President, since April 1993; prior thereto General
Officer United States Air Force since 1984.
Gerard F. Corbett........ 43 Vice President - Corporate Communications, since February
1994; prior thereto Director of Corporate Communications of
ASARCO Incorporated since 1989.
William F. Gates......... 72 Vice President, since 1988; President of Loral Randtron
Systems until April 1992.
Stephen L. Jackson....... 52 Vice President - Administration.
Nicholas C. Moren........ 47 Vice President and Treasurer, since April 1991; prior
thereto Acting Treasurer since February 1991, independent
consultant since January 1990 and Vice
President - Treasurer of TW Services, Inc. since 1983.
Lawrence H. Schwartz..... 56 Vice President - Technology.
Robert F. Welte.......... 62 Vice President; President of Loral Electronic Systems until
September 1992.
Eric J. Zahler........... 43 Vice President and General Counsel, since April 1992; prior
thereto Partner, Fried, Frank, Harris, Shriver & Jacobson.
</TABLE>

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required under Items 11, 12 and 13, is set forth in the
Company's 1994 definitive proxy statement which is incorporated herein by
reference.

16
<PAGE> 18

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<S> <C> <C>
(a) 1. Financial Statements PAGE
----
Index to financial statements and financial statement schedules........... F-1
Report of independent auditors............................................ F-2
Consolidated statements of operations for the years ended March 31, 1994,
1993 and 1992............................................................. F-3
Consolidated balance sheets at March 31, 1994 and 1993.................... F-4
Consolidated statements of shareholders' equity for the years ended March
31, 1994, 1993 and 1992................................................... F-5
Consolidated statements of cash flows for the years ended March 31, 1994,
1993 and 1992..................... ....................................... F-6
Notes to consolidated financial statements................................ F-7 - F-20

2. Financial Statement Schedules
Schedule II -- Accounts Receivable From Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties......... S-1
Schedule V -- Property, Plant and Equipment.............................. S-2
Schedule VI -- Accumulated Depreciation and Amortization of Property,
Plant
and Equipment.............................................. S-3
Schedule X -- Supplementary Income Statement Information................. S-4
</TABLE>

Financial Statement Schedules not listed herein are either not
required or the information required to be included therein is reflected
in the Consolidated Financial Statements.

3. Exhibits

Unless otherwise indicated, each of the following exhibits has been
previously filed with the Securities and Exchange Commission and is
located in file number 1-4238. Exhibits 10.1 through 10.18 are
management contracts or compensation plans.

3.2 Loral Corporation By-Laws as in effect May 12, --
1994

4.1 Revolving Credit Agreement among Loral Current Report on Form 8-K dated
Corporation, Certain Banks, Morgan Guaranty February 23, 1994, Exhibit 4.1
Trust Company of New York, Chemical Bank,
Barclays Bank PLC, and Continental Bank, N.A.,
dated as of February 23, 1994

4.2 364 Day Revolving Credit Agreement among Loral Current Report on Form 8-K dated
Corporation, Certain Banks, Morgan Guaranty February 23, 1994, Exhibit 4.2
Trust Company of New York, Chemical Bank,
Barclays Bank PLC, and Continental Bank, N.A.,
dated as of February 23, 1994

10.1 Loral 1983 Stock Option Plan 1983 Proxy Material

10.2 Amendment to the Loral 1983 Stock Option Plan Annual Report on Form 10-K for the
fiscal year ended March 31, 1986,
Exhibit 10.11

10.3 Amended Loral 1986 Stock Option Plan Form 10-Q for the quarter ended June
30, 1988, Exhibit 10.1
</TABLE>

17
<PAGE> 19

<TABLE>
<CAPTION>
FILED HEREWITH (-) OR INCORPORATED BY
REFERENCE TO
EXHIBIT REGISTRATION NO. OR OTHER DOCUMENT
- - - ------- -------------------------------------
<S> <C> <C>
10.4 Amendment to the Loral 1980, 1981, 1983 and Annual Report on Form 10-K for the
1986 Stock Option Plans fiscal year ended March 31, 1990,
Exhibit 10.8

10.5 1991 Amendment to the Loral 1986 Stock Option Annual Report on Form 10-K for the
Plan fiscal year ended March 31, 1991,
Exhibit 10.9

10.6 Loral Corporation Restricted Stock Purchase Current Report on Form 8-K dated May
Plan 13, 1987, Exhibit 10.28

10.7 Amendment to the Loral Corporation Restricted Form 10-Q for the quarter ended June
Stock Purchase Plan 30, 1987, Exhibit 10.2

10.8 Restated Employment Agreement between Loral Annual Report on Form 10-K for the
Corporation and Bernard L. Schwartz, dated as fiscal year ended March 31, 1990,
of April 1, 1990 Exhibit 10.11

10.9 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Bernard L. Schwartz, dated as of March 15, 1990 fiscal year ended March 31, 1991,
Exhibit 10.13

10.10 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Bernard L. Schwartz, dated as of December 10, fiscal year ended March 31, 1991,
1990 Exhibit 10.14

10.11 Employment Contract between Loral Corporation Form 10-Q for the quarter ended June
and Frank C. Lanza, dated as of April 1, 1987 30, 1987, Exhibit 10.1 and Annual
Report on Form 10-K for the fiscal
year ended March 31, 1982, Exhibit
10.11

10.12 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1988,
March 31, 1988 Exhibit 10.19

10.13 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1990,
March 21, 1990 Exhibit 10.16

10.14 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1992,
April 1, 1992 Exhibit 10.17

10.15 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Frank C. Lanza, dated as of August 5, 1985 fiscal year ended March 31, 1991,
Exhibit 10.18

10.16 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Michael P. DeBlasio, dated as of December 10, fiscal year ended March 31, 1991,
1990 Exhibit 10.19

10.17 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Robert V. LaPenta, dated as of December 10, fiscal year ended March 31, 1992,
1990 Exhibit 10.20

10.18 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Michael B. Targoff Insurance Trust, dated as of fiscal year ended March 31, 1990,
April 30, 1990 Exhibit 10.20

10.19 Split-dollar life insurance agreement with E. Annual Report on Form 10-K for the
Donald Shapiro, dated as of December 10, 1990 fiscal year ended March 31, 1992,
Exhibit 10.22
</TABLE>

18
<PAGE> 20

<TABLE>
<CAPTION>
FILED HEREWITH (-) OR INCORPORATED BY
REFERENCE TO
EXHIBIT REGISTRATION NO. OR OTHER DOCUMENT
- - - ------- -------------------------------------
<S> <C> <C>
10.20 Form of Indemnity Agreement between Loral Annual Report on Form 10-K for the
Corporation and Officers and Directors of Loral fiscal year ended March 31, 1987,
Corporation Exhibit 10.22

10.21 Standstill Agreement among Loral Corporation Amendment No. 1 to Current Report on
and certain limited partnerships affiliated Form 8-K dated June 30, 1992, Exhibit
with Shearson Lehman Brothers Holdings, Inc. 4.1
dated as of August 14, 1992

10.22 Amendment No. 1 to Standstill Agreement, dated Annual Report on Form 10-K for the
as of November 13, 1992, among Loral fiscal year ended March 31, 1993,
Corporation and certain limited partnerships Exhibit 10.27
affiliated with Shearson Lehman Brothers
Holdings, Inc.

10.23 Asset Purchase Agreement between Loral Current Report on Form 8-K dated
Corporation and International Business Machines December 12, 1993, Exhibit 10.1
Corporation dated as of December 12, 1993; and
letter dated December 13, 1993

10.24 Certain letters relating to the Asset Purchase Current Report on Form 8-K dated
Agreement between Loral Corporation and March 1, 1994, Exhibit 10.2
International Business Machines Corporation
dated December 21, 1993 through March 1, 1994

11 Computation of Earnings Per Share for the three --
years ended March 31, 1994

12 Computation of Ratio of Earnings to Fixed --
Charges for the five years ended March 31, 1994

21 Subsidiaries of the Registrant --

23 Consent of Coopers & Lybrand --

24 Powers of Attorney --
</TABLE>

Note: Certain instruments with respect to issues of long-term debt have not
been filed as Exhibits to this report since the authorized principal amount of
any one of such issues does not exceed 10% of the total assets of the Registrant
and its subsidiaries on a consolidated basis as of March 31, 1994. Such
indebtedness is described in general terms in Note 5 to Consolidated Financial
Statements included herein. The Registrant agrees to furnish to the Commission a
copy of each instrument upon its request.

(b) Reports on Form 8-K

<TABLE>
<CAPTION>
DATE OF REPORT ITEMS REPORTED
-------------- --------------
<S> <C>
February 23, 1994 Item 5 -- Other Events:
The Registrant entered into new revolving credit facilities.

March 1, 1994 Item 2 -- Acquisition of Assets:
The Registrant completed its acquisition of Federal Systems
Company, a division of International Business Machines Corporation.
</TABLE>

19
<PAGE> 21

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LORAL CORPORATION

By: BERNARD L. SCHWARTZ
-----------------------------
Bernard L. Schwartz
(Chairman of the Board and
Chief Executive Officer)
Date: May 12, 1994

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
BERNARD L. SCHWARTZ Chairman of the Board, Chief Executive May 12, 1994
- - - -------------------------------------- Officer and Director
Bernard L. Schwartz

FRANK C. LANZA Director and President May 12, 1994
- - - --------------------------------------
Frank C. Lanza

* Director May 12, 1994
- - - --------------------------------------
Howard Gittis

* Director May 12, 1994
- - - --------------------------------------
Robert B. Hodes

* Director May 12, 1994
- - - --------------------------------------
Gershon Kekst

Director
- - - --------------------------------------
Charles Lazarus

* Director May 12, 1994
- - - --------------------------------------
Malvin A. Ruderman

* Director May 12, 1994
- - - --------------------------------------
E. Donald Shapiro

* Director May 12, 1994
- - - --------------------------------------
Allen M. Shinn

* Director May 12, 1994
- - - --------------------------------------
Thomas J. Stanton Jr.

* Director May 12, 1994
- - - --------------------------------------
Daniel Yankelovich

MICHAEL P. DEBLASIO Principal Financial Officer May 12, 1994
- - - --------------------------------------
Michael P. DeBlasio

ROBERT V. LAPENTA Principal Accounting Officer May 12, 1994
- - - --------------------------------------
Robert V. LaPenta

*By MICHAEL B. TARGOFF Attorney-in-Fact May 12, 1994
----------------------------
Michael B. Targoff
</TABLE>

20
<PAGE> 22

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Report of Independent Auditors.................................................... F-2
Consolidated Statements of Operations............................................. F-3
Consolidated Balance Sheets....................................................... F-4
Consolidated Statements of Shareholders' Equity................................... F-5
Consolidated Statements of Cash Flows............................................. F-6
Notes to Consolidated Financial Statements........................................ F-7 to F-20
Schedule II -- Accounts Receivable From Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties................... S-1
Schedule V -- Property, Plant and Equipment..................................... S-2
Schedule VI -- Accumulated Depreciation and Amortization of Property, Plant and
Equipment......................................................... S-3
Schedule X -- Supplementary Income Statement Information........................ S-4
</TABLE>

F-1
<PAGE> 23

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of
Loral Corporation:

We have audited the consolidated financial statements and the financial
statement schedules of Loral Corporation and Subsidiaries (the "Company") listed
under Items 14(a)1 and 14(a)2 of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules 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 consolidated financial position of Loral
Corporation and Subsidiaries as of March 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1994 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.

As discussed in Notes 6 and 9 to the consolidated financial statements, in
1993 the Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions.

COOPERS & LYBRAND

1301 Avenue of the Americas
New York, New York 10019
May 12, 1994

F-2
<PAGE> 24

LORAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Sales (Note 1)......................................... $4,008,733 $3,335,403 $2,881,820
Costs and expenses (Notes 1, 2 and 3).................. 3,607,367 3,039,149 2,589,626
---------- ---------- ----------
Operating income....................................... 401,366 296,254 292,194
Interest and investment income......................... 8,275 12,422 10,633
Interest expense....................................... 47,269 53,133 61,837
---------- ---------- ----------
Income before income taxes, minority interest and
equity in net income (loss) of affiliate............. 362,372 255,543 240,990
Income taxes (Note 6).................................. 135,278 94,551 89,166
---------- ---------- ----------
Income before minority interest and equity in net
income (loss) of affiliate........................... 227,094 160,992 151,824
Minority interest (Note 2)............................. (2,586) (28,710)
Equity in net income (loss) of affiliate (Note 2)...... 1,174 663 (1,319)
---------- ---------- ----------
Income before extraordinary item and cumulative effect
of changes in accounting............................. 228,268 159,069 121,795
Extraordinary item--loss on extinguishment of debt, net
of income taxes of $10,440 (Note 5).................. (17,776)
Cumulative effect of changes in accounting, net of
income taxes of $97,122 (Notes 6 and 9).............. (233,377)
---------- ---------- ----------
Net income (loss)...................................... $ 228,268 $ (92,084) $ 121,795
---------- ---------- ----------
---------- ---------- ----------
Earnings per share (Note 1)
Primary:
Income before extraordinary item and cumulative
effect of changes in accounting................... $2.72 $ 2.06 $2.00
Extraordinary item................................... (.23)
Cumulative effect of changes in accounting........... (3.03)
----- ------ -----
Net income (loss).................................... $2.72 $(1.20) $2.00
----- ------ -----
----- ------ -----
Fully diluted:
Income before extraordinary item and cumulative
effect of changes in accounting................... $2.72 $ 2.02 $1.93
Extraordinary item................................... (.23)
Cumulative effect of changes in accounting........... (2.99)
----- ------ -----
Net income (loss).................................... $2.72 $(1.20) $1.93
----- ------ -----
----- ------ -----
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 25

LORAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1994 1993
---------- ----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents (Note 1)........................................ $ 238,498 $ 116,902
Contracts in process (Notes 1 and 3)...................................... 1,328,338 1,050,414
Deferred income taxes (Note 6)............................................ 104,063 74,406
Other current assets...................................................... 173,714 123,495
---------- ----------
Total current assets............................................... 1,844,613 1,365,217
---------- ----------
Property, plant and equipment (Notes 1 and 4)............................... 1,926,978 1,271,457
Less, accumulated depreciation and amortization........................... 620,554 489,765
---------- ----------
1,306,424 781,692
---------- ----------
Cost in excess of net assets acquired, less amortization (Notes 1 and 2).... 1,342,872 537,155
Investment in affiliates (Notes 1 and 2).................................... 163,479 137,017
Deferred income taxes (Note 6).............................................. 37,873 36,845
Prepaid pension cost and other assets (Note 9).............................. 480,907 370,152
---------- ----------
$5,176,168 $3,228,078
---------- ----------
---------- ----------
LIABILITIES and SHAREHOLDERS' EQUITY:
Current liabilities:
Current portion of debt (Note 5).......................................... $ 173,928 $ 43,209
Accounts payable, trade................................................... 248,657 151,344
Customer advances......................................................... 286,273 102,452
Accrued employment costs.................................................. 201,238 173,759
Income taxes (Note 6)..................................................... 77,815 60,440
Other current liabilities................................................. 302,256 223,509
---------- ----------
Total current liabilities................................................... 1,290,167 754,713
---------- ----------
Postretirement benefits (Note 9)............................................ 639,266 622,048
Other liabilities........................................................... 241,368 172,658
Long-term debt (Note 5)..................................................... 1,624,061 490,806
Commitments and contingencies (Notes 2, 8 and 11)
Shareholders' equity (Note 7):
Common stock, $.25 par value; authorized 150,000,000 and 70,000,000
shares, issued 84,225,000 and 41,714,000 shares......................... 21,056 10,429
Capital surplus........................................................... 773,676 753,208
Retained earnings......................................................... 643,373 460,288
---------- ----------
1,438,105 1,223,925
Less:
Treasury stock, at cost (888,000 and 448,000 shares)...................... 19,681 19,777
Equity adjustments........................................................ 37,118 16,295
---------- ----------
Total shareholders' equity......................................... 1,381,306 1,187,853
---------- ----------
$5,176,168 $3,228,078
---------- ----------
---------- ----------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 26

LORAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992

<TABLE>
<CAPTION>
COMMON STOCK
------------------
SHARES CAPITAL RETAINED TREASURY EQUITY
ISSUED AMOUNT SURPLUS EARNINGS STOCK ADJUSTMENTS
------ ------- -------- --------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Balance March 31, 1991............................. 25,956 $6,489 $197,460 $ 496,391 $ (348) $ (28,023)
Shares issued:
Sale of common stock............................. 4,600 1,150 177,234
Exercise of stock options and related tax
benefits, net of shares tendered............... 548 137 12,639 (4,336)
Employee benefit plans........................... 807 202 30,998 3,928
Grant of restricted options, net................... 3,664 (3,664)
Amortization of restricted options................. 3,421
Shares earned under Restricted Stock Purchase
Plan............................................. 6,736
Adjustment of unearned restricted stock to
market value at year-end......................... (2,598) 2,598
Net income......................................... 121,795
Dividends $.47 per share*.......................... (28,453)
Foreign currency translation adjustment............ (82)
------ ------- -------- --------- -------- -----------
Balance March 31, 1992............................. 31,911 7,978 419,397 589,733 (756) (19,014)
Shares issued:
Exercise of stock options and related tax
benefits, net of shares tendered............... 1,472 368 39,749 (16,403)
Employee benefit plans........................... 456 114 14,807 248
Restricted Stock Purchase Plan................... 150 38 5,108 (5,108)
Conversion of subordinated debentures............ 1,575 394 69,890
Acquisition of minority interest................. 6,150 1,537 193,405 237
Purchase of treasury stock......................... (3,103)
Grant of restricted options, net................... 5,562 (5,562)
Amortization of restricted options................. 10,772
Shares earned under Restricted Stock Purchase
Plan............................................. 7,827
Adjustment of unearned restricted stock to
market value at year-end......................... 5,290 (5,290)
Income before extraordinary item and cumulative
effect of changes in accounting.................. 159,069
Extraordinary item................................. (17,776)
Cumulative effect of changes in accounting......... (233,377)
Dividends $.495 per share*......................... (37,361)
Foreign currency translation adjustment............ 80
------ ------- -------- --------- -------- -----------
Balance March 31, 1993............................. 41,714 10,429 753,208 460,288 (19,777) (16,295)
Shares issued:
Exercise of stock options and related tax
benefits, net of shares tendered............... 380 95 9,359 (62)
Employee benefit plans........................... 289 72 11,167 159
Two-for-one stock split............................ 41,842 10,460 (10,460)
Forfeiture of Restricted Stock Purchase Plan
Shares........................................... (369) (1) 369
Grant of restricted options, net................... 8,466 (8,466)
Amortization of restricted options................. 3,246
Shares earned under Restricted Stock Purchase
Plan............................................. 3,919
Adjustment of unearned restricted stock to
market value at year-end......................... 2,305 (2,305)
Net income......................................... 228,268
Dividends $.545 per share*......................... (45,183)
Additional minimum pension liability............... (16,049)
Foreign currency translation adjustment............ (1,537)
------ ------- -------- --------- -------- -----------
Balance March 31, 1994............................. 84,225 $21,056 $773,676 $ 643,373 $(19,681) $ (37,118)
------ ------- -------- --------- -------- -----------
------ ------- -------- --------- -------- -----------
</TABLE>

- - - ---------------
* Adjusted to reflect two-for-one stock split distributed on October 7, 1993,
see Note 7.

See notes to consolidated financial statements.

F-5
<PAGE> 27

LORAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------------
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income (loss).................................................... $ 228,268 $ (92,084) $ 121,795
Extraordinary item................................................... 17,776
Cumulative effect of changes in accounting........................... 233,377
Depreciation and amortization........................................ 178,184 154,005 128,641
Deferred income taxes................................................ 31,727 14,818 8,433
Minority interest.................................................... 2,586 28,710
Equity in net (income) loss of affiliates............................ (1,174) (663) 1,319
Changes in operating assets and liabilities:
Contracts in process............................................... 31,850 (29,963) 35,323
Other current assets............................................... (55,338) (40,673) 46,486
Prepaid pension cost and other assets.............................. (22,767) (38,444) (18,024)
Accounts payable and accrued liabilities........................... (21,247) 1,539 (168,682)
Income taxes....................................................... 17,375 27,063 27,868
Postretirement benefits and other liabilities...................... (26,366) 23,392 6,078
Other.............................................................. (562) (914) (82)
----------- --------- ---------
Net cash from operating activities................................... 359,950 271,815 217,865
----------- --------- ---------
Investing activities:
Acquisition of businesses, net of cash acquired...................... (1,426,103) (261,976) 5,240
Purchase price adjustment............................................ 9,000 48,289
Proceeds from note receivable........................................ 20,935 2,988
Investment in other assets........................................... (15,265)
Investment in affiliates............................................. (25,288) (9,500) (3,500)
Proceeds from sale of stock of affiliate............................. 12,197
Repayments from (advances to) affiliate.............................. (1,375) 1,305 (32,261)
Capital expenditures................................................. (102,952) (97,268) (81,541)
Disposition of property, plant and equipment......................... 6,492 8,309 7,402
----------- --------- ---------
(1,528,291) (353,198) (53,383)
----------- --------- ---------
Financing activities:
Net borrowings (payments) under revolving credit facilities and
commercial paper................................................... 808,018 115,531 (236,700)
Proceeds from borrowings............................................. 503,534 120,803 101,885
Payments of debt..................................................... (47,578) (211,201) (108,996)
Dividends paid....................................................... (45,183) (37,361) (28,453)
Proceeds from issuance of common stock............................... 20,789 38,921 221,952
Purchase of treasury stock........................................... (3,103)
Other................................................................ 50,357 (16,418) 1,890
----------- --------- ---------
1,289,937 7,172 (48,422)
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents................. 121,596 (74,211) 116,060
Cash and cash equivalents, beginning of year......................... 116,902 191,113 75,053
----------- --------- ---------
Cash and cash equivalents, end of year............................... $ 238,498 $ 116,902 $ 191,113
----------- --------- ---------
----------- --------- ---------
Supplemental information:
Interest paid during the year........................................ $ 46,342 $ 48,729 $ 63,183
----------- --------- ---------
----------- --------- ---------
Income taxes paid during the year, net of refunds.................... $ 73,729 $ 42,549 $ 36,970
----------- --------- ---------
----------- --------- ---------
</TABLE>

See Notes 1 and 2 for additional information.

See notes to consolidated financial statements.

F-6
<PAGE> 28

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of Loral
Corporation and its subsidiaries ("Loral" or the "Company"). The Company's
investments in its affiliates are carried on the equity method of accounting.
All significant intercompany balances and transactions have been eliminated.

STATEMENTS OF CASH FLOWS:

The Company classifies investments that are readily convertible into cash,
and have original maturities of three months or less as cash equivalents.

Changes in operating assets and liabilities are net of the impact of
acquisitions and final purchase price allocations. Investing activities do not
include certain marketable securities transactions in 1993 which were not
settled in cash.

FINANCIAL INSTRUMENTS:

The carrying amount of cash and cash equivalents approximates fair value.
Except as discussed in Notes 5 and 11, all other financial instruments are not
material.

CONTRACTS IN PROCESS:

Sales on long-term production-type contracts are recorded as units are
shipped; profits applicable to such shipments are recorded pro rata, based upon
estimated total profit at completion of the contract. Sales and profits on cost
reimbursable contracts are recognized as costs are incurred. Sales and estimated
profits under other long-term contracts are recognized under the percentage of
completion method of accounting using the cost to cost method. Amounts
representing contract change orders or claims are included in sales only when
they can be reliably estimated and realization is probable.

Costs accumulated under long-term contracts include applicable amounts of
selling, general and administrative expenses. Losses on contracts are
immediately recognized in full when determinable. Revisions in profit estimates
are reflected in the period in which the facts which require the revision become
known.

In accordance with industry practice, contracts in process contain amounts
relating to contracts and programs with long production cycles, a portion of
which may not be realized within one year.

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are stated at cost. Depreciation is provided
primarily on the straight-line method over the estimated useful lives of the
related assets. Leasehold improvements are amortized over the shorter of the
lease term or the estimated useful life of the improvements.

COST IN EXCESS OF NET ASSETS ACQUIRED:

The excess of the cost of purchased businesses over the fair value of the
net assets acquired is being amortized using a straight-line method generally
over a 40-year period. Accumulated amortization amounted to $70,207,000 and
$49,456,000 at March 31, 1994 and 1993, respectively.

The carrying amount of the cost in excess of net assets acquired is
evaluated on a recurring basis. Current and future profitability as well as
current and future undiscounted cash flows, excluding financing costs, of the
acquired businesses are primary indicators of recoverability. For the three
years ended March 31, 1994, there were no adjustments to the carrying amount of
the cost in excess of net assets acquired resulting from these evaluations.

F-7
<PAGE> 29

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOREIGN CURRENCY:

Assets and liabilities of foreign operations are translated into U.S.
dollars at year-end rates and income and expenses are translated at average
exchange rates during the year. The effects of the translation adjustments
recorded as a component of Equity Adjustments in Shareholders' Equity aggregated
$1,904,000, $367,000 and $447,000 at March 31, 1994, 1993 and 1992,
respectively. Foreign currency transaction gains and losses for the three years
ended March 31, 1994 were not material. The Company enters into forward exchange
contracts to hedge the effect of foreign currency fluctuations on certain
transactions and commitments denominated in foreign currencies. Gains and losses
on commitment hedges are deferred and included in the basis of the transaction
underlying the commitment.

EARNINGS PER SHARE:

Primary earnings per share are computed based upon the weighted average
number of common stock and common stock equivalents (stock options) outstanding.
Fully diluted earnings per share also reflect additional dilution related to
stock options due to the use of the market price at the end of the period, when
higher than the average price for the period. In 1993 and 1992, fully diluted
earnings per share assume the conversion of certain convertible debentures,
giving effect to the resultant reduction in interest costs, net of the tax
effect thereon, through the redemption date. In 1993, the impact of the
extraordinary item and cumulative effect of changes in accounting on the fully
diluted calculation is anti-dilutive, resulting in the net fully diluted amount
equalling the net primary amount.

INCOME TAXES:

Effective April 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). See
Note 6, Income Taxes.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:

RECLASSIFICATIONS:

Certain reclassifications have been made to conform prior-year amounts to
the current-year presentation.

2. ACQUISITIONS AND INVESTMENT IN AFFILIATES:

ACQUISITIONS:

On March 1, 1994, effective January 1, 1994, the Company, through its newly
formed wholly owned subsidiary Loral Federal Systems Company ("LFS"), acquired
substantially all the assets and liabilities of the Federal Systems Company, a
division of International Business Machines Corporation, for $1,503,500,000 in
cash, plus acquisition costs of $8,000,000. The assets and liabilities recorded
in connection with the purchase price allocation were $1,925,194,000 and
$413,694,000, respectively. The acquisition was financed through cash on hand
and commercial paper borrowings.

On August 31, 1992, the Company, through its newly formed wholly owned
subsidiary Loral Vought Systems Corporation ("LVS"), acquired substantially all
the assets and liabilities of the missile business of LTV Aerospace and Defense
Company for $261,250,000 in cash, plus acquisition costs of $2,000,000. The
purchase price was subsequently reduced by a $9,000,000 purchase price
adjustment paid in cash to the Company in December 1992. The assets and
liabilities recorded in connection with the purchase price

F-8
<PAGE> 30

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

allocation were $564,502,000 and $310,252,000, respectively. The acquisition was
financed through cash on hand and borrowings under existing credit facilities.

In October 1990, Loral Aerospace Holdings, Inc. ("LAH"), a company owned by
the Company and certain partnerships affiliated with Lehman Brothers Holdings
Inc. (the "Lehman Partnerships"), acquired substantially all the businesses of
Ford Aerospace Corporation ("FAC"). The FAC businesses were acquired by separate
subsidiaries of LAH; Loral Aerospace Corp. ("Loral Aerospace") purchased all the
businesses other than FAC's Space Systems Division, which was in effect
purchased by Space Systems/Loral, Inc. ("SS/L").

Effective June 1, 1992, the Company acquired the Lehman Partnerships'
equity interest in LAH through the issuance of 12,313,810 shares of Loral Common
Stock (as adjusted for two-for-one stock split, see Note 7) and 627.3 shares of
LAH Series S Preferred Stock. Each share of Series S Preferred Stock represents
a beneficial interest in one share of common stock of SS/L. As a result of the
issuance of the Series S Preferred Stock, the Lehman Partnerships have no
economic interest in LAH other than with respect to the SS/L operations. This
transaction increased shareholders' equity by $195,179,000, eliminated minority
interest, decreased the investment in affiliate by $86,907,000 and increased
cost in excess of net assets acquired by $159,960,000. If the Lehman
Partnerships continue to hold Series S Preferred Stock after January 1, 1998, or
after a change in control of Loral, they will have the right to request that the
Company purchase their Series S Preferred Stock at an appraised fair market
value. In such event, the Company may elect to purchase such Series S Preferred
Stock at appraised fair market value, or if the Company elects not to purchase
the stock, the Lehman Partnerships may require the combined interests of the
Company and the Lehman Partnerships in SS/L to be sold to a third party.

In April 1993, the Company acquired the advanced simulation business of
Bolt Beranek and Newman Inc. for $6,000,000 in cash. In September 1993, the
Company acquired certain assets and assumed certain liabilities of Quintron
Corporation for $21,422,000 in cash. These acquisitions are not expected to have
a material effect on the operations of the Company.

The acquisitions of LFS, LVS and the Lehman Partnerships' equity interest
in LAH have been accounted for as purchases. As such, Loral's consolidated
financial statements reflect the results of operations of the acquired entities
and the elimination of the minority interest from the respective effective dates
of acquisition.

Performance under acquired contracts in process, the accounting for which
is described in Note 3, contributed after-tax income of $49,061,000, $43,283,000
and $24,843,000, net of after-tax interest cost on debt related to the
acquisitions and incremental amortization of cost in excess of net assets
acquired aggregating $29,125,000, $18,653,000 and $14,765,000 for 1994, 1993,
and 1992, respectively.

Had the acquisitions of LFS, LVS and the Lehman Partnerships' equity
interest in LAH occurred on April 1, 1992, the unaudited proforma sales, income
before extraordinary item and cumulative effect of changes in accounting and
related earnings per share data for the years ended March 31, 1994 and 1993
would have been: $5,853,700,000 and $5,954,900,000; $228,000,000 and
$177,000,000; and $2.72 and $2.24, respectively. The results, which are based on
various assumptions, are not necessarily indicative of what would have occurred
had the acquisitions been consummated as of April 1, 1992.

INVESTMENT IN AFFILIATES:

In April 1991, SS/L sold 49% of its common stock to three European space
systems manufacturers for $171,500,000. At that time LAH made an additional
capital contribution of $3,500,000 to SS/L. In November 1992, a fourth European
investor acquired 12 1/4% of SS/L's common stock from SS/L for $57,167,000. In
order to maintain the 51% interest in SS/L, Loral Aerospace purchased additional
shares of SS/L common stock for $59,500,000, consisting of $9,500,000 in cash
and the contribution of a $50,000,000

F-9
<PAGE> 31

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

subordinated note and warrant issued in March 1992 by SS/L to Loral Aerospace
for cash. In December 1992, the Lehman Partnerships purchased an additional
104.55 shares of Series S Preferred Stock from LAH for $12,197,500 in cash. As a
result of these transactions, Loral has an effective 32.7% economic interest in
SS/L. No gain or loss was realized by Loral in connection with the sale of any
SS/L common stock or Series S Preferred Stock.

LAH and Loral Aerospace retain 51% of the outstanding common stock of SS/L,
but have agreed not to cause SS/L to take certain actions without the
concurrence of three, or in some cases, all of the SS/L directors appointed by
the four European investors. Accordingly, the Company's investment in SS/L is
classified as "Investment in affiliates," and the results of operations of SS/L
are included in "Equity in net income (loss) of affiliate."

In March 1994, the Company and seven other partners made capital
commitments totalling $275,000,000 to Globalstar, L.P., a limited partnership of
which the Company is the managing general partner, which plans to design and
operate a worldwide satellite-based telecommunications network. The Globalstar
network, consisting of 48 low-earth-orbiting satellites, subject to receiving
local licensing authority such as is pending before the Federal Communications
Commission, will offer voice, data, paging and geolocation services to both
handheld and fixed terminals. Total system cost through 1998, the expected
in-service date, is expected to total approximately $1,800,000,000, which
Globalstar intends to finance through sales of additional equity, advance
payments from service providers, and debt financing.

At March 31, 1994, the Company has an effective 42% equity interest in
Globalstar and has a total capital commitment of $107,000,000, of which
$25,288,000 has been funded. The remaining commitment is expected to be funded
in two installments, in September 1994 and March 1995. Through SS/L, the Company
has an additional 2% indirect equity interest in Globalstar. By sales of its
equity interest to other strategic partners and through subsequent Globalstar
equity offerings, the Company expects to reduce its direct and indirect equity
interest to approximately 25%.

Globalstar has awarded SS/L, the prime contract to design, construct and
launch the satellite constellation. SS/L has and expects to award subcontracts
to third parties, including other investors in Globalstar, for substantial
portions of its obligations under the contract.

As managing general partner of Globalstar, the Company is entitled to
receive a management fee determined in accordance with the partnership
agreement.

3. CONTRACTS IN PROCESS:

Billings and accumulated costs and profits on long-term contracts,
principally U.S. Government, comprise the following:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1994 1993
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Billed contract receivables................................ $ 423,894 $ 291,332
Unbilled contract receivables.............................. 1,901,156 1,130,915
Inventoried costs.......................................... 557,259 571,655
----------- ----------
2,882,309 1,993,902
Less, unliquidated progress payments....................... (1,553,971) (943,488)
----------- ----------
Net contracts in process................................... $ 1,328,338 $1,050,414
----------- ----------
----------- ----------
</TABLE>

Unbilled contract receivables represent accumulated costs and profits
earned but not yet billed to customers at year-end. The Company expects that
substantially all such amounts will be billed and collected within one year.

F-10
<PAGE> 32

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following data has been used in the determination of costs and expense:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Selling, general and administrative costs included
in inventoried costs............................. $ 64,212 $ 82,676 $ 89,655
Selling, general and administrative costs
incurred......................................... 465,473 391,079 357,073
Independent research and development, including bid
and proposal costs, included in S,G&A incurred... 172,604 124,718 122,903
</TABLE>

In connection with the determination of the fair value of assets acquired
(Note 2) and pursuant to the provisions of Accounting Principles Board Opinion
No. 16, the Company has valued acquired contracts in process at contract price,
minus the estimated cost to complete and an allowance for the Company's normal
profit on its effort to complete such contracts.

4. PROPERTY, PLANT AND EQUIPMENT:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 116,347 $ 68,710
Buildings and improvements.................................. 560,163 310,728
Machinery, equipment, furniture and fixtures................ 1,125,261 800,261
Leasehold improvements...................................... 125,207 91,758
----------- -----------
$ 1,926,978 $ 1,271,457
----------- -----------
----------- -----------
</TABLE>

Depreciation and amortization expense in 1994, 1993 and 1992 was
$141,853,000, $113,447,000, and $100,954,000, respectively.

5. DEBT:

<TABLE>
<CAPTION>
MARCH 31,
------------------------
1994 1993
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper (3.76% and 3.37% at March 31, 1994 and 1993,
respectively).............................................. $ 1,373,548 $ 99,562
Revolving credit (4.03% at March 31, 1993)................... 165,969
9 1/8% Senior Debentures due 2022............................ 100,000 100,000
8 3/8% Senior Debentures due 2023............................ 100,000 100,000
7% Senior Debentures due 2023................................ 200,000
Other........................................................ 24,441 68,484
----------- ---------
1,797,989 534,015
Less current maturities...................................... 173,928 43,209
----------- ---------
Total long-term debt......................................... $ 1,624,061 $ 490,806
----------- ---------
----------- ---------
</TABLE>

In February 1994, the Company entered into a five-year, $1,200,000,000
revolving credit facility and a 364-day, $500,000,000 revolving credit facility
with a group of banks replacing an existing three-year revolving credit
facility. The revolving credit facilities serve to back up the Company's
commercial paper borrowings. The amount available for borrowing under the
facilities is reduced by the outstanding commercial paper. Borrowings under the
facilities are unsecured and bear interest, at the Company's option, at various
rates based on the base rate, or on margins over the CD rate or EuroDollar rate.
The Company pays a commitment

F-11
<PAGE> 33

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

fee on the unused portion. The margins and the commitment fee are subject to
adjustment. Borrowings are prepayable at any time and are due at maturity. The
agreements contain financial covenants requiring the Company to maintain certain
levels of net worth and an interest coverage ratio, as well as a limitation on
indebtedness and dividends.

The outstanding commercial paper borrowings at March 31, 1994, supported by
the Company's five-year revolving credit facility are classified as long-term
since the Company intends to refinance these borrowings through long-term
borrowings, rollover of commercial paper borrowings or utilization of the
revolving credit facilities.

In September 1993, the Company issued $200,000,000 7% Senior Debentures.
The 7%, 8 3/8% and 9 1/8% Senior Debentures are not redeemable prior to maturity
and are not subject to any sinking fund provisions.

In October 1993, the Securities and Exchange Commission declared effective
a shelf registration statement which enables the Company to issue up to
$300,000,000 of additional debt securities.

In anticipation of refinancing a portion of the revolving credit
facilities, the Company entered into several interest rate hedge agreements,
maturing in April and June 1994, with a principal amount of $500,000,000.

In fiscal 1993, the Company recorded an extraordinary charge of $28,216,000
pre-tax, $17,776,000 after-tax, or $.23 per share for the early redemption of
certain long-term debt issues and the cancellation of an existing credit
facility. The extraordinary charge consisted of redemption premiums and the
write-off of unamortized discounts and financing costs. In connection with the
redemption of $69,694,000 principal amount of certain convertible debentures,
the Company issued 3,149,710 shares of Loral Common Stock (as adjusted for
two-for-one stock split, see Note 7).

The aggregate maturities of long-term debt, excluding commercial paper
borrowings classified as long-term, for the years 1995 through 1999 are as
follows: $173,928,000, $329,000, $10,626,000, $1,106,000 and $859,000.

The fair value of the Company's total debt and the interest rate hedges,
based on quoted market prices or on current rates for similar debt with the same
maturities, was approximately $1,762,000,000 and $554,500,000 at March 31, 1994
and 1993, respectively.

6. INCOME TAXES:

In 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"), which changed the method of
accounting for income taxes from the deferred method to the liability method.
Under the liability method, deferred tax assets and liabilities are recognized
based on the temporary differences between the carrying amounts of assets and
liabilities for financial statement purposes and income tax purposes using
currently enacted tax rates. The adoption of SFAS 109 did not have a material
effect on the financial position or results of operations for the year ended
March 31, 1993.

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal.............................................. $ 89,369 $67,898 $53,114
State and local...................................... 14,182 11,835 12,864
-------- ------- -------
103,551 79,733 65,978
Deferred, principally Federal........................ 31,727 14,818 23,188
-------- ------- -------
Total provision for income taxes..................... $135,278 $94,551 $89,166
-------- ------- -------
-------- ------- -------
</TABLE>

F-12
<PAGE> 34

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The effective income tax rate differs from the statutory Federal income tax
rate for the following reasons:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate..................... 35.0% 34.0% 34.0%
Research and development and other tax credits........ (1.1) (.4) (1.0)
State and local income taxes, net of Federal income
tax benefit and state and local income tax
credits............................................. 3.8 3.5 4.5
Foreign sales corporation tax benefit................. (.7) (.8) (.7)
Other, net............................................ .3 .7 .2
---- ---- ----
Effective income tax rate............................. 37.3% 37.0% 37.0%
---- ---- ----
---- ---- ----
</TABLE>

On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was
signed into law, including a provision that increased the Federal corporate
income tax rate by 1%, to 35%, effective January 1, 1993. This increase was
partially offset by the additional tax benefit resulting from revaluing deferred
tax assets at the higher rate.

The provision for income taxes excludes: current tax benefits related to
the exercise of stock options, credited directly to Shareholders' Equity, of
$3,643,000 and $10,237,000 for 1994 and 1993, respectively; a deferred tax
benefit of $10,261,000, related to the additional minimum pension liability
debited directly to Shareholders' Equity for 1994; and, in 1993, the tax benefit
of $10,440,000, related to the extraordinary item and the deferred tax benefit
of $97,122,000, related to the cumulative effect of the change in accounting for
SFAS 106.

The significant components of the net deferred income tax asset are:

<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1994 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Compensation and benefits.................................... $ 14,545 $ 6,979
Income recognition on long-term contracts.................... (16,887) (486)
Installment sales............................................ 9,100 10,754
Inventoried costs............................................ 100,927 50,235
Other postretirement employee benefits....................... 191,678 190,452
Pension costs................................................ (126,771) (101,599)
Property, plant and equipment................................ (64,912) (66,945)
Other, net................................................... 34,256 21,861
--------- ---------
Net deferred income tax asset................................ $ 141,936 $ 111,251
--------- ---------
--------- ---------
</TABLE>

The net deferred income tax asset is classified as follows:

<TABLE>
<CAPTION>
MARCH 31,
----------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Current deferred income tax asset............................. $104,063 $74,406
-------- -------
-------- -------
Long-term deferred income tax asset........................... $ 37,873 $36,845
-------- -------
-------- -------
</TABLE>

F-13
<PAGE> 35

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SHAREHOLDERS' EQUITY:

In September 1993, the shareholders approved an increase in the number of
authorized shares of common stock from 70,000,000 shares to 150,000,000 shares.

On October 7, 1993, the Company completed a two-for-one stock split in the
form of a 100% stock distribution payable to shareholders of record on September
28, 1993. Accordingly, all share and per share amounts have been adjusted to
reflect the stock split.

The Company has 2,000,000 authorized and unissued shares of preferred stock
(par value $1.00). The designation of terms, conditions and amounts of such
preferred stock may be set by the Board of Directors.

Under the Company's various stock option plans, options may be granted at
prices determined by the Compensation and Stock Option Committee. The Committee
determines the exercise and expiration dates of the options, which may not be
later than 10 years from the date of grant. For options granted at less than 75%
of the fair market value at date of grant, the plans provide for return of stock
issued on exercise of these options on a ratable basis should the recipient
leave the Company's employment under certain circumstances within six years of
the grant of these options. Unearned compensation with respect to options
granted at less than fair market value at date of grant, included as a component
of Equity Adjustments in Shareholders' Equity, aggregated $13,644,000,
$8,424,000 and $13,632,000 at March 31, 1994, 1993 and 1992, respectively, and
is being amortized over the period that the options vest.

Options outstanding have been granted at prices ranging from $4.50 to
$37.63 per share.

A summary of the option transactions follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Options outstanding, beginning of year.................. 3,764 5,500 6,392
Options granted......................................... 1,895 1,340 550
Options exercised....................................... (508) (2,944) (1,096)
Exercise price.......................................... ($4.50 ($2.85 ($2.85
to $19.56) to $20.19) to $17.57)
Options cancelled....................................... (86) (132) (346)
--------- --------- ---------
Options outstanding, end of year........................ 5,065 3,764 5,500
--------- --------- ---------
--------- --------- ---------
Options exercisable, end of year........................ 1,781 1,390 2,606
--------- --------- ---------
--------- --------- ---------
</TABLE>

There were 51,026 shares, 1,859,140 shares and 3,081,690 shares of common
stock available for future option grants at March 31, 1994, 1993, and 1992,
respectively.

Under the Company's Restricted Stock Purchase Plan, established in 1988,
2,000,000 shares of the Company's common stock were issued under the Plan, upon
payment by the employee of the par value per share. The total number of shares
earned under the Plan each year equals 3% of the Company's pre-tax profit
divided by the grant value (currently $105.00 per share) of restricted shares
outstanding. Any shares not earned at the earlier of completion of the seventh
year after grant or termination of employment will be essentially forfeited by
being repurchased by the Company at par value. Under the Plan, 104,846 shares,
341,714 shares and 420,986 shares were earned for the years ended March 31,
1994, 1993 and 1992, respectively. At March 31, 1994, 147,738 shares of common
stock are still to be earned and 13,060 shares of common stock are available for
future grants under this Plan. Unearned compensation related to these shares,
included as a component of Equity Adjustments in Shareholders' Equity,
aggregated $5,521,000, $7,504,000 and $4,935,000 at March 31, 1994, 1993, and
1992 respectively, and is amortized as the shares are earned.

F-14
<PAGE> 36

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES:

The Company leases certain facilities and equipment under agreements
expiring at various dates through 2080. At March 31, 1994, future minimum
payments for noncancellable operating and capital leases with initial or
remaining terms in excess of one year are as follows:

OPERATING LEASES CAPITAL LEASES TOTAL
--------------------------- -------------- --------
REAL ESTATE EQUIPMENT
----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1995............................. $ 56,914 $13,162 $ 1,243 $ 71,319
1996............................. 44,897 10,363 1,243 56,503
1997............................. 33,907 7,589 11,394 52,890
1998............................. 23,375 6,469 1,243 31,087
1999............................. 16,208 5,465 1,243 22,916
Thereafter....................... 100,444 5,158 9,628 115,230
----------- ------------- -------------- --------
$ 275,745 $48,206 $ 25,994 $349,945
----------- ------------- -------------- --------
----------- ------------- -------------- --------
</TABLE>

Real estate lease commitments have been reduced by minimum sublease rentals
of $27,399,000 due in the future under noncancellable subleases. The present
value of the minimum lease payments for capital leases is $16,729,000, net of
imputed interest of $9,265,000.

Leases covering major items of real estate and equipment contain renewal
and or purchase options which may be exercised by the Company. Rent expense, net
of sublease income of $4,180,000, $2,378,000 and $5,218,000, was $65,239,000,
$50,539,000 and $44,281,000, in 1994, 1993 and 1992, respectively.

At March 31, 1994, outstanding letters of credit were approximately
$392,000,000.

At acquisition, LFS's contracts in process included a systems integration
contract with the Federal Aviation Administration ("FAA") for the modernization
of the U.S. air traffic control system. Prior to the acquisition, discussions
were held between LFS and FAA officials with respect to modifying certain terms
and conditions of the contract. This contract has also been the subject of
considerable public and media attention in the past year and in December 1993,
the FAA initiated a comprehensive review of the contract. The extent of the
contract modifications, if any, as a result of the comprehensive review, as well
as future negotiations with the FAA, is not determinable at this time. The final
purchase price of LFS is subject to a reduction, up to a specified limit, based
upon the outcome of these matters. (See Current Report on Form 8-K dated March
1, 1994, Exhibit 10.2.) In the opinion of management, and in light of the
potential adjustment of the LFS purchase price and reserves provided, the
ultimate outcome of this matter will not have a material adverse effect on the
financial position or results of operations of the Company.

F-15
<PAGE> 37

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

connection with environmental matters and that such expenditures will not have a
material adverse effect on its financial condition or results of operations.

There are a number of lawsuits or claims pending against the Company and
incidental to its business. However, in the opinion of management, the ultimate
liability on these matters, if any, will not have a material adverse effect on
the financial position or results of operations of the Company.

9. PENSIONS AND OTHER EMPLOYEE BENEFITS:

PENSIONS:

The Company maintains several pension plans, both contributory and
noncontributory, covering certain employees. Eligibility for participation in
these plans varies and benefits are generally based on members' compensation and
years of service. The Company's funding policy is generally to contribute
annually the maximum amount that can be deducted for Federal income tax
purposes. Plan assets are invested primarily in U.S. government and agency
obligations and listed stocks and bonds.

Pension (credit) cost included the following components:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period....... $ 31,530 $ 25,387 $ 20,650
Interest cost on projected benefit obligation........ 159,747 123,560 69,621
Actual return on plan assets......................... (273,974) (123,292) (90,786)
Net amortization and deferral........................ 64,221 (38,886) 10,299
--------- --------- --------
Total pension (credit) cost.......................... $ (18,476) $ (13,231) $ 9,784
--------- --------- --------
--------- --------- --------
</TABLE>

The following presents the plans' funded status and amounts recognized in
the balance sheet:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------------------------
1994 1993
----------------------------- -----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- -------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................ $ 1,844,260 $235,480 $ 1,551,190 $ 44,031
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
Accumulated benefits........................... $ 1,871,754 $236,467 $ 1,584,481 $ 44,531
Effect of projected future salary increases.... 151,071 13,184 125,222 2,565
------------- -------------- ------------- --------------
Projected benefits............................. 2,022,825 249,651 1,709,703 47,096
Plan assets at fair value........................ 2,361,527 211,489 2,086,929 33,076
------------- -------------- ------------- --------------
Plan assets in excess of (less than) projected
benefit obligation............................. 338,702 (38,162) 377,226 (14,020)
Unrecognized net (gain) loss..................... 12,879 39,495 (113,604) 1,039
Unrecognized prior service cost.................. (1,714) 12,484 5,655 11,527
Unrecognized net asset existing at transition.... (2,241) (1) (2,194) (408)
Additional minimum liability..................... (38,794) (9,593)
------------- -------------- ------------- --------------
Prepaid (accrued) pension cost................... $ 347,626 $(24,978) $ 267,083 $(11,455)
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>

F-16
<PAGE> 38
LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The principal actuarial assumptions were:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................... 7.75% 9.0 % 9.0 %
Rate of increase in compensation levels.......................... 4.75% 6.0 % 6.0 %
Expected long-term rate of return on plan assets................. 9.5 % 9.5 % 9.5 %
</TABLE>

POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS:

In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees and dependents at
certain locations. Participants are eligible for these benefits when they retire
from active service and meet the eligibility requirements for the Company's
pension plans. These benefits are funded primarily on a pay-as-you-go basis with
the retiree generally paying a portion of the cost through contributions,
deductibles and coinsurance provisions.

Effective April 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106"). SFAS 106 requires employers to recognize the
cost of postretirement health and welfare obligations in their financial
statements over the years of employee service. These costs were previously
expensed on a pay-as-you-go basis. The Company elected to immediately recognize
the accumulated postretirement obligation upon adoption of SFAS 106. A
non-recurring charge of $330,499,000 pre-tax, $233,377,000, after-tax, or $3.03
per share, was recorded as the cumulative effect of the accounting change. Total
postretirement health care and life insurance costs were $41,570,000 and
$57,353,000 for 1994 and 1993, respectively under SFAS 106. These costs for
1992, which were recorded on a cash basis, and have not been restated, were
$17,455,000.

In March 1993 and March 1994, the Company adopted various plan amendments
which are being amortized as prior service cost commencing in the quarter
following adoption.

Postretirement health care and life insurance costs included the following
components:

<TABLE>
<CAPTION>
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost -- benefits earned during the period............. $ 9,588 $11,364
Interest cost on accumulated postretirement benefit
obligation.................................................. 46,050 45,989
Net amortization.............................................. (14,068)
-------- -------
Total postretirement health care and life insurance costs..... $ 41,570 $57,353
-------- -------
-------- -------
</TABLE>

The following table presents the amounts recognized in the balance sheet
at:

<TABLE>
<CAPTION>
MARCH 31,
----------------------
1994 1993
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $ 363,886 $259,490
Fully eligible plan participants............................ 29,689 95,939
Other active plan participants.............................. 95,372 50,365
--------- --------
Total accumulated postretirement benefit obligation........... 488,947 405,794
Unrecognized prior service cost related to plan amendments.... 252,200 204,799
Unrecognized net loss, primarily due to change in the discount
rate........................................................ (126,859)
--------- --------
Accrued postretirement health care and life insurance costs... $ 614,288 $610,593
--------- --------
--------- --------
</TABLE>
F-17
<PAGE> 39

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Actuarial assumptions used in determining the accumulated postretirement
benefit obligation include a discount rate of 7.75% and 9% for 1994 and 1993,
respectively, and an assumed health care cost trend rate of 12.4% decreasing
gradually to an ultimate rate of 6% by the year 2003. Changing the assumed
health care cost trend rate by 1% in each year would change the accumulated
postretirement benefit obligation at March 31, 1994 by approximately $50,000,000
and the aggregate service and interest cost components for 1994 by approximately
$6,500,000.

EMPLOYEE SAVINGS PLANS:

Under its various employee savings plans, the Company matches the
contributions of participating employees up to a designated level. The extent of
the match, vesting terms and the form of the matching contribution vary among
the plans. Under these plans, the matching contributions, in cash, Loral common
stock or both, for 1994, 1993 and 1992 were $22,929,000, $18,625,000 and
$19,179,000, respectively.

POSTEMPLOYMENT BENEFITS:

In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). The Company is required to adopt SFAS 112
by fiscal 1995 and based on preliminary estimates does not expect any material
impact to the financial position or results of operations of the Company.

10. SALES TO PRINCIPAL CUSTOMERS:

The Company operates primarily in one industry segment, defense
electronics. Sales to principal customers are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. Government Agencies........................... $2,578,004 $2,077,009 $1,530,417
Foreign (principally foreign governments).......... 564,612 477,501 594,813
Other (principally U.S. Government end use)........ 866,117 780,893 756,590
---------- ---------- ----------
$4,008,733 $3,335,403 $2,881,820
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Foreign sales comprise the following:

11. RELATED PARTY TRANSACTIONS:

The Company charges SS/L a fee for providing SS/L with management services
under an agreement among the Company, LAH, SS/L and the four European investors.
The management fee was $2,981,000, $2,576,000 and $1,953,000 in 1994, 1993 and
1992, respectively. The Company and LAH allocate certain

F-18
<PAGE> 40

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

overhead costs and expenses to SS/L and SS/L charges LAH certain overhead costs.
The net allocated expenses charged to SS/L were $9,446,000, $10,448,000, and
$10,414,000 in 1994, 1993 and 1992, respectively. In addition, the Company sells
products to SS/L. Net sales to SS/L were $15,769,000, $11,574,000 and $8,513,000
in 1994, 1993 and 1992, respectively. Included in other current assets are
advances to SS/L of $8,207,000 and $6,832,000 at March 31, 1994 and 1993,
respectively. LAH and SS/L have a tax sharing agreement whereby certain tax
liabilities and benefits are shared equitably. For the year ended March 31,
1992, LAH paid $10,239,000 to SS/L pursuant to this agreement. LAH has
guaranteed performance of SS/L under certain commercial contracts. To date, SS/L
has performed satisfactorily under these contracts, and management believes that
they will be successfully completed.

In 1989, the Company sold its Aircraft Braking Systems and Engineered
Fabrics divisions to K&F Industries, Inc. ("K&F"), of which the Chairman of
Loral owns 35% of the capital stock and certain executive officers of Loral own
rights to purchase 4% of the capital stock. In connection with the sale, K&F
issued to the Company a $30,000,000 14 3/4% paid-in-kind subordinated
convertible debenture due 2004 (the "Debenture") convertible into 15% of the
common equity of K&F. In accordance with Securities and Exchange Commission
Staff Accounting Bulletin No. 81, the value of the Debenture has not been
recognized by the Company. Because the Debenture is not publicly traded its fair
value is not readily determinable. However, the Company believes that the
Debenture has a fair value less than the publicly traded K&F subordinated
debentures, which have rights superior to the Debenture and pay interest
currently, and are trading at approximately 92% of face value.

The Company and K&F have agreements covering various real property
occupancy arrangements and agreements under which the Company and K&F provide
certain services, such as benefits administration, treasury, accounting and
legal services to each other. The charges for these services, as agreed to by
the Company and K&F, are based upon the actual cost incurred in providing the
services without a profit. These transactions between the Company and K&F were
not significant. Sales to K&F were $6,785,000, $4,796,000 and $8,828,000 in
1994, 1993 and 1992, respectively.

F-19
<PAGE> 41

LORAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

<TABLE>
<CAPTION>
1994 QUARTER ENDED
--------------------------------------------------
JUNE 30 SEPT. 30 DEC. 31 MARCH 31 YEAR
--------- -------- -------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales................................................ $849,451 $836,633 $902,003 $1,420,646 $4,008,733
Operating income..................................... 70,182 78,396 97,952 154,836 401,366
Net income........................................... 40,351 46,717 56,945 84,255 228,268
Earnings per share:*
Primary............................................ .48 .56 .68 1.00 2.72
Fully diluted...................................... .48 .56 .68 1.00 2.72
</TABLE>

<TABLE>
<CAPTION>
1993 QUARTER ENDED
------------------------------------------------
JUNE 30 SEPT. 30 DEC. 31 MARCH 31 YEAR
--------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales................................................. $ 681,300 $738,902 $941,141 $974,060 $3,335,403
Operating income...................................... 51,449 64,860 76,367 103,578 296,254
Income before extraordinary item and cumulative effect
of changes in accounting............................ $ 24,403 $ 35,876 $ 41,417 $57,373 $ 159,069
Extraordinary item.................................... (17,776 ) (17,776)
Cumulative effect of changes in accounting............ (233,377) (233,377)
--------- -------- -------- -------- ----------
Net income (loss)..................................... $(208,974) $ 35,876 $ 41,417 $39,597 $ (92,084)
--------- -------- -------- -------- ----------
--------- -------- -------- -------- ----------
Earnings per share:*
Primary:
Income before extraordinary item and cumulative
effect of changes in accounting................. $ 0.36 $0.46 $0.52 $ .69 $ 2.06
Extraordinary item................................ (.21 ) (.23)
Cumulative effect of changes in accounting........ (3.41) (3.03)
------ ----- ----- ------ ------
Net income (loss)................................. $(3.05) $0.46 $0.52 $ .48 $(1.20)
------ ----- ----- ------ ------
------ ----- ----- ------ ------
Fully diluted:
Income before extraordinary item and cumulative
effect of changes in accounting................. $ 0.35 $0.45 $0.51 $ .69 $ 2.02
Extraordinary item................................ (.21 ) (.23)
Cumulative effect of changes in accounting........ (3.40) (2.99)
------ ----- ----- ------ ------
Net income (loss)................................. $(3.05) $0.45 $0.51 $ .48 $(1.20)
------ ----- ----- ------ ------
------ ----- ----- ------ ------
</TABLE>

- - - ---------------
* Earnings per share is computed independently for each of the periods presented
and therefore the quarters may not sum to the total for the year. Adjusted to
reflect two-for-one stock split distributed October 7, 1993.

F-20
<PAGE> 42

LORAL CORPORATION AND SUBSIDIARIES

SCHEDULE II -- ACCOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)

BALANCE AT
---------- BALANCE AT
APRIL 1 ADDITIONS DEDUCTIONS MARCH 31
------- --------- ---------- ----------
AMOUNTS
AMOUNTS WRITTEN NOT
NAME OF DEBTOR COLLECTED OFF CURRENT CURRENT
- - - -------------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:

George Taft, Senior Vice President of Loral
Electronic Systems (a)...................... $100 $ 100

Lawrence H. Schwartz, Vice President of Loral
Corporation (b)............................. 100 100

Year ended March 31, 1993:

George Taft.................................... 100 $100

Lawrence H. Schwartz........................... 100 100

Year ended March 31, 1992:

George Taft.................................... 100 $100

Lawrence H. Schwartz........................... $ 100 100

Robert Ziernicki, former Senior Vice President
of Loral Electronic Systems (c)............. 218 218
</TABLE>

- - - ---------------

Notes: (a) The loan was charged interest at 5% and was not collateralized. The
loan was paid in full in June 1993.

(b) The loan was charged interest at 7% and was collateralized. The loan
was paid in full in March 1994.

S-1
<PAGE> 43

LORAL CORPORATION AND SUBSIDIARIES

SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)

BALANCE AT ADDITIONS OTHER BALANCE AT
DESCRIPTION APRIL 1 AT COST RETIREMENTS CHANGES MARCH 31
- - - ------------------------------------------ ---------- --------- ----------- ------- ----------
(a) (b)

<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land.................................... $ 68,710 $ 47,637 $ 116,347
Buildings and improvements.............. 310,728 254,676 $ (165) $(5,076) 560,163
Machinery, equipment, furniture and
fixtures............................. 800,261 340,889 (14,688) (1,201) 1,125,261
Leasehold improvements.................. 91,758 29,875 (774) 4,348 125,207
---------- --------- ----------- ------- ----------
$1,271,457 $ 673,077 $ (15,627) $(1,929) $1,926,978
---------- --------- ----------- ------- ----------
---------- --------- ----------- ------- ----------
Year ended March 31, 1993:
Land.................................... $ 61,415 $ 9,894 $ (315) $(2,284) $ 68,710
Buildings and improvements.............. 293,635 16,446 (1,800) 2,447 310,728
Machinery, equipment, furniture and
fixtures............................. 708,336 129,371 (37,172) (274) 800,261
Leasehold improvements.................. 34,958 57,913 (1,083) (30) 91,758
---------- --------- ----------- ------- ----------
$1,098,344 $ 213,624 $ (40,370) $ (141) $1,271,457
---------- --------- ----------- ------- ----------
---------- --------- ----------- ------- ----------
Year ended March 31, 1992:
Land.................................... $ 59,023 $ 4,263 $(1,871) $ 61,415
Buildings and improvements.............. 268,847 15,585 $ (992) 10,195 293,635
Machinery, equipment, furniture and
fixtures............................. 621,445 68,506 (20,786) 39,171 708,336
Leasehold improvements.................. 31,451 4,036 (643) 114 34,958
---------- --------- ----------- ------- ----------
$ 980,766 $ 92,390 $ (22,421) $47,609 $1,098,344
---------- --------- ----------- ------- ----------
---------- --------- ----------- ------- ----------
</TABLE>

- - - ---------------
Notes:

(a) Includes the following amounts acquired through business acquisitions:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- --------
<S> <C> <C> <C>
Land........................................ $ 47,521 $ 9,894 $ 2,100
Building and improvements................... 246,620 7,524 94
Machinery, equipment furniture and
fixtures.................................. 259,643 62,832 8,254
Leasehold improvements...................... 16,341 36,106 401
--------- --------- --------
$ 570,125 $ 116,356 $ 10,849
--------- --------- --------
--------- --------- --------
</TABLE>

(b) Primarily reclassifications among asset categories, in addition to other
minor adjustments. Fiscal 1992 includes final purchase price allocations of
$46,518.

S-2
<PAGE> 44

LORAL CORPORATION AND SUBSIDIARIES

SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
CHARGED
BALANCE TO BALANCE
AT COST AND OTHER AT
DESCRIPTION APRIL 1 EXPENSE RETIREMENTS CHANGES MARCH 31
----------- ------- ------- ----------- ------- --------
(a)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Building and improvements.................. $ 65,735 $ 15,961 $ (33) $ (98) $ 81,565
Machinery, equipment, furniture and
fixtures................................ 398,860 113,613 (10,064) (778) 501,631
Leasehold improvements..................... 25,170 12,279 (638) 547 37,358
-------- -------- ----------- ------- --------
$489,765 $141,853 $ (10,735) $(329) $620,554
-------- -------- ----------- ------- --------
-------- -------- ----------- ------- --------
Year ended March 31, 1993:
Buildings and improvements................. $ 54,966 $ 11,330 $ (561) $ 65,735
Machinery, equipment, furniture and
fixtures................................ 337,269 91,808 (30,203) $ (14) 398,860
Leasehold improvements..................... 16,285 10,309 (1,425) 1 25,170
-------- -------- ----------- ------- --------
$408,520 $113,447 $ (32,189) $ (13) $489,765
-------- -------- ----------- ------- --------
-------- -------- ----------- ------- --------
Year ended March 31, 1992:
Buildings and improvements................. $ 44,455 $ 10,675 $ (46) $(118) $ 54,966
Machinery, equipment, furniture and
fixtures................................ 263,646 87,024 (13,383) (18) 337,269
Leasehold improvements..................... 13,393 3,255 (466) 103 16,285
-------- -------- ----------- ------- --------
$321,494 $100,954 $ (13,895) $ (33) $408,520
-------- -------- ----------- ------- --------
-------- -------- ----------- ------- --------
</TABLE>

- - - ---------------
Notes:

(a) Primarily reclassifications among asset categories, in addition to other
minor adjustments.

Depreciation and amortization:

The annual provisions for depreciation and amortization have been computed
principally in accordance with the following range of years (provided primarily
on the straight-line method):

Buildings and improvements -- 5 to 45 years

Machinery, equipment, furniture and fixtures -- 3 to 13 years

Leasehold improvements -- Lesser of asset life or lease term.

S-3
<PAGE> 45

LORAL CORPORATION AND SUBSIDIARIES

SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED MARCH 31, 1994, 1993 AND 1992
(IN THOUSANDS)

<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------
DESCRIPTION 1994 1993 1992
----------- ---- ---- ----
<S> <C> <C> <C> <C>
(1) Maintenance and repairs................................... $47,223 $36,170 $34,735
------- ------- -------
------- ------- -------
(2) Amortization of intangible assets and similar deferrals: *
Goodwill.................................................. $12,858 $ 7,377
Unearned compensation..................................... 18,599 10,157
Other assets.............................................. 9,101 10,153
------- -------
$40,558 $27,687
------- -------
------- -------
</TABLE>

- - - ---------------
* Amounts are not presented because such amounts are less than one percent of
total sales.

S-4
<PAGE> 46

EXHIBIT INDEX

<TABLE>
<CAPTION>
FILED HEREWITH (-) OR INCORPORATED BY
REFERENCE TO
EXHIBIT REGISTRATION NO. OR OTHER DOCUMENT
- - - ------- -------------------------------------
<S> <C> <C>
3.1 Loral Corporation Restated Certificate of Form 10-Q for the quarter ended
Incorporation as in effect May 12, 1994 September 30, 1993, Exhibit 3
3.2 Loral Corporation By-Laws as in effect May 12, --
1994
4.1 Revolving Credit Agreement among Loral Current Report on Form 8-K dated
Corporation, Certain Banks, Morgan Guaranty February 23, 1994, Exhibit 4.1
Trust Company of New York, Chemical Bank,
Barclays Bank PLC, and Continental Bank, N.A.,
dated as of February 23, 1994
4.2 364 Day Revolving Credit Agreement among Loral Current Report on Form 8-K dated
Corporation, Certain Banks, Morgan Guaranty February 23, 1994, Exhibit 4.2
Trust Company of New York, Chemical Bank,
Barclays Bank PLC, and Continental Bank, N.A.,
dated as of February 23, 1994
10.1 Loral 1983 Stock Option Plan 1983 Proxy Material
10.2 Amendment to the Loral 1983 Stock Option Plan Annual Report on Form 10-K for the
fiscal year ended March 31, 1986,
Exhibit 10.11
10.3 Amended Loral 1986 Stock Option Plan Form 10-Q for the quarter ended June
30, 1988, Exhibit 10.1
10.4 Amendment to the Loral 1980, 1981, 1983 and Annual Report on Form 10-K for the
1986 Stock Option Plans fiscal year ended March 31, 1990,
Exhibit 10.8
10.5 1991 Amendment to the Loral 1986 Stock Option Annual Report on Form 10-K for the
Plan fiscal year ended March 31, 1991,
Exhibit 10.9
10.6 Loral Corporation Restricted Stock Purchase Current Report on Form 8-K dated May
Plan 13, 1987, Exhibit 10.28
10.7 Amendment to the Loral Corporation Restricted Form 10-Q for the quarter ended June
Stock Purchase Plan 30, 1987, Exhibit 10.2
10.8 Restated Employment Agreement between Loral Annual Report on Form 10-K for the
Corporation and Bernard L. Schwartz, dated as fiscal year ended March 31, 1990,
of April 1, 1990 Exhibit 10.11
10.9 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Bernard L. Schwartz, dated as of March 15, 1990 fiscal year ended March 31, 1991,
Exhibit 10.13
10.10 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Bernard L. Schwartz, dated as of December 10, fiscal year ended March 31, 1991,
1990 Exhibit 10.14
10.11 Employment Contract between Loral Corporation Form 10-Q for the quarter ended June
and Frank C. Lanza, dated as of April 1, 1987 30, 1987, Exhibit 10.1 and Annual
Report on Form 10-K for the fiscal
year ended March 31, 1982, Exhibit
10.11
10.12 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1988,
March 31, 1988 Exhibit 10.19
10.13 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1990,
March 21, 1990 Exhibit 10.16
</TABLE>
<PAGE> 47

<TABLE>
<CAPTION>
FILED HEREWITH (-) OR INCORPORATED BY
REFERENCE TO
EXHIBIT REGISTRATION NO. OR OTHER DOCUMENT
- - - ------- -------------------------------------
<S> <C> <C>
10.14 Amendment to Employment Contract between Loral Annual Report on Form 10-K for the
Corporation and Frank C. Lanza, dated as of fiscal year ended March 31, 1992,
April 1, 1992 Exhibit 10.17
10.15 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Frank C. Lanza, dated as of August 5, 1985 fiscal year ended March 31, 1991,
Exhibit 10.18
10.16 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Michael P. DeBlasio, dated as of December 10, fiscal year ended March 31, 1991,
1990 Exhibit 10.19
10.17 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Robert V. LaPenta, dated as of December 10, fiscal year ended March 31, 1992,
1990 Exhibit 10.20
10.18 Split-dollar life insurance agreement with Annual Report on Form 10-K for the
Michael B. Targoff Insurance Trust, dated as of fiscal year ended March 31, 1990,
April 30, 1990 Exhibit 10.20
10.19 Split-dollar life insurance agreement with E. Annual Report on Form 10-K for the
Donald Shapiro, dated as of December 10, 1990 fiscal year ended March 31, 1992,
Exhibit 10.22
10.20 Form of Indemnity Agreement between Loral Annual Report on Form 10-K for the
Corporation and Officers and Directors of Loral fiscal year ended March 31, 1987,
Corporation Exhibit 10.22
10.21 Standstill Agreement among Loral Corporation Amendment No. 1 to Current Report on
and certain limited partnerships affiliated Form 8-K dated June 30, 1992, Exhibit
with Shearson Lehman Brothers Holdings, Inc. 4.1
dated as of August 14, 1992
10.22 Amendment No. 1 to Standstill Agreement, dated Annual Report on Form 10-K for the
as of November 13, 1992, among Loral fiscal year ended March 31, 1993,
Corporation and certain limited partnerships Exhibit 10.27
affiliated with Shearson Lehman Brothers
Holdings, Inc.
10.23 Asset Purchase Agreement between Loral Current Report on Form 8-K dated
Corporation and International Business Machines December 12, 1993, Exhibit 10.1
Corporation dated as of December 12, 1993; and
letter dated December 13, 1993
10.24 Certain letters relating to the Asset Purchase Current Report on Form 8-K dated
Agreement between Loral Corporation and March 1, 1994, Exhibit 10.2
International Business Machines Corporation
dated December 21, 1993 through March 1, 1994
11 Computation of Earnings Per Share for the three --
years ended March 31, 1994
12 Computation of Ratio of Earnings to Fixed --
Charges for the five years ended March 31, 1994
21 Subsidiaries of the Registrant --
23 Consent of Coopers & Lybrand --
24 Powers of Attorney --
</TABLE>

<PAGE> 1

EXHIBIT 3.2

BY-LAWS
OF
LORAL CORPORATION

OFFICES

1. The principal office of the corporation shall be at 600 Third Avenue,
New York, New York.

2. The corporation may also have offices at such other places, within or
without the State of New York and within or without the United States of America
as the board of directors may from time to time designate or as the business of
the corporation may require.

STOCKHOLDERS' MEETINGS

3. Place: The annual meetings of stockholders of the corporation, for the
election of directors and for the transaction of such other business as may come
before such meetings, shall be held at the principal office of the corporation
in New York, or at such other place in the State of New York as the Board of
Directors shall from time to time designate and as may be set forth in the
notice of the meeting. Special meetings of stockholders, other than those
regulated by statute, in which event the requirements of the statutes shall be
followed, may be held at such place within the State of New York and at such
time as may be stated in the notice of the meeting.

4. Annual Meeting: The annual meeting of stockholders for 1972 shall be
held on June 29, 1972 and, commencing with the year 1973, shall be held on the
last Tuesday of July in each year and every year, if not a holiday, and if a
holiday, then on the next succeeding business day, at 2:00 P.M., or at such
other date, time and place as may be determined by the Board of Directors, for
the purpose of electing a board of directors and transacting such other business
as may properly be brought before the meeting.

5. Special Meetings: Special meetings of the stockholders of the
Corporation may be called only by the Board of Directors or by the Chairman of
the Board.

6. Notice of Meetings: Written notice of every meeting of stockholders,
stating the time, place and purpose thereof, shall be delivered or mailed not
less than ten (10) nor more than seventy-five (75) days prior thereto to each
stockholder of record at his last known post-office address as the same appears
on the books of the corporation.

7. Quorum: The holders of a majority in interest of the stock issued and
outstanding, and entitled to vote thereat, present in person, or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute, by the certificate of incorporation or by these by-laws; provided,
however, that if at any such meeting the holders of any class of stock of the
corporation are entitled to vote separately as a class, the holders of a
majority of the number of shares of such class outstanding shall constitute a
quorum for such purpose. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. At such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally called.

8. Voting: At any meeting of the stockholders, every stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder and bearing a date not
more than eleven (11) months prior to said meeting, unless said instrument
provides for a longer period. Each stockholder shall have one vote for each
share of stock having voting power, registered in his name on the books of the
corporation. The stockholders entitled to vote shall be those of
<PAGE> 2

record on the date fixed pursuant to Paragraph 36 hereof as the record date for
the determination of stockholders entitled to vote, or, if no such record date
shall have been fixed, then on the date of such meeting. Voting on any question
or for any election shall be oral unless a vote by ballot is required by law or
is demanded by any stockholder present and entitled to vote; then, in either of
such cases, the vote shall be taken by ballot. All elections shall be had and
all questions decided by a plurality vote of the shares voting, except as
otherwise required by law, or the certificate of incorporation or the by-laws.

9. Inspectors of Election: At all elections of directors, the proxies
shall be received and all questions relating to the qualifications to vote and
the validity of proxies and the acceptance or rejection of votes shall be
decided, and the ballots, if any, shall be received and counted by two
inspectors. Such inspectors shall be appointed by the presiding officer of the
meeting, shall be sworn faithfully to execute their duties with strict
impartiality and according to the best of their ability, and shall in writing
certify to their findings. No director or officer or candidate for election as
director shall be appointed to act as inspector.

DIRECTORS

10. Number: (a) The number of directors which shall constitute the whole
Board shall be eleven (11). At the 1985 annual meeting of stockholders, the
directors shall be divided into three classes, of three directors per class,
with the term of office of the first class to expire at the 1986 annual meeting
of stockholders, the term of office of the second class to expire at the 1987
annual meeting of stockholders and the term of office of the third class to
expire at the 1988 annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election; directors elected to fill a vacancy shall be elected for a
term equal to the remaining term of office of the class to which such directors
shall have been elected.

(b) Subject to the rights of the holders of any class or series of the
capital stock of the Corporation entitled to vote generally in the election of
directors (hereinafter in these By-Laws referred to as the "Voting Stock") then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the next regular annual meeting of stockholders at
which directors are to be elected. No decrease in the authorized number of
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.

(c) Subject to the rights of the holders of any class or series of the
Voting Stock then outstanding, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
directors or by the affirmative vote of the holders of at least 80 percent of
the voting power of all of the then-outstanding shares of the Voting Stock,
voting together as a single class.

11. Powers: The property and business of the corporation shall be managed
by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.

12. Organization Meeting: The first meeting of each newly elected board
shall be held immediately following the annual meeting of stockholders at the
same place, or shall be held at such other time and place either within or
without the State of New York as shall be fixed by the vote of the stockholders
at the annual meeting, unless the newly elected board shall by unanimous consent
fix a different time and place, in which event the meeting shall be held at the
time and place fixed by the directors. No notice of such meeting shall be
necessary, but the consent to the time and place of such meeting given by any
director who is not present at the meeting shall be in writing.

13. Regular Meetings: Regular meetings of the board may be held without
notice at such time and place either within or without the State of New York or
within or without the United States of America as shall from time to time be
determined by the board.
<PAGE> 3

14. Special Meetings: Special meetings of the board may be held within or
without the State of New York or within or without the United States of America
and may be called by the Chairman of the Board of Directors on two (2) days
notice by mail or twenty-four (24) hours notice by telephone, telegram,
cablegram or radiogram to each director; special meetings shall be called by the
President, Vice President or Secretary in like manner and on like notice at the
written request of a majority of the directors.

15. Quorum: At all meetings of the board, a majority of the directors then
in office shall be necessary and sufficient to constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by the statute or by
the certificate of incorporation or by these by-laws.

15A. Action by Unanimous Consent: Any action required or permitted to be
taken by the board or any committee thereof may be taken without a meeting of
all members of the board or the committee consent in writing to the adoption of
a resolution authorizing the action. The resolution and the written consents
thereto by the members of the board or committee shall be filed with the minutes
of the proceedings of the board or committee.

16. Executive Committee: There shall be an executive committee consisting
of the chairman of the board of directors and two (2) other directors chosen by
the board, who shall serve during the pleasure of the board or for terms fixed
by it. Two members of the executive committee shall constitute a quorum for the
transaction of business. The executive committee shall have all the authority of
the board of directors to the extent permitted by law.

OFFICERS

17. Officers: The officers of the corporation shall be a chairman of the
board of directors, president, one or more vice presidents, a secretary, a
treasurer and a controller and such other officers as the board of directors
shall deem proper. The officers, other than the chairman of the board of
directors and the president, need not be members of the board of directors, but
the chairman of the board of directors and the president shall be members of the
board. The same person may hold two or more offices.

18. Election: The board of directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers and may, not
inconsistent with the by-laws fix the powers and duties of any officer. Each
officer so chosen shall hold office until his successor shall be chosen and
shall qualify, unless he shall sooner resign or be removed as herein in these
by-laws provided.

19. Agents: The board may appoint such agents as it shall deem necessary,
who shall act as such for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.

20. Salaries: The salaries of the chairman of the board of directors, the
chairman of the executive committee, the president, vice-president, the
secretary and the treasurer shall be fixed by the board of directors. The
salaries of all other officers and agents of the corporation shall be fixed by
the board of directors or by such officer or officers as the board of directors
may designate.

21. Removal and Vacancies: Any officer or agent elected or appointed by
the board of directors may be removed with or without cause, at any time by the
affirmative vote of a majority of the board of directors then in office. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the board of directors.

22. Chairman of the Board of Directors: The Chairman of the Board shall be
the Chief Executive Officer of this Corporation and shall have general charge
and control of all the business and affairs of the Corporation. He shall preside
at all meetings of the stockholders and the Board of Directors. In the absence
of the Chairman of the Executive Committee, the Chairman of the Board shall
preside at meetings of the Executive Committee. The Chairman of the Board shall
from time to time secure information concerning the business and affairs of the
Corporation and shall promptly lay such information before the Board of
Directors.
<PAGE> 4

23. Chairman of the Executive Committee: The chairman of the executive
committee shall preside at all meetings of the executive committee at which he
is present. He shall do and perform such duties as may, from time to time, be
assigned to him by the board of directors.

24. The President: The President shall, in the absence of the Chairman of
the Board, preside at meetings of the stockholders, of the Board of Directors
and, in the absence also of the Chairman of the Executive Committee, of the
Executive Committee; and shall, in case of a vacancy in the office of the
Chairman of the Board, have the power to perform the duties incident to such
office. He shall be the Chief Operating Officer of the Corporation, subject to
the control of the Chairman of the Board.

25. Vice Presidents: The vice-presidents shall perform such duties as may
be assigned by the board of directors.

26. The Secretary: The secretary shall attend all sessions of the board of
directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose. He shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the board of directors, and shall perform such other duties as may
be prescribed by the board of directors or president, under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation, and when
authorized by the board of directors, affix the same to any instrument requiring
it, and when so affixed it may be attested by his signature or by the signature
of the treasurer or an assistant secretary.

27. Assistant Secretaries: The assistant secretaries, if any, shall be
chosen by the board of directors, shall, in order of their seniority and in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties as the board of
directors shall prescribe.

28. The Treasurer: The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.

29. He shall disburse the funds of the corporation as may be ordered by the
board of directors, taking proper vouchers for such disbursements, and shall
render to the president and directors at the regular meetings of the board of
directors, or whenever they may require it, an account of all his transactions
as treasurer and of the financial condition of the corporation.

30. If required by the board of directors, he shall give the corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the board for the faithful performance of the duties of his office and the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.

31. Assistant Treasurers: The assistant treasurers, if any shall be chosen
by the board of directors, shall in the order of their seniority and in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties as the board of
directors shall prescribe.

RESIGNATION: FILLING OF VACANCIES

32. Resignation: Any director or officer may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein and, if no time be specified at the time of its receipt by the
president, vice-president or secretary, the acceptance of which resignation
shall not be necessary to make it effective.

33. Repealed as of August 20, 1985.
<PAGE> 5

CERTIFICATES OF STOCK

34. The certificates for shares of the capital stock of the corporation
shall be in such form, not inconsistent with the certificate of incorporation,
as shall be approved by the board of directors. Each certificate shall be signed
by the Chairman of the Board, president or a vice-president and also by the
secretary or an assistant secretary or the treasurer or an assistant treasurer,
and shall be sealed with seal of the corporation, which may be facsimile. If the
certificate is signed by either a transfer agent or a transfer clerk acting on
behalf of the corporation and a registrar, the signature or any such officer of
the corporation and the signature of a transfer agent acting on behalf of the
corporation may be facsimile. In case of any officer or officers who shall have
signed, or whose facsimile signature or signatures shall have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the corporation, whether because of death, resignation or otherwise before such
certificate or certificates may nevertheless be adopted by the corporation and
be used and delivered as though the officer or officers who signed the said
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
corporation.

TRANSFERS OF STOCK

35. The stock of the corporation shall be transferable or assignable only
on the books of the corporation by the holder thereof, in person or by duly
authorized attorney, upon surrender of the certificate or certificates for such
shares duly endorsed for transfer. The board of directors may appoint a transfer
agent or transfer agents or registrar or registrars of transfers for any class
or classes of capital stock of the corporation, and may require all
certificates, or all certificates of any class or classes, to bear the signature
of either or both.

CLOSING OF TRANSFER BOOKS

36. The board of directors, subject to the provisions of the certificate of
incorporation, shall have power to close the stock transfer books of the
corporation for a period not exceeding fifty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period of not exceeding fifty days
in connection with obtaining the consent of stockholders for any purpose;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the board of directors may fix in advance a date, not exceeding fifty
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders, and only such stockholders as
shall be stockholders of record of the date so fixed, shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.

REGISTERED STOCKHOLDERS

37. The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, except as may be otherwise provided by the laws of New
York.
<PAGE> 6

LOST CERTIFICATES

38. The board of directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, and the board of directors, when authorizing such issue of a new
certificate or certificates, may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
corporation.

CONTRACTS, LOANS AND BANK ACCOUNTS

39. The board of directors may, except as may otherwise be required by law,
authorize any officer or officers, agent or agents in the name of, and on behalf
of, the corporation to enter into any contract or execute or deliver any
instrument or to sign any checks, drafts or other orders for the payment of
money or notes or other evidences of indebtedness, and such authority may be
general or confined to specific instances.

FISCAL YEAR

40. The fiscal year shall begin the first day of April in each year.

DIVIDENDS

41. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital stock.

42. Before payment of any dividend, there may be set aside out of any funds
of the corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may abolish any such reserve in the manner in which it was created.

SEAL

43. The board of directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
corporation, the year of incorporation and the words "Corporate Seal" "New
York". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.

NOTICE AND WAIVER OF NOTICES

44. Whenever any notice is required by these by-laws to be given, personal
notice is not meant unless expressly so stated; and any notice so required shall
be deemed to be sufficient if given by depositing same in a post-office box in a
sealed, post-paid wrapper addressed to the person entitled thereto at his last
known post-office address, and such notice shall be deemed to have been given on
the day of such mailing. Any notice required to be given under these by-laws may
be waived by the person entitled thereto in writing, whether before or after the
time stated therein. Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings, except as otherwise provided by statute.
<PAGE> 7

AMENDMENTS

45. Amendments: These By-Laws may be amended, added to, rescinded or
repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting;
provided, however, as respects actions by the stockholders to amend, add to,
rescind or repeal any By-Law, and notwithstanding any other provisions of these
By-Laws or any provision of law which might otherwise permit a lesser vote but
not in derogation of any special vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation of
the Corporation, any Preferred Stock Designation or these By-Laws, the
affirmative vote of the holders of at least 80 percent of the voting power of
all the then-outstanding shares of the Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal Paragraph 5, or Paragraph
10(a), (b) or (c) of these By-Laws or this proviso to this Paragraph 45.

BY-LAW AMENDMENT

46. Indemnification. In addition to such rights of Indemnification as are
provided by Article Ninth, Section (3) of the Certificate of Incorporation and
as otherwise provided by applicable law, and in accordance with the New York
Business Corporation Law, this Corporation may enter into such contracts of
indemnification with directors and officers of this Corporation as may be
authorized from time to time by the Board of Directors.

<PAGE> 1

EXHIBIT 11
LORAL CORPORATION AND SUBSIDIARIES

COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------
1994 1993 1992
-------- --------- --------
<S> <C> <C> <C>
Primary:
Income before extraordinary item and cumulative effect
of changes in accounting............................. $228,268 $ 159,069 $121,795
Extraordinary item...................................... (17,776)
Cumulative effect of changes in accounting.............. (233,377)
-------- --------- --------
Net income (loss) applicable to common shares........... $228,268 $ (92,084) $121,795
-------- --------- --------
-------- --------- --------
Shares:
Weighted average common shares outstanding.............. 82,590 75,944 59,844
Common equivalent shares applicable to stock options.... 1,261 1,082 1,110
------ ------ ------
Average number of shares outstanding and common
equivalent shares.................................... 83,851 77,026 60,954
------ ------ ------
------ ------ ------
Primary earnings per common share and common equivalent
share:
Income before extraordinary item and cumulative
effect of changes in accounting.................... $2.72 $ 2.06 $2.00
Extraordinary item................................... (.23)
Cumulative effect of changes in accounting........... (3.03)
----- ------ -----
$2.72 $(1.20) $2.00
----- ------ -----
----- ------ -----
Fully Diluted:
Income before extraordinary item and cumulative effect
of changes in accounting............................. $228,268 $ 159,069 $121,795
Adjustment to interest expense, net of the tax effect
thereon attributable to convertible debt............. 3,376 4,446
-------- --------- --------
Adjusted income before extraordinary item and cumulative
effect of changes in accounting...................... 228,268 162,445 126,241
Extraordinary item...................................... (17,776)
Cumulative effect of changes in accounting.............. (233,377)
-------- --------- --------
Adjusted net income (loss).............................. $228,268 $ (88,708) $126,241
-------- --------- --------
-------- --------- --------
Shares:
Average number of common shares as adjusted for primary
computation.......................................... 83,851 77,026 60,954
Incremental increase to shares under stock options where
the quarter's ending market price is higher than the
average market price during the quarter.............. 94 86 64
Shares issuable for convertible debt.................... 3,410 4,508
------ ------ ------
Average number of shares outstanding on a fully diluted
basis................................................ 83,945 80,522 65,526
------ ------ ------
------ ------ ------
Earnings per common share assuming full dilution:
Income before extraordinary item and cumulative
effect of changes in accounting.................... $2.72 $ 2.02 $1.93
Extraordinary item................................... (.23)
Cumulative effect of changes in accounting........... (2.99)
----- ------ -----
$2.72 $(1.20)* $1.93
----- ------ -----
----- ------ -----
</TABLE>

- - - ---------------
* The impact of the extraordinary item and cumulative effect of changes in
accounting on the fully diluted calculation is anti-dilutive, resulting in the
net fully diluted amount equalling the net primary amount.

<PAGE> 1

EXHIBIT 12

LORAL CORPORATION AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations
before taxes, minority interest and
equity in net income (loss) of
affiliate.......................... $362,372 $255,543 $240,990 $165,801 $123,061
Add:
Interest expense................... 46,957 50,656 57,771 56,429 39,713
Amortization of debt expense....... 312 2,477 4,066 2,503 661
Amortization of capitalized
interest......................... 1,407 1,020 1,035 547 318
Interest component of rent
expense.......................... 19,572 15,162 13,284 10,858 8,014
-------- -------- -------- -------- --------
Earnings.............................. $430,620 $324,858 $317,146 $236,138 $171,767
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Fixed charges:
Interest expense...................... $ 46,957 $ 50,656 $ 57,771 $ 56,429 $ 39,713
Amortization of debt expense.......... 312 2,477 4,066 2,503 661
Capitalized interest.................. 268 271 29 1,784 805
Interest component of rent expense.... 19,572 15,162 13,284 10,858 8,014
-------- -------- -------- -------- --------
Fixed charges......................... $ 67,109 $ 68,566 $ 75,150 $ 71,574 $ 49,193
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges...... 6.42x 4.74x 4.22x 3.30x 3.49x
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<PAGE> 1

EXHIBIT 21

LORAL CORPORATION AND SUBSIDIARIES

SUBSIDIARIES

As of March 31, 1994, active subsidiaries, all 100% owned directly or
indirectly (except as noted below), consist of the following:

<TABLE>
<CAPTION>
STATE OR COUNTRY
OF INCORPORATION
----------------------
<S> <C>
Conic Corporation............................................................. Delaware
Frequency Sources, Inc. ...................................................... Delaware
FSI Investment Corporation.................................................. Massachusetts
Loral Infrared & Imaging Systems, Inc. ..................................... Delaware
LC Acquiring Corp. ........................................................... Delaware
Loral Defense Systems Corp. ................................................ Delaware
Loral Librascope Corporation.............................................. Delaware
Loral Fairchild Corp. ...................................................... Delaware
Loral Federal Systems Company............................................... Delaware
IBM Federal Sector Services Corporation................................... Delaware
IBM International Air Traffic Corporation................................. Delaware
International Business Machines Aerospace Systems Integration
Corporation.............................................................. Delaware
LORAL/ROLM Mil-Spec Corp. .................................................. Delaware
Loracon Sales Corporation..................................................... Delaware
Loral Aerospace Holdings, Inc. ............................................... Delaware
Loral Aerospace Corp. ...................................................... Delaware
Logistic Services Corporation............................................. Delaware
Loral Aerospace International, Inc. ...................................... Delaware
Loral General Partner, Inc. .............................................. Delaware
Space Systems/Loral, Inc.(2)................................................ Delaware
International Space Technology, Inc.(3)................................... Delaware
Cosmotech(3)............................................................ Russian Federation
SS/L Export Corporation(2)................................................ U. S. Virgin Islands
Loral American Beryllium Corporation.......................................... Delaware
Be MI AG(1)................................................................. Switzerland
Loral Electro-Optical Systems, Inc. .......................................... Delaware
Electro-Opticas Superior S.A. de C.V. ...................................... United Mexican States
Loral Europe Limited.......................................................... United Kingdom
Loral Hycor, Inc. ............................................................ Delaware
Hycor International, Inc. .................................................. Massachusetts
Loral International, Inc. .................................................... Delaware
L/E Systems Corporation(4).................................................. Delaware
Loral International Belgian Services Limited................................ Delaware
Loral International GmbH.................................................... Republic of Germany
Loral International Systems Limited......................................... Delaware
Loral Properties Inc. ........................................................ Delaware
Loral Sales Office Corp. ..................................................... Delaware
Loral Sonar Systems Corp. .................................................... Delaware
Loral Travel Services, Inc. .................................................. Delaware
Loral Vought Systems Corporation.............................................. Delaware
Loral Vought Services, Inc. ................................................ Delaware
MLRS International Corporation(6)........................................... Delaware
Mikrodalga Electronik Sistemler Sanayi Ve Tacaret Anonim Sirketi(7)........... Turkey
The Narda Microwave Corporation............................................... New York
The Narda International Corp. .............................................. New York
Randtron Systems, Inc. ....................................................... Delaware
Loral Export Corporation.................................................... U. S. Virgin Islands
Loral Securities, Inc. ..................................................... Delaware
Valley Association Corporation(4)............................................. Ohio
WITG, Inc.(5)................................................................. Delaware
</TABLE>

- - - ---------------
(1) Only 33.3% owned directly or indirectly

(2) Only 32.7% owned directly or indirectly

(3) Only 16.16% owned directly or indirectly

(4) Only 50% owned directly or indirectly

(5) Only 25% owned directly or indirectly

(6) Only 77.48% owned directly or indirectly

(7) Only 50.67% owned directly or indirectly

<PAGE> 1

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statements
of Loral Corporation and Subsidiaries on Form S-8 (File Nos. 2-78421, 2-91193,
33-7589, 33-8822, 33-14516, 33-23757 and 33-37829) and Form S-3 (File No.
33-50407) of our report dated May 12, 1994, which includes an explanatory
paragraph regarding changes in methods of accounting for income taxes and
postretirement benefits other than pensions as discussed in Notes 6 and 9 to the
consolidated financial statements, on our audits of the consolidated financial
statements and financial statement schedules of Loral Corporation and
Subsidiaries as of March 31, 1994 and 1993, and for the years ended March 31,
1994, 1993 and 1992, which report is included in this Annual Report on Form
10-K.

COOPERS & LYBRAND

1301 Avenue of the Americas
New York, NY 10019
May 12, 1994

<PAGE> 1

EXHIBIT 24

POWER OF ATTORNEY

The undersigned, as a Director of Loral Corporation, a New York corporation (the
"Company"), and/or, as applicable, as an officer of the Company; does hereby
constitute and appoint Michael B. Targoff and/or Eric J. Zahler to be his agent
and attorney-in-fact; with the power to act fully hereunder and with full power
of substitution to act in the name and on behalf of the undersigned; to sign in
the name and on behalf of the undersigned, as Director of the Company or as
Officer of the Company, and file with the Securities and Exchange Commission, an
Annual Report on Form 10-K for fiscal year 1994; to execute and deliver any
agreements, instruments, certificates or other documents which he shall deem
necessary or proper in connection with the filing of such Report and amendments
or supplements and generally to act for and in the name of the undersigned with
respect to such filing as fully as could be undersigned if then personally
present and acting.

IN WITNESS WHEREOF, the undersigned has executed the Power-of-Attorney on
the date set opposite his respective name.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- - - ------------------------------------------ --------------------------------------- --------------
<C> <S> <C>
Chairman of the Board, Chief Executive
- - - ------------------------------------------ Officer and Director
Bernard L. Schwartz
Director and President
- - - ------------------------------------------
Frank C. Lanza

/s/ HOWARD GITTIS Director March 9, 1994
- - - ------------------------------------------
Howard Gittis

/s/ ROBERT B. HODES Director March 9, 1994
- - - ------------------------------------------
Robert B. Hodes

/s/ GERSHON KEKST Director March 9, 1994
- - - ------------------------------------------
Gershon Kekst

Director
- - - ------------------------------------------
Charles Lazarus

/s/ MALVIN A. RUDERMAN Director March 9, 1994
- - - ------------------------------------------
Malvin A. Ruderman

/s/ E. DONALD SHAPIRO Director March 9, 1994
- - - ------------------------------------------
E. Donald Shapiro

/s/ ALLEN M. SHINN Director March 9, 1994
- - - ------------------------------------------
Allen M. Shinn

/s/ THOMAS J. STANTON, JR. Director March 9, 1994
- - - ------------------------------------------
Thomas J. Stanton, Jr.

/s/ DANIEL YANKELOVICH Director March 9, 1994
- - - ------------------------------------------
Daniel Yankelovich

</TABLE>