Global Crossing Reports Third Quarter 2009 Results
-- Free Cash Flow increased $62 million sequentially to $52 million, resulting in year-to-date Free Cash Flow of $10 million.
-- OIBDA increased 30 percent year-over-year to $91 million, resulting in year-to-date total of $259 million.
-- Consolidated revenue increased to $643 million, a 1 percent increase year-over-year in constant currency terms.
-- "Invest and grow" revenue increased to $553 million, a 4 percent increase year over year in constant currency terms.
-- Company confirms annual guidance for 2009.
- Press Release
- Source: Global Crossing
- On 4:15 pm EDT, Wednesday October 28, 2009
FLORHAM PARK, N.J., Oct. 28 /PRNewswire-FirstCall/ -- Global Crossing (Nasdaq: GLBC - News), a leading global IP solutions provider, today announced third quarter 2009 results. The company said it will discuss its consolidated financial and operational results for the third quarter 2009 on a conference call tomorrow.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| GLBC | 11.55 | -0.59 |
Business Highlights
Global Crossing generated consolidated revenue of $643 million for the third quarter of 2009. Revenue from the company's "invest and grow" category -- that part of the business focused on serving global enterprises and carrier customers, excluding wholesale voice -- was $553 million, representing a sequential increase of 3 percent and a year-over-year decrease of 2 percent. On a constant currency basis, "invest and grow" revenue decreased 1 percent sequentially and increased 4 percent year over year. Operating Income Before Depreciation and Amortization (OIBDA) for the quarter was $91 million, representing a decrease of 2 percent sequentially and an increase of 30 percent year over year. Free Cash Flow was $52 million in the quarter, an improvement of $62 million sequentially and $19 million year over year. Year-to-date Free Cash Flow was $10 million through the third quarter. OIBDA and Free Cash Flow are non-GAAP measures that are defined and reconciled in our financial tables. All constant currency comparisons herein reflect third quarter 2009 and prior period results translated at the average actual foreign exchange rates for the applicable prior period.
"Global Crossing's core business continued to show year-over-year improvement on a constant currency basis, reflecting solid demand for our advanced IP-based solutions despite a challenging global economic environment," said John Legere, CEO of Global Crossing. "In addition, the Company's Free Cash Flow generation of $52 million for the quarter and $10 million year to date demonstrates significant progress. We remain confident in our ability to deliver the annual guidance we provided at the beginning of the year."
Operational Results
Global Crossing's consolidated revenue was $643 million in the third quarter of 2009, representing a sequential increase of $10 million or 2 percent, including an $18 million favorable foreign exchange impact. Year-over-year consolidated revenue decreased $26 million or 4 percent, including a $33 million unfavorable foreign exchange impact. On a constant currency basis, consolidated revenue decreased 1 percent sequentially and increased 1 percent year over year.
The company's "invest and grow" category generated revenue of $553 million for the third quarter. This represents a sequential increase of $14 million or 3 percent, including an $18 million favorable foreign exchange impact. Year-over-year "invest and grow" revenue decreased $9 million or 2 percent, including a $32 million unfavorable foreign exchange impact. On a constant currency basis, "invest and grow" revenue decreased 1 percent sequentially and increased 4 percent year over year. "Invest and grow" revenue in the prior quarter included $8 million for one customer's buyout of certain long-term obligations under an existing contract. "Invest and grow" revenue in the third quarter included $4 million for the completion of that buyout.
On a segment basis, GCUK generated $117 million in "invest and grow" revenue compared with $113 million in the prior quarter and $152 million in the third quarter of 2008. GC Impsat generated $127 million in "invest and grow" revenue compared with $121 million in the prior quarter and $124 million in the third quarter of 2008. ROW generated $312 million in "invest and grow" revenue compared with $309 million in the prior quarter and $289 million in the third quarter of 2008.
Sequentially, on a constant currency basis, GC Impsat "invest and grow" revenues increased 1 percent, as growth from new orders was partially offset by erosion isolated to a few large customers. Sequentially, on a constant currency basis, ROW "invest and grow" revenues were flat, as operational growth was offset by the adverse sequential impact related to the customer buyout referenced above. In GCUK "invest and grow" revenues decreased sequentially 6 percent on a constant currency basis principally due to lower revenues from non-recurring charges to customers, including professional services. Year over year, in constant currency terms, "invest and grow" revenues in both GC Impsat and ROW increased 9 percent, while revenues in GCUK declined 9 percent.
Wholesale voice revenue decreased by $5 million on a sequential basis and $17 million year over year to $89 million. The expected decline in wholesale voice was associated with the continued management of this business for margin. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.
The company reported Gross Margin of $200 million in the third quarter of 2009, compared with $201 million in the prior quarter and $192 million in the third quarter of 2008. On a sequential basis, Gross Margin decreased $1 million primarily due to a decrease in revenue and from a retroactive property tax assessment of $5 million in the UK, offset by a favorable foreign exchange impact of $6 million and a reduction in access costs arising from a favorable regulatory ruling related to access charges paid by GCUK in periods prior to 2009. Year over year, Gross Margin increased $8 million due to an operational improvement in revenue, a $12 million decrease in access costs (including the impact of the previously referenced favorable regulatory ruling) and a decrease in incentive compensation, partially offset by an unfavorable foreign exchange impact of $10 million and the retroactive property tax assessment referenced above. (Note: Due to timing of receipt of the retroactive property tax assessment, the $5 million charge was included in GCUK's reported results for the second quarter and is included in Global Crossing Limited's reported results for the third quarter.)
Sales, general and administrative (SG&A) expenses were $109 million in the third quarter of 2009, compared with $108 million in the prior quarter and $122 million in the third quarter of 2008. On a sequential basis, the increase in SG&A was primarily attributable to $4 million unfavorable foreign exchange impact, partially offset by lower incentive compensation accruals in the quarter. The year-over-year decrease was primarily attributable to an $8 million favorable foreign exchange impact, as well as cost savings initiatives and lower incentive compensation accruals.
Global Crossing reported $91 million of OIBDA in the third quarter, a sequential decrease of $2 million, including a $2 million favorable foreign exchange impact. On a year-over-year basis, OIBDA increased $21 million, including an unfavorable foreign exchange impact of $2 million. On a segment basis, GCUK, GC Impsat and ROW contributed OIBDA of $25 million, $44 million and $22 million, respectively.
Global Crossing's consolidated net loss applicable to common shareholders was $74 million for the third quarter of 2009. On a sequential basis, net loss increased $100 million due to a $29 million loss on the extinguishment of debt and $59 million of unfavorable foreign exchange impacts reflected in other income, net. On a year-over-year basis, net loss increased by $1 million.
Cash and Liquidity
On September 22, 2009, the company completed a private offering of $750 million in senior secured notes due 2015 with a coupon of 12 percent. The company used $348 million of the proceeds to refinance Global Crossing Limited's existing term loan facility and $237 million to fund the purchase of senior notes issued by GC Impsat Holdings I Plc, including consent fees. After transaction fees and expenses in connection with the offering, the company added approximately $125 million of cash to the balance sheet for general corporate purposes.
"Refinancing activity during the quarter greatly simplified our capital structure, extended our debt maturities and increased our liquidity, giving us greater flexibility to operate and invest in our business," said John Kritzmacher, CFO of Global Crossing.
For the third quarter of 2009, the company reported Free Cash Flow of $52 million, as compared to negative $10 million in the prior quarter and $33 million in the third quarter of 2008. The sequential increase in Free Cash Flow was primarily driven by improved collections and lower capital expenditures. The year-over-year increase in Free Cash Flow was primarily attributable to an increase in OIBDA and lower capital expenditures.
Cash flow provided by operating activities for the third quarter was $85 million after interest payments of $25 million, including prepayment of $5 million of accrued interest on the debt extinguished in September. Global Crossing received $33 million in proceeds from the sale of IRUs and prepaid services in the third quarter. Global Crossing used $33 million for purchases of property, plant and equipment, and entered into $24 million of capital lease agreements to finance various equipment purchases and software licenses.
As of September 30, 2009, Global Crossing had unrestricted cash of $429 million compared to $268 million at June 30, 2009. The company had $449 million in total cash at September 30, 2009, compared to $289 million in total cash at June 30, 2009.
2009 Guidance
The following table is provided for informational purposes only and represents the Company's 2009 guidance as provided on February 16, 2009.
Measures 2009 Guidance
($in millions) ---------------
--------------
Revenue $2,500 - $2,600
-------------- ---------------
OIBDA $320 - $380
-------------- ---------------
Free Cash Flow $50 - $100
-------------- ---------------
Non-GAAP Measures
Pursuant to the Securities and Exchange Commission's (SEC's) Regulation G, the attached financial tables include definitions of non-GAAP financial measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP).
Conference Call
The company will hold a conference call on Thursday, October 29, 2009 at 9:00 a.m. EDT to discuss its financial results. The call may be accessed by dialing +1 212 231 2933 or by dialing +44 203 300 0095. Callers are advised to access the call 15 minutes prior to the start time. A Webcast with presentation slides will be available at http://investors.globalcrossing.com/events.cfm.
A replay of the call will be available on Thursday, October 29, 2009 beginning at 11:30 a.m. EDT and will be accessible until Thursday, November 5, 2009 at 11:30 a.m. EST. To access the replay, callers should dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21440224. Callers in the United Kingdom should dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21440224.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC - News) is a leading global IP solutions provider with the world's first integrated global IP-based network. The company offers a full range of secure data, voice, and video products to approximately 40 percent of the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It delivers services to more than 690 cities in more than 60 countries and six continents around the globe.
Website Access to Company Information
Global Crossing maintains a corporate website at www.globalcrossing.com, and you can find additional information about the company through the Investors pages on that website at http://investors.globalcrossing.com. Global Crossing utilizes its website as a channel of distribution of important information about the company. Global Crossing routinely posts financial and other important information regarding the company and its business, financial condition and operations on the Investors web pages.
Visitors to the Investors web pages can view and print copies of Global Crossing's SEC filings, including periodic and current reports on Forms 10-K, 10-Q and 8-K, as soon as reasonably practicable after those filings are made with the SEC. Copies of the charters for each of the standing committees of Global Crossing's Board of Directors, its Corporate Governance Guidelines, Ethics Policy, press releases and analysts presentations are all available through the Investors web pages.
Please note that the information contained on any of Global Crossing's websites is not incorporated by reference in, or considered to be a part of, any document unless expressly incorporated by reference therein.
This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties that could cause the actual results to differ materially, including: Global Crossing's history of substantial operating losses and the fact that, in the near term, funds from operations will not satisfy cash requirements; legal and contractual restrictions on the inter-company transfer of funds by the company's subsidiaries; the company's ability to continue to connect its network to incumbent carriers' networks or maintain Internet peering arrangements on favorable terms; the consequences of any inadvertent violation of the company's Network Security Agreement with the U.S. Government; increased competition and pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; political, legal and other risks due to the company's substantial international operations; risks associated with movements in foreign currency exchange rates; risks related to restrictions on the conversion of the Venezuelan bolivar into U.S. dollars and to the resultant buildup of a material excess bolivar cash balance, which is carried on Global Crossing's books at the official exchange rate, attributing to the bolivar a value that is significantly greater than the value prevailing on the parallel market; potential weaknesses in internal controls of acquired businesses, and difficulties in integrating internal controls of those businesses with the company's own internal controls; the concentration of revenue in a limited number of customers, and the rights of such customers to terminate their contracts or to simply cease purchasing services thereunder; exposure to contingent liabilities; and other risks referenced from time to time in the company's filings with the Securities and Exchange Commission. Global Crossing undertakes no duty to update information contained in this press release or in other public disclosures at any time.
CONTACT GLOBAL CROSSING:
Press Contacts
Michael Schneider
+ 1 973 937 0146
Michael.Schneider@globalcrossing.com
Analysts/Investors Contact
Mark Gottlieb
+ 1 800 836 0342
glbc@globalcrossing.com
Gino Mathew
+1 973 937 0133
Gino.Mathew@globalcrossing.com
IR/PR1
Global Crossing Limited Table 1
Condensed Consolidated Balance Sheets
($ in millions)
September 30, December 31,
2009 2008
-------------- -------------
(unaudited) (as adjusted)
ASSETS:
Current assets:
Cash and cash equivalents $429 $360
Restricted cash and cash
equivalents - current portion 9 7
Accounts receivable, net of
allowances of $53 and $58 339 336
Prepaid costs and other current
assets 108 103
------ ------
Total current assets 885 806
------ ------
Restricted cash and cash equivalents -
long term 11 11
Property and equipment, net of
accumulated depreciation of $1,117
and $851 1,302 1,300
Intangible assets, net (including
goodwill of $173 and $147) 196 172
Other assets 69 60
------ ------
Total assets $2,463 $2,349
====== ======
LIABILITIES:
Current liabilities:
Accounts payable $260 $329
Accrued cost of access 98 92
Short term debt and current portion
of long term debt 27 26
Accrued restructuring costs -
current portion 11 13
Deferred revenue - current portion 148 138
Other current liabilities 412 361
------ ------
Total current liabilities 956 959
------ ------
Long term debt 1,308 1,127
Obligations under capital leases 94 93
Deferred revenue 347 308
Accrued restructuring costs 14 14
Other deferred liabilities 77 94
------ ------
Total liabilities 2,796 2,595
------ ------
SHAREHOLDERS' DEFICIT:
Common stock, 110,000,000 shares
authorized, $.01 par value,
60,148,983 and 56,696,312 shares
issued and outstanding as of
September 30, 2009 and December
31, 2008, respectively 1 1
Preferred stock with controlling shareholder,
45,000,000 shares authorized,
$.10 par value, 18,000,000 shares
issued and outstanding 2 2
Additional paid-in capital 1,425 1,399
Accumulated other comprehensive loss (32) (23)
Accumulated deficit (1,729) (1,625)
------ ------
Total shareholders' deficit (333) (246)
------ ------
Total liabilities and
shareholders' deficit $2,463 $2,349
====== ======
Note 1. On January 1, 2009, the Company adopted Financial Accounting
Standard Board ("FASB") Accounting Standards Codification ("ASC") Subtopic
470-20 ("Debt with Conversion and Other Options")("ASC Subtopic 470-20").
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, additional paid-in capital and accumulated deficit have
increased $38 and $17 respectively, and other assets and long term debt
have decreased $1 and $22 respectively in the condensed consolidated
balance sheet at December 31, 2008.
Global Crossing Limited Table 2
Unaudited Condensed Consolidated Statements of Operations
($ in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (as adjusted) (unaudited) (as adjusted)
Revenue $643 $669 $1,885 $1,955
Cost of revenue (excluding
depreciation and
amortization,
shown separately below):
Cost of access (288) (310) (859) (915)
Real estate, network
and operations (106) (114) (301) (334)
Third party
maintenance (26) (28) (77) (83)
Cost of equipment
and other sales (23) (25) (68) (71)
---------- ---------- ---------- ----------
Total cost of
revenue (443) (477) (1,305) (1,403)
---------- ---------- ---------- ----------
Gross margin 200 192 580 552
Selling, general and
administrative (109) (122) (321) (381)
Depreciation and
amortization (89) (84) (250) (244)
---------- ---------- ---------- ----------
Operating income (loss) 2 (14) 9 (73)
Other income (expense):
Interest income 2 2 7 8
Interest expense (39) (44) (113) (136)
Other income
(expense), net (32) (25) 11 3
---------- ---------- ---------- ----------
Loss before preconfirmation
contingencies and benefit
(provision) for income
taxes (67) (81) (86) (198)
Net gain on
preconfirmation
contingencies - 5 - 9
---------- ---------- ---------- ----------
Loss before benefit
(provision) for income
taxes (67) (76) (86) (189)
Benefit (provision)
for income taxes (6) 4 (18) (43)
---------- ---------- ---------- ----------
Net loss (73) (72) (104) (232)
Preferred stock
dividends (1) (1) (3) (3)
---------- ---------- ---------- ----------
Loss applicable to
common shareholders $(74) $(73) $(107) $(235)
========== ========== ========== ==========
Loss per common share,
basic and diluted:
Loss applicable
to common
shareholders $(1.23) $(1.30) $(1.81) $(4.23)
========== ========== ========== ==========
Weighted average
number of
common shares 60,135,114 56,176,273 58,999,359 55,526,762
========== ========== ========== ==========
Note 1. On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20.
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $2 and $5 for the three
and nine months ended September 30, 2008, respectively.
Note 2. For the three months ended September 30, 2008, $2 of sales taxes
netted against revenue were reclassified to selling, general and
administrative expenses to be consistent with the presentation of other
similar taxes. Additionally, $5 of costs incurred to operate the GC Impsat
Segment data center business, primarily employee-related expenses, were
reclassified from selling, general and administrative to real estate,
network and operations as they represent service delivery costs and
therefore are appropriately reported as cost of revenue.
Note 3. For the nine months ended September 30, 2008, $5 of sales taxes
netted against revenue were reclassified to selling, general and
administrative expenses to be consistent with the presentation of other
similar taxes. Additionally, $14 of costs incurred to operate the GC
Impsat Segment data center business, primarily employee-related expenses,
were reclassified from selling, general and administrative to real estate,
network and operations as they represent service delivery costs and
therefore are appropriately reported as cost of revenue.
Global Crossing Limited Table 3
Condensed Consolidated Statements of Cash Flows
($ in millions)
Nine Months Ended
September 30,
---------------
2008
2009 (as adjusted)
---- -------------
(unaudited)
Cash flows provided by (used in) operating activities:
Net loss $(104) $(232)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on sale of marketable securities - 2
Non-cash loss on extinguishment of debt 15 -
Non-cash income tax provision - 24
Non-cash stock compensation expense 15 61
Depreciation and amortization 250 244
Provision for doubtful accounts 5 7
Amortization of prior period IRUs (18) (13)
Gain on preconfirmation contingencies - (9)
Change in long term deferred revenue 51 60
Other (27) 6
Change in operating working capital:
- Changes in accounts receivable 8 (25)
- Changes in accounts payable (82) 28
- Changes in other current assets (20) (50)
- Changes in other current liabilities 42 21
---- ----
Net cash provided by operating activities 135 124
---- ----
Cash flows provided by (used in) investing activities:
Purchases of property and equipment (125) (143)
Purchases of marketable securities - (11)
Proceeds from sale of property and equipment - 4
Proceeds from sale of marketable securities 4 12
Change in restricted cash and cash
equivalents (2) 18
---- ----
Net cash used in investing activities (123) (120)
---- ----
Cash flows provided by (used in) financing activities:
Proceeds from short and long term debt 741 7
Repayment of capital lease obligations (47) (44)
Repayment of long term debt (including
current portion) (592) (12)
Premium paid on extinguishment of debt (14) -
Proceeds from exercise of stock options - 1
Finance costs incurred (24) -
Payment of employee taxes on share-based
compensation (12) -
---- ----
Net cash provided by (used in) financing activities 52 (48)
---- ----
Effect of exchange rate changes on cash and cash
equivalents 5 (7)
---- ----
Net increase (decrease) in cash and cash equivalents 69 (51)
Cash and cash equivalents, beginning of period 360 397
---- ----
Cash and cash equivalents, end of period $429 $346
==== ====
Note 1. On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20.
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, net loss and other within Cash flows provided by (used
in) operating activities has increased in $5 for the nine months ended
September 30, 2008.
Global Crossing Limited and Subsidiaries Table 4
Unaudited Condensed Consolidated Statements of Operations
($ in millions)
Quarter Ended September 30, 2009
--------------------------------
GC
GCUK Impsat ROW (1) Eliminations Total
---- ------ ----- ------------ -----
Revenue $120 $129 $397 $(3) $643
Cost of revenue
Cost of access (33) (27) (231) 3 (288)
Real estate,
network and
operations (22) (20) (65) 1 (106)
Third party
maintenance (5) (6) (15) - (26)
Cost of equipment
and other sales (16) (4) (3) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (76) (57) (314) 4 (443)
---- ---- ---- ---- ----
Gross margin 44 72 83 1 200
Selling, general and
administrative (19) (28) (61) (1) (109)
Depreciation and
amortization (18) (22) (49) - (89)
---- ---- ---- ---- ----
Operating income (loss) 7 22 (27) - 2
---- ---- ---- ---- ----
Other income (expense):
Interest income 3 2 - (3) 2
Interest expense (14) (8) (20) 3 (39)
Other income
(expense), net (8) (13) (11) - (32)
---- ---- ---- ---- ----
Income (loss) before
preconfirmation
contingencies and
benefit (provision)
for income taxes (12) 3 (58) - (67)
Net gain on
preconfirmation
contingencies - - - - -
---- ---- ---- ---- ----
Income (loss) before
benefit (provision)
for income taxes (12) 3 (58) - (67)
Benefit
(provision) for
income taxes - (6) - - (6)
---- ---- ---- ---- ----
Net income (loss) (12) (3) (58) - (73)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss)
applicable to common
shareholders $(12) $(3) $(59) $- $(74)
==== ==== ==== ==== ====
Quarter Ended June 30, 2009
---------------------------
GC
GCUK Impsat ROW (1) Eliminations Total
---- ------ ----- ------------ -----
Revenue $115 $125 $397 $(4) $633
Cost of revenue
Cost of access (36) (27) (225) 3 (285)
Real estate,
network and
operations (18) (21) (59) - (98)
Third party
maintenance (6) (5) (16) - (27)
Cost of equipment
and other sales (17) (3) (2) - (22)
---- ---- ---- ---- ----
Total cost of
revenue (77) (56) (302) 3 (432)
---- ---- ---- ---- ----
Gross margin 38 69 95 (1) 201
Selling, general and
administrative (17) (25) (67) 1 (108)
Depreciation and
amortization (16) (21) (45) - (82)
---- ---- ---- ---- ----
Operating income (loss) 5 23 (17) - 11
---- ---- ---- ---- ----
Other income (expense):
Interest income 1 2 4 (3) 4
Interest expense (13) (9) (19) 3 (38)
Other income
(expense), net 28 7 23 - 58
---- ---- ---- ---- ----
Income (loss) before
preconfirmation
contingencies and
benefit (provision)
for income taxes 21 23 (9) - 35
Net gain on
preconfirmation
contingencies - - - - -
---- ---- ---- ---- ----
Income (loss) before
benefit (provision)
for income taxes 21 23 (9) - 35
Benefit
(provision) for
income taxes (1) (5) (2) - (8)
---- ---- ---- ---- ----
Net income (loss) 20 18 (11) - 27
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss)
applicable to common
shareholders $20 $18 $(12) $- $26
==== ==== ==== ==== ====
Quarter Ended September 30, 2008
--------------------------------
GC
GCUK Impsat (3) ROW (1,2) Eliminations Total
---- --------- -------- ------------ -----
Revenue $155 $127 $390 $(3) $669
Cost of revenue
Cost of access (48) (28) (237) 3 (310)
Real estate,
network and
operations (25) (20) (69) - (114)
Third party
maintenance (7) (6) (15) - (28)
Cost of equipment
and other sales (18) (3) (4) - (25)
---- ---- ---- ---- ----
Total cost of
revenue (98) (57) (325) 3 (477)
---- ---- ---- ---- ----
Gross margin 57 70 65 - 192
Selling, general and
administrative (20) (30) (72) - (122)
Depreciation and
amortization (22) (20) (42) - (84)
---- ---- ---- ---- ----
Operating income (loss) 15 20 (49) - (14)
---- ---- ---- ---- ----
Other income (expense):
Interest income 2 1 - (1) 2
Interest expense (16) (9) (20) 1 (44)
Other income
(expense), net (17) (9) 1 - (25)
---- ---- ---- ---- ----
Income (loss) before
preconfirmation
contingencies and
benefit (provision)
for income taxes (16) 3 (68) - (81)
Net gain on
preconfirmation
contingencies - 4 1 - 5
---- ---- ---- ---- ----
Income (loss) before
benefit (provision)
for income taxes (16) 7 (67) - (76)
Benefit
(provision) for
income taxes - 2 2 - 4
- - - - -
Net income (loss) (16) 9 (65) - (72)
Preferred stock
dividends - - (1) - (1)
- - -- - --
Income (loss)
applicable to common
shareholders $(16) $9 $(66) $- $(73)
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $2 for the three months
ended September 30, 2008.
(3) For the three months ended September 30, 2008 $2 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Additionally, for the three months ended September 30, 2008 $5 of costs
incurred to operate the GC Impsat Segment data center business, primarily
employee-related expenses, were reclassified from selling, general and
administrative to real estate, network and operations as they represent
service delivery costs and therefore are appropriately reported as cost of
revenue.
Global Crossing Limited and Subsidiaries Table 5
Unaudited Summary of Consolidated Revenue
($ in millions)
Quarter Ended September 30, 2009
--------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------ ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $117 $125 $311 $- $553
Carrier voice 3 2 84 - 89
Other - - 1 - 1
Intersegment revenue - 2 1 (3) -
---- ---- ---- ---- ----
Consolidated revenue $120 $129 $397 $(3) $643
==== ==== ==== ==== ====
Quarter Ended June 30, 2009
---------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------ ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $113 $119 $307 $- $539
Carrier voice 2 4 88 - 94
Other - - - - -
Intersegment revenue - 2 2 (4) -
---- ---- ---- ---- ----
Consolidated revenue $115 $125 $397 $(4) $633
==== ==== ==== ==== ====
Quarter Ended September 30, 2008
--------------------------------
GCUK GC Impsat (2) ROW (1) Eliminations Total
---- ------------ ------ ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $152 $123 $287 $- $562
Carrier voice 3 3 100 - 106
Other - - 1 - 1
Intersegment revenue - 1 2 (3) -
---- ---- ---- ---- ----
Consolidated revenue $155 $127 $390 $(3) $669
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) For the three months ended September 30, 2008 $2 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Global Crossing Limited Table 6
Unaudited Reconciliation of OIBDA to Income (Loss) Applicable to Common
Shareholders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of OIBDA, which is considered a non-GAAP (Generally
Accepted Accounting Principles) financial measure, to income (loss)
applicable to common shareholders.
OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from operating income (loss) in that it
excludes depreciation and amortization. Such excluded expenses primarily
reflect the non-cash impacts of historical capital investments, as opposed
to the cash impacts of capital expenditures made in recent periods. In
addition, OIBDA does not give effect to cash used for debt service
requirements and thus does not reflect available funds for reinvestment,
distributions or other discretionary uses.
Management uses OIBDA as an important part of our internal reporting and
planning processes and as a key measure to evaluate profitability and
operating performance, make comparisons between periods, and to make
resource allocation decisions. Management believes that the investment
community uses similar performance measures to compare performance of
competitors in our industry.
There are material limitations to using non-GAAP financial measures. Our
calculation of OIBDA may differ from similarly titled measures used by
other companies, and may not be comparable to those other measures.
Additionally, OIBDA does not include certain significant items such as
depreciation and amortization, interest income, interest expense, income
taxes, other non-operating income or expense items, preferred stock
dividends, and gains and losses on pre-confirmation contingencies. OIBDA
should be considered in addition to, and not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
Management believes that OIBDA is useful to our investors as it is a
relevant indicator of operating performance, especially in a capital-
intensive industry such as telecommunications. OIBDA provides investors
with an indication of the underlying performance of our everyday business
operations. It excludes the effect of items associated with our
capitalization and tax structures, such as interest income, interest
expense and income taxes, and of other items not associated with our
everyday operations.
Quarter Ended September 30, 2009
--------------------------------
GC
GCUK Impsat ROW (1) Eliminations Total
---- ------ ------ ------------ -----
OIBDA $25 $44 $22 $- $91
Depreciation and
amortization (18) (22) (49) - (89)
---- ---- ---- ---- ----
Operating income (loss) 7 22 (27) - 2
Interest income 3 2 - (3) 2
Interest expense (14) (8) (20) 3 (39)
Other expense, net (8) (13) (11) - (32)
Provision for income
taxes - (6) - - (6)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to common
shareholders $(12) $(3) $(59) $- $(74)
==== ==== ==== ==== ====
Quarter Ended June 30, 2009
---------------------------
GC
GCUK Impsat ROW (1) Eliminations Total
---- ------ ------ ------------ -----
OIBDA $21 $44 $28 $- $93
Depreciation and
amortization (16) (21) (45) - (82)
---- ---- ---- ---- ----
Operating income (loss) 5 23 (17) - 11
Interest income 1 2 4 (3) 4
Interest expense (13) (9) (19) 3 (38)
Other income, net 28 7 23 - 58
Provision for income
taxes (1) (5) (2) - (8)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss) applicable
to common shareholders $20 $18 $(12) $- $26
==== ==== ==== ==== ====
Quarter Ended September 30, 2008
--------------------------------
GC
GCUK Impsat ROW (1,2) Eliminations Total
---- ------ -------- ------------ -----
OIBDA $37 $40 $(7) $- $70
Depreciation and
amortization (22) (20) (42) - (84)
---- ---- ---- ---- ----
Operating income (loss) 15 20 (49) - (14)
Interest income 2 1 - (1) 2
Interest expense (16) (9) (20) 1 (44)
Other income (expense),
net (17) (9) 1 - (25)
Net gain on
preconfirmation
contingencies - 4 1 - 5
Benefit for income taxes - 2 2 - 4
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss) applicable
to common shareholders $(16) $9 $(66) $- $(73)
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $2 for the three months
ended September 30, 2008.
Global Crossing Limited and Subsidiaries Table 7
Unaudited Reconciliations of Free Cash Flow to Net Cash
Provided by Operating Activities
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Free Cash Flow, which is considered a non-GAAP
(Generally Accepted Accounting Principles) financial measure, to net cash
provided by operating activities.
We define Free Cash Flow as net cash provided by (used in) operating
activities less purchases of property and equipment as disclosed in the
statement of cash flows. Free Cash Flow differs from the net change in
cash and cash equivalents in the statement of cash flows in that it
excludes the cash impact of: all investing activities (other than capital
expenditures, which are a fundamental and recurring part of our business);
all financing activities; and exchange rate changes on cash and cash
equivalents balances.
Management uses Free Cash Flow as a relevant indicator of our ability to
generate cash to pay debt. Free Cash Flow also is an important part of
our internal reporting and a key measure used by management to evaluate
liquidity from period to period. We believe that the investment community
uses similar performance measures to compare performance of competitors in
our industry.
There are material limitations to using non-GAAP financial measures. Our
calculation of Free Cash Flow may differ from similarly titled measures
used by other companies, and may not be comparable to those other
measures. Moreover, we do not currently pay a significant amount of
income taxes due to net operating losses, and we therefore generate higher
Free Cash Flow than comparable businesses that do pay income taxes.
Additionally, Free Cash Flow is subject to variability quarter over
quarter as a result of the timing of payments related to accounts
receivable and accounts payable and capital expenditures. Free Cash Flow
also does not include certain significant cash items such as purchases and
sales out of the ordinary course of business, proceeds from financing
activities, repayments of capital lease obligations and other debt, and
the effect of exchange rate changes on cash and cash equivalents balances.
Free Cash Flow should be considered in addition to, and not as a
substitute for, net change in cash and cash equivalents in the statement
of cash flows reported in accordance with GAAP.
Management believes that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday
business operations and the ability to pay debt.
Quarter Ended
September 30,
2009
----
Free Cash Flow $52
Purchases of property and equipment 33
---
Net cash provided by operating activities $85
===
Quarter Ended
June 30,
2009
----
Free Cash Flow $(10)
Purchases of property and equipment 54
---
Net cash provided by operating activities $44
===
Quarter Ended
September 30,
2008
----
Free Cash Flow $33
Purchases of property and equipment 51
---
Net cash provided by operating activities $84
===
Global Crossing Limited and Subsidiaries Table 8
Unaudited Reconciliations of 2009 OIBDA and Free Cash
Flow Guidance
($ in millions)
When providing projections for non-GAAP measures, we are required to
provide a reconciliation of the non-GAAP measure to the most directly
comparable GAAP metric to the extent available without unreasonable
efforts. In such cases, we may indicate an amount or range for GAAP
measures that are components of the reconciliation. The provision of such
amounts or ranges must not be interpreted as explicit or implicit
projections of those GAAP components. To reconcile the non-GAAP financial
metric to GAAP, we must use amounts or ranges for the GAAP components that
arithmetically add up to the non-GAAP financial metric. While we feel
reasonably comfortable with the methodology used to generate the
projections of our non-GAAP financial metrics, we fully expect that the
amounts or ranges used for the GAAP components will vary from actual
results. We have made numerous assumptions in preparing our projections.
These assumptions, including the amounts of the various components that
comprise a financial metric, may or may not prove to be correct. We will
consider our projections of non-GAAP financial metrics to have been
achieved if the specific non-GAAP measure is met or exceeded, even if the
GAAP components of the reconciliation are materially different from those
provided in an earlier reconciliation.
This reconciliation was prepared based on the Company's guidance as
provided on February 16, 2009, which is included in the preceding press
release for informational purposes only.
Twelve months ended
December 31, 2009
-------------------
Low End of High End of
Guidance Guidance
OIBDA $320 $380
Depreciation and
amortization (330) (331)
----- -----
Operating income (loss) (10) 49
Interest expense, net (147) (147)
Provision for income taxes (27) (27)
Preferred stock dividends (4) (4)
----- -----
Net loss applicable to
common shareholders $(188) $(129)
===== =====
Free Cash Flow $50 $100
Purchases of property and
equipment 145 155
----- -----
Net cash provided by
operating activities $195 $255
===== =====
For definitions and further description of these non-GAAP measures
see tables 6 and 7.
Global Crossing Limited and Subsidiaries Table 9
Definitions of Non-GAAP measures
Operating Income (Loss) Before Depreciation and Amortization ("OIBDA"):
OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from operating income (loss), as calculated
in accordance with GAAP and reflected on our consolidated financial
statements, in that it excludes depreciation and amortization. Such
excluded expenses primarily reflect the non-cash impacts of historical
capital investments, as opposed to the cash impacts of capital
expenditures made in recent periods. In addition, OIBDA does not give
effect to cash used for debt service requirements and thus does not
reflect available funds for reinvestment, distributions or other
discretionary uses.
Management uses OIBDA as an important part of our internal reporting and
planning processes and as a key measure to evaluate profitability and
operating performance, make comparisons between periods, and to make
resource allocation decisions. Management believes that the investment
community uses similar performance measures to compare performance of
competitors in our industry.
There are material limitations to using non-GAAP financial measures. Our
calculation of OIBDA may differ from similarly titled measures used by
other companies, and may not be comparable to those other measures.
Additionally, OIBDA does not include certain significant items such as
depreciation and amortization, interest income, interest expense, income
taxes, other non-operating income or expense items, preferred stock
dividends, and gains and losses on preconfirmation contingencies. OIBDA
should be considered in addition to, and not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
Management believes that OIBDA is useful to our investors as it is a
relevant indicator of operating performance, especially in a capital-
intensive industry such as telecommunications. OIBDA provides investors
with an indication of the underlying performance of our everyday business
operations. It excludes the effect of items associated with our
capitalization and tax structures, such as interest income, interest
expense and income taxes, and of other items not associated with our
everyday operations.
Free Cash Flow:
Free Cash Flow is a non-GAAP financial measure. We define Free Cash
Flow as net cash provided by (used in) operating activities less
purchases of property and equipment as disclosed in the statement of cash
flows. Free Cash Flow differs from the net change in cash and cash
equivalents in the statement of cash flows in that it excludes the cash
impact of: all investing activities (other than capital expenditures,
which are a fundamental and recurring part of our business); all
financing activities; and exchange rate changes on cash and cash
equivalents balances.
Management uses Free Cash Flow as a relevant indicator of our ability to
generate cash to pay debt. Free Cash Flow also is an important part of
our internal reporting and a key measure used by management to evaluate
liquidity from period to period. We believe that the investment community
uses similar performance measures to compare performance of competitors
in our industry.
There are material limitations to using non-GAAP financial measures.
Our calculation of Free Cash Flow may differ from similarly titled
measures used by other companies, and may not be comparable to those
other measures. Moreover, we do not currently pay a significant amount
of income taxes due to net operating losses, and we therefore generate
higher Free Cash Flow than comparable businesses that do pay income
taxes. Additionally, Free Cash Flow is subject to variability quarter
over quarter as a result of the timing of payments related to accounts
receivable and accounts payable and capital expenditures. Free Cash Flow
also does not include certain significant cash items such as purchases
and sales out of the ordinary course of business, proceeds from financing
activities, repayments of capital lease obligations and other debt, and
the effect of exchange rate changes on cash and cash equivalents
balances. Free Cash Flow should be considered in addition to, and not as
a substitute for, net change in cash and cash equivalents in the
statement of cash flows reported in accordance with GAAP.
Management believes that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday
business operations and the ability to pay debt.
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