Global Crossing Reports First Quarter 2009 Results
- Consolidated revenue of $609 million, representing a year-over-year decrease of 4 percent as reported and an increase of 6 percent in constant currency terms.
- "Invest and grow" revenue of $510 million, representing a year-over-year decrease of 2 percent as reported and an increase of 10 percent in constant currency terms.
- OIBDA of $75 million, representing a year-over-year increase of 67 percent as reported and an increase of 93 percent in constant currency terms.
FLORHAM PARK, N.J., May 4 -- Global Crossing (NASDAQ:GLBC)
, a leading global IP solutions provider, today announced first quarter 2009 results. The company said it will discuss its consolidated financial and operational results for the first quarter 2009 on a conference call tomorrow.
Business Highlights
Global Crossing generated consolidated revenue of $609 million for the first quarter of 2009, representing a year-over-year decrease of 4 percent as reported and an increase of 6 percent in constant currency terms. 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 $510 million, representing a year-over-year decrease of 2 percent as reported and an increase of 10 percent in constant currency terms. Operating Income Before Depreciation & Amortization (OIBDA) for the quarter was $75 million, representing a year-over-year increase of 67 percent as reported and an increase of 93 percent in constant currency terms. Free Cash Flow was negative $32 million in the quarter, compared to negative $19 million in the year ago period. OIBDA and Free Cash Flow are non-GAAP measures that are defined and reconciled in our press tables. All constant currency comparisons herein reflect first quarter 2009 and prior period results translated at the average actual foreign exchange rates for the applicable prior period.
"On a constant currency basis, 'invest and grow' revenue increased 10 percent year over year, consistent with the underpinnings of our annual guidance," said John Legere, CEO of Global Crossing. "We remain confident about the full-year outlook ahead as demand for our advanced IP-based solutions continues to enable improvements in our annual earnings and Free Cash Flow."
Operational Results
Global Crossing's consolidated revenue was $609 million in the first quarter of 2009, representing a sequential decline of $35 million or 5 percent, including a $20 million unfavorable foreign exchange impact. Year-over-year consolidated revenue decreased $23 million or 4 percent, including a $63 million unfavorable foreign exchange impact. On a constant currency basis, consolidated revenue declined 2 percent sequentially and increased 6 percent year over year. Beyond foreign exchange impacts, revenue in the quarter was unfavorably affected by the long-awaited attrition of the Camelot contract within our GCUK segment and further reduction in wholesale voice revenue as the company continues to optimize that business for margin performance.
The company's "invest and grow" category generated revenue of $510 million for the first quarter. This represents a sequential decline of $33 million or 6 percent, including substantially all of the $20 million unfavorable sequential foreign exchange impact. Year-over-year "invest and grow" revenue decreased $9 million or 2 percent, including substantially all of the $63 million unfavorable foreign exchange impact. On a constant currency basis, "invest and grow" revenue declined 2 percent sequentially and increased 10 percent year over year.
On a segment basis, GCUK generated $107 million in "invest and grow" revenue compared with $132 million in the prior quarter and $150 million in the first quarter of 2008. GC Impsat generated $113 million in "invest and grow" revenue compared with $122 million in the prior quarter and $110 million in the first quarter of 2008. Rest-of-World (ROW) generated $294 million in "invest and grow" revenue compared with $297 million in the prior quarter and $262 million in the first quarter of 2008. Sequentially, on a constant currency basis, "invest and grow" revenues in GCUK and GC Impsat decreased 6 percent and 7 percent, respectively, and ROW increased 1 percent. The decline in GCUK was associated with the Camelot attrition. The decline at GC Impsat was primarily driven by a customer settlement in the prior quarter. Year-over-year, in constant currency terms, "invest and grow" revenues in GC Impsat and ROW increased 16 percent and 15 percent, respectively, but declined slightly in GCUK due to the Camelot attrition.
Wholesale voice revenue decreased by $2 million on a sequential basis and $14 million year over year to $98 million. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.
Cost of revenue -- which includes cost of access; technical real estate, network and operations; third-party maintenance; and cost of equipment sales -- was $430 million in the first quarter, compared with $432 million in the prior quarter and $457 million in the first quarter of 2008. On a sequential basis, cost of revenue declined due to a favorable foreign exchange impact of $13 million and a reduction in access costs attributable to lower revenue. These decreases were offset by higher incentive compensation accruals following a net reversal in the fourth quarter of 2008.
The year-over-year decrease in cost of revenue was primarily attributable to a favorable foreign exchange impact of $38 million, in addition to lower incentive compensation accruals compared to the first quarter of last year. These decreases were offset by higher costs on increased revenue, higher payroll-related costs and severance charges in the first quarter of 2009.
The company reported Gross Margin, defined as "Revenue" less "Cost of Revenue," of $179 million in the first quarter of 2009, compared with $212 million in the prior quarter and $175 million in the first quarter of 2008. On a sequential basis, Gross Margin declined due to an unfavorable foreign exchange impact, an increase in incentive compensation accruals and lower revenue in the period.
Sales, general and administrative (SG&A) expenses were $104 million in the first quarter of 2009, compared with $110 million in the prior quarter and $130 million in the first quarter of 2008. On a sequential basis, SG&A decreased primarily due to a favorable foreign exchange impact of $4 million, savings from cost reduction initiatives implemented in the quarter and a decrease in professional fees. This decrease was partially offset by higher incentive compensation accruals following a net reversal in the fourth quarter of 2008. The year-over-year SG&A decrease was primarily attributable to $13 million favorable foreign exchange impact and lower incentive compensation accruals, as well as savings related to professional fees and cost reduction initiatives implemented in the first quarter of 2009.
Global Crossing reported $75 million of OIBDA in the first quarter, a sequential decrease of $27 million, including a $3 million unfavorable foreign exchange impact and a $16 million increase in incentive compensation accruals following a net accrual reversal in the prior quarter. On a year-over-year basis, OIBDA increased $30 million, including a $12 million unfavorable foreign exchange impact and a $10 million decrease in incentive compensation accruals. In the first quarter, GCUK, GC Impsat and ROW contributed OIBDA of $23 million, $39 million and $13 million, respectively.
Global Crossing's consolidated net loss applicable to common shareholders was $59 million for the first quarter of 2009, compared with a net loss of $53 million in the prior quarter and net loss of $72 million in the first quarter of 2008. On a sequential basis, net loss increased due to the previously described decrease in OIBDA, partially offset by a more unfavorable foreign exchange impact in the fourth quarter of 2008. Year-over-year, net loss improved principally due to the previously described improvement in OIBDA and a lower income tax provision, partially offset by an unfavorable foreign exchange impact in the first quarter of 2009.
Cash and Liquidity
For the first quarter of 2009, the company reported negative Free Cash Flow of $32 million, as compared to positive Free Cash Flow of $30 million in the prior quarter and negative Free Cash Flow of $19 million in the first quarter of 2008. The sequential and year-over-year variances were primarily driven by higher working capital requirements in the first quarter of 2009.
Cash flow provided by operating activities for the first quarter was $6 million. Global Crossing received $32 million in proceeds from the sale of indefeasible rights of use (IRUs) and prepaid services in the first quarter. Global Crossing used $38 million for Purchases of Property and Equipment and entered into $5 million of capital lease agreements to finance various equipment purchases and software licenses.
As of March 31, 2009, Global Crossing had unrestricted cash of $306 million compared to $360 million at December 31, 2008, and $362 at March 31, 2008. The company had $322 million in total cash at March 31, 2009, compared to $378 million in total cash at December 31, 2008, and $420 million at March 31, 2008.
2009 Guidance
The following table is provided for informational purposes only and represents the company's 2009 guidance as provided on February 16, 2009.
Measures 2009 Guidance
($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 Tuesday, May 5, 2009 at 9:00 a.m. EDT to discuss its financial results. The call may be accessed by dialing +1 212 231 2908 or by dialing +44 203 300 0096. 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.cfmhttp://investors.globalcrossing. com/events.cfm.
A replay of the call will be available on Tuesday, May 5, 2009 beginning at 11:30 a.m. EDT and will be accessible until Thursday, May 14, 2009 at 11:30 a.m. EDT. To access the replay, callers should dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21422929. Callers in the United Kingdom should dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21422929.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ:GLBC)
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.comwww.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; 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; downward pressure on the Company's common stock price that may result from sales of the significant number of shares paid to employees under incentive compensation arrangements, including approximately 3.2 million unrestricted shares delivered to employees in March and April 2009 under the 2008 annual bonus program; 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 at globalcrossing.com
Analysts/Investors Contact
Suzanne Lipton
+ 1 800 836 0342
glbc at globalcrossing.com
Gino Mathew
+1 973 937 0133
Gino.Mathew at globalcrossing.com
IR/PR1
Global Crossing Limited Table 1
Condensed Consolidated Balance Sheets
($ in millions)
March 31, 2009 December 31, 2008
---------------- -----------------
(unaudited) (as adjusted)
ASSETS:
Current assets:
Cash and cash equivalents $306 $360
Restricted cash and cash
equivalents - current portion 4 7
Accounts receivable, net of
allowances of $58 and $58 332 336
Prepaid costs and other
current assets 114 103
------ ------
Total current assets 756 806
------ ------
Restricted cash and cash
equivalents - long term 12 11
Property and equipment, net of
accumulated depreciation of
$917 and $851 1,260 1,300
Intangible assets, net (including
goodwill of $148 and $147) 172 172
Other assets 58 60
------ ------
Total assets $2,258 $2,349
====== ======
LIABILITIES:
Current liabilities:
Accounts payable $277 $329
Accrued cost of access 86 92
Short term debt and current
portion of long term debt 28 26
Accrued restructuring costs
- current portion 13 13
Deferred revenue - current portion 133 138
Other current liabilities 371 361
------ ------
Total current liabilities 908 959
------ ------
Long term debt 1,120 1,127
Obligations under capital leases 83 93
Deferred revenue 329 308
Accrued restructuring costs 12 14
Other deferred liabilities 66 94
------ ------
Total liabilities 2,518 2,595
------ ------
SHAREHOLDERS' DEFICIT:
Common stock, 110,000,000 shares
authorized, $.01 par value,
58,015,406 and 56,696,312 shares
issued and outstanding as of
March 31, 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 1,426 1,399
Accumulated other comprehensive loss (6) (23)
Accumulated deficit (1,683) (1,625)
------ ------
Total shareholders' deficit (260) (246)
------ ------
Total liabilities and
shareholders' deficit $2,258 $2,349
====== ======
Note 1. On January 1, 2009, the Company adopted Financial Accounting
Standard Board Staff Position No. APB 14-1 "Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" ("APB 14-1"). APB 14-1 specifies that issuers of such
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. APB
14-1 must be applied on a retrospective basis. As a result of applying APB
14-1, 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
March 31,
-------------------------
2009 2008
---------- ----------
(unaudited) (as adjusted)
Revenue $609 $632
Cost of revenue (excluding depreciation
and amortization, shown separately
below):
Cost of access (286) (299)
Real estate, network and operations (97) (108)
Third party maintenance (24) (27)
Cost of equipment and other sales (23) (23)
---------- ----------
Total cost of revenue (430) (457)
---------- ----------
Gross margin 179 175
Selling, general and administrative (104) (130)
Depreciation and amortization (79) (76)
---------- ----------
Total operating expenses (613) (663)
---------- ----------
Operating loss (4) (31)
Other income (expense):
Interest income 1 4
Interest expense (36) (46)
Other income (expense), net (15) 20
---------- ----------
Loss before provision for income taxes (54) (53)
Provision for income taxes (4) (18)
---------- ----------
Net loss (58) (71)
Preferred stock dividends (1) (1)
---------- ----------
Loss applicable to common shareholders $(59) $(72)
========== ==========
Loss per common share, basic and diluted:
Loss applicable to common shareholders $(1.04) $(1.32)
========== ==========
Weighted average number of common shares 56,923,415 54,718,587
========== ==========
Note 1. On January 1, 2009, the Company adopted Financial Accounting
Standard Board Staff Position No. APB 14-1 "Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" ("APB 14-1"). APB 14-1 specifies that issuers of such
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. APB
14-1 must be applied on a retrospective basis. As a result of applying APB
14-1, interest expense has increased $2 for the three months ended March
31, 2008.
Note 2. For the three months ended March 31, 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, $4 of costs associated with operating the GC
Impsat Segment data center and voice business, principally related to
employee related expenses, were reclassified from selling, general and
administrative to real estate, network and operations as they represent
service delivery costs and therefore are appropriately reported as cost of
revenue.
Global Crossing Limited Table 3
Condensed Consolidated Statements of Cash Flows
($ in millions)
Three Months Ended
March 31,
-------------------------
-----------
2008
2009 (as adjusted)
----------- -----------
(unaudited)
Cash flows provided by (used in)
operating activities:
Net loss $(58) $(71)
Adjustments to reconcile net loss to net
cash used in operating activities:
Non-cash income tax provision - 15
Non-cash stock compensation expense 5 22
Depreciation and amortization 79 76
Provision for doubtful accounts 2 3
Amortization of prior period IRUs (5) (4)
Change in long term deferred revenue 27 4
Other 20 (18)
Change in operating working capital:
- Changes in accounts receivable - (9)
- Changes in accounts payable (50) (3)
- Changes in other current assets (19) (16)
- Changes in other current liabilities 5 26
---- ----
Net cash provided by
operating activities 6 25
---- ----
Cash flows provided by (used in)
investing activities:
Purchases of property and equipment (38) (44)
Change in restricted cash
and cash equivalents 2 (5)
---- ----
Net cash used in investing activities (36) (49)
---- ----
Cash flows provided by (used in)
financing activities:
Proceeds from short and long term debt 3 4
Repayment of capital lease obligations (15) (13)
Repayment of long term debt
(including current portion) (6) (4)
Payment of employee taxes on
share-based compensation (4) -
Other - 1
---- ----
Net cash used in financing activities (22) (12)
---- ----
Effect of exchange rate changes
on cash and cash equivalents (2) 1
---- ----
Net decrease in cash
and cash equivalents (54) (35)
Cash and cash
equivalents, beginning
of period 360 397
---- ----
Cash and cash equivalents, end of period $306 $362
==== ====
Note 1. On January 1, 2009, the Company adopted Financial Accounting
Standard Board Staff Position No. APB 14-1 "Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion (Including
Partial Cash Settlement)" ("APB 14-1"). APB 14-1 specifies that issuers
of such 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. APB 14-1 must be applied on a retrospective basis. As
a result of applying APB 14-1, net loss and other within net cash
provided by (used in) operating activities has increased in $2 for the
three months ended March 31, 2008.
Global Crossing Limited and Subsidiaries Table 4
Unaudited Condensed Consolidated Statements of Operations
($ in millions)
Quarter Ended March 31, 2009
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ----- ------------ -----
Revenue $110 $116 $387 $(4) $609
Cost of revenue
Cost of access (34) (27) (229) 4 (286)
Real estate,
network and
operations (18) (18) (61) - (97)
Third party
maintenance (5) (5) (14) - (24)
Cost of equipment
and other sales (15) (2) (6) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (72) (52) (310) 4 (430)
---- ---- ---- ---- ----
Gross margin 38 64 77 - 179
Selling, general
and administrative (15) (25) (64) - (104)
Depreciation and
amortization (15) (20) (44) - (79)
---- ---- ---- ---- ----
Total operating
expenses (102) (97) (418) 4 (613)
---- ---- ---- ---- ----
Operating income (loss) 8 19 (31) - (4)
Other income (expense):
Interest income 2 1 1 (3) 1
Interest expense (12) (8) (19) 3 (36)
Other income
(expense), net (3) 5 (17) - (15)
---- ---- ---- ---- ----
Income (loss) before
provision for income
taxes (5) 17 (66) - (54)
Provision for income
taxes - (4) - - (4)
---- ---- ---- ---- ----
Net income (loss) (5) 13 (66) - (58)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss)
applicable to
common shareholders $(5) $13 $(67) $- $(59)
==== ==== ==== ==== ====
Quarter Ended December 31, 2008
-------------------------------
GC Impsat ROW
GCUK (4) (1),(3) Eliminations Total
---- --------- ----- ------------ -----
Revenue $134 $124 $394 $(8) $644
Cost of revenue
Cost of access (42) (30) (232) 8 (296)
Real estate,
network and
operations (19) (14) (56) - (89)
Third party
maintenance (7) (5) (12) - (24)
Cost of equipment and
other sales (16) (3) (4) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (84) (52) (304) 8 (432)
---- ---- ---- ---- ----
Gross margin 50 72 90 - 212
Selling, general
and administrative (25) (32) (53) - (110)
Depreciation and
amortization (19) (21) (42) - (82)
---- ---- ---- ---- ----
Total operating
expenses (128) (105) (399) 8 (624)
---- ---- ---- ---- ----
Operating income (loss) 6 19 (5) - 20
Other income (expense):
Interest income 2 1 1 (2) 2
Interest expense (14) (8) (20) 2 (40)
Other income
(expense), net (41) (14) 26 - (29)
---- ---- ---- ---- ----
Income (loss) before
reorganization items,
net and income taxes (47) (2) 2 - (47)
Net gain on
preconfirmation
contingencies - - 1 - 1
---- ---- ---- ---- ----
Income (loss) before
provision for income
taxes (47) (2) 3 - (46)
Provision for income
taxes - (2) (4) - (6)
---- ---- ---- ---- ----
Net loss (47) (4) (1) - (52)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to
common shareholders $(47) $(4) $(2) $- $(53)
==== ==== ==== ==== ====
Quarter Ended March 31, 2008
----------------------------
ROW
GC Impsat (1),
GCUK (2),(4) (2),(3) Eliminations Total
---- --------- ------ ------------ -----
Revenue $153 $112 $370 $(3) $632
Cost of revenue
Cost of access (46) (29) (227) 3 (299)
Real estate, network
and operations (25) (18) (65) - (108)
Third party
maintenance (9) (5) (13) - (27)
Cost of equipment and
other sales (18) (2) (3) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (98) (54) (308) 3 (457)
---- ---- ---- ---- ----
Gross margin 55 58 62 - 175
Selling, general
and administrative (20) (31) (79) - (130)
Depreciation and
amortization (22) (18) (36) - (76)
---- ---- ---- ---- ----
Total operating
expenses (140) (103) (423) 3 (663)
---- ---- ---- ---- ----
Operating income (loss) 13 9 (53) --- (31)
Other income (expense):
Interest income 2 1 3 (2) 4
Interest expense (17) (8) (23) 2 (46)
Other income
(expense), net - (1) 21 - 20
---- ---- ---- ---- ----
Income (loss) before
provision for income
taxes (2) 1 (52) - (53)
Provision for income
taxes - (5) (13) - (18)
---- ---- ---- ---- ----
Net loss (2) (4) (65) - (71)
Preferred stock dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to
common shareholders $(2) $(4) $(66) $- $(72)
==== ==== ==== ==== ====
(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) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment
to the GC Impsat Segment. Since the transfer is between entities
under common control, the Company has retroactively restated GC
Impsat's results to include the GC Brazil and GC Chile operations and
removed the GC Brazil and GC Chile operations from ROW's results for
all periods presented.
(3) On January 1, 2009, the Company adopted Financial Accounting Standard
Board Staff Position No. APB 14-1 "Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion (Including
Partial Cash Settlement)" ("APB 14-1"). APB 14-1 specifies that
issuers of such 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. APB 14-1 must be applied on a
retrospective basis. As a result of applying APB 14-1, interest
expense has increased $2 for the three months ended March 31, 2008,
and $2 for the three months ended December 31, 2008.
(4) For the three months ended March 31, 2008 and December 31, 2008, $2
and $2 respectively 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 March 31, 2008 and
December 31, 2008, $4 and $3 respectively of costs associated with
operating the GC Impsat Segment data center and voice business,
principally related to employee related expenses, were reclassified
from selling, general and administrative to real estate, network and
operations as they represent service delivery costs and therefore are
appropriately reported as cost of revenue.
Global Crossing Limited and Subsidiaries Table 5
Unaudited Summary of Consolidated Revenue
($ in millions)
Quarter Ended March 31, 2009
----------------------------
GCUK GC Impsat ROW(1)Eliminations Total
---- --------- ----- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales channel $107 $111 $292 $- $510
Carrier voice 3 3 92 - 98
Other - - 1 - 1
Intersegment revenue - 2 2 (4) -
---- ---- ---- ---- ----
Consolidated revenues $110 $116 $387 $(4) $609
---- ---- ---- ---- ----
Quarter Ended December 31, 2008
-------------------------------
GC
GCUK Impsat(3) ROW(1)Eliminations Total
---- ----------- ----- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales channel $132 $120 $291 $- $543
Carrier voice 2 2 96 - 100
Other - - 1 - 1
Intersegment revenue - 2 6 (8) -
---- ---- ---- ---- ----
Consolidated revenues $134 $124 $394 $(8) $644
---- ---- ---- ---- ----
Quarter Ended March 31, 2008
----------------------------
GC
Impsat ROW(1), Eliminations
GCUK (2),(3) (2) (2) Total
---- --------- ---- ------------- -----
Revenue:
Enterprise, carrier data
and indirect sales channel $150 $109 $260 $- $519
Carrier voice 3 2 107 - 112
Other - - 1 - 1
Intersegment revenue - 1 2 (3) -
---- ---- ---- ---- ----
Consolidated revenues $153 $112 $370 $(3) $632
---- ---- ---- ---- ----
(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) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment
to the GC Impsat Segment. Since the transfer is between entities
under common control, the Company has retroactively restated GC
Impsat's results to include the GC Brazil and GC Chile operations and
removed the GC Brazil and GC Chile operations from ROW's results for
all periods presented.
(3) For the three months ended March 31, 2008 and December 31, 2008, $2
and $2 respectively of sales taxes netted against revenue were
reclassified to selling, general and administrative expenses to be
consistent with the presentation of other similar taxes.
Global Crossing Limited Table 6
Unaudited Reconciliation of OIBDA to Net Income (Loss)
Applicable to Common Shareholders
($ 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), 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.
Quarter Ended March 31, 2009
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ----- ------------ -----
OIBDA $23 $39 $13 $- $75
Depreciation
and amortization (15) (20) (44) - (79)
---- ---- ---- ---- ----
Operating income (loss) 8 19 (31) - (4)
Interest income 2 1 1 (3) 1
Interest expense (12) (8) (19) 3 (36)
Other income
(expense), net (3) 5 (17) - (15)
Provision for income
taxes - (4) - - (4)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Net income (loss)
applicable to common
shareholders $(5) $13 $(67) $- $(59)
==== ==== ==== ==== ====
Quarter Ended December 31, 2008
-------------------------------
ROW
GCUK GC Impsat (1),(3) Eliminations Total
---- --------- ------- ------------ -----
OIBDA $25 $40 $37 $- $102
Depreciation
and amortization (19) (21) (42) - (82)
---- ---- ---- ---- ----
Operating income (loss) 6 19 (5) - 20
Interest income 2 1 1 (2) 2
Interest expense (14) (8) (20) 2 (40)
Other income
(expense), net (41) (14) 26 - (29)
Net gain on
preconfirmation
contingencies - - 1 - 1
Provision for income
taxes - (2) (4) - (6)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Net loss applicable
to common shareholders $(47) $(4) $(2) $- $(53)
==== ==== ==== ==== ====
Quarter Ended March 31, 2008
----------------------------
GC Impsat ROW(1),
GCUK (2) (2),(3) Eliminations Total
---- --------- ------ ------------ -----
OIBDA $35 $27 $(17) $- $45
Depreciation
and amortization (22) (18) (36) - (76)
---- ---- ---- ---- ----
Operating income (loss) 13 9 (53) - (31)
Interest income 2 1 3 (2) 4
Interest expense (17) (8) (23) 2 (46)
Other income
(expense), net - (1) 21 - 20
Provision for income
taxes - (5) (13) - (18)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Net loss applicable
to common shareholders $(2) $(4) $(66) $- $(72)
==== ==== ==== ==== ====
(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) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW
Segment to the GC Impsat Segment. Since the transfer is between
entities under common control, the Company has retroactively restated
GC Impsat's results to include the GC Brazil and GC Chile operations
and removed the GC Brazil and GC Chile operations from ROW's results
for all periods presented.
(3) On January 1, 2009, the Company adopted Financial Accounting Standard
Board Staff Position No. APB 14-1 "Accounting for Convertible
Instruments That May be Settled in Cash upon Conversion (Including
Partial Cash Settlement)" ("APB 14-1"). APB 14-1 specifies that
issuers of such 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. APB 14-1 must be applied on
retrospective basis. As a result of applying APB 14-1, interest
expense has increased $2 for the three months ended March 31, 2008,
and December 31, 2008.
Global Crossing Limited and Subsidiaries Table 7
Unaudited Reconciliations of Free Cash Flow to Net
Cash Provided by Operating Activities
($ 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.
Three months ended
March 31,
2009
----
Free Cash Flow $(32)
Purchases of property and equipment 38
----
Net cash provided by operating activities $6
====
Three months ended
December 31,
2008
----
Free Cash Flow $30
Purchases of property and equipment 49
----
Net cash provided by operating activities $79
====
Three months ended
March 31,
2008
----
Free Cash Flow $(19)
Purchases of property and equipment 44
----
Net cash provided by operating activities $25
====
Global Crossing Limited and Subsidiaries Table 8
Unaudited Reconciliations of 2009 OIBDA and Free
Cash Flow Guidance
($ 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.
Twelve months ended
December 31, 2009
-------------------
Low End of Guidance High End of 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.
