Global Crossing Reports Second Quarter 2009 Results
-Consolidated revenue of $633 million, representing sequential growth of 4 percent and a year-over- year decline of 3 percent as reported -Consolidated revenue growth of 2 percent sequentially and 6 percent year over year on a constant currency basis -"Invest and grow" revenue of $539 million, representing an increase of 4 percent sequentially and 9 percent year over year on a constant currency basis -OIBDA of $93 million, representing an increase of 24 percent sequentially and 66 percent year over year as reported
FLORHAM PARK, N.J., July 28 -- Global Crossing (NASDAQ:GLBC)
, a leading global IP solutions provider, today announced second quarter 2009 results. The company said it will discuss its consolidated financial and operational results for the second quarter 2009 on a conference call tomorrow.
Business Highlights
Global Crossing generated consolidated revenue of $633 million for the second 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 $539 million, representing a sequential increase of 6 percent and a year-over-year decrease of 1 percent as reported. On a constant currency basis, "invest and grow" revenue increased 4 percent sequentially and 9 percent year over year. Operating Income Before Depreciation and Amortization (OIBDA) for the quarter was $93 million, representing an increase of 24 percent sequentially and 66 percent year over year. Free Cash Flow was negative $10 million in the quarter, an improvement of $22 million sequentially and $23 million year over year. OIBDA and Free Cash Flow are non-GAAP measures that are defined and reconciled in our financial tables.
"Global Crossing's return to sequential revenue growth demonstrates continued strength in demand for our advanced IP-based solutions," said John Legere, CEO of Global Crossing. "Our compelling value proposition, strong emphasis on customer satisfaction, and unique strategic position continue to enable expected improvements in our profitability and free cash flow."
Operational Results
Global Crossing's consolidated revenue was $633 million in the second quarter of 2009, representing a sequential increase of $24 million or 4 percent, including an $11 million favorable foreign exchange impact. Year-over-year consolidated revenue decreased $21 million or 3 percent, including a $58 million unfavorable foreign exchange impact. On a constant currency basis, consolidated revenue increased 2 percent sequentially and 6 percent year over year.
The company's "invest and grow" category generated revenue of $539 million for the second quarter. This represents a sequential increase of $29 million or 6 percent, including substantially all of the $11 million favorable sequential foreign exchange impact. Year-over-year "invest and grow" revenue decreased $8 million or 1 percent, including a $57 million unfavorable foreign exchange impact. On a constant currency basis, "invest and grow" revenue increased 4 percent sequentially and 9 percent year over year. Revenue in the quarter included $8 million for a customer's buyout of certain long-term obligations under an existing contract.
On a segment basis, GCUK generated $113 million in "invest and grow" revenue compared with $107 million in the prior quarter and $154 million in the second quarter of 2008. GC Impsat generated $121 million in "invest and grow" revenue compared with $113 million in the prior quarter and $117 million in the second quarter of 2008. Rest-of-World (ROW) generated $309 million in "invest and grow" revenue compared with $294 million in the prior quarter and $280 million in the second quarter of 2008. Sequentially, on a constant currency basis, GCUK, GC Impsat and ROW "invest and grow" revenues increased 1 percent, 3 percent and 5 percent, respectively. Year over year, in constant currency terms, "invest and grow" revenues in GC Impsat and ROW increased 16 percent and 13 percent, respectively, while revenues in GCUK declined 4 percent.
Wholesale voice revenue decreased by $4 million on a sequential basis and $12 million year over year to $94 million. The decline was associated with the continued management of the wholesale voice business for margin. 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 $432 million in the second quarter, compared with $430 million in the prior quarter and $469 million in the second quarter of 2008. On a sequential basis, cost of revenue increased due to an unfavorable foreign exchange impact of $6 million, partially offset by an operational improvement in access costs. The year-over-year decrease in cost of revenue was primarily attributable to a favorable foreign exchange impact of $39 million and lower incentive compensation accruals, partially offset by an increase in cost of equipment, professional services and third-party maintenance costs.
The company reported Gross Margin, defined as "Revenue" less "Cost of Revenue," of $201 million in the second quarter of 2009, compared with $179 million in the prior quarter and $185 million in the second quarter of 2008. On a sequential basis, Gross Margin increased $22 million primarily due to an increase in "invest and grow" revenue, accompanied by a favorable foreign exchange impact of $5 million. Year over year, Gross Margin increased $16 million due to an operational improvement in revenue and lower incentive compensation compared to the year ago period, partially offset by an unfavorable foreign exchange impact of $19 million.
Sales, general and administrative (SG&A) expenses were $108 million in the second quarter of 2009, compared with $104 million in the prior quarter and $129 million in the second quarter of 2008. On a sequential basis, SG&A increased primarily due to higher professional fees. The year-over-year decrease was primarily attributable to $12 million favorable foreign exchange impact, as well as lower incentive compensation accruals and savings related to cost reduction initiatives.
Global Crossing reported $93 million of Operating Income Before Depreciation and Amortization (OIBDA) in the second quarter, a sequential increase of $18 million, including a $3 million favorable foreign exchange impact. On a year-over-year basis, OIBDA increased $37 million, including an unfavorable foreign exchange impact of $7 million and a $10 million decrease in incentive compensation accruals. The sequential and year-over-year improvement in OIBDA was principally driven by higher revenue on a constant currency basis and improved revenue mix. On a segment basis, GCUK, GC Impsat and ROW contributed OIBDA of $21 million, $44 million and $28 million, respectively.
Global Crossing's consolidated net income applicable to common shareholders was $26 million for the second quarter of 2009, including $57 million in foreign exchange gains reflected in Other Income, net. On a sequential basis, net income increased $85 million due to the previously described increase in OIBDA and a favorable foreign exchange impact. Year over year, net income increased $116 million principally due to the previously described improvements in OIBDA and a favorable foreign exchange impact, as well as a lower income tax provision.
Cash and Liquidity
For the second quarter of 2009, the company reported Free Cash Flow of negative $10 million, as compared to negative $32 million in the prior quarter and negative $33 million in the second quarter of 2008. The sequential increase in Free Cash Flow was primarily driven by the improvement in OIBDA and a reduction in cash used for working capital, partially offset by an increase in capital expenditures. The year-over-year increase in Free Cash Flow was primarily attributable to an increase in OIBDA and lower interest expense.
Cash flow provided by operating activities for the second quarter was $44 million. Global Crossing received $27 million in proceeds from the sale of indefeasible rights of use (IRUs) and prepaid services in the second quarter. Global Crossing used $54 million for purchases of property, plant and equipment, including approximately $12 million for upgrades to its Atlantic and South American subsea systems, and entered into $20 million of capital lease agreements to finance various equipment purchases and software licenses.
As of June 30, 2009, Global Crossing had unrestricted cash of $268 million compared to $306 million at March 31, 2009. The company had $289 million in total cash at June 30, 2009, compared to $322 million in total cash at March 31, 2009.
2009 Guidance
The following table is provided for informational purposes only and represents the Company's 2009 guidance as provided on February 16, 2009.
Measures 2009 Guidance
($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 Wednesday, July 29, 2009 at 9:00 a.m. EDT to discuss its financial results. The call may be accessed by dialing +1 212 231 2924 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 Wednesday, July 29, 2009 beginning at 11:30 a.m. EDT and will be accessible until Wednesday, August 5, 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 21432271. Callers in the United Kingdom should dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21432271.
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.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; 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
Mark Gottlieb
+ 1 800 836 0342
glbc at globalcrossing.com
Antonio Suarez
+1 973 937 0233
Antonio.Suarez at globalcrossing.com
IR/PR1
Global Crossing Limited Table 1
Condensed Consolidated Balance Sheets
($ in millions)
June 30, December 31,
2009 2008
--------- -----------
(unaudited) (as adjusted)
ASSETS:
Current assets:
Cash and cash equivalents $268 $360
Restricted cash and cash
equivalents - current portion 9 7
Accounts receivable, net of
allowances of $53 and $58 365 336
Prepaid costs and
other current assets 107 103
------ ------
Total current assets 749 806
------ ------
Restricted cash and cash
equivalents - long term 12 11
Property and equipment, net of
accumulated depreciation of
$1,043 and $851 1,319 1,300
Intangible assets, net
(including goodwill of $164 and $147) 189 172
Other assets 59 60
------ ------
Total assets $2,328 $2,349
====== ======
LIABILITIES:
Current liabilities:
Accounts payable $282 $329
Accrued cost of access 86 92
Short term debt and current
portion of long term debt 19 26
Accrued restructuring costs
- current portion 13 13
Deferred revenue - current portion 146 138
Other current liabilities 399 361
------ ------
Total current liabilities 945 959
------ ------
Long term debt 1,157 1,127
Obligations under capital leases 88 93
Deferred revenue 337 308
Accrued restructuring costs 13 14
Other deferred liabilities 73 94
------ ------
Total liabilities 2,613 2,595
------ ------
SHAREHOLDERS' DEFICIT:
Common stock, 110,000,000
shares authorized, $.01
par value, 60,134,317 and
56,696,312 shares issued and
outstanding as of June 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 1,422 1,399
Accumulated other comprehensive loss (54) (23)
Accumulated deficit (1,656) (1,625)
------ ------
Total shareholders' deficit (285) (246)
------ ------
Total liabilities and
shareholders' deficit $2,328 $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 Six Months Ended
June 30, June 30,
------------------------- ------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
(unaudited) (as adjusted) (unaudited) (as adjusted)
Revenue $633 $654 $1,242 $1,286
Cost of revenue
(excluding
depreciation and
amortization, shown
separately below):
Cost of access (285) (306) (571) (605)
Real estate,
network and
operations (98) (112) (195) (220)
Third party
maintenance (27) (28) (51) (55)
Cost of
equipment
and other sales (22) (23) (45) (46)
---------- ---------- ---------- ----------
Total cost
of revenue (432) (469) (862) (926)
---------- ---------- ---------- ----------
Gross margin 201 185 380 360
Selling, general
and administrative (108) (129) (212) (259)
Depreciation and
amortization (82) (84) (161) (160)
---------- ---------- ---------- ----------
Total
operating
expenses (622) (682) (1,235) (1,345)
---------- ---------- ---------- ----------
Operating income
(loss) 11 (28) 7 (59)
Other income (expense):
Interest income 4 2 5 6
Interest expense (38) (46) (74) (92)
Other income, net 58 8 43 28
---------- ---------- ---------- ----------
Income (loss) before
preconfirmation
contingencies
and provision
for income taxes 35 (64) (19) (117)
Net gain on
preconfirmation
contingencies - 4 - 4
---------- ---------- ---------- ----------
Income (loss)
before provision
for income taxes 35 (60) (19) (113)
Provision for
income taxes (8) (29) (12) (47)
---------- ---------- ---------- ----------
Net income (loss) 27 (89) (31) (160)
Preferred stock
dividends (1) (1) (2) (2)
---------- ---------- ---------- ----------
Income (loss)
applicable to common
shareholders $26 $(90) $(33) $(162)
========== ========== ========== ==========
Income (loss)
per common share,
basic:
Income (loss)
applicable to
common
shareholders $0.43 $(1.62) $(0.56) $(2.93)
========== ========== ========== ==========
Weighted average
number of
common shares 59,904,503 55,675,011 58,422,070 55,196,799
========== ========== ========== ==========
Income (loss)
per common share,
diluted:
Income (loss)
applicable to
common
shareholders $0.34 $(1.62) $(0.56) $(2.93)
========== ========== ========== ==========
Weighted average
number of
common shares 78,540,571 55,675,011 58,422,070 55,196,799
========== ========== ========== ==========
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 $1 and $3 for the three and six
months ended June 30, 2008, respectively.
Note 2. For the three months ended June 30, 2008, $1 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 six months ended June 30, 2008, $3 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, $9 of costs incurred to operate the GC Impsat Segment data
center business, primarily employee-related expenses, were reclassified
from selling, general and administrative to real estate, network and
operations as they represent service delivery costs and therefore are
appropriately reported as cost of revenue.
Global Crossing Limited Table 3
Condensed Consolidated Statements of Cash Flows
($ in millions)
Six Months Ended
June 30,
------------------------
2008
2009 (as adjusted)
---- ----
(unaudited)
Cash flows provided by
(used in) operating activities:
Net loss $(31) $(160)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Loss on sale of marketable securities - 3
Non-cash income tax provision - 27
Non-cash stock compensation expense 10 43
Depreciation and amortization 161 160
Provision for doubtful accounts 4 5
Amortization of prior period IRUs (11) (7)
Gain on preconfirmation contingencies - (4)
Change in long term deferred revenue 32 32
Other (46) (34)
Change in operating
working capital:
- Changes in accounts receivable (17) (21)
- Changes in accounts payable (59) 5
- Changes in other current assets (12) (41)
- Changes in other current
liabilities 19 32
---- ----
Net cash provided by operating activities 50 40
---- ----
Cash flows provided by
(used in) investing activities:
Purchases of property and equipment (92) (92)
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) (6)
---- ----
Net cash used in investing activities (90) (93)
---- ----
Cash flows provided by
(used in) financing activities:
Proceeds from short and long
term debt 6 7
Repayment of capital lease
obligations (30) (29)
Repayment of long term Debt
(including current portion) (20) (9)
Proceeds from exercise of stock
options - 1
Payment of employee
taxes on share-based
compensation (12) -
---- ----
Net cash used in financing activities (56) (30)
---- ----
Effect of exchange rate changes on cash
and cash equivalents 4 4
---- ----
Net decrease in cash and cash equivalents (92) (79)
Cash and cash equivalents, beginning
of period 360 397
---- ----
Cash and cash equivalents, end
of period $268 $318
==== ====
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 $3 for the six months ended June 30, 2008.
Global Crossing Limited and Subsidiaries Table 4
Unaudited Condensed Consolidated Statements of Operations
($ in millions)
Quarter Ended
June 30, 2009
--------------
GC ROW
GCUK Impsat (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)
---- ---- ---- ---- ----
Total
operating
expenses (110) (102) (414) 4 (622)
---- ---- ---- ---- ----
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 income taxes 21 23 (9) - 35
Net gain on
preconfirmation
contingencies - - - - -
---- ---- ---- ---- ----
Income (loss) before
provision for
income taxes 21 23 (9) - 35
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
March 31, 2009
--------------
GC ROW
GCUK Impsat (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
preconfirmation
contingencies and
income taxes (5) 17 (66) - (54)
Net gain on
preconfirmation
contingencies - - - - -
---- ---- ---- ---- ----
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
June 30, 2008
--------------
GC
Impsat ROW
GCUK (2,4) (1,2,3) Eliminations Total
---- ------- ----- ------------ -----
Revenue $157 $119 $382 $(4) $654
Cost of revenue
Cost of access (48) (28) (233) 3 (306)
Real estate,
network and
operations (24) (23) (66) 1 (112)
Third party
maintenance (9) (4) (15) - (28)
Cost of equipment
and other sales (17) (3) (3) - (23)
---- ---- ---- ---- ----
Total cost
of revenue (98) (58) (317) 4 (469)
---- ---- ---- ---- ----
Gross margin 59 61 65 - 185
Selling, general and
administrative (22) (30) (77) - (129)
Depreciation
and amortization (21) (22) (41) - (84)
---- ---- ---- ---- ----
Total
operating
expenses (141) (110) (435) 4 (682)
---- ---- ---- ---- ----
Operating income
(loss) 16 9 (53) - (28)
Other income (expense):
Interest income 2 - 2 (2) 2
Interest expense (18) (10) (20) 2 (46)
Other income
(expense), net 1 4 3 - 8
---- ---- ---- ---- ----
Income (loss) before
preconfirmation
contingencies
and income taxes 1 3 (68) - (64)
Net gain on
preconfirmation
contingencies - - 4 - 4
---- ---- ---- ---- ----
Income (loss)
before provision
for income taxes 1 3 (64) - (60)
Provision for
income taxes (1) (12) (16) - (29)
---- ---- ---- ---- ----
Net income (loss) - (9) (80) - (89)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss)
applicable to
common shareholders $- $(9) $(81) $- $(90)
==== ==== ==== ==== ====
(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 August 2008, Global Crossing Limited transferred its GC Chile
operations 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 Chile
operations and removed GC Chile 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 $1 for the three
months ended June 30, 2008.
(4) For the three months ended June 30, 2008 $1 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 June 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 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 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 revenue $110 $116 $387 $(4) $609
---- ---- ---- ---- ----
Quarter Ended June 30, 2008
---------------------------
GCUK GC Impsat(2,3) ROW(1,2) Eliminations(2) Total
---- ------------- ------- -------------- -----
Revenue:
Enterprise, carrier
data and indirect
sales channel $154 $114 $279 $- $547
Carrier voice 3 2 101 - 106
Other - - 1 - 1
Intersegment
revenue - 3 1 (4) -
---- ---- ---- ---- ----
Consolidated
revenue $157 $119 $382 $(4) $654
---- ---- ---- ---- ----
(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 August 2008, Global Crossing Limited transferred its GC Chile
operations 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 Chile
operations and removed GC Chile from ROW's results for all periods
presented.
(3) For the three months ended June 30, 2008 $1 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Global Crossing Limited Table 6
Unaudited Reconciliation of OIBDA to Income (Loss) Applicable to
Common Shareholders
($ 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 June 30, 2009
---------------------------
GCUK GC 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 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)
---- ---- ---- ---- ----
Income (loss) applicable
to common shareholders $(5) $13 $(67) $- $(59)
==== ==== ==== ==== ====
Quarter Ended June 30, 2008
---------------------------
GCUK GC Impsat(2) ROW (1,2,3) Eliminations Total
---- ----------- ---------- ------------ -----
OIBDA $37 $31 $(12) $- $56
Depreciation and
amortization (21) (22) (41) - (84)
---- ---- ---- ---- ----
Operating income
(loss) 16 9 (53) - (28)
Interest income 2 - 2 (2) 2
Interest expense (18) (10) (20) 2 (46)
Other income, net 1 4 3 -- 8
Net gain on
preconfirmation
contingencies - - 4 - 4
Provision for
income taxes (1) (12) (16) - (29)
Preferred
stock dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable
to common
shareholders $- $(9) $(81) $- $(90)
==== ==== ==== ==== ====
(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 August 2008, Global Crossing Limited transferred its GC Chile
operations 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 Chile
operations and removed GC Chile 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 $1 for the three months ended June 30, 2008.
Global Crossing Limited and Subsidiaries Table 7
Unaudited Reconciliations of Free Cash Flow to Net Cash
Provided by Operating Activities
($ 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
June 30,
2009
----
Free Cash Flow $(10)
Purchases of property and equipment $54
----
Net cash provided by operating activities $44
====
Quarter Ended
March 31,
2009
----
Free Cash Flow $(32)
Purchases of property and equipment $38
----
Net cash provided by operating activities $6
====
Quarter Ended
June 30,
2008
----
Free Cash Flow $(33)
Purchases of property and equipment $48
----
Net cash provided by operating activities $15
====
Global Crossing Limited and Subsidiaries Table 8
Unaudited Reconciliations of 2009 OIBDA and Free Cash Flow Guidance
($ 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 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.
