Global Crossing Reports GCUK's First Quarter 2011 Results
By Global Crossing Limited, PRNEWednesday, June 8, 2011
LONDON, June 9, 2011 -
Global Crossing Limited (NASDAQ: GLBC), a leading global IP solutions
provider, today announced first-quarter results for its subsidiary, Global
Crossing (UK) Telecommunications Limited (GCUK).
Highlights
For the first quarter of 2011, GCUK generated revenue of 74 million
pounds and Operating Income Before Depreciation and Amortization (OIBDA) of
13 million pounds. (OIBDA is a non-GAAP measure defined and reconciled
below.) The company also reported net cash used in operations of 11 million
pounds.
"We continue to diversify our commercial enterprise customer base in the
UK while broadening our position with UK government customers," said John
Legere, chief executive officer of Global Crossing. "We are well positioned
to meet demand as customers continue to seek improved performance and
efficiencies by adopting advanced IP-based solutions."
First Quarter Results
GCUK generated revenue of 74 million pounds in the first quarter, a
sequential decrease of 11 percent and a year-over-year decrease of 5 percent.
The sequential decrease was primarily due to non-recurring benefits in the
prior quarter of 4 million pounds from the completion of a customer contract
and 5 million pounds from the sale of equipment in connection with a new
managed services contract. The year-over-year decrease was primarily due to
price reductions associated with recent contracts to renew and extend
services to existing customers, accompanied by lower government spending.
Gross profit was 26 million pounds for the quarter, a sequential decrease
of 5 million pounds and a year-over-year decrease of 3 million pounds. The
sequential decrease was primarily driven by 4 million pounds of margin
benefits in the prior quarter associated with the previously mentioned
contract completion and equipment sale. The year-over-year decrease was
primarily driven by lower revenue.
GCUK's OIBDA for the first quarter was 13 million pounds, compared to 18
million pounds in the fourth quarter of 2010 and 20 million pounds in the
first quarter of 2010. The sequential decrease was primarily attributable to
lower gross profit due to the aforementioned benefit in the prior quarter
from the contract completion and equipment sale, accompanied by higher
accrued incentive compensation and severance charges related to efficiency
initiatives. The year-over-year decrease was primarily driven by 6 million
pounds of property tax and insurance recoveries in the year-ago period and
lower revenue.
GCUK recorded a net loss of 1 million pounds for the first quarter,
compared with a net loss of 2 million pounds in the fourth quarter of 2010
and a net loss of 5 million pounds in the first quarter of 2010. The
year-over-year decrease in net loss was primarily due to favorable foreign
exchange impacts on net U.S dollar denominated debt, partially offset by a
decrease in OIBDA.
Cash and Liquidity
As of March 31, 2011, GCUK had cash and cash equivalents of 37 million
pounds, compared with 49 million pounds on December 31, 2010 and 33 million
pounds on March 31, 2010.
GCUK's cash and cash equivalents decreased 12 million pounds in the first
quarter. Net cash used in operating activities during the first quarter
totaled 11 million pounds, after cash used in operating working capital of 18
million pounds and interest payments of 2 million pounds. During the quarter,
GCUK recorded purchases of property, plant and equipment of 4 million pounds
and principal payments on finance leases and other debt of 2 million pounds.
In accordance with the indenture governing GCUK's senior secured notes,
on April 26, 2011 GCUK commenced an offer to purchase 11 million pounds in
aggregate principal amount of such notes, including accrued interest, using
50 percent of GCUK's excess operating cash flow for the year ended December
31, 2010. The offer expired at 4:00 p.m. London time on May 26, 2011, and
GCUK Finance reported that no tenders had been received prior to expiration.
International Financial Reporting Standards
GCUK's results reported here include unaudited consolidated financial
results for the three months ended March 31, 2011, December 31, 2010 and
March 31, 2010; the unaudited consolidated balance sheet as of March 31,
2011; and the audited consolidated balance sheet as of December 31, 2010, all
in accordance with IFRS and in pounds sterling, as published by the
International Accounting Standards Board (IASB). GCUK's results for the first
quarters of 2011 and 2010 and the fourth quarter of 2010 were included in
Global Crossing's consolidated results previously reported on May 3, 2011, in
accordance with U.S. GAAP and in U.S. dollars.
Non-GAAP Financial Measures
Consistent with the U.S. Securities and Exchange Commission's (SEC's)
Regulation G, the attached tables include a definition of OIBDA, as well as a
reconciliation of such measure to the most directly comparable financial
measure calculated in accordance with IFRS.
Conference Call
Management has decided to discontinue conducting separate quarterly
conference calls to report GCUK's standalone financial results in light of
Global Crossing's April 11, 2011, announcement that it has entered into a
definitive agreement with Level 3 Communications, Inc. ("Level 3") under
which Level 3 will acquire Global Crossing. However, Global Crossing will
continue to issue quarterly releases of GCUK financial results and make
periodic filings with the SEC as may be required by law or under the
applicable indenture for the notes issued by Global Crossing (UK) Finance
Plc.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) is a leading global IP, Ethernet, data
center and video solutions provider with the world's first integrated global
IP-based network. The company offers a full range of data, voice,
collaboration, broadcast and media services delivered with superior customer
service.
Global Crossing provides services to enterprises (including approximately
40 percent of the Fortune 500); government departments and agencies; and 700
carriers, mobile operators and ISPs. It delivers converged IP services to
more than 700 cities in more than 70 countries, and has 17 world-class data
centers in major business centers around the globe.
Please visit www.globalcrossing.com for more information about
Global Crossing.
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
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, 8-K, and in respect of GCUK's Forms 20-F and 6-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.
IMPORTANT INFORMATION FOR INVESTORS
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any vote
or approval. The proposed amalgamation involving Level 3 Communications, Inc.
("Level 3") and Global Crossing Limited ("Global Crossing") announced on
April 11, 2011 will be submitted to the stockholders of Level 3 and the
stockholders of Global Crossing for their consideration. Level 3 and Global
Crossing have filed with the SEC a registration statement on Form S-4 that
includes a preliminary joint proxy statement of Level 3 and Global Crossing
that also constitutes a preliminary prospectus of Level 3, and may in the
future file with the SEC other relevant documents concerning the proposed
transaction. Level 3 and Global Crossing will each provide the final joint
proxy statement/prospectus to its respective stockholders. Investors and
security holders are urged to read the registration statement and the joint
proxy statement/prospectus and any other relevant documents filed with the
SEC when they become available, as well as any amendments or supplements to
those documents, because they contain and will contain important information
about Level 3, Global Crossing and the proposed transaction. Investors and
security holders may obtain a free copy of the registration statement and
joint proxy statement/prospectus, as well as other filings containing
information about Level 3 and Global Crossing, free of charge at the SEC's
Web Site at www.sec.gov. In addition, the joint proxy
statement/prospectus, the SEC filings that are or will be incorporated by
reference in the joint proxy statement/prospectus and the other documents
filed or to be filed with the SEC by Level 3 may be obtained free of charge
by directing such request to: Investor Relations, Level 3, Inc., 1025
Eldorado Boulevard, Broomfield, Colorado 80021 or from Level 3's Investor
Relations page on its corporate website at www.Level3.com and the
joint proxy statement/prospectus, the SEC filings that are or will be
incorporated by reference in the joint proxy statement/prospectus and the
other documents filed or to be filed with the SEC by Global Crossing may be
obtained free of charge by directing such request to: Global Crossing by
telephone at (800) 836-0342 or by submitting a request by e-mail to
glbc@globalcrossing.com or a written request to the Secretary, Wessex House,
45 Reid Street, Hamilton HM12 Bermuda or from Global Crossing's Investor
Relations page on its corporate website at www.globalcrossing.com.
Level 3, Global Crossing and their respective directors, executive
officers, and certain other members of management and employees may be deemed
to be participants in the solicitation of proxies in favor of the proposed
transaction from the stockholders of Level 3 and from the stockholders of
Global Crossing, respectively. Information about the directors and executive
officers of Level 3 is set forth in the proxy statement on Schedule 14A for
Level 3's 2011 Annual Meeting of Stockholders, which was filed with the SEC
on April 4, 2011 and information about the directors and executive officers
of Global Crossing is set forth in the proxy statement on Schedule 14A for
Global Crossing's 2011 Annual General Meeting of Shareholders, which was
filed with the SEC on April 29, 2011. Additional information regarding
participants in the proxy solicitation may be obtained by reading the joint
proxy statement/prospectus regarding the proposed transaction.
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: the failure to occur of any condition to the closing of the
acquisition of Global Crossing by Level 3 and uncertainties as to the timing
of the closing; the failure to achieve or any delay in achieving expected
synergies and other financial benefits from the acquisition; changes in
Global Crossing's risk profile resulting from the acquisition; limitations on
Global Crossing's financial and operational flexibility that arise under the
covenants in the amalgamation agreement that could restrict it from taking
advantage of opportunities to strategically enhance its business or improve
its capital structure; delays or reductions in purchases from Global Crossing
by customers because of their perceived uncertainty about its ability to meet
their needs after closing of the acquisition; disruptions in Global
Crossing's business due to current and prospective employees experiencing
uncertainty about their future roles with the company and the diversion of
their time and attention from ongoing business operations; Global Crossing's
history of substantial operating losses and the fact that, in the near term,
funds from operations will not satisfy cash requirements; the availability of
future borrowings in an amount sufficient to pay Global Crossing's
indebtedness and to fund its other liquidity needs; legal and contractual
restrictions on the inter-company transfer of funds by Global Crossing's
subsidiaries; Global Crossing'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 Global
Crossing'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 Global Crossing'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 that would prevail on an
open market; potential weaknesses in internal controls of acquired
businesses, and difficulties in integrating internal controls of those
businesses with Global Crossing's own internal controls; exposure to
contingent liabilities; and other risks referenced from time to time in
Global Crossing'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 Contact
Michael Schneider
+1-973-937-0146
michael.schneider@globalcrossing.com
Analysts/Investors Contact
Mark Gottlieb
+1-800-836-0342
glbc@globalcrossing.com
Gino Mathew
United Kingdom
+1-973-937-0133
gino.mathew@globalcrossing.com
IR/PR1
6 Schedules to Follow
Schedule 1: Consolidated Statements of Financial Position
Schedule 2: Consolidated Statements of Operations
Schedule 3: Consolidated Statements of Cash Flows
Schedule 4: Summary of Consolidated Revenues
Schedule 5: Supplemental Information provided pursuant to the indenture
governing the GCUK senior secured notes
Schedule 6: Reconciliation of OIBDA to Net Loss
Schedule 1
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Financial Position
Results below are in pounds sterling in thousands
March 31, December 31,
2011 2010
------- -------
(unaudited)
Non-current assets
Intangible assets, net 10,902 10,524
Property, plant and equipment, net 134,439 139,269
Investment in associate 182 218
Retirement benefit asset 299 299
Trade and other receivables 38,171 38,768
------ ------
183,993 189,078
------- -------
Current assets
Trade and other receivables, net 45,020 49,718
Cash and cash equivalents 36,875 49,224
------ ------
81,895 98,942
------ ------
Total assets 265,888 288,020
======= =======
Current liabilities
Trade and other payables (65,780) (72,680)
Senior secured notes (10,857) (10,857)
Deferred revenue (34,162) (39,608)
Provisions (1,655) (2,011)
Obligations under finance leases (6,676) (7,111)
Other debt obligations - (18)
(119,130) (132,285)
-------- --------
Non-current liabilities
Trade and other payables (21,972) (22,874)
Senior secured notes (257,727) (262,538)
Deferred revenue (75,618) (79,099)
Retirement benefit obligation (1,842) (1,842)
Provisions (1,686) (1,636)
Obligations under finance leases (9,337) (8,109)
------ ------
(368,182) (376,098)
-------- --------
Total liabilities (487,312) (508,383)
-------- --------
Net liabilities (221,424) (220,363)
======== ========
Capital and reserves
Equity share capital (101,000 shares
outstanding at BPS1 each) 101 101
Capital reserve 32,430 32,330
Accumulated deficit (253,955) (252,794)
-------- --------
Total equity (221,424) (220,363)
======== ========
Schedule 2
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Operations
Results below are in pounds sterling in thousands
Three Months Ended
------------------
March 31, December 31, March 31,
2011 2010 2010
---------- ------------- ----------
(unaudited) (unaudited) (unaudited)
Revenue 73,855 82,804 77,880
Cost of sales (47,570) (51,630) (49,095)
Gross profit 26,285 31,174 28,785
Distribution costs (7,030) (6,580) (6,528)
Administrative expenses (17,117) (16,365) (12,509)
Operating profit 2,138 8,229 9,748
Finance revenue 1,119 1,108 1,253
Finance charges (9,155) (8,967) (9,153)
Net foreign exchange gain/(loss)
on foreign currency borrowings,
net 4,711 (2,276) (6,565)
Loss before tax (1,187) (1,906) (4,717)
Tax benefit (charge) 26 (28) (147)
--- --- ----
Loss for the period (1,161) (1,934) (4,864)
====== ====== ======
Schedule 3
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Cash Flows
Results below are in pounds sterling in thousands
For the Three Months Ended
--------------------------
March 31, December 31, March 31,
2011 2010 2010
---------- ------------- ----------
(unaudited) (unaudited) (unaudited)
Operating activities
Loss for the period (1,161) (1,934) (4,864)
Adjustments for:
Finance costs, net 3,325 10,135 14,465
Income tax charges 26 28 147
Depreciation of property,
plant and equipment 8,449 8,537 8,585
Amortization of intangible
assets 609 466 506
Amortization of prepaid
connection costs 1,541 1,680 1,701
Share based payment expense/
(credit) 100 (67) 126
Loss on disposal of
property, plant and
equipment 12 17 126
Impairment of property,
plant and equipment - 650 -
Equity income for associate 36 - (8)
Change in long term deferred
revenue (3,481) (3,341) (2,023)
Change in long term other
assets and liabilities (1,097) (4,801) (209)
Change in operating working
capital:
-Change in trade accounts
receivable and accrued
income 3,806 10,533 (10,860)
-Change in trade accounts
payable and accrued cost of
access (5,115) (21) (7,845)
-Change in other
receivables current (2,320) 7,178 (7,950)
-Change in other payables
current (14,424) (2,983) (175)
------- ------ ----
Cash generated from
operations (9,694) 26,077 (8,278)
Interest paid (1,599) (15,960) (1,113)
------ ------- ------
Net cash (used in)/provided
by operating activities (11,293) 10,117 (9,391)
------- ------ ------
Investing activities
Interest received 2,790 29 15
Purchase of property, plant
and equipment (4,317) (1,774) (5,435)
------ ------ ------
Net cash used in investing
activities (1,527) (1,745) (5,420)
------ ------ ------
Financing activities
Loans provided by group
companies - - 13,100
Proceeds from sale/leaseback 2,513 - -
Repayments of capital
elements under finance
leases (2,024) (1,311) (2,519)
Repayment of capital element
of other debt obligations (18) (17) (183)
--- --- ----
Net cash provided by/(used
in) financing activities 471 (1,328) 10,398
--- ------ ------
Net (decrease)/increase in
cash and cash equivalents (12,349) 7,044 (4,413)
Cash and cash equivalents at
beginning of period 49,224 42,180 37,331
------ ------ ------
Cash and cash equivalents at
end of period 36,875 49,224 32,918
====== ====== ======
Schedule 4
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Three Months Ended
------------------
March 31, December 31, March 31,
2011 2010 2010
---------- --------- ----------
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise, carrier data
and indirect sales
channels 73,328 82,067 76,575
Carrier voice 419 629 1,180
--- --- -----
Revenues from third party
customers 73,747 82,696 77,755
Revenues from Global
Crossing group companies 108 108 125
--- --- ---
Consolidated revenues 73,855 82,804 77,880
====== ====== ======
Schedule 5
SUPPLEMENTAL INFORMATION PROVIDED PURSUANT TO THE INDENTURE GOVERNING THE
GCUK SENIOR SECURED NOTES
GCUK is required to provide the holders of its Senior Secured Notes due
2014 with quarterly information pursuant to Section 4.17(a)(2) of the
indenture governing such notes. For quarters prior to the first quarter of
2010, GCUK satisfied this requirement by providing the note holders with a
quarterly report separate and apart from its quarterly earnings press
releases. Starting with the first quarter of 2010, GCUK has satisfied this
requirement by providing the note holders with its quarterly earnings press
releases. This schedule of supplemental information is being included with
the earnings press release to ensure that the information being provided
complies with Section 4.17(a)(2) of the indenture.
Liquidity and Capital Resources
GCUK's ability to make payments on and to refinance its indebtedness and
to fund planned capital expenditures will depend on its ability to generate
cash in the future. This depends to a degree on general economic, financial,
competitive, legislative, regulatory and other factors that are beyond GCUK's
control.
Based on GCUK's current level of operations, expected revenue growth
trends and anticipated cost management and operating improvements, GCUK
believes its future cash flow from operations, available cash and cash
available from financing activities will be adequate to meet its future
liquidity needs for at least the next twelve months. However, GCUK currently
expects its cash and cash equivalents to decrease in 2011 as a result of
relatively flat operating performance and greater working capital
requirements as compared to 2010.
There can be no assurance that GCUK's business will generate sufficient
cash flow from operations, that currently anticipated operating improvements
will be realized on schedule or that future borrowings will be available to
GCUK in an amount sufficient to enable it to pay its indebtedness or to fund
its other liquidity needs. GCUK will need to refinance all or a substantial
portion of its indebtedness on or before maturity. GCUK cannot provide
assurances that it will be able to refinance any of its indebtedness on
commercially reasonable terms or at all.
GCUK monitors its capital structure on an ongoing basis and from time to
time considers financing and refinancing options to improve its capital
structure and to enhance its financial flexibility. GCUK's ability to enter
into new financing arrangements is subject to restrictions in its outstanding
debt instruments and restrictions imposed on GCUK by its parent company in
light of contractual restrictions applicable to the parent company under the
terms of its senior preferred shares and under the Plan of Amalgamation
described below. Subject to the foregoing restrictions, at any given time
GCUK may pursue a variety of financing opportunities, and its decision to
proceed with any financing will depend, among other things, on prevailing
market conditions, near term maturities and available terms.
From time to time GCUK reviews its operations and may consider
opportunities to strategically enhance, expand or change its operations and
leverage its capabilities. Initiatives that may result from such reviews may
include, among others, plans to reduce operating expenses and/or optimize
existing operating resources, expansion of existing or entry into
complementary lines of business, additional capital investment in GCUK's
network and service infrastructure and opportunistic acquisitions. At any
given time in connection with the foregoing GCUK may be engaged in varying
levels of analyses or negotiations with potential counterparties. The
below-described covenants in GCUK's parent company's Plan of Amalgamation may
limit GCUK's flexibility to take advantage of such opportunities unless its
parent obtains Level 3 Communications, Inc.'s consent. If GCUK pursues any
such initiatives or transactions, it may require additional equity or debt
financing, and there can be no assurance that it will be able to obtain such
financing on favorable terms or at all, or that Level 3 will provide any
necessary consent to pursue such financings. Undertaking any such initiatives
may place greater demands on GCUK's cash flows due to increased capital and
operating expenses and debt service.
At March 31, 2011, GCUK's available liquidity consisted of 37 million
pounds of unrestricted cash and cash equivalents.
In the long term, GCUK expects its operating results and cash flows to
improve as a result of growth of its revenues, including the economies of
scale expected to result from such growth, and from ongoing cost management
initiatives, including initiatives to optimize the access network and
effectively lower unit prices. Thus, in the long term, GCUK expects to
generate positive cash flow from operating activities in an amount sufficient
to fund all investing and financing requirements, subject to the need to
refinance the GCUK Senior Secured Notes. However, its ability to improve cash
flows is subject to the risks and uncertainties described in GCUK's periodic
reports filed with the SEC and in the press release to which this Schedule is
attached.
In addition, GCUK's short term liquidity and more specifically its
quarterly cash flows are subject to considerable variability as a result of
the timing of interest payments as well as the following factors.
- Working capital variability significantly impacts its cash
flows and can cause its intra-quarter cash balances to drop to levels
significantly lower than those levels prevailing at the end of a
quarter.
- The UK government is implementing austerity measures aimed at
reducing costs in a wide range of areas, including telecommunications.
The implementation of pricing actions and the reduction of spending by
governmental entities have had a negative effect on GCUK's revenue
performance and that impact could become more significant in the
future.
- Within 120 days after each calendar year, GCUK must offer to
purchase a portion of the Senior Secured Notes at 100% of their
principal amount using 50% of the Operating Cash Flow (as defined in
the Indenture) for that year. In respect of 2010, GCUK offered to
purchase 11 million pounds of the Notes, including accrued interest
and the offer expired with no GCUK Notes tendered.
- Cash outlays for purchases of property, plant and equipment
can vary significantly from quarter to quarter primarily due to the
timing of major network upgrades. Although GCUK has the flexibility to
reduce expected capital expenditures in future periods to conserve
cash, the majority of its capital expenditures are directly related to
customer requirements and therefore ultimately generate long-term cash
flows.
Financing activities
On March 31, 2011, GCUK received 3 million pounds of proceeds under a
lease facility with Close Leasing Limited. The arrangement is subject to an
applicable rate of interest of approximately 9% per annum, with payments
monthly until April 2013.
Commitments
During the quarter the Company entered into a ten year right-of-way
agreement with a minimum commitment of 2 million pounds.
Other
During 2008, GCUK and others entered into a dispute with BT in relation
to BT's adherence with its regulatory pricing obligations for wholesale
leased lines ("PPCs") during the period since June 2004 and this dispute was
filed with Ofcom. Ofcom issued its Final Determination in October 2009 and
ordered BT to settle with GCUK. This ruling was appealed by BT to the
Competition Appeal Tribunal ("CAT") in December 2009 and hearings were held
in May and October 2010. In March 2011, the CAT issued its determination and
found against BT in all instances. In April 2011, BT initiated an appeal of
the CAT ruling to the Court of Appeal.
On April 10, 2011, GCUK's parent Global Crossing Limited entered into an
Agreement and Plan of Amalgamation (the "Plan of Amalgamation") with Level 3
Communications, Inc., a Delaware corporation ("Level 3"), and Apollo
Amalgamation Sub, Ltd., a Bermuda company and wholly owned subsidiary of
Level 3 ("Amalgamation Sub"), pursuant to which GCUK's parent and
Amalgamation Sub will be amalgamated under Bermuda law with the surviving
amalgamated company continuing as a subsidiary of Level 3 (the
"Amalgamation"). Under the terms and subject to the conditions of the Plan of
Amalgamation, each share of capital stock of GCUK's parent will be converted
into 16 shares of common stock of Level 3 (and, in the case of the parent's
preferred shares, the right to receive accrued and unpaid dividends thereon).
The Plan of Amalgamation contains customary representations and warranties
and covenants, and is subject to certain closing conditions including receipt
of certain regulatory and governmental approvals. The covenants in the Plan
of Amalgamation include, among others, agreements by GCUK's parent (i) to
continue, and to ensure that its subsidiaries continue, conducting their
businesses in the ordinary course, consistent with past practice and in
compliance with applicable law, during the interim period between the
execution of the Plan of Amalgamation and consummation of the Amalgamation
and (ii) not to engage in, and not to allow any of its subsidiaries to engage
in, certain specified kinds of transactions during that period without Level
3's consent, including equity and debt financings, including any such
financings that may be needed for general corporate purposes during the
period prior to the consummation of the Amalgamation, which could be delayed
due to the need for regulatory approvals or otherwise.
The consummation of the Amalgamation would constitute a "Change of
Control" under and as defined in the indenture for GCUK's Senior Secured
Notes. Pursuant to Section 4.09 of the indenture, within 30 days following
any Change of Control, GCUK is required to commence an offer to purchase all
of the then outstanding Senior Secured Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued interest, if any, thereon
to the date of purchase.
Schedule 6
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Reconciliation of Net (Loss) Profit to OIBDA
Results below are in pounds sterling in thousands
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of net (loss)/profit under IFRS to OIBDA, which is considered
a non-GAAP (Generally Accepted Accounting Principles) financial measure.
OIBDA is defined as operating profit before depreciation and amortization
and foreign exchange (losses) gains on operating working capital movements,
based upon our consolidated statements of operations. OIBDA differs from
operating profit, 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, finance revenue, finance charges, foreign exchange (losses)
gains, income taxes and other non-operating profit or loss items. 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.
Three Months Ended
------------------
March 31, December 31, March 31,
2011 2010 2010
---- -------- ----
(unaudited) (unaudited) (unaudited)
Net loss (1,161) (1,934) (4,864)
Tax (benefit) charge (26) 28 147
Finance revenue (1,119) (1,108) (1,253)
Finance charges 9,155 8,967 9,153
Net foreign exchange
(gain)/loss on foreign (4,711) 2,276 6,565
currency borrowings, net ------ ----- -----
Operating profit 2,138 8,229 9,748
Depreciation and
amortization 10,127 10,042 10,219
Other foreign exchange gain/
(loss), loss on 370 203 396
disposal of fixed assets and
other income --- --- ---
OIBDA 12,635 18,474 20,363
====== ====== ======
.
Tags: England, Global Crossing Limited, June 9, London
