Global Crossing Reports GCUK's First Quarter Results
By Global Crossing, PRNESunday, June 13, 2010
LONDON, June 14, 2010 - 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 2010, GCUK generated revenue of 78 million
pounds and Operating Income Before Depreciation and Amortization (OIBDA) of
20 million pounds. (OIBDA is a non-GAAP measure defined and reconciled
below.) The company also reported cash use from operations of 8 million
pounds before interest payments of 1 million pounds.
"Our investments in new products and services, and the expansion of our
enterprise sales force are progressing as planned," said John Legere, chief
executive officer of Global Crossing. "These actions will enable us to
diversify and profitably grow GCUK's revenue over the coming quarters of
2010."
First Quarter Results
GCUK generated revenue of 78 million pounds, flat sequentially and a
year-over-year decrease of 1 percent. The year-over-year decline was
primarily due to a decrease in wholesale voice revenue.
Gross profit was 29 million pounds for the quarter, a 1 million pound
increase sequentially and year over year. The sequential and year-over-year
increase in gross profit was principally due to an improvement in revenue mix
with lower equipment and professional services costs, partially offset by an
increase in access costs.
GCUK's OIBDA for the first quarter was 20 million pounds, compared with
16 million pounds in the fourth quarter of 2009 and 17 million pounds in the
first quarter of 2009. The sequential and year-over-year increases were
driven by 6 million pounds of property tax and insurance recoveries in the
quarter, partially offset by an increase in accrued incentive compensation,
salaries and commissions and higher restructuring provisions for real estate.
GCUK recorded a net loss of 5 million pounds for the first quarter,
compared with a net loss of 2 million pounds in both the fourth quarter of
2009 and the first quarter of 2009. The sequential and year-over-year
increases in net loss were primarily due to an unfavorable foreign exchange
impact on net U.S. dollar-denominated debt.
Cash and Liquidity
As of March 31, 2010, GCUK had cash and cash equivalents of 33 million
pounds, compared with 37 million pounds at the end of December 31, 2009, and
33 million pounds at the end of March 31, 2009.
GCUK's cash and cash equivalents decreased 4 million pounds in the first
quarter. Net cash used in operating activities during the first quarter
totaled 9 million pounds, including cash use from operating working capital
of 27 million pounds and interest payments of 1 million pounds. During the
quarter, GCUK recorded purchases of property, plant and equipment of 5
million pounds, and principal payments on finance leases and other debt of 3
million pounds. In addition, GCUK borrowed 13 million pounds from Global
Crossing Europe Limited, a subsidiary of Global Crossing Limited, for general
corporate purposes.
In accordance with the indenture governing the senior secured notes, on
May 14, 2010, the company repurchased approximately 0.2 million pounds of its
senior secured notes, including aggregate principal amount and accrued and
unpaid interest.
International Financial Reporting Standards
GCUK's results reported here include unaudited consolidated financial
results for the three months ended March 31, 2010, December 31, 2009 and
March 31, 2009; the unaudited consolidated balance sheet as of March 31,
2010; and the audited consolidated balance sheet as of December 31, 2009, 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 2010 and 2009 and the fourth quarter of 2009 were included in
Global Crossing's consolidated results previously reported on April 28, 2010,
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 scheduled a conference call for Monday, June 14, 2010, at
9:00 a.m. EDT/2:00 p.m. BST to discuss GCUK's financial results. The call may
be accessed by dialing +1-212-231-2900 or +44-(0)-20-8196-2883. Callers are
advised to dial in 15 minutes prior to the 9:00 a.m. EDT start time. The call
will also be Webcast at investors.globalcrossing.com/results.cfm.
A replay of the call will be available on Monday, June 14, 2010,
beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until
Monday, June 21, 2010, at 11:00 a.m. EDT/4:00 p.m. BST. To access the replay,
dial +1-402-977-9140 or +1-800-633-8284 and enter reservation number
21470298. UK callers may access the replay by dialing +44-(0)-87-0000-3081 or
(0)-80-0692-0831 and entering reservation number 21470298.
ABOUT GLOBAL CROSSING (UK) TELECOMMUNICATIONS LIMITED.
Global Crossing UK Telecommunications Limited provides a full range of
managed telecommunications services in a secure environment ideally suited
for IP-based business applications. The company provides managed voice, data,
Internet and e-commerce solutions to a strong and established commercial
customer base, including more than 100 UK government departments, as well as
systems integrators, rail sector customers and major corporate clients. In
addition, Global Crossing UK provides carrier services to national and
international communications service providers.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC) is a leading global IP and Ethernet
solutions provider with the world's first integrated global IP-based network.
The company offers a full range of data, voice and collaboration services
with an industry leading customer experience to approximately 40 percent of
the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It
delivers converged IP services to more than 700 cities in more than 70
countries 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
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.
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 impact on the business of current global economic conditions
and the tightening in global credit markets; increased competition and
pricing pressures resulting from technology advances and regulatory changes;
competitive disadvantages relative to competitors with superior resources;
the impact on the business of the tightening of budgets by UK government
agencies, including significant customers of GCUK; dependence on a number of
key personnel; 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; the influence of the company's parent,
and possible conflicts of interest of the parent or of certain of GCUK's
directors and officers; our ability to raise capital through financing
activities in an amount sufficient to pay our indebtedness and to fund our
other liquidity needs; exposure to contingent liabilities; and other risks
referenced from time to time in GCUK'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 Contacts
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
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Schedule 1
Consolidated Statements of Financial Position
Results below are in pounds sterling in thousands
March 31, December 31,
2010 2009
---- ----
(unaudited)
Non-current assets
Intangible assets, net 11,396 11,417
Property, plant and equipment, net 155,118 157,526
Investment in associate 218 210
Retirement benefit asset 468 468
Trade and other receivables 34,991 33,230
202,191 202,851
------- -------
Current assets
Trade and other receivables 76,472 58,125
Cash and cash equivalents 32,918 37,331
109,390 95,456
Total assets 311,581 298,307
======= =======
Current liabilities
Trade and other payables (79,015) (81,085)
Senior secured notes (11,819) (11,819)
Deferred revenue (39,094) (37,313)
Provisions (1,610) (1,281)
Obligations under finance leases (7,446) (7,310)
Other debt obligations (111) (285)
(139,095) (139,093)
-------- --------
Non-current liabilities
Trade and other payables (23,979) (10,830)
Senior secured notes (263,834) (255,496)
Deferred revenue (88,303) (90,326)
Retirement benefit obligation (2,551) (2,551)
Provisions (2,067) (2,211)
Obligations under finance leases (10,961) (12,262)
Other debt obligations - (9)
(391,695) (373,685)
Total liabilities (530,790) (512,778)
Net liabilities (219,209) (214,471)
======== ========
Capital and reserves
Equity share capital (101,000
shares outstanding 101 101
at 1 pound each)
Capital reserve 31,397 31,271
Accumulated deficit (250,707) (245,843)
Total equity (219,209) (214,471)
======== ========
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Schedule 2
Consolidated Statements of Operations
Results below are in pounds sterling in thousands
Three months ended
------------------
March 31, December 31, March 31,
2010 2009 2009
---------- ------------- ----------
(unaudited) (unaudited) (unaudited)
Revenue 77,880 78,126 78,588
Cost of sales (49,095) (50,457) (50,524)
Gross profit 28,785 27,669 28,064
Distribution costs (6,528) (5,417) (4,574)
Administrative
expenses (12,509) (16,839) (16,902)
Operating profit 9,748 5,413 6,588
Finance revenue 1,253 1,026 1,237
Finance charges (9,153) (8,538) (8,559)
Net foreign exchange
(loss)/gain (6,565) 686 (1,299)
on foreign currency
borrowings, net
Loss before tax (4,717) (1,413) (2,033)
Tax charge (147) (149) (158)
---- ---- ----
Loss for the period (4,864) (1,562) (2,191)
====== ====== ======
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Schedule 3
Consolidated Statements of Cash Flows
Results below are in pounds sterling in thousands
Three months ended
------------------
March 31, March 31,
2010 2009
---------- ----------
(unaudited) (unaudited)
Operating activities
Loss for the period (4,864) (2,191)
Adjustments for:
Finance costs, net 14,465 8,621
Income tax charges 147 158
Depreciation of property, plant and
equipment 8,585 8,262
Amortization of intangible assets 506 394
Amortization of prepaid connection
costs 1,701 2,441
Share based payment expense 126 543
Loss/(gain) on disposal of property,
plant and equipment 126 (50)
Equity income for associate (8) (32)
Change in long term deferred revenue (2,023) (3,705)
Change in long term other assets and
liabilities (209) (1,513)
Change in operating working capital:
Change in trade accounts receivable
and accrued (10,860) (3,188)
income
Change in trade accounts payable and
accrued cost of (7,845) (4,158)
access
Change in other receivables current (7,950) (3,817)
Change in other payables current (175) 2,226
Cash generated from operations (8,278) 3,991
Interest paid (1,113) (528)
Net cash (used in)/provided by
operating activities (9,391) 3,463
------ -----
Investing activities
Interest received 15 121
Proceeds from disposal of property,
plant and equipment - 58
Purchase of property, plant and
equipment (5,435) (3,142)
------ ------
Net cash used in investing activities (5,420) (2,963)
------ ------
Financing activities
Loans provided by group companies 13,100 -
Repayment of employee taxes on share-
based payments - (416)
Repayments of capital elements under
finance leases (2,519) (3,405)
Repayment of capital element of other
debt obligations (183) (121)
Net cash provided by/(used in)
financing activities 10,398 (3,942)
------ ------
Net decrease in cash and cash
equivalents (4,413) (3,442)
Cash and cash equivalents at
beginning of period 37,331 36,100
Cash and cash equivalents at end of
period 32,918 32,658
====== ======
Non-cash investing activities:
Capital lease and debt obligations
incurred 1,354 -
===== ===
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Schedule 4
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Three months ended
------------------
March 31, December March 31,
2010 31, 2009 2009
---------- --------- ----------
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise, carrier data and
indirect 76,575 76,618 76,589
sales channels
Carrier voice 1,180 1,383 1,874
----- ----- -----
Revenues from third party
customers 77,755 78,001 78,463
Revenues from Global
Crossing group companies 125 125 125
--- ---
Consolidated revenues 77,880 78,126 78,588
====== ====== ======
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 will satisfy 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
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 its existing major debt instruments as
described below. However, its ability to improve cash
flows is subject to the risks and uncertainties discussed
below.
In the short term, GCUK expects cash provided by operating
activities to exceed purchases of property and equipment.
In addition, its 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 factors noted below.
-- 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.
-- Adverse general economic conditions could cause
customer buying patterns with GCUK to change as a result
of their cash conservation efforts, which could have an
adverse impact on its cash flows. Such adverse conditions
could also adversely impact its working capital to the
extent suppliers seek more timely payment from GCUK or
customers pay GCUK on a less timely basis.
-- 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 with 50% of the
Operating Cash Flow (as defined in the Indenture) for
that year. In respect of 2009, it offered to purchase
11.8 million pounds of the Notes, excluding accrued
interest and purchased 0.2 million pounds of the Notes,
plus accrued interest through the purchase date.
-- GCUK's liquidity may also be adversely affected if it
is found liable in respect of contingent legal, tax and
other liabilities. The amount and timing of the
resolution of these contingencies remain uncertain.
Financing activities
On March 30, 2010, GCUK entered into a 0.9 million pounds
finance lease facility with Huawei Technologies (UK) Co
Ltd which was fully drawn down at that time. The lease
is subject to an applicable rate of interest of 8% per
annum, with payments made over a period of 18 months from
April 30, 2010.
On March 31, 2010, GCUK borrowed $20.0 million from Global
Crossing Europe Limited ("GCE"), a subsidiary of Global
Crossing Limited. The loan matures on September 15, 2013
and accrues interest at 12% per annum, payable semi-
annually on March 15 and September 15 of each year.
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Schedule 6
Reconciliation of OIBDA to Net Loss
Results below are in pounds sterling in thousands
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 net loss under
IFRS.
OIBDA is defined as operating profit before depreciation and amortization
and foreign exchange gains (losses) 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 gains (losses) 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 March 31,
2010 31, 2009 2009
---------- --------- ----------
(unaudited) (unaudited) (unaudited)
Net loss (4,864) (1,562) (2,191)
Tax charge 147 149 158
Finance revenue (1,253) (1,026) (1,237)
Finance charges 9,153 8,538 8,559
Net foreign exchange
loss/(gain) on
foreign currency
borrowings, net 6,565 (686) 1,299
----- ---- -----
Operating profit 9,748 5,413 6,588
Depreciation and 10,219 10,657 10,463
amortization
Other foreign
exchange gain 396 (210) 285
(loss), loss on
disposal of fixed --- ---- ---
assets and other income
OIBDA 20,363 15,860 17,336
====== ====== ======
GLOBAL CROSSING, Press, Michael Schneider, +1-973-937-0146, Michael.Schneider at globalcrossing.com, or Analysts/Investors, Mark Gottlieb, +1-800-836-0342, glbc at globalcrossing.com, or Gino Mathew, United Kingdom, +1-973-937-0133, gino.mathew at globalcrossing.com
Tags: Global Crossing, June 14, London, United Kingdom
