Global Crossing Reports GCUK's Second Quarter Results
By Global Crossing Limited, PRNETuesday, August 31, 2010
LONDON, September 1, 2010 - Global Crossing Limited (Nasdaq: GLBC), a leading global IP solutions
provider, today announced second quarter results for its subsidiary, Global
Crossing (UK) Telecommunications Limited (GCUK).
Highlights
For the second quarter of 2010, GCUK generated revenue of 78 million
pounds and Operating Income Before Depreciation and Amortization (OIBDA) of
15 million pounds. (OIBDA is a non-GAAP measure defined and reconciled
below.) The company also reported cash provided by operations of 22 million
pounds before interest payments of 17 million pounds.
"Our return to year-over-year improvement in enterprise and carrier data
revenue demonstrates continuing demand for our IP-based solutions and managed
services," said John Legere, chief executive officer of Global Crossing. "We
see opportunity in the UK market, even in a challenging economic environment,
and we are investing prudently to diversify and grow our revenue as we
strengthen our competitive position."
Second Quarter Results
GCUK generated revenue of 78 million pounds, flat sequentially and a
year-over-year increase of 1 percent. The year-over-year increase was
primarily due to growth in the company's enterprise and carrier data sales
channels.
Gross profit was 29 million pounds for the quarter, flat sequentially and
a year-over-year increase of 2 million pounds. The year-over-year increase in
gross profit was principally due to sales growth, improved revenue mix and
lower depreciation and amortization expense.
GCUK's OIBDA for the second quarter was 15 million pounds, compared with
20 million pounds in the first quarter of 2010 and 12 million pounds in the
second quarter of 2009. The sequential decrease was principally driven by
property tax and insurance recoveries of 6 million pounds in the previous
quarter. The year-over-year increase was primarily due to sales growth,
improved revenue mix and a reduction in property tax charges as a result of
recognizing a 3 million pound retroactive property tax assessment in the
year-ago period. These improvements were partially offset by higher allocated
corporate overhead costs and an increase in salaries and commissions in the
quarter.
GCUK recorded a net loss of 3 million pounds for the second quarter,
compared with a net loss of 5 million pounds in the first quarter of 2010 and
net income of 10 million pounds in the second quarter of 2009. The sequential
decrease in net loss was primarily due to a decrease in unfavorable foreign
exchange impacts on net U.S. dollar-denominated debt. The year-over-year
decrease in net income was primarily due to unfavorable foreign exchange
impacts on net U.S. dollar-denominated debt in the current year compared with
favorable foreign exchange impacts in the prior year.
Cash and Liquidity
As of June 30, 2010, GCUK had cash and cash equivalents of 38 million
pounds, compared with 33 million pounds at the end of March 31, 2010, and 17
million pounds at the end of June 30, 2009.
GCUK's cash and cash equivalents increased 5 million pounds in the second
quarter. Net cash provided by operating activities during the second quarter
totaled 5 million pounds, including cash provided by operating working
capital of 12 million pounds and interest payments of 17 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 1 million pounds.
International Financial Reporting Standards
GCUK's results reported here include unaudited consolidated financial
results for the three months ended June 30, 2009, March 31, 2010 and June 30,
2010; the unaudited consolidated balance sheet as of June 30, 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 second quarters of
2010 and 2009 and the first quarter of 2010 were included in Global
Crossing's consolidated results previously reported on July 26, 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 Wednesday, September 1,
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 +1-212-231-2901 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 Wednesday, September 1, 2010,
beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until
Wednesday, September 8, 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
21478662. UK callers may access the replay by dialing +44(0)87-0000-3081 or
(0)80-0692-0831 and entering reservation number 21478662.
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) Profit
Schedule 1
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Financial Position
Results below are in pounds sterling in thousands
June 30, December 31,
2010 2009
--------- ---------
(unaudited)
Non-current assets
Intangible assets, net 11,294 11,417
Property, plant and equipment, net 151,199 157,526
Investment in associate 218 210
Retirement benefit asset 468 468
Trade and other receivables 35,017 33,230
198,196 202,851
------- -------
Current assets
Trade and other receivables 68,369 58,125
Cash and cash equivalents 38,260 37,331
------ ------
106,629 95,456
------- ------
Total assets 304,825 298,307
======= =======
Current liabilities
Trade and other payables (77,933) (81,085)
Senior secured notes (3,876) (11,819)
Deferred revenue (42,576) (37,313)
Provisions (1,337) (1,281)
Obligations under finance leases (7,395) (7,310)
Other debt obligations (71) (285)
(133,188) (139,093)
-------- --------
Non-current liabilities
Trade and other payables (23,739) (10,830)
Senior secured notes (271,910) (255,496)
Deferred revenue (83,625) (90,326)
Retirement benefit obligation (1,763) (2,551)
Provisions (1,930) (2,211)
Obligations under finance leases (10,406) (12,262)
Other debt obligations - (9)
--- ---
(393,373) (373,685)
-------- --------
Total liabilities (526,561) (512,778)
-------- --------
Net liabilities (221,736) (214,471)
======== ========
Capital and reserves
Equity share capital (101,000 shares
outstanding at 1 pound each) 101 101
Capital reserve 32,292 31,271
Accumulated deficit (254,129) (245,843)
-------- --------
Total equity (221,736) (214,471)
======== ========
Schedule 2
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Operations
Results below are in pounds sterling in thousands
Three months ended
------------------
June 30, March 31, June 30,
2010 2010 2009
--------- --------- ---------
(unaudited) (unaudited) (unaudited)
Revenue 77,994 77,880 77,309
Cost of sales (49,317) (49,095) (50,922)
Gross profit 28,677 28,785 26,387
Distribution costs (6,334) (6,528) (4,586)
Administrative
expenses (17,316) (12,509) (19,301)
Operating profit 5,027 9,748 2,500
Finance revenue 1,161 1,253 1,151
Finance charges (9,385) (9,153) (8,657)
Net foreign exchange
(loss)/gain on
foreign currency
borrowings, net (220) (6,565) 15,198
(Loss)/profit before
tax (3,417) (4,717) 10,192
Tax charge (5) (147) (202)
--- ---- ----
(Loss)/profit for the
period (3,422) (4,864) 9,990
====== ====== =====
Six months ended
----------------
June 30, June 30,
2010 2009
--------- ---------
(unaudited) (unaudited)
Revenue 155,874 155,897
Cost of sales (98,412) (101,446)
------- --------
Gross profit 57,462 54,451
Distribution costs (12,862) (9,160)
Administrative
expenses (29,825) (36,203)
------- -------
Operating profit 14,775 9,088
Finance revenue 2,414 2,388
Finance charges (18,538) (17,216)
Net foreign exchange
(loss)/gain on
foreign currency
borrowings, net (6,785) 13,899
(Loss)/profit before
tax (8,134) 8,159
Tax charge (152) (360)
---- ----
(Loss)/profit for the
period (8,286) 7,799
====== =====
Schedule 3
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Cash Flows
Results below are in pounds sterling in thousands
Six months ended
----------------
June 30, June 30,
2010 2009
--------- ---------
(unaudited) (unaudited)
Operating activities
(Loss)/profit for the period (8,286) 7,799
Adjustments for:
Finance costs, net 22,909 929
Income tax charges 152 360
Depreciation of property, plant and
equipment 17,142 17,437
Amortization of intangible assets 1,062 844
Amortization of prepaid connection costs 3,324 4,719
Share based payment expense 233 634
Loss/(gain) on disposal of property,
plant and equipment 126 (50)
Equity income for associate (8) (32)
Change in long term deferred revenue (6,701) (6,152)
Change in long term other assets and
liabilities (1,138) (1,286)
Change in operating working capital:
Change in trade accounts receivable and
accrued income (10,047) (9,277)
Change in trade accounts payable and
accrued cost of access 1,138 (1,613)
Change in other receivables current (7,185) (8,460)
Change in other payables current 957 2,078
--- -----
Cash generated from operations 13,678 7,930
Interest paid (18,035) (16,776)
------- -------
Net cash used in operating activities (4,357) (8,846)
------ ------
Investing activities
Interest received 6,078 1,271
Proceeds from disposal of property, plant
and equipment - 58
Purchase of property, plant and equipment (9,739) (7,150)
------
Net cash used in investing activities (3,661) (5,821)
------ ------
Financing activities
Loans provided by group companies 13,100 9,908
Repayment of senior secured notes (221) (7,382)
Repayment of employee taxes on share-
based payments - (1,047)
Repayments of capital elements under
finance leases (3,710) (5,544)
Repayment of capital element of other
debt obligations (222) (401)
Net cash provided by/(used in) financing
activities 8,947 (4,466)
----- ------
Net increase/(decrease) in cash and cash
equivalents 929 (19,133)
Cash and cash equivalents at beginning of
period 37,331 36,100
Cash and cash equivalents at end of
period 38,260 16,967
====== ======
Non-cash investing activities:
Capital lease and debt obligations
incurred 2,141 -
===== ===
Schedule 4
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Three months ended Six months ended
-------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
--------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Enterprise,
carrier
data and
indirect
sales
channels 76,938 76,575 75,338 153,513 151,927
Carrier
Voice 931 1,180 1,846 2,111 3,720
Revenues
from third
party
customers 77,869 77,755 77,184 155,624 155,647
Revenues
from Global
Crossing
group
companies 125 125 125 250 250
Consolidated
Revenues 77,994 77,880 77,309 155,874 155,897
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 Senior Secured Notes. However, its ability to improve cash
flows is subject to the risks and uncertainties, such as the variability of
quarterly cash flows, 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. If the current year to date results were the results for the full
year to December 31, 2010, the Company would be obliged to make an
Annual Repurchase Offer of approximately 3.9 million pounds, exclusive
of accrued but unpaid interest.
- 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
In May and June 2010, GCUK made further finance lease draw downs from NSC
Global Limited (trading as Cisco Capital) under a previously agreed facility.
The draw downs totalled 0.8 million pounds and accrues interest at between 9%
and 9.5%, with payments made over a period of 36 months from the date of draw
down.
Schedule 6
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Reconciliation of OIBDA to Net (Loss) Profit
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)/profit 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 Six Months ended
-------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
--------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Net (loss)
profit (3,422) (4,864) 9,990 (8,286) 7,799
Tax charge 5 147 202 152 360
Finance revenue (1,161) (1,253) (1,151) (2,414) (2,388)
Finance charges 9,385 9,153 8,657 18,538 17,216
Net foreign
exchange
loss/(gain)
on foreign
currency
borrowings, net 220 6,565 (15,198) 6,785 (13,899)
Operating profit 5,027 9,748 2,500 14,775 9,088
Depreciation and
amortization 10,105 10,219 11,262 20,324 21,725
Other foreign
exchange
(loss) gain,
loss on
disposal of
fixed assets
and other
income (17) 396 (1,382) 379 (1,097)
OIBDA 15,115 20,363 12,380 35,478 29,716
Press Contact: Michael Schneider, +1-973-937-0146, Michael.Schneider at globalcrossing.com; Analysts/Investors Contacts: 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: England, Global Crossing Limited, London, September 1
