LONDON, September 12, 2011 /PRNewswire/ --
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 2011, GCUK generated revenue of 72
million pounds and Operating Income Before Depreciation and
Amortization (OIBDA) of 12 million pounds. (OIBDA is a
non-GAAP measure defined and reconciled below.) The company
also reported cash generated from operations of 8 million pounds
before interest payments of 16 million pounds.
"We continue to invest in advanced IP-based networking solutions
and highly skilled sales resources to expand and diversify our
enterprise customer base in the UK," said John Legere, chief executive officer of Global
Crossing. "Meanwhile, we are successfully positioning for
broader opportunities with UK government customers. In fact,
GCUK was recently approved as a supplier for UK Government's
Managed Telecommunications Convergence Framework, which broadens
our addressable market opportunity to an additional 6 million
government users. We also received full Public Service
Network certification from the UK Cabinet Office for delivery of
its Government Conveyance Network and PSN Internet Protocol Virtual
Private Network services to the Public Sector."
Second Quarter Results
GCUK generated revenue of 72 million pounds in the second
quarter, a sequential decrease of 2 percent and a year-over-year
decrease of 7 percent. Sequentially, GCUK revenue declined
due to lower equipment sales, partially offset by higher sales of
services to non-government enterprise customers.
Year-over-year, "invest and grow" revenue declined
principally due to price reductions associated with recent contract
renewals and extensions, accompanied by lower equipment sales.
Gross profit was 26 million pounds for the quarter, essentially
flat sequentially and a decrease of 3 million pounds
year-over-year. The year-over-year decrease was primarily
driven by lower revenue.
GCUK's OIBDA for the second quarter was 12 million pounds,
compared to 13 million pounds in the first quarter of 2011 and 15
million pounds in the second quarter of 2010. The sequential
and year-over-year decreases were primarily due to price reductions
associated with recent contract renewals and extensions.
GCUK recorded a net loss of 5 million pounds for the second
quarter, compared with a net loss of 1 million pounds in the first
quarter of 2011 and a net loss of 3 million pounds in the second
quarter of 2010. The sequential increase in net loss was
primarily due to unfavorable foreign exchange impacts on net U.S.
dollar denominated debt. The year-over-year increase in net loss
was primarily due to lower OIBDA.
Cash and Liquidity
As of June 30, 2011, GCUK had cash
and cash equivalents of 27 million pounds, compared with 37 million
pounds on March 31, 2011 and 38
million pounds on June 30, 2010.
GCUK's cash and cash equivalents decreased 10 million pounds in
the second quarter. Net cash used in operating activities
during the second quarter totaled 8 million pounds after interest
payments of 16 million pounds. During the quarter, GCUK
recorded purchases of property, plant and equipment of 3 million
pounds and principal payments on finance leases 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, 2011, March 31,
2011 and June 30, 2010; the
unaudited consolidated balance sheet as of June 30, 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 second quarters of 2011 and 2010 and
the first quarter of 2011 were included in Global Crossing's
consolidated results previously reported on July 27, 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.
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 http://www.globalcrossing.com for more information
about Global Crossing.
Website Access to Company Information
Global Crossing maintains a corporate website at
http://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, 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
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
Kate Rankin
+1-973-937-0417
Kate.Rankin@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
June 30, December 31,
2011 2010
---- ----
(unaudited)
Non-current assets
Intangible assets, net 10,789 10,524
Property, plant and equipment, net 128,046 139,269
Investment in associate 182 218
Retirement benefit asset 299 299
Trade and other receivables 39,363 38,768
178,679 189,078
------- -------
Current assets
Trade and other receivables, net 58,787 49,718
Cash and cash equivalents 26,564 49,224
85,351 98,942
Total assets 264,030 288,020
======= =======
Current liabilities
Trade and other payables (69,510) (72,680)
Senior secured notes (1,207) (10,857)
Deferred revenue (36,289) (39,608)
Provisions (1,219) (2,011)
Obligations under finance leases (6,726) (7,111)
Other debt obligations - (18)
(114,951) (132,285)
-------- --------
Non-current liabilities
Trade and other payables (22,348) (22,874)
Senior secured notes (267,772) (262,538)
Deferred revenue (73,932) (79,099)
Retirement benefit obligation (1,842) (1,842)
Provisions (1,707) (1,636)
Obligations under finance leases (8,088) (8,109)
(375,689) (376,098)
Total liabilities (490,640) (508,383)
Net liabilities (226,610) (220,363)
======== ========
Capital and reserves
Equity share capital (101,000 shares
outstanding at 1 pound each) 101 101
Capital reserve 32,520 32,330
Accumulated deficit (259,231) (252,794)
Total equity (226,610) (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
------------------
June 30, March 31, June 30,
2011 2011 2010
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Revenue 72,181 73,855 77,994
Cost of sales (46,160) (47,570) (49,317)
Gross profit 26,021 26,285 28,677
Distribution costs (6,791) (7,030) (6,334)
Administrative expenses (16,601) (17,117) (17,316)
Operating profit 2,629 2,138 5,027
Finance revenue 1,064 1,119 1,161
Finance charges (8,896) (9,155) (9,385)
Net foreign exchange
(loss)/gain on foreign
currency borrowings, net (83) 4,711 (220)
Loss before tax (5,286) (1,187) (3,417)
Tax benefit (charge) 10 26 (5)
--- --- ---
Loss for the period (5,276) (1,161) (3,422)
====== ====== ======
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
--------------------------
June 30, March 31, June 30,
2011 2011 2010
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Operating activities
Loss for the period (5,276) (1,161) (3,422)
Adjustments for:
Finance costs, net 7,915 3,325 8,444
Income tax charges (10) (26) 5
Depreciation of
property, plant and
equipment 8,458 8,449 8,557
Amortization of
intangible assets 610 609 556
Amortization of
prepaid connection
costs 1,154 1,541 1,623
Share based payment
expense 90 100 107
Loss on disposal of
property, plant and
equipment 19 12 -
Equity income for
associate - 36 -
Change in long term
deferred revenue (1,686) (3,481) (4,678)
Change in long term
other assets and
liabilities (1,342) (1,097) (929)
Change in operating
working capital:
-Change in trade
accounts receivable
and accrued income (7,278) 3,806 813
-Change in trade
accounts payable and
accrued cost of
access 4,511 (5,115) 8,983
-Change in other
receivables current (7,949) (2,320) 765
-Change in other
payables current 8,745 (14,372) 1,132
Cash generated from
operations 7,961 (9,694) 21,956
Interest paid (15,954) (1,599) (16,922)
Net cash (used
in)/provided by
operating activities (7,993) (11,293) 5,034
------ ------- -----
Investing activities
Interest received 1,370 2,790 6,063
Proceeds from
disposal of
property, plant and
equipment 18 - -
Purchase of property,
plant and equipment (2,598) (4,317) (4,304)
------ ------ ------
Net cash used in
investing activities (1,210) (1,527) 1,759
------ ------ -----
Financing activities
Repayment of senior
secured notes - - (221)
Proceeds from sale/
leaseback - 2,513 -
Repayments of capital
elements under
finance leases (1,108) (2,024) (1,191)
Repayment of capital
element of other
debt obligations - (18) (39)
Net cash provided by/
(used in) financing
activities (1,108) 471 (1,451)
------ --- ------
Net
(decrease)/increase
in cash and cash
equivalents (10,311) (12,349) 5,342
Cash and cash
equivalents at
beginning of period 36,875 49,224 32,918
Cash and cash
equivalents at end
of period 26,564 36,875 38,260
====== ====== ======
Schedule 4
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Three Months Ended
------------------
June 30, March 31, June 30,
2011 2011 2010
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise, carrier data and
indirect sales channels 71,603 73,328 76,938
Carrier voice 470 419 931
--- --- ---
Revenues from third party
customers 72,073 73,747 77,869
Revenues from Global Crossing
group companies 108 108 125
--- --- ---
Consolidated revenues 72,181 73,855 77,994
====== ====== ======
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. In addition,
the interim operating covenants in the agreement of amalgamation
between Level 3 Communications, Inc. and Global Crossing Limited
(GCUK's parent company) also limit GCUK's financial and operational
flexibility unless Level 3's consent is obtained. These covenants
include, among others, agreements by Global Crossing on behalf of
it and its subsidiaries (including GCUK) (i) to 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 amalgamation agreement on
April 10, 2011 and consummation of
the amalgamation between Level 3 and Global Crossing and (ii) not
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. 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. In
addition, from time to time GCUK reviews its operations and may
consider opportunities to strategically enhance, expand or change
its operations and leverage its capabilities. The aforementioned
covenants in the amalgamation agreement may limit GCUK's
flexibility to take advantage of such opportunities unless Level
3's consent is obtained. If GCUK pursues any such opportunities, 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 June 30, 2011, GCUK's available
liquidity consisted of 27 million 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, 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.This
expectation is based in part on the raising of financing for
certain property and equipment from vendors and other third parties
in similar amounts to 2010. Its ability to arrange such
financings is subject to negotiating acceptable terms from
equipment vendors and financing parties. 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's austerity measures aimed at reducing costs
in a wide range of areas, including telecommunications could have a
negative effect on GCUK's future revenue performance.
- 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, it offered to
purchase 11 million of the Notes, excluding accrued interest.
No Notes were tendered.
If the current year to date results were the results for the
full year to December 31, 2011, the
Company would be obliged to make an Annual Repurchase Offer of
approximately 1 million, inclusive 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.
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
------------------
June 30, March 31, June 30,
2011 2011 2010
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Net loss (5,276) (1,161) (3,422)
Tax (benefit)/charge (10) (26) 5
Finance revenue (1,064) (1,119) (1,161)
Finance charges 8,896 9,155 9,385
Net foreign exchange loss/
(gain) on foreign currency
borrowings, net 83 (4,711) 220
--- ------ ---
Operating profit 2,629 2,138 5,027
Depreciation and amortization 9,750 10,127 10,105
Other foreign exchange gain/
(loss), loss on disposal of
fixed assets and other
income 55 370 (17)
--- --- ---
OIBDA 12,434 12,635 15,115
====== ====== ======