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Global Crossing Reports Third Quarter 2009 Results

Global Crossing Reports Third Quarter 2009 Results

— Free Cash Flow increased $62 million sequentially to $52 million, resulting in year-to-date Free Cash Flow of $10 million.

— OIBDA increased 30 percent year-over-year to $91 million, resulting in year-to-date total of $259 million.

— Consolidated revenue increased to $643 million, a 1 percent increase year-over-year in constant currency terms.

— “Invest and grow” revenue increased to $553 million, a 4 percent increase year over year in constant currency terms.

— Company confirms annual guidance for 2009.


Press Release

Source: Global Crossing

On 4:15 pm EDT, Wednesday October 28, 2009


FLORHAM PARK, N.J., Oct. 28 / — Global Crossing (Nasdaq: GLBC - News), a leading global IP solutions provider, today announced third quarter 2009 results. The company said it will discuss its consolidated financial and operational results for the third quarter 2009 on a conference call tomorrow.


Business Highlights


Global Crossing generated consolidated revenue of $643 million for the third quarter of 2009. Revenue from the company’s “invest and grow” category — that part of the business focused on serving global enterprises and carrier customers, excluding wholesale voice — was $553 million, representing a sequential increase of 3 percent and a year-over-year decrease of 2 percent. On a constant currency basis, “invest and grow” revenue decreased 1 percent sequentially and increased 4 percent year over year. Operating Income Before Depreciation and Amortization (OIBDA) for the quarter was $91 million, representing a decrease of 2 percent sequentially and an increase of 30 percent year over year. Free Cash Flow was $52 million in the quarter, an improvement of $62 million sequentially and $19 million year over year. Year-to-date Free Cash Flow was $10 million through the third quarter. OIBDA and Free Cash Flow are non-GAAP measures that are defined and reconciled in our financial tables. All constant currency comparisons herein reflect third quarter 2009 and prior period results translated at the average actual foreign exchange rates for the applicable prior period.


“Global Crossing’s core business continued to show year-over-year improvement on a constant currency basis, reflecting solid demand for our advanced IP-based solutions despite a challenging global economic environment,” said John Legere, CEO of Global Crossing. “In addition, the Company’s Free Cash Flow generation of $52 million for the quarter and $10 million year to date demonstrates significant progress. We remain confident in our ability to deliver the annual guidance we provided at the beginning of the year.”


Operational Results


Global Crossing’s consolidated revenue was $643 million in the third quarter of 2009, representing a sequential increase of $10 million or 2 percent, including an $18 million favorable foreign exchange impact. Year-over-year consolidated revenue decreased $26 million or 4 percent, including a $33 million unfavorable foreign exchange impact. On a constant currency basis, consolidated revenue decreased 1 percent sequentially and increased 1 percent year over year.


The company’s “invest and grow” category generated revenue of $553 million for the third quarter. This represents a sequential increase of $14 million or 3 percent, including an $18 million favorable foreign exchange impact. Year-over-year “invest and grow” revenue decreased $9 million or 2 percent, including a $32 million unfavorable foreign exchange impact. On a constant currency basis, “invest and grow” revenue decreased 1 percent sequentially and increased 4 percent year over year. “Invest and grow” revenue in the prior quarter included $8 million for one customer’s buyout of certain long-term obligations under an existing contract. “Invest and grow” revenue in the third quarter included $4 million for the completion of that buyout.


On a segment basis, GCUK generated $117 million in “invest and grow” revenue compared with $113 million in the prior quarter and $152 million in the third quarter of 2008. GC Impsat generated $127 million in “invest and grow” revenue compared with $121 million in the prior quarter and $124 million in the third quarter of 2008. ROW generated $312 million in “invest and grow” revenue compared with $309 million in the prior quarter and $289 million in the third quarter of 2008.


Sequentially, on a constant currency basis, GC Impsat “invest and grow” revenues increased 1 percent, as growth from new orders was partially offset by erosion isolated to a few large customers. Sequentially, on a constant currency basis, ROW “invest and grow” revenues were flat, as operational growth was offset by the adverse sequential impact related to the customer buyout referenced above. In GCUK “invest and grow” revenues decreased sequentially 6 percent on a constant currency basis principally due to lower revenues from non-recurring charges to customers, including professional services. Year over year, in constant currency terms, “invest and grow” revenues in both GC Impsat and ROW increased 9 percent, while revenues in GCUK declined 9 percent.


Wholesale voice revenue decreased by $5 million on a sequential basis and $17 million year over year to $89 million. The expected decline in wholesale voice was associated with the continued management of this business for margin. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.


The company reported Gross Margin of $200 million in the third quarter of 2009, compared with $201 million in the prior quarter and $192 million in the third quarter of 2008. On a sequential basis, Gross Margin decreased $1 million primarily due to a decrease in revenue and from a retroactive property tax assessment of $5 million in the UK, offset by a favorable foreign exchange impact of $6 million and a reduction in access costs arising from a favorable regulatory ruling related to access charges paid by GCUK in periods prior to 2009. Year over year, Gross Margin increased $8 million due to an operational improvement in revenue, a $12 million decrease in access costs (including the impact of the previously referenced favorable regulatory ruling) and a decrease in incentive compensation, partially offset by an unfavorable foreign exchange impact of $10 million and the retroactive property tax assessment referenced above. (Note: Due to timing of receipt of the retroactive property tax assessment, the $5 million charge was included in GCUK’s reported results for the second quarter and is included in Global Crossing Limited’s reported results for the third quarter.)


Sales, general and administrative (SG&A) expenses were $109 million in the third quarter of 2009, compared with $108 million in the prior quarter and $122 million in the third quarter of 2008. On a sequential basis, the increase in SG&A was primarily attributable to $4 million unfavorable foreign exchange impact, partially offset by lower incentive compensation accruals in the quarter. The year-over-year decrease was primarily attributable to an $8 million favorable foreign exchange impact, as well as cost savings initiatives and lower incentive compensation accruals.


Global Crossing reported $91 million of OIBDA in the third quarter, a sequential decrease of $2 million, including a $2 million favorable foreign exchange impact. On a year-over-year basis, OIBDA increased $21 million, including an unfavorable foreign exchange impact of $2 million. On a segment basis, GCUK, GC Impsat and ROW contributed OIBDA of $25 million, $44 million and $22 million, respectively.


Global Crossing’s consolidated net loss applicable to common shareholders was $74 million for the third quarter of 2009. On a sequential basis, net loss increased $100 million due to a $29 million loss on the extinguishment of debt and $59 million of unfavorable foreign exchange impacts reflected in other income, net. On a year-over-year basis, net loss increased by $1 million.


Cash and Liquidity


On September 22, 2009, the company completed a private offering of $750 million in senior secured notes due 2015 with a coupon of 12 percent. The company used $348 million of the proceeds to refinance Global Crossing Limited’s existing term loan facility and $237 million to fund the purchase of senior notes issued by GC Impsat Holdings I Plc, including consent fees. After transaction fees and expenses in connection with the offering, the company added approximately $125 million of cash to the balance sheet for general corporate purposes.


“Refinancing activity during the quarter greatly simplified our capital structure, extended our debt maturities and increased our liquidity, giving us greater flexibility to operate and invest in our business,” said John Kritzmacher, CFO of Global Crossing.


For the third quarter of 2009, the company reported Free Cash Flow of $52 million, as compared to negative $10 million in the prior quarter and $33 million in the third quarter of 2008. The sequential increase in Free Cash Flow was primarily driven by improved collections and lower capital expenditures. The year-over-year increase in Free Cash Flow was primarily attributable to an increase in OIBDA and lower capital expenditures.


Cash flow provided by operating activities for the third quarter was $85 million after interest payments of $25 million, including prepayment of $5 million of accrued interest on the debt extinguished in September. Global Crossing received $33 million in proceeds from the sale of IRUs and prepaid services in the third quarter. Global Crossing used $33 million for purchases of property, plant and equipment, and entered into $24 million of capital lease agreements to finance various equipment purchases and software licenses.


As of September 30, 2009, Global Crossing had unrestricted cash of $429 million compared to $268 million at June 30, 2009. The company had $449 million in total cash at September 30, 2009, compared to $289 million in total cash at June 30, 2009.


2009 Guidance


The following table is provided for informational purposes only and represents the Company’s 2009 guidance as provided on February 16, 2009.


Measures 2009 Guidance

($in millions) —————

————–

Revenue $2,500 - $2,600

————– —————

OIBDA $320 - $380

————– —————

Free Cash Flow $50 - $100

————– —————


Non-GAAP Measures


Pursuant to the Securities and Exchange Commission’s (SEC’s) Regulation G, the attached financial tables include definitions of non-GAAP financial measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP).


Conference Call


The company will hold a conference call on Thursday, October 29, 2009 at 9:00 a.m. EDT to discuss its financial results. The call may be accessed by dialing +1 212 231 2933 or by dialing +44 203 300 0095. Callers are advised to access the call 15 minutes prior to the start time. A Webcast with presentation slides will be available at http://investors.globalcrossing.com/events.cfm.


A replay of the call will be available on Thursday, October 29, 2009 beginning at 11:30 a.m. EDT and will be accessible until Thursday, November 5, 2009 at 11:30 a.m. EST. To access the replay, callers should dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21440224. Callers in the United Kingdom should dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21440224.


ABOUT GLOBAL CROSSING


Global Crossing (Nasdaq: GLBC - News) is a leading global IP solutions provider with the world’s first integrated global IP-based network. The company offers a full range of secure data, voice, and video products to approximately 40 percent of the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It delivers services to more than 690 cities in more than 60 countries and six continents around the globe.


Website Access to Company Information


Global Crossing maintains a corporate website at www.globalcrossing.com, and you can find additional information about the company through the Investors pages on that website at http://investors.globalcrossing.com. Global Crossing utilizes its website as a channel of distribution of important information about the company. Global Crossing routinely posts financial and other important information regarding the company and its business, financial condition and operations on the Investors web pages.


Visitors to the Investors web pages can view and print copies of Global Crossing’s SEC filings, including periodic and current reports on Forms 10-K, 10-Q and 8-K, as soon as reasonably practicable after those filings are made with the SEC. Copies of the charters for each of the standing committees of Global Crossing’s Board of Directors, its Corporate Governance Guidelines, Ethics Policy, press releases and analysts presentations are all available through the Investors web pages.


Please note that the information contained on any of Global Crossing’s websites is not incorporated by reference in, or considered to be a part of, any document unless expressly incorporated by reference therein.


This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties that could cause the actual results to differ materially, including: Global Crossing’s history of substantial operating losses and the fact that, in the near term, funds from operations will not satisfy cash requirements; legal and contractual restrictions on the inter-company transfer of funds by the company’s subsidiaries; the company’s ability to continue to connect its network to incumbent carriers’ networks or maintain Internet peering arrangements on favorable terms; the consequences of any inadvertent violation of the company’s Network Security Agreement with the U.S. Government; increased competition and pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; political, legal and other risks due to the company’s substantial international operations; risks associated with movements in foreign currency exchange rates; 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 prevailing on the parallel market; potential weaknesses in internal controls of acquired businesses, and difficulties in integrating internal controls of those businesses with the company’s own internal controls; the concentration of revenue in a limited number of customers, and the rights of such customers to terminate their contracts or to simply cease purchasing services thereunder; exposure to contingent liabilities; and other risks referenced from time to time in the company’s filings with the Securities and Exchange Commission. Global Crossing undertakes no duty to update information contained in this press release or in other public disclosures at any time.

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