Global Crossing Reports GCUK's Fourth Quarter and Full Year 2010 Results
LONDON, April 21, 2011 /PRNewswire/ -- Global Crossing Limited (Nasdaq: GLBC), a leading global IP solutions provider, today announced fourth-quarter and full-year 2010 results for its subsidiary, Global Crossing (UK) Telecommunications Limited (GCUK).
Highlights
For the fourth quarter of 2010, GCUK generated revenue of 83 million pounds and Operating Income Before Depreciation and Amortization (OIBDA) of 18 million pounds. (OIBDA is a non-GAAP measure defined and reconciled below.) The company also reported net cash provided by operations of 10 million pounds. For the full year, GCUK generated revenue of 314 million pounds and OIBDA of 70 million pounds.
"GCUK reported solid results in 2010, with an increase of three percent year over year in GCUK's 'Invest and Grow' revenue," said John Legere, Global Crossing's chief executive officer. "We continue to position the business strategically for long-term growth through investments in sales resources and enhanced capabilities to deliver value-added IP, Ethernet, data center and managed solutions."
Fourth Quarter Results
GCUK generated revenue of 83 million pounds in the fourth quarter, a sequential increase of 10 percent and a year-over-year increase of 6 percent. The sequential and year-over-year increases were primarily due to a non-recurring benefit 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 contract for managed services.
Gross profit was 31 million pounds for the quarter, a sequential increase of 3 million pounds and a year-over-year increase of 4 million pounds. The sequential and year-over-year improvements were primarily driven by 4 million pounds of margin associated with the previously mentioned contract completion and equipment sale.
GCUK's OIBDA for the fourth quarter was 18 million pounds, compared to 16 million pounds in the third quarter of 2010 and 16 million pounds in the fourth quarter of 2009. The sequential and year-over-year improvements were driven by improvements in gross profit.
GCUK recorded a net loss of 2 million pounds for the fourth quarter, compared with a net profit of 3 million pounds in the third quarter of 2010 and a net loss of 2 million pounds in the fourth quarter of 2009. The sequential decrease in net profit was primarily due to unfavorable foreign exchange impacts on net U.S. dollar-denominated debt, partially offset by the improvement in OIBDA.
Full Year Results
GCUK generated revenue of 314 million pounds in 2010, compared with 309 million pounds for 2009. The year-over-year increase in revenue was due to growth in the company's strategic "Invest and Grow" services including the previously mentioned contract completion and equipment sale, partially offset by declines in wholesale voice revenue.
Gross profit for 2010 was 117 million pounds, or 37 percent of revenue, compared with gross profit of 112 million pounds, or 36 percent of revenue in 2009. The year-over-year increase in gross profit was principally due to margin associated with the previously mentioned contract completion and equipment sale and lower depreciation and amortization in 2010, partially offset by the benefit in 2009 from a favorable regulatory ruling.
GCUK's OIBDA for 2010 was 70 million pounds, compared with 66 million pounds in 2009. The year-over-year increase in OIBDA was due to higher gross margin.
GCUK recorded net loss of 7 million pounds for 2010, compared with net profit of 5 million pounds in 2009. The year-over-year decrease was primarily due to an unfavorable foreign exchange impact on net U.S. dollar-denominated debt in 2010.
Cash and Liquidity
As of December 31, 2010, GCUK had cash and cash equivalents of 49 million pounds, compared with 42 million pounds on September 30, 2010, and 37 million pounds on December 31, 2009.
GCUK's cash and cash equivalents increased 7 million pounds in the fourth quarter. Net cash provided by operating activities during the fourth quarter totaled 10 million pounds, after cash provided by operating working capital of 16 million pounds and interest payments of 16 million pounds. During the quarter, GCUK recorded purchases of property, plant and equipment of 2 million pounds and principal payments on finance leases and other debt of 1 million pounds.
GCUK's cash and cash equivalents increased by 12 million pounds during 2010. Net cash from operating activities during 2010 totaled 16 million pounds, including cash used in operating working capital of 7 million pounds and interest payments of 34 million pounds. During 2010, GCUK recorded purchases of property, plant and equipment of 16 million pounds and principal payments on finance leases and other debt of 8 million pounds. In 2010, GCUK also borrowed 13 million pounds from Global Crossing Europe Limited, a subsidiary of Global Crossing Limited.
International Financial Reporting Standards
GCUK's results reported here include audited consolidated financial results for the year ended December 31, 2009; unaudited consolidated financial results for the year ended December 31, 2010 and the three months ended December 31, 2009, September 30, 2010 and December 31, 2010; the unaudited consolidated balance sheet as of December 31, 2010; and 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 fourth quarters of 2010 and 2009 and the third quarter of 2010, as well as those for the full years 2010 and 2009, were included in Global Crossing's consolidated results previously reported on February 22, 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
On April 11, 2011, Global Crossing announced it has entered into a definitive agreement with Level 3 Communications, Inc. ("Level 3") under which Level 3 will acquire Global Crossing. Pending completion of the acquisition, 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. However, management has decided to discontinue conducting separate quarterly conference calls to discuss GCUK's standalone financial results.
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, including the failure to obtain a required approval or the experiencing of a material adverse effect by either company; the failure to achieve expected synergies from the acquisition; the impact on the business of current global economic conditions and volatility in global credit markets; the impact on the business of the tightening of budgets by UK government agencies, including significant customers of GCUK; the availability of future borrowings in an amount sufficient to pay our indebtedness and to fund our other liquidity needs; increased competition and pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; 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; foreign exchange risks; 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; 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
5 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: Reconciliation of OIBDA to Net Profit/LOSS
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Financial Position
Results below are in pounds sterling in thousands
Schedule 1
December December
31, 31,
2010 2009
---- ----
(unaudited)
Non-current assets
Intangible assets, net 10,524 11,417
Property, plant and equipment, net 139,269 157,526
Investment in associate 218 210
Retirement benefit asset 299 468
Trade and other receivables 38,768 33,230
189,078 202,851
------- -------
Current assets
Trade and other receivables, net 49,718 58,125
Cash and cash equivalents 49,224 37,331
98,942 95,456
Total assets 288,020 298,307
======= =======
Current liabilities
Trade and other payables (72,680) (81,085)
Senior secured notes (10,857) (11,819)
Deferred revenue (39,608) (37,313)
Provisions (2,011) (1,281)
Obligations under finance leases (7,111) (7,310)
Other debt obligations (18) (285)
(132,285) (139,093)
-------- --------
Non-current liabilities
Trade and other payables (22,874) (10,830)
Senior secured notes (262,538) (255,496)
Deferred revenue (79,099) (90,326)
Retirement benefit obligation (1,842) (2,551)
Provisions (1,636) (2,211)
Obligations under finance leases (8,109) (12,262)
Other debt obligations - (9)
(376,098) (373,685)
Total liabilities (508,383) (512,778)
Net liabilities (220,363) (214,471)
======== ========
Capital and reserves
Equity share capital (101,000 shares
outstanding at 1 each) 101 101
Capital reserve 32,330 31,271
Accumulated deficit (252,794) (245,843)
Total equity (220,363) (214,471)
======== ========
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Operations
Results below are in pounds sterling in thousands
Schedule 2
Three Months Ended
------------------
December September December
31, 2010 30, 2010 31, 2009
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Revenue 82,804 75,331 78,126
Cost of sales (51,630) (47,021) (50,457)
Gross profit 31,174 28,310 27,669
Distribution costs (6,580) (5,745) (5,417)
Administrative expenses (16,365) (16,269) (16,839)
Operating profit 8,229 6,296 5,413
Finance revenue 1,108 1,139 1,026
Finance charges (8,967) (9,142) (8,538)
Net foreign exchange
(loss)/gain on foreign
currency borrowings, net (2,276) 5,039 686
(Loss)/profit before tax (1,906) 3,332 (1,413)
Tax charge (28) (63) (149)
--- --- ----
(Loss)/profit for the period
(1,934) 3,269 (1,562)
====== ===== ======
Year Ended
----------
December December
31, 2010 31, 2009
--------- ---------
(unaudited)
Revenue 314,009 308,864
Cost of sales (197,063) (197,160)
Gross profit 116,946 111,704
Distribution costs (25,187) (19,352)
Administrative expenses (62,459) (68,708)
Operating profit 29,300 23,644
Finance revenue 4,661 4,924
Finance charges (36,647) (34,311)
Net foreign exchange (loss)/gain on foreign
currency borrowings, net (4,022) 11,009
(Loss)/profit before tax (6,708) 5,266
Tax charge (243) (598)
---- ----
(Loss)/profit for the period (6,951) 4,668
====== =====
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Cash Flows
Results below are in pounds sterling in thousands
Schedule 3
For the Year Ended
------------------
December December
31, 2010 31, 2009
--------- ---------
(unaudited)
Operating activities
(Loss)/profit for the period (6,951) 4,668
Adjustments for:
Finance costs, net 36,008 18,378
Income tax charges 243 598
Depreciation of property, plant and
equipment 34,199 35,256
Amortization of intangible assets 2,100 1,803
Amortization of prepaid connection
costs 6,659 8,637
Share based payment expense 271 767
Loss/(gain) on disposal of property,
plant and equipment 591 (19)
Impairment of assets 650 -
Equity income for associate (8) (32)
Change in long term deferred revenue (11,227) (10,368)
Change in long term other assets and
liabilities (5,332) (24)
Change in operating working capital:
-Change in trade accounts receivable
and accrued income 1,675 3,016
-Change in trade accounts payable and
accrued cost of access (2,553) (6,001)
-Change in other receivables current (1,407) (9,715)
- Change in other payables current (4,875) 3,589
Cash generated from operations 50,043 50,553
Interest paid (34,155) (32,208)
Net cash provided by operating
activities 15,888 18,345
------ ------
Investing activities
Interest received 6,141 1,230
Proceeds from disposal of property,
plant and equipment - 58
Purchase of property, plant and
equipment (15,693) (12,000)
------- -------
Net cash used in investing activities (9,552) (10,712)
------ -------
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)
Proceeds from sale/leaseback - 4,455
Repayments of capital elements under
finance leases (7,047) (11,649)
Repayment of capital element of other
debt obligations (275) (687)
Net cash provided by/(used in)
financing activities 5,557 (6,402)
----- ------
Net increase in cash and cash
equivalents 11,893 1,231
Cash and cash equivalents at beginning
of year 37,331 36,100
Cash and cash equivalents at end of
year 49,224 37,331
====== ======
Non-cash investing activities:
Capital lease and debt obligations
incurred 2,697 2,542
===== =====
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Schedule 4
Three Months Ended
------------------
December September December
31, 2010 30, 2010 31, 2009
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise, carrier data and
indirect sales channels 82,067 74,590 76,618
Carrier voice 629 633 1,383
--- --- -----
Revenues from third party customers 82,696 75,223 78,001
Revenues from Global Crossing group
companies 108 108 125
--- ---
Consolidated revenues 82,804 75,331 78,126
====== ====== ======
Year Ended
----------
December December
31, 2010 31, 2009
--------- ---------
(unaudited)
Revenues:
Enterprise, carrier data and
indirect sales channels 310,170 301,924
Carrier voice 3,373 6,440
----- -----
Revenues from third party customers 313,543 308,364
Revenues from Global Crossing group
companies 466 500
--- ---
Consolidated revenues 314,009 308,864
======= =======
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Reconciliation of Net (Loss) Profit to OIBDA
Results below are in pounds sterling in thousands
Schedule 5
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
------------------
December September December
31, 2010 30, 2010 31, 2009
--------- ---------- ---------
(unaudited) (unaudited) (unaudited)
Net (loss)/profit (1,934) 3,269 (1,562)
Tax charge 28 63 149
Finance revenue (1,108) (1,139) (1,026)
Finance charges 8,967 9,142 8,538
Net foreign exchange loss/
(gain) on foreign currency
borrowings, net 2,276 (5,039) (686)
----- ------ ----
Operating profit 8,229 6,296 5,413
Depreciation and amortization 10,042 10,043 10,657
Other foreign exchange gain/
(loss), loss on disposal of
fixed assets and other income 203 109 (210)
--- --- ----
OIBDA 18,474 16,448 15,860
====== ====== ======
Year Ended
----------
December December
31, 2010 31, 2009
--------- ---------
(unaudited) (unaudited)
Net (loss)/profit (6,951) 4,668
Tax charge 243 598
Finance revenue (4,661) (4,924)
Finance charges 36,647 34,311
Net foreign exchange loss/
(gain) on foreign currency
borrowings, net 4,022 (11,009)
----- -------
Operating profit 29,300 23,644
Depreciation and amortization 40,409 43,124
Other foreign exchange gain/
(loss), loss on disposal of
fixed assets and other income 691 (848)
--- ----
OIBDA 70,400 65,920
====== ======
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