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Global Crossing Announces First Quarter Results, Completes Recapitalization and Impsat Acquisition
- Impsat acquisition adds significant scale to Global Crossing's Latin
American operations.
- Recapitalization includes $250 million term loan and debt-to-equity
conversion by majority shareowner.
- Core "invest and grow" revenue increased 9 percent sequentially; IP
traffic grew 20 percent.
FLORHAM PARK, N.J., May 10 /PRNewswire-FirstCall/ -- Global Crossing
(Nasdaq: GLBC) today reported its consolidated financial and operational
results for the first quarter of 2007.
The company today announced that it has completed its acquisition of
IMPSAT Fiber Networks, Inc. (Impsat), a leading provider of integrated
broadband data, Internet, voice telecommunications and advanced hosting.
Global Crossing also announced that it had completed a five-year, $250
million secured term loan facility with Goldman Sachs and Credit Suisse as
joint book runners, yielding net cash proceeds of $241 million. To
facilitate the loan, a subsidiary of the company's majority shareowner,
Singapore Technologies Telemedia (ST Telemedia), agreed to subordinate its
mandatorily convertible notes due December, 2008 to the term loan and then
to convert the notes into common stock and warrants.
Impsat Acquisition
Global Crossing completed its acquisition of Impsat yesterday for a
total estimated transaction value of $347 million, comprised of
approximately $95 million in equity, $26 million of assumed indebtedness
and repayment of $226 million of indebtedness. A portion of the funds used
to consummate the merger was financed from the proceeds of an offering,
arranged by Credit Suisse, of 9.875-percent senior notes due 2017 by GC
Impsat Holdings I Plc, a subsidiary of Global Crossing. Global Crossing
used approximately $160 million in cash to fund the remainder of the
transaction and associated costs. No capital stock was issued in
conjunction with the acquisition.
"Today we're proud to be closing our acquisition of Impsat - a business
that fits solidly into Global Crossing's strategy of selling IP and data
services to enterprises and carriers around the world," said John Legere,
Global Crossing's chief executive officer. "Like Fibernet in the UK, Impsat
will further enhance the momentum we've already achieved in our 'invest and
grow' segment by adding product capabilities and growth potential, as well
as solid financial results."
While Impsat's first quarter results are not reflected in Global
Crossing's financial results, they are expected to contribute positively to
the second quarter performance commencing on the May 9, 2007 closing date.
On a standalone basis, Impsat's unaudited results for the first three
months of 2007 included revenue of $78 million and EBITDA (as defined in
the attached schedules) of $19 million.
First Quarter Operational Highlights
Global Crossing continued to invest in its VoIP platform during the
first quarter, adding VoIP Local Service in Hong Kong and Italy, as well as
83 additional communities in the U.S. The company brought its VoIP Outbound
Service to 14 more countries in Europe, Latin America and the Asia Pacific
region, and enriched its VoIP Professional Services portfolio, partnering
with Avaya to launch Global Crossing Managed IP Telephony Solutions(TM).
Rounding out its first quarter converged IP service introductions, Global
Crossing incorporated Network Integrity into its IP VPN solution, adding
monitoring and control features, and it restructured collaboration services
to significantly reduce provisioning time for wholesale customers.
Momentum from these new and existing services propelled Global
Crossing's IP traffic, which grew roughly 20 percent during the first
quarter of 2007 compared to the prior quarter, and 176 percent compared
with the same time last year. VPN traffic increased 24 percent quarter over
quarter and 120 percent year over year. IP-interconnected VoIP traffic
jumped nearly 24 percent during the quarter and 147 percent year over year.
First Quarter Financial Results
Note: First quarter 2006 financial results do not include contributions
from Fibernet.
Revenue and Margin
Global Crossing's strategic acquisitions of Fibernet and Impsat will
amplify both the company's customer base and also its product capabilities,
accelerating sales opportunities as integration is completed.
During the first quarter of 2007, Global Crossing continued to grow
consolidated revenue on a sequential basis. In the first quarter, the
company reported $504 million of consolidated revenue, an increase of $16
million or 3 percent from the fourth quarter, when consolidated revenue was
$488 million. On a year-over-year basis, consolidated revenue expanded by
11 percent compared with the first quarter of 2006.
The company's core enterprise, carrier data and indirect channels
segment, also referred to as its "invest and grow" segment, saw revenue
increase by 9 percent sequentially to $381 million in the first quarter,
compared with $351 million in the fourth quarter of 2006. The "invest and
grow" segment improved 33 percent year over year, from $286 million in the
first quarter of 2006. In the regions excluding the UK, the "invest and
grow" segment generated $240 million in the first quarter, a 10 percent
sequential increase and 28 percent year over year. The company's GCUK
subsidiary generated $141 million in "invest and grow" revenue in the first
quarter, compared with $133 million in the fourth quarter of 2006 and $98
million in the first quarter of 2006.
Demonstrating the company's continued actions to reduce low-margin
revenue and associated costs, wholesale voice revenue declined to $122
million in the first quarter, compared with $135 million in the fourth
quarter of 2006 and $168 million in the first quarter of 2006.
Adjusted gross margin (as defined in the attached schedules) for the
consolidated business was reported at 44 percent of revenue or $220 million
in the first quarter, a 3 percent sequential increase and 29 percent year
over year. "Invest and grow" adjusted gross margin was 54 percent of
revenue or $207 million in the first quarter, compared with $196 million
and $150 million in the fourth and first quarters of 2006, respectively.
Consolidated adjusted gross margin for the first quarter of 2007 was
adversely impacted by approximately $7 million in certain regulatory
charges and other customer- specific items that increased cost of access
expense.
Costs
Cost of access expense for the first quarter was $284 million, compared
with $274 million in the fourth quarter and $285 million in the first
quarter of 2006. Cost of revenue -- which includes cost of access;
technical real estate, network and operations; third party maintenance; and
cost of equipment sales -- was $421 million in the first quarter, compared
with $403 million and $401 million in the fourth and first quarters of
2006, respectively. The sequential increase in cost of revenue expense was
comprised of higher cost of access expense resulting from revenue growth
and the $7 million associated with regulatory charges and customer-specific
items noted above; higher real estate, network and operations costs mainly
driven by retention bonuses and performance-based stock compensation
accruals; and the increase in higher cost of equipment sales associated
with large customers outside of the UK purchasing capacity and equipment.
Sales, general and administrative (SG&A) expenses were $106 million in
the first quarter, compared with $79 million in the fourth quarter and $100
million in the first quarter of 2006. The sequential increase was primarily
attributable to stock and incentive compensation; higher property and non-
income taxes; severance costs, higher employee-related benefits that are
normally greater at the beginning of the year; and higher sales costs
resulting from strong revenue growth. SG&A was adversely impacted by
approximately $5 million of unexpected items in the first quarter.
To improve the company's results, management has identified and begun
implementation of initiatives to generate operational savings of at least
$20 million per annum, with up to $15 million of savings anticipated for
2007. These actions include organizational realignment and functional
consolidation resulting in headcount reductions; outsourcing of some third
party maintenance; and reduction of discretionary expenses.
Earnings
Global Crossing's adjusted EBITDA less non-cash stock compensation
("adjusted cash EBITDA," which is further defined in the tables that
follow) was reported as a loss of $8 million. This compared to adjusted
cash EBITDA of $12 million in the fourth quarter and an adjusted cash
EBITDA loss of $33 million in the first quarter of last year. The
sequential variance was attributable to the higher costs described above,
including the $7 million regulatory and customer-specific charges and $5
million of unexpected SG&A items, partially offset by increased gross
margin.
Consolidated net loss applicable to common shareholders was $121
million for the first quarter, compared with a loss of $90 million in the
fourth quarter of 2006 and $109 million in the first quarter of 2006. The
sequential increase in net loss was attributed to $20 million lower
adjusted cash EBITDA; a $9 million increase in stock-based compensation; a
$4 million increase in net interest expenses due to the add-on notes issued
by GCUK in December and interest on Impsat notes issued in February; and a
$21 million reduction in other income (comprised of a $16 million gain on
settlement of contracts due to the Fibernet acquisition in the fourth
quarter, $8 million expense of deferred financing fees related to the
Impsat bridge loan in the first quarter, partially offset by $2 million in
foreign exchange gains). These variances were partially offset by $28
million of lower income tax provisions.
Cash and Liquidity
As of March 31, 2007, Global Crossing had $378 million of cash and cash
equivalents. The company's $81 million of cash use for the quarter included
$18 million of financing and acquisition fees. The remainder of cash used
was attributable to adjusted cash EBITDA losses, increased expenditures
made to strategic access vendors and capital expense. Cash used for capital
expenditures and principal on capital leases and long-term debt was $45
million in the first quarter. These cash expenditures were offset by $21
million in proceeds from the sale of indefeasible rights of use (IRUs).
On May 9, 2007, the company borrowed $250 million under a five-year
senior secured term loan agreement with Goldman Sachs and Credit Suisse as
joint book runners, which yielded net cash proceeds of $241 million after
payment of fees and expenses. The proceeds will be used to refinance the
company's existing $55 million working capital facility with Bank of
America (including the provision of cash collateral for letters of credit),
to provide additional liquidity necessitated principally by cash used to
close the Impsat acquisition and to reduce days payable with key access
vendors during the first and second quarters. The improved relationship
with key vendors has enabled and will continue to enable more favorable
access price negotiation and operational throughput. The company expects to
have sufficient liquidity to fund ongoing working capital needs and other
cash requirements until its operations generate sustainable positive cash
flow.
The new term loan is expected to bear interest of Libor plus 6 percent;
has significant financial maintenance covenants; and has repayment premiums
of 103 percent in the first year, 102 percent in the second year and 101
percent in the third year. Certain terms, including the interest rate, are
subject to adjustment by the joint book runners during the syndication
process. The loan is secured by substantially all of Global Crossing's
worldwide assets excluding GCUK and Global Crossing's Latin American
assets, including Impsat.
In connection with the establishment of the term loan facility, the
company's majority shareowner, ST Telemedia, has agreed to immediately
subordinate the security of their mandatorily convertible notes to the term
loan, and to convert the notes within 120 days. ST Telemedia will receive
common stock and warrants totaling 16.58 million shares, plus $7.5 million
in cash.
In addition, on May 9, 2007, Impsat completed its previously announced
tender offer for its Series A 6-percent senior guaranteed convertible notes
due 2011 (the "Series A Notes") and its Series B 6-percent senior
guaranteed convertible notes due 2011 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"), pursuant to its Offer to Purchase
and Consent Solicitation Statement, dated January 29, 2007. The tender
offer expired at 5:00 p.m. EDT, on May 9, 2007.
On May 10, 2007, Impsat announced that it is accepting for payment all
validly tendered Notes, consisting of $92 million in aggregate principal
amount at maturity of Notes, representing approximately 99 percent of the
outstanding Notes. The supplemental indenture executed in connection with
the merger became operative May 10, 2007.
Guidance
The company has revised its full-year guidance for adjusted cash EBITDA
to reflect lower adjusted cash EBITDA reported in the first quarter,
primarily as a result of the unusual items discussed above and the delayed
closing of the Impsat acquisition. The company has also revised its cash
use for 2007 to reflect the reduced adjusted cash EBITDA guidance, higher
working capital and interest on the new debt instrument. The company
expects that the results generated in the second half of 2007 and exit
rates into 2008 will remain substantially the same as provided in the
guidance given on March 15, 2007.
Revised guidance is as follows:
Metric
($ in millions) 2007 Guidance Revised Guidance YTD Results
Revenue $2,170 - $2,245 $504
Invest and grow
revenue $1,710 - $1,755 $381
Wholesale voice
revenue $460 - $490 $122
Adjusted gross margin
percentage 50% 44%
Invest and grow adjusted
gross margin percentage 60% 54%
Wholesale voice adjusted
gross margin percentage 12% 10%
Adjusted Cash EBITDA $200 - $225 $165 - $195 ($8)
Cash use (1) ($35) - 0 ($115) - ($95) ($63)
Note:
Cash use for 2007 does not include cash used for the purchase of Impsat
or fees for financing or M&A activities.
Pursuant to the Securities and Exchange Commission's (SEC's) Regulation
G, the attached schedules include definitions of Global Crossing's adjusted
cash EBITDA and adjusted gross margin 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). Further, as some investors hold separate
securities in the form of senior notes issued by the company's Global
Crossing UK subsidiary, the company has included in certain of the attached
schedules a breakdown of results between the GCUK subsidiary and the
results of Global Crossing excluding the GCUK subsidiary.
Conference Call
The company will hold a conference call on Thursday, May 10, 2007 at
9:00 a.m. EDT to discuss its financial results. The call may be accessed at
+1 212 271 4600 or +44 (0) 870 001 3146. 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, May 10, 2007
beginning at 12:00 p.m. EDT and will be accessible until Thursday, May 17,
2007 at 12:00 p.m. EDT. The replay may be accessed by dialing +1 402 977
9140 or +1 800 633 8284 and entering reservation 21337542. Callers in the
UK can dial +44 (0) 870 000 3081 or +44 0 800 692 0831 and enter
reservation number 21337542.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC) provides telecommunications solutions
over the world's first integrated global IP-based network. Its core network
connects more than 300 cities in 29 countries worldwide, and delivers
services to more than 600 cities in 60 countries and 6 continents around
the globe. The company's global sales and support model matches the network
footprint and, like the network, delivers a consistent customer experience
worldwide.
Global Crossing IP services are global in scale, linking the world's
enterprises, governments and carriers with customers, employees and
partners worldwide in a secure environment that is ideally suited for
IP-based business applications, allowing e-commerce to thrive. The company
offers a full range of data, voice and security products, to approximately
40 percent of the Fortune 500, as well as 700 carriers, mobile operators
and ISPs. Its Professional Services and Managed Solutions provide VoIP,
security and network consulting and management services to support its
Global Crossing IP VPN service and Global Crossing VoIP services. Global
Crossing was the first -- and remains the only -- global communications
provider with IPv6 natively deployed in both its private and public
backbone networks.
Please visit www.globalcrossing.com or blogs.globalcrossing.com/ for
more information about Global Crossing.
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: Failure to achieve expected synergies or operating results
resulting from the acquisition of Fibernet or Impsat; 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; 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
and Impsat'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 Contacts
Becky Yeamans
+ 1 973 937 0155
PR@globalcrossing.com
Tisha Kresler
+ 1 973 937 0146
PR@globalcrossing.com
Kendra Langlie
Latin America
+ 1 305 808 5912
LatAmPR@globalcrossing.com
Jo Graves
Europe
+ 44 (0) 1256 858 403
EuropePR@globalcrossing.com
Analysts/Investors Contact
Laurinda Pang
+ 1 800 836 0342
glbc@globalcrossing.com
Tony Suarez
+1 800 836 0342
glbc@globalcrossing.com
IR/PR1
FINANCIAL INFORMATION TO FOLLOW
As some investors hold separate securities in the form of senior notes
issued by a subsidiary of Global Crossing (UK) Telecommunications Ltd.
("GCUK"), the company has included in certain of the tables a breakdown of
the consolidated results between GCUK and the results of Global Crossing
excluding GCUK.
Global Crossing Limited and Subsidiaries
Unaudited Pro Forma Summary of Consolidated Revenues, Cost of Access, and
Adjusted Gross Margin
($ in millions)
Quarter Ended Quarter Ended
March 31, 2007 December 31, 2006
GCUK ROW(1) Total GCUK ROW(1) Total
Revenues:
Enterprise, carrier data and
indirect channels $141 $240 $381 $133 $218 $351
Wholesale voice 3 119 122 2 133 135
Other - 1 1 - 2 2
Consolidated revenues $144 $360 $504 $135 $353 $488
Cost of access:
Enterprise, carrier data and
indirect channels $(40) $(134) $(174) $(38) $(117) $(155)
Wholesale voice (3) (107) (110) (2) (117) (119)
Other - - - - - -
Consolidated cost of access $(43) $(241) $(284) $(40) $(234) $(274)
Adjusted gross margin:
Enterprise, carrier data and
indirect channels $101 $106 $207 $95 $101 $196
Wholesale voice - 12 12 - 16 16
Other - 1 1 - 2 2
Consolidated adjusted gross
margin $101 $119 $220 $95 $119 $214
Quarter Ended March 31, 2006
GCUK ROW(1) Total
Revenues:
Enterprise, carrier data and
indirect channels $98 $188 $286
Wholesale voice 1 167 168
Other - 2 2
Consolidated revenues $99 $357 $456
Cost of access:
Enterprise, carrier data and
indirect channels $(29) $(107) $(136)
Wholesale voice (1) (148) (149)
Other - - -
Consolidated cost of access $(30) $(255) $(285)
Adjusted gross margin:
Enterprise, carrier data and
indirect channels $69 $81 $150
Wholesale voice - 19 19
Other - 2 2
Consolidated adjusted gross
margin $69 $102 $171
Pro Forma Explanatory Note:
On October 11, 2006, GC Acquisitions, a wholly-owned subsidiary of
Global Crossing Limited and affiliate of Global Crossing (UK)
Telecommunications Ltd. (GCUK), took control of Fibernet Group Plc
(Fibernet) and since that date the results of Fibernet have been
consolidated into Global Crossing's results. On December 28, 2006,
a subsidiary of GCUK acquired all of Fibernet's UK operations.
Unaudited pro forma tables for the quarter ended December 31, 2006 have
been prepared on the basis that GCUK had acquired Fibernet's UK
operations on October 11, 2006.
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications
Ltd. and subsidiaries (GCUK).
As some investors hold separate securities in the form of senior notes
issued by a subsidiary of GCUK, the company has included in certain of the
tables a breakdown of the consolidated results between GCUK and the results
of Global Crossing excluding GCUK.
Global Crossing Limited and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
($ in millions)
Quarter Ended March 31, 2007
GCUK ROW(1) Total
REVENUES $144 $360 $504
COST OF REVENUE (EXCLUDING DEPRECIATION):
Cost of access (43) (241) (284)
Real estate, network and operations (24) (64) (88)
Third party maintenance (9) (15) (24)
Cost of equipment sales (18) (7) (25)
Total cost of revenue (94) (327) (421)
Selling, general and administrative (18) (88) (106)
Depreciation and amortization (18) (32) (50)
Total operating expenses (130) (447) (577)
OPERATING INCOME (LOSS) 14 (87) (73)
OTHER INCOME (EXPENSE)
Interest expense, net (15) (14) (29)
Other income (expense), net - (6) (6)
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS AND PROVISION FOR INCOME TAXES (1) (107) (108)
Net, gain on preconfirmation
contingencies - - -
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (1) (107) (108)
Provision for income taxes (1) (11) (12)
NET INCOME (LOSS) (2) (118) (120)
Preferred stock dividends - (1) (1)
INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS $(2) $(119) $(121)
Quarter Ended December 31, 2006
GCUK ROW(1) Total
REVENUES $135 $353 $488
COST OF REVENUE (EXCLUDING DEPRECIATION):
Cost of access (40) (234) (274)
Real estate, network and operations (24) (60) (84)
Third party maintenance (8) (15) (23)
Cost of equipment sales (19) (3) (22)
Total cost of revenue (91) (312) (403)
Selling, general and administrative (18) (61) (79)
Depreciation and amortization (18) (31) (49)
Total operating expenses (127) (404) (531)
OPERATING INCOME (LOSS) 8 (51) (43)
OTHER INCOME (EXPENSE)
Interest expense, net (15) (10) (25)
Other income (expense), net 24 (9) 15
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS AND PROVISION FOR INCOME TAXES 17 (70) (53)
Net, gain on preconfirmation
contingencies - 3 3
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 17 (67) (50)
Provision for income taxes (22) (18) (40)
NET INCOME (LOSS) (5) (85) (90)
Preferred stock dividends - - -
INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS $(5) $(85) $(90)
Quarter Ended March 31, 2006
GCUK ROW(1) Total
REVENUES $99 $357 $456
COST OF REVENUE (EXCLUDING DEPRECIATION):
Cost of access (30) (255) (285)
Real estate, network and operations (18) (59) (77)
Third party maintenance (8) (16) (24)
Cost of equipment sales (10) (5) (15)
Total cost of revenue (66) (335) (401)
Selling, general and administrative (14) (86) (100)
Depreciation and amortization (10) (27) (37)
Total operating expenses (90) (448) (538)
OPERATING INCOME (LOSS) 9 (91) (82)
OTHER INCOME (EXPENSE)
Interest expense, net (11) (10) (21)
Other income (expense), net 4 (3) 1
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS AND PROVISION FOR INCOME TAXES 2 (104) (102)
Net, gain on preconfirmation
contingencies - 6 6
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 2 (98) (96)
Provision for income taxes - (12) (12)
NET INCOME (LOSS) 2 (110) (108)
Preferred stock dividends - (1) (1)
INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS $2 $(111) $(109)
Pro Forma Explanatory Note:
On October 11, 2006, GC Acquisitions, a wholly-owned subsidiary of Global
Crossing Limited and affiliate of Global Crossing (UK) Telecommunications
Ltd. (GCUK), took control of Fibernet Group Plc (Fibernet) and since that
date the results of Fibernet have been consolidated into Global
Crossing's results. On December 28, 2006, a subsidiary of GCUK acquired
all of Fibernet's UK operations. Unaudited pro forma tables for the
quarter ended December 31, 2006 have been prepared on the basis that GCUK
had acquired Fibernet's UK operations on October 11, 2006.
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications
Ltd. and subsidiaries (GCUK).
Global Crossing Limited and Subsidiaries
Condensed Consolidated Balance Sheets
($ in millions)
March 31 December 31,
2007 2006
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $378 $459
Restricted cash and cash equivalents 3 3
Accounts receivable, net of
allowances of $46 and $43 246 251
Prepaid costs and other current assets 96 84
Total current assets 723 797
Restricted cash and cash equivalents 233 3
Property and equipment, net of
accumulated depreciation of $454 and $407 1,142 1,132
Intangible assets, net (including
goodwill of $6 and $2) 29 26
Other assets 90 86
Total assets $2,217 $2,044
LIABILITIES:
Current liabilities:
Short-term debt $6 $6
Accounts payable 253 283
Accrued cost of access 102 107
Current portion of long term debt 30 6
Accrued restructuring costs -
current portion 26 30
Deferred revenue - current portion 128 128
Other current liabilities 376 336
Total current liabilities 921 896
Debt with controlling shareholder 275 275
Long-term debt 891 661
Obligations under capital leases 112 106
Deferred revenue 171 163
Accrued restructuring costs 58 61
Other deferred liabilities 79 77
Total liabilities 2,507 2,239
SHAREHOLDERS' DEFICIT:
Common stock, 85,000,000 shares
authorized, $.01 par value,
36,907,251 and 36,609,236
shares issued and outstanding
as of March 31, 2007 and December
31, 2006, respectively - -
Preferred stock, 45,000,000
shares authorized, $.10 par
value, 18,000,000 shares issued to
controlling shareholder and
outstanding 2 2
Additional paid-in capital 883 857
Accumulated other comprehensive loss (30) (29)
Accumulated deficit (1,145) (1,025)
Total shareholders' deficit (290) (195)
Total liabilities and
shareholders' deficit $2,217 $2,044
Global Crossing Limited and Subsidiaries
Condensed Consolidated Statements of Cash Flows
($ in millions) Three Months Ended
March 31,
2007 2006
Cash flows provided by (used in)
operating activities:
Net loss $(120) $(108)
Adjustments to reconcile net loss
to net cash used in operating activities:
Loss on sale of property and equipment 1 -
Non-cash income tax provision 10 11
Non-cash stock compensation expense 15 12
Depreciation and amortization 50 37
Provision for doubtful accounts 1 2
Amortization of prior period IRUs (2) (1)
Gain on preconfirmation contingencies - (6)
Changes in operating working capital (25) (7)
Other 20 4
Net cash used in operating activities (50) (56)
Cash flows provided by (used in)
investing activities:
Purchases of property and equipment (33) (14)
Change in restricted cash and cash
equivalents (230) 2
Net cash used in investing activities (263) (12)
Cash flows provided by (used in)
financing activities:
Proceeds from long term debt 247 -
Repayment of capital lease obligations (10) (3)
Repayment of long term debt (2) (1)
Proceeds from exercise of stock options 3 2
Finance costs incurred (6) -
Other - (1)
Cash flows provided by (used in)
financing activities 232 (3)
Effect of exchange rate changes on
cash and cash equivalents - 1
Net decrease in cash and cash equivalents (81) (70)
Cash and cash equivalents, beginning
of period 459 224
Cash and cash equivalents, end of period $378 $154
Non-cash investing and financing activities:
Capital lease and debt obligations
incurred $31 $27
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Adjusted Cash EBITDA and Adjusted EBITDA, which are
considered non-GAAP (Generally Accepted Accounting Principles) financial
metrics, to net income, which is the most directly comparable GAAP measure.
Global Crossing's calculation of its Adjusted Cash EBITDA and Adjusted
EBITDA measures may not be consistent with EBITDA measures of other
companies. Management believes that Adjusted Cash EBITDA and Adjusted
EBITDA are relevant indicators of operating performance, especially in a
capital-intensive industry such as telecommunications. Adjusted Cash EBITDA
and Adjusted EBITDA are important aspects of the company's internal
reporting and are also used by the investment community in assessing
financial performance. These non-GAAP measures should be used in addition
to, but not as a substitute for, the analysis provided in the statement of
operations. As some investors hold separate securities in the form of
senior notes issued by a subsidiary of GCUK, the company has included in
certain of the tables a breakdown of the consolidated results between GCUK
and the results of Global Crossing excluding GCUK.
Global Crossing Limited
Unaudited Pro Forma Reconciliation of Adjusted Cash EBITDA and Adjusted
EBITDA to Income (Loss) Applicable to Common Shareholders (unaudited)
($ in millions)
Quarter Ended Quarter Ended
March 31, 2007 December 31, 2006
GCUK ROW(1) Total GCUK ROW(1) Total
Adjusted Cash EBITDA $34 $(42) $(8) $26 $(14) $12
Non-cash stock compensation (2) (13) (15) - (6) (6)
Adjusted EBITDA 32 (55) (23) 26 (20) 6
Depreciation and amortization (18) (32) (50) (18) (31) (49)
Interest expense, net (15) (14) (29) (15) (10) (25)
Other income (expense), net - (6) (6) 24 (9) 15
Net, gain on pre-confirmation
contingencies - - - - 3 3
Provision for income taxes (1) (11) (12) (22) (18) (40)
Preferred stock dividends - (1) (1) - - -
Income (loss) applicable to common
shareholders $(2) $(119) $(121) $(5) $(85) $(90)
Quarter Ended March 31, 2006
GCUK ROW(1) Total
Adjusted Cash EBITDA $20 $(53) $(33)
Non-cash stock compensation (1) (11) (12)
Adjusted EBITDA 19 (64) (45)
Depreciation and amortization (10) (27) (37)
Interest expense, net (11) (10) (21)
Other income (expense), net 4 (3) 1
Net, gain on pre-confirmation
contingencies - 6 6
Provision for income taxes - (12) (12)
Preferred stock dividends - (1) (1)
Income (loss) applicable to common
shareholders $2 $(111) $(109)
Pro Forma Explanatory Note:
On October 11, 2006, GC Acquisitions, a wholly-owned subsidiary of Global
Crossing Limited and affiliate of Global Crossing (UK) Telecommunications
Ltd. (GCUK), took control of Fibernet Group Plc (Fibernet) and since that
date the results of Fibernet have been consolidated into Global
Crossing's results. On December 28, 2006, a subsidiary of GCUK acquired
all of Fibernet's UK operations. Unaudited pro forma tables for the
quarter ended December 31, 2006 have been prepared on the basis that GCUK
had acquired Fibernet's UK operations on October 11, 2006.
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications
Ltd. and subsidiaries (GCUK).
Definitions:
Adjusted Cash EBITDA is earnings before interest, taxes, depreciation
and amortization, other income/ (expense), net, net gain on
pre-confirmation contingencies, preferred stock dividends and non-cash
stock compensation.
Adjusted EBITDA is earnings before interest, taxes, depreciation and
amortization, other income/ (expense), net, net gain on pre-confirmation
contingencies and preferred stock dividends.
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Adjusted Gross Margin, which is considered a non-GAAP
financial metric, to gross margin, which is the most directly comparable
GAAP measure. Management believes that Adjusted Gross Margin is a relevant
indicator of operating performance since it links revenue lines with the
largest and most directly related costs incurred to generate such revenue.
Adjusted Gross Margin should be used in addition to, but not as a
substitute for, the analysis provided in the statement of operations. As
some investors hold separate securities in the form of senior notes issued
by a subsidiary of GCUK, the company has included in certain of the tables
a breakdown of the consolidated results between GCUK and the results of
Global Crossing excluding GCUK.
Global Crossing Limited and Subsidiaries
Unaudited Pro Forma Reconciliation of Adjusted Gross Margin to Gross
Margin
($ in millions)
Quarter Ended Quarter Ended Quarter Ended
March 31, 2007 December 31, 2006 March 31, 2006
GCUK ROW(1) Total GCUK ROW(1) Total GCUK ROW(1) Total
Adjusted Gross
Margin $101 $119 $220 $95 $119 $214 $69 $102 $171
Real estate,
network and
operations (24) (64) (88) (24) (60) (84) (18) (59) (77)
Third party
maintenance (9) (15) (24) (8) (15) (23) (8) (16) (24)
Cost of equipment
sales (18) (7) (25) (19) (3) (22) (10) (5) (15)
Gross margin $50 $33 $83 $44 $41 $85 $33 $22 $55
Pro Forma Explanatory Note:
On October 11, 2006, GC Acquisitions, a wholly-owned subsidiary of Global
Crossing Limited and affiliate of Global Crossing (UK) Telecommunications
Ltd. (GCUK), took control of Fibernet Group Plc (Fibernet) and since that
date the results of Fibernet have been consolidated into Global
Crossing's results. On December 28, 2006, a subsidiary of GCUK acquired
all of Fibernet's UK operations. Unaudited pro forma tables for the
quarter ended December 31, 2006 have been prepared on the basis that GCUK
had acquired Fibernet's UK operations on October 11, 2006.
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications
Ltd. and subsidiaries (GCUK).
Definition:
Adjusted gross margin is revenue minus cost of access.
Impsat Fiber Networks, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
($ in thousands)
Quarter Ended
March 31, 2007
NET REVENUES:
Broadband and satellite $48,498
Internet 9,931
Value-added services 12,425
Telephony 7,210
Sales of equipment 85
TOTAL NET REVENUES 78,149
COSTS AND EXPENSES:
Direct costs:
Contracted services (7,106)
Other direct costs (10,271)
Leased capacity (20,375)
Cost of equipment sold (32)
Total direct costs (37,784)
Salaries and wages (15,973)
Selling, general and administrative (5,832)
Depreciation and amortization (15,674)
TOTAL COSTS AND EXPENSES (75,263)
OPERATING INCOME 2,886
OTHER INCOME (EXPENSES):
Interest income 214
Interest expense (4,247)
Net gain on foreign exchange 3,225
Other loss, net (1,898)
TOTAL OTHER (EXPENSES) INCOME (2,706)
INCOME BEFORE INCOME TAXES 180
PROVISION FOR FOREIGN INCOME TAXES (913)
NET LOSS $(733)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Impsat Fiber Networks, Inc.'s ("Impsat") EBITDA, which is
considered a non-GAAP (Generally Accepted Accounting Principles) financial
metric, to net loss, which is the most directly comparable GAAP measure.
Global Crossing's calculation of Impsat's EBITDA measure may not be
consistent with EBITDA measures of other companies. Management believes
that Impsat's EBITDA is a relevant indicator of operating performance,
especially in a capital-intensive industry such as telecommunications. This
non-GAAP measure should be used in addition to, but not as a substitute
for, the analysis provided in the statement of operations.
As a result of the merger and Impsat's becoming a Global Crossing
subsidiary, adjustments may be made to Impsat's presentation of financial
information and Impsat's accounting policies in order to conform them, in
each case, to those of Global Crossing and its subsidiaries. As a result of
these potential adjustments, and due to the fact that Global Crossing
calculates Adjusted EBITDA differently than Impsat does and has presented
it in this press release, management anticipates that the presentation of
Impsat's Adjusted EBITDA in this press release may not be comparable to the
way it will be presented on a going-forward basis.
Impsat Fiber Networks, Inc. and Subsidiaries
Unaudited Reconciliation of EBITDA to Net Loss
($ in thousands)
Quarter Ended
March 31, 2007
EBITDA $18,560
Depreciation and amortization (15,674)
Interest income 214
Interest expense (4,247)
Net gain on foreign exchange 3,225
Other loss, net (1,898)
Provision for foreign income taxes (913)
Net loss $(733)
Definitions:
EBITDA is earnings before interest, taxes, depreciation and
amortization, net gain on foreign exchange and other loss, net.
SOURCE Global Crossing
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