Global Crossing Announces Fourth Quarter and Full Year 2009 Results
- 2009 results in line with guidance for Revenue, OIBDA and Free Cash Flow.
- 2009 Free Cash Flow increased to $82 million, an improvement of $71 million year over year.
- Full-year OIBDA increased to $342 million, a 31 percent improvement year-over-year in constant currency terms.
- Full-year “Invest and grow” revenue increased to $2.16 billion, a 6 percent improvement year-over-year in constant currency terms.
- 2010 guidance reflects strong growth in OIBDA and continued positive full-year Free Cash Flow.
FLORHAM PARK, N.J., Feb. 16 /PRNewswire-FirstCall/ -- Global Crossing (Nasdaq: GLBC), a leading global IP solutions provider, today announced unaudited fourth quarter and full-year 2009 results. The company said it will discuss its consolidated financial and operational results for the fourth quarter and full-year 2009 on a conference call tomorrow. The following table highlights financial results:
Results at a Glance
(Dollars in millions)
4Q Yr/Yr Growth 2009 Yr/Yr Growth
4Q 2009 Reported Constant 2009 Reported Constant
Currency Currency
Consolidated
Revenues $ 651 1% -1% $ 2,536 -2% 3%
"Invest and
Grow" Revenues $ 557 3% 0% $ 2,159 -1% 6%
OIBDA $ 83 -19% -22% $ 342 25% 31%
Free Cash Flow $ 72 $ 42 $ 82 $ 71
The company’s OIBDA, Free Cash Flow and constant currency measures are non-GAAP measures. See “Non-GAAP Metrics,” below, and the reconciliations of OIBDA and Free Cash Flow to the most directly comparable GAAP measures included in the attached financial tables.
Business Highlights
Global Crossing completed the year within its annual guidance ranges for Revenue, OIBDA and Free Cash Flow. The company reported Free Cash Flow of $82 million, an increase of $71 million compared to 2008. Global Crossing also reported “invest and grow” revenue of $2.16 billion, an increase of 6 percent compared with 2008 in constant currency terms. The company generated $342 million of OIBDA for 2009, an increase of 31 percent compared with 2008 in constant currency terms.
“Global Crossing delivered on its 2009 guidance despite a challenging economic environment,” said John Legere, CEO of Global Crossing. “We enter 2010 with a world-class global network and a differentiated set of product capabilities that provide a platform for continued growth and unparalleled customer satisfaction.”
Full Year Results
Global Crossing’s consolidated business generated $2.54 billion of revenue in 2009, representing a $63 million decline year over year, including a $138 million unfavorable foreign exchange impact. The company’s “invest and grow” services – namely that part of the business focused on serving global enterprises and carrier customers, excluding wholesale voice – generated revenue of $2.16 billion in 2009, including a $135 million unfavorable foreign exchange impact. Excluding the foreign exchange impact, “invest and grow” revenue increased $123 million, or 6 percent, year over year.
On a segment basis, the company’s “rest of world” (ROW), GC Impsat and GCUK segments generated “invest and grow” revenue of $1.23 billion, $492 million, and $460 million, respectively. In constant currency terms, ROW and GC Impsat “invest and grow” revenue increased by 10 percent and 9 percent, respectively, as compared to 2008. GCUK’s “invest and grow” revenue decreased 5 percent in constant currency terms as compared to 2008, principally due to the completion of the Camelot contract at the end of 2008.
Wholesale voice revenue declined 12 percent, or $50 million, year over year to $374 million. The decline reflects continued focus on managing the wholesale voice business for margin. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.
Global Crossing reported gross margin of $770 million or 30.4 percent of consolidated revenue for 2009, an increase of $6 million compared with 2008 including a $46 million unfavorable foreign exchange impact. Gross margin of $764 million in 2008 was 29.4 percent of consolidated revenue. Year-over-year the improvement in gross margin as a percent of consolidated revenue was driven by revenue growth in constant currency terms, improved revenue mix, lower cost of access and lower incentive compensation, partly offset by higher cost of equipment and other sales, real estate expense and payroll costs.
Sales, general and administrative (SG&A) expenses were $428 million in 2009, a $63 million decrease from $491 million in 2008, including a $30 million favorable foreign exchange impact. Excluding the impact of foreign exchange, the year-over-year improvement was driven primarily by cost reduction initiatives and, to a lesser degree, lower professional fees and incentive compensation accruals.
The company reported $342 million of OIBDA for 2009, a year-over-year improvement of $69 million, including an unfavorable foreign exchange impact of $16 million. Excluding the impact of foreign exchange, OIBDA grew $85 million or 31 percent year over year. On a segment basis, ROW, GC Impsat and GCUK contributed $89 million, $160 million and $93 million of OIBDA, respectively.
Global Crossing’s consolidated net loss applicable to common shareholders was $145 million for 2009, compared with a loss of $288 million in 2008. The year-over-year improvement was primarily driven by the improvement in OIBDA previously described, favorable foreign exchange impacts reflected in other income, net, and a lower provision for income tax and interest expense.
Fourth Quarter Results
Global Crossing’s consolidated revenue was $651 million in the fourth quarter of 2009, representing a 1 percent increase both sequentially and year over year. The sequential increase included a $4 million favorable foreign exchange impact and the year-over-year increase included a $13 million favorable foreign exchange impact. In constant currency terms, consolidated revenue increased 1 percent sequentially and declined 1 percent year over year. The year-over-year revenue comparison was adversely impacted by the completion of the Camelot contract at the end of 2008 within the GCUK segment.
The company’s “invest and grow” services generated revenue of $557 million in the fourth quarter. This represents an increase of 1 percent sequentially and 3 percent year over year, including substantially all of the favorable foreign exchange impacts referenced above. In constant currency terms, “invest and grow” revenue was essentially flat sequentially and year-over-year. Sequentially, “invest and grow” revenue was unfavorably impacted by a non-recurring benefit of $4 million in the third quarter within the ROW segment for one customer’s buyout of certain long-term obligations under an existing contract.
On a segment basis, ROW, GC Impsat and GCUK generated “invest and grow” revenue of $316 million, $131 million, and $123 million, respectively. In constant currency terms, this represented a sequential increase of 1 percent for both ROW and GC Impsat and an increase of 6 percent for GCUK. Year-over-year, in constant currency terms, ROW increased 5 percent and GC Impsat and GCUK declined 2 percent and 5 percent, respectively.
The company’s wholesale voice business generated revenue of $93 million in the fourth quarter, a 4 percent increase sequentially and a 7 percent decline year over year.
Global Crossing reported gross margin for the fourth quarter of $190 million compared with $200 million in the third quarter of 2009 and $212 million in the fourth quarter of 2008. The sequential decrease of $10 million in gross margin was driven by revenue mix, the non-recurring third quarter benefit from one customer’s contract buyout, and an increase in accrued incentive compensation. The year-over-year decrease of $22 million in gross margin was primarily driven by a $10 million increase in accrued incentive compensation, as the year-ago period included a net reversal of accrued incentive compensation. In addition, changes in revenue mix resulted in higher cost of equipment and other sales compared with the year-ago period.
SG&A expenses were $107 million in the fourth quarter of 2009, compared with $109 million in the third quarter of 2009 and $110 million in the fourth quarter of 2008. Foreign currency unfavorably impacted SG&A by $1 million sequentially and $2 million year over year. Excluding foreign exchange impacts, the sequential decline was due to lower commissions, professional fees and restructuring costs, partly offset by other miscellaneous costs increases. Year-over-year, the decline in SG&A was associated with lower commissions and professional fees, partly offset by a $4 million increase in accrued incentive compensation.
Global Crossing reported $83 million of OIBDA in the fourth quarter, compared with $91 million in the third quarter of 2009 and $102 million in the fourth quarter of 2008. The year-over-year decrease included a $14 million increase in accrued incentive compensation, partly offset by a favorable foreign exchange impact of $3 million. On a segment basis, ROW, GC Impsat and GCUK contributed $26 million, $33 million and $24 million, respectively.
Global Crossing’s consolidated net loss applicable to common shareholders was $38 million for the fourth quarter of 2009. On a sequential basis, net loss decreased $36 million, principally due to a non-recurring $29 million loss on the extinguishment of debt in the prior quarter and a benefit in the provision for income taxes in the current quarter, partly offset by higher interest expense and lower OIBDA described above. On a year-over-year basis, net loss decreased $15 million, principally due to favorable foreign exchange impacts and a benefit in the provision for income taxes, partly offset by higher depreciation and amortization and lower OIBDA described above.
Cash and Liquidity
As of December 31, 2009, Global Crossing had $477 million of unrestricted cash and cash equivalents, compared with $360 at December 31, 2008 and $429 at September 30, 2009. Including $16 million of restricted cash, Global Crossing had total cash of $493 million at December 31, 2009.
For 2009, cash flow from operating activities was $256 million, including $117 million of interest on indebtedness. Global Crossing received $130 million in proceeds from the sale of indefeasible rights of use (IRUs) and prepaid services in 2009. The company reported Free Cash Flow of $82 million for 2009. Uses of cash for the year included $249 million used for capital expenditures and for principal payments on capital leases.
Cash flow from operating activities for the fourth quarter was $121 million. Global Crossing received $38 million in proceeds from the sale of IRUs and prepaid services in the fourth quarter. The company reported Free Cash Flow of $72 million. Uses of cash for the quarter included $77 million for capital expenditures and for principal payments on capital leases.
2010 Guidance
“We expect to grow again in 2010, fueled by investments in our products, network and sales force. We will continue to make investments for growth, as we did in 2009, using internally-generated cash from operations while delivering another year of positive Free Cash Flow in 2010,” added John Legere.
Based on foreign exchange rates as of February 15, 2010, company guidance measures for 2010 are as follows:
Metric 2009 Actual 2010 Guidance
($in millions)
“Invest & Grow” Revenue $2,159 $2,300 - $2,375
OIBDA $342 $390 - $440
Free Cash Flow $82 $10 – $60
Free Cash Flow Guidance reflects $55 million of additional interest expense as well as lower sales of IRUs and prepaid services compared to 2009.
The above guidance represents management’s current good faith estimates for the designated measures and is based on various assumptions which may or may not materialize. Some of the risks and uncertainties that could cause actual results to differ materially from these estimates are referenced at the end of this press release.
Non-GAAP Metrics
Pursuant to the Securities and Exchange Commission’s (SEC’s) Regulation G and Item 10(e)(1)(i) of Regulation S-X, 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). In addition, measures referred to in this press release as being calculated “in constant currency terms” are non-GAAP measures intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such measures are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.
Conference Call
The company will hold a conference call on Wednesday, February 17, 2009 at 9:00 a.m. EST to discuss its financial results. The call may be accessed by dialing +1 212 271 4651 or, if calling from within the United Kingdom, by dialing +44 203 300 0097. Callers are advised to access the call 15 minutes before 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 Wednesday, February 17, 2010 beginning at 11:30 a.m. EST and will be accessible until Friday, February 26, 2010 at 11:30 a.m. EST. To access the replay, North American callers may dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21455839. Callers in the United Kingdom may dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21455839.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) is a leading global IP and Ethernet solutions provider with the world's first integrated global IP-based network. The company offers a full range of data, voice and collaboration services with an industry leading customer experience and delivers service to approximately 40 percent of the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It delivers converged IP services to more than 700 cities in more than 70 countries around the world.
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.
CONTACT GLOBAL CROSSING: |
|
Press Contacts |
|
Michael Schneider |
|
+ 1 973 937 0146 |
|
Analysts/Investors Contact |
|
Mark Gottlieb |
|
+ 1 800 836 0342 |
|
Antonio Suarez |
|
+1 973 937 0233 |
|
IR/PR1
Global Crossing Limited Table 1
Consolidated Balance Sheets
($ in millions)
December 31, December 31,
2009 2008
----------- -----------
(unaudited) (as adjusted)
ASSETS:
Current assets:
Cash and cash equivalents $477 $360
Restricted cash and cash
equivalents - current portion 9 7
Accounts receivable, net of
allowances of $50 and $58 328 336
Prepaid costs and other current assets 101 103
------ -------
Total current assets 915 806
------ -------
Restricted cash and cash equivalents -
long term 7 11
Property and equipment, net of
accumulated depreciation of $1,216
and $851 1,280 1,300
Intangible assets, net
(including goodwill of $175 and $147) 198 172
Other assets 88 60
------ ------
Total assets $2,488 $2,349
====== ======
LIABILITIES:
Current liabilities:
Accounts payable $312 $329
Accrued cost of access 87 92
Short term debt and current portion of
long term debt 37 26
Accrued restructuring costs - current
portion 12 13
Deferred revenue - current portion 174 138
Other current liabilities 421 361
------ ------
Total current liabilities 1,043 959
------ ------
Long term debt 1,295 1,127
Obligations under capital leases 90 93
Deferred revenue 334 308
Accrued restructuring costs 13 14
Other deferred liabilities 73 94
------ ------
Total liabilities 2,848 2,595
------ ------
SHAREHOLDERS' DEFICIT:
Common stock, 110,000,000 shares
authorized, $.01 par value,
60,219,817 and 56,696,312 shares issued
and outstanding as of December 31, 2009
and December 31, 2008, respectively $1 $1
Preferred stock with controlling
shareholder, 45,000,000 shares
authorized, $.10 par value, 18,000,000
shares issued and outstanding 2 2
Additional paid-in capital 1,427 1,399
Accumulated other comprehensive loss (24) (23)
Accumulated deficit (1,766) (1,625)
------ ------
Total shareholders' deficit (360) (246)
------ ------
Total liabilities and
shareholders' deficit $2,488 $2,349
====== ======
Note 1. On January 1, 2009, the Company adopted Financial Accounting
Standard Board ("FASB") Accounting Standards Codification ("ASC") Subtopic
470-20 ("Debt with Conversion and Other Options")("ASC Subtopic 470-20").
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, additional paid-in capital and accumulated deficit have
increased $38 and $17 respectively, and other assets and long term debt
have decreased $1 and $22 respectively in the consolidated
balance sheet at December 31, 2008.
Global Crossing Limited Table 2
Consolidated Statements of Operations
($ in millions)
Year Ended December 31,
-------------------------
2009 2008
---------- -----------
(unaudited) (as adjusted)
Revenue $2,536 $2,599
Cost of revenue (excluding depreciation
and amortization, shown separately below):
Cost of access (1,159) (1,211)
Real estate, network and operations (406) (423)
Third party maintenance (103) (107)
Cost of equipment and other sales (98) (94)
---------- ----------
Total cost of revenue (1,766) (1,835)
---------- ----------
Gross margin 770 764
Selling, general and administrative (428) (491)
Depreciation and amortization (340) (326)
---------- ----------
Operating income (loss) 2 (53)
Other income (expense):
Interest income 7 10
Interest expense (160) (176)
Other income (expense), net 11 (26)
---------- ----------
Loss before preconfirmation contingencies
and provision for income taxes (140) (245)
Net gain on preconfirmation
contingencies - 10
---------- ----------
Loss before provision for income taxes (140) (235)
Provision for income taxes (1) (49)
---------- ----------
Net loss (141) (284)
Preferred stock dividends (4) (4)
---------- ----------
Loss applicable to common shareholders $(145) $(288)
========== ==========
Loss per common share, basic and diluted:
Loss applicable to common shareholders $(2.45) $(5.16)
========== ==========
Weighted average number of common
shares 59,290,355 55,771,867
========== ==========
Note 1. On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20.
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $7 for the year ended
December 31, 2008.
Note 2. For the year ended December 31, 2008, $7 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Additionally, $17 of costs incurred to operate the GC Impsat Segment data
center business, primarily employee-related expenses, were reclassified
from selling, general and administrative to real estate, network and
operations as they represent service delivery costs and therefore are
appropriately reported as cost of revenue.
Global Crossing Limited Table 3
Consolidated Statements of Cash Flows
($ in millions)
Year Ended December 31,
------------------------
2009 2008
--------- ----------
(unaudited) (as adjusted)
Cash flows provided by (used in) operating
activities:
Net loss $(141) $(284)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Gain on sale of property and
equipment - (4)
Loss on sale of marketable
securities - 2
Non-cash loss on extinguishment of debt 15 -
Deferred income tax (20) (1)
Non-cash income tax provision - 35
Non-cash stock compensation expense 18 55
Depreciation and amortization 340 326
Provision for doubtful accounts 7 6
Amortization of prior period IRUs (22) (15)
Deferred reorganization costs (3) (3)
Gain on preconfirmation contingencies - (10)
Change in long term deferred revenue 42 83
Other (28) 45
Change in operating working capital:
- Changes in accounts receivable 17 (25)
- Changes in accounts payable (30) 59
- Changes in other current assets (16) (52)
- Changes in other current
liabilities 77 (14)
---- ----
Net cash provided by operating
activities 256 203
---- ----
Cash flows provided by (used in) investing
activities:
Purchases of property and equipment (174) (192)
Purchases of marketable securities - (11)
Proceeds from sale of property and
equipment - 10
Proceeds from sale of marketable
securities 4 16
Change in restricted cash and cash
equivalents 2 31
---- ----
Net cash used in investing activities (168) (146)
---- ----
Cash flows provided by (used in) financing
activities:
Proceeds from short and long term debt 741 10
Repayment of capital lease obligations (75) (59)
Repayment of long term debt
(including current portion) (597) (24)
Premium paid on extinguishment of debt (14) -
Proceeds from exercise of stock options - 1
Proceeds from sales/leasebacks 7 -
Finance costs incurred (23) -
Payment of employee taxes on share-
based compensation (13) (3)
---- ----
Net cash provided by (used in) financing
activities 26 (75)
---- ----
Effect of exchange rate changes on cash
and cash equivalents 3 (19)
---- ----
Net increase (decrease) in cash and cash
equivalents 117 (37)
Cash and cash equivalents, beginning of
period 360 397
---- ----
Cash and cash equivalents, end of period $477 $360
==== ====
Note 1. On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20.
ASC Subtopic 470-20 specifies that issuers of convertible instruments
should separately account for the liability and equity components in a
manner that will reflect the entity's non-convertible debt borrowing rate
when interest cost is recognized in subsequent periods. ASC Subtopic 470-
20 must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, net loss and other within cash flows provided by (used
in) operating activities has increased $7 for the year ended December
31, 2008.
Global Crossing Limited and Subsidiaries Table 4
Unaudited Consolidated Statements of Operations
($ in millions)
Year Ended December 31, 2009
-----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue $470 $504 $1,586 $(24) $2,536
Cost of revenue
Cost of access (140) (118) (923) 22 (1,159)
Real estate, network
and operations (76) (83) (249) 2 (406)
Third party
maintenance (21) (23) (59) - (103)
Cost of equipment
and other sales (70) (15) (13) - (98)
------ ------ ------ ------ ------
Total cost of
revenue (307) (239) (1,244) 24 (1,766)
------ ------ ------ ------ ------
Gross margin 163 265 342 - 770
Selling, general and
administrative (70) (105) (253) - (428)
Depreciation and
amortization (66) (87) (187) - (340)
------ ------ ------ ------ ------
Operating income (loss) 27 73 (98) - 2
Other income (expense):
Interest income 8 6 9 (16) 7
Interest expense (53) (33) (90) 16 (160)
Other income
(expense), net 18 - (7) - 11
------ ------ ------ ------ ------
Income (loss) before
benefit (provision) for
income taxes - 46 (186) - (140)
Benefit (provision)
for income taxes (1) 2 (2) - (1)
------ ------ ------ ------ ------
Net income (loss) (1) 48 (188) - (141)
Preferred stock
dividends - - (4) - (4)
------ ------ ------ ------ ------
Income (loss)
applicable
to common
shareholders $(1) $48 $(192) $- $(145)
====== ====== ====== ====== ======
Year Ended December 31, 2008
------------------------------------------------
GCUK GC Impsat(3) ROW (1,2) Eliminations Total
---- ------------ --------- ------------ -----
Revenue $599 $482 $1,536 $(18) $2,599
Cost of revenue
Cost of access (184) (115) (929) 17 (1,211)
Real estate, network
and operations (93) (75) (256) 1 (423)
Third party
maintenance (32) (20) (55) - (107)
Cost of equipment
and other sales (69) (11) (14) - (94)
----- ----- ----- ----- ------
Total cost of
revenue (378) (221) (1,254) 18 (1,835)
----- ----- ------ ----- ------
Gross margin 221 261 282 - 764
Selling, general and
administrative (87) (123) (281) - (491)
Depreciation and
amortization (84) (81) (161) - (326)
----- ----- ----- ----- -----
Operating income (loss) 50 57 (160) - (53)
Other income (expense):
Interest income 8 3 6 (7) 10
Interest expense (65) (35) (83) 7 (176)
Other income
(expense), net (57) (20) 51 - (26)
----- ----- ----- ----- -----
Income (loss) before
preconfirmation
contingencies and
provision for income
taxes (64) 5 (186) - (245)
Net gain on
preconfirmation
contingencies - 4 6 - 10
----- ----- ----- ----- -----
Income (loss) before
provision for
income taxes (64) 9 (180) - (235)
Provision for
income taxes (1) (17) (31) - (49)
----- ----- ----- ----- -----
Net loss (65) (8) (211) - (284)
Preferred stock
dividends - - (4) - (4)
----- ----- ----- ----- -----
Loss applicable to
common shareholders $(65) $(8) $(215) $- $(288)
===== ===== ===== ===== =====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $7 for the year ended
December 31, 2008.
(3) For the year ended December 31, 2008 $7 of sales taxes netted against
revenue were reclassified to selling, general and administrative expenses
to be consistent with the presentation of other similar taxes.
Additionally, $17 of costs incurred to operate the GC Impsat Segment data
center business, primarily employee-related expenses, were reclassified
from selling, general and administrative to real estate, network and
operations as they represent service delivery costs and therefore are
appropriately reported as cost of revenue.
Global Crossing Limited and Subsidiaries Table 5
Unaudited Consolidated Statements of Operations
($ in millions)
Quarter Ended December 31, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue $125 $134 $405 $(13) $651
Cost of revenue
Cost of access (37) (37) (238) 12 (300)
Real estate, network
and operations (18) (24) (64) 1 (105)
Third party
maintenance (5) (7) (14) - (26)
Cost of equipment and
other sales (22) (6) (2) - (30)
---- ---- ---- ---- ----
Total cost of
revenue (82) (74) (318) 13 (461)
---- ---- ---- ---- ----
Gross margin 43 60 87 - 190
Selling, general and
administrative (19) (27) (61) - (107)
Depreciation and
amortization (17) (24) (49) - (90)
---- ---- ---- ---- ----
Operating income (loss) 7 9 (23) - (7)
Other income (expense):
Interest income 2 1 4 (7) -
Interest expense (14) (8) (32) 7 (47)
Other income
(expense), net 1 1 (2) - -
---- ---- ---- ---- ----
Income (loss) before
benefit for income taxes (4) 3 (53) - (54)
Benefit for income
taxes - 17 - - 17
---- ---- ---- ---- ----
Net income (loss) (4) 20 (53) - (37)
Preferred stock dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss) applicable
to common shareholders $(4) $20 $(54) $- $(38)
==== ==== ==== ==== ====
Quarter Ended September 30, 2009
-----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue $120 $129 $397 $(3) $643
Cost of revenue
Cost of access (33) (27) (231) 3 (288)
Real estate, network
and operations (22) (20) (65) 1 (106)
Third party
maintenance (5) (6) (15) - (26)
Cost of equipment and
other sales (16) (4) (3) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (76) (57) (314) 4 (443)
---- ---- ---- ---- ----
Gross margin 44 72 83 1 200
Selling, general and
administrative (19) (28) (61) (1) (109)
Depreciation and
amortization (18) (22) (49) - (89)
---- ---- ---- ---- ----
Operating income (loss) 7 22 (27) - 2
Other income (expense):
Interest income 3 2 - (3) 2
Interest expense (14) (8) (20) 3 (39)
Other expense, net (8) (13) (11) - (32)
---- ---- ---- ---- ----
Income (loss) before
provision for income
taxes (12) 3 (58) - (67)
Provision for income
taxes - (6) - - (6)
---- ---- ---- ---- ----
Net loss (12) (3) (58) - (73)
Preferred stock dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to common
shareholders $(12) $(3) $(59) $- $(74)
==== ==== ==== ==== ====
Quarter Ended December 31, 2008
------------------------------------------------
GCUK GC Impsat (3) ROW (1,2) Eliminations Total
---- ------------- --------- ------------ -----
Revenue $134 $124 $394 $(8) $644
Cost of revenue
Cost of access (42) (30) (232) 8 (296)
Real estate, network
and operations (19) (14) (56) - (89)
Third party
maintenance (7) (5) (12) - (24)
Cost of equipment and
other sales (16) (3) (4) - (23)
---- ---- ---- ---- ----
Total cost of
revenue (84) (52) (304) 8 (432)
---- ---- ---- ---- ----
Gross margin 50 72 90 - 212
Selling, general and
administrative (25) (32) (53) - (110)
Depreciation and
amortization (19) (21) (42) - (82)
---- ---- ---- ---- ----
Operating income (loss) 6 19 (5) - 20
Other income (expense):
Interest income 2 1 1 (2) 2
Interest expense (14) (8) (20) 2 (40)
Other income
(expense), net (41) (14) 26 - (29)
---- ---- ---- ---- ----
Income (loss) before
preconfirmation
contingencies and
provision
for income
taxes (47) (2) 2 - (47)
Net gain on
preconfirmation
contingencies - - 1 - 1
---- --- ---- ---- ----
Income (loss) before
provision for income
taxes (47) (2) 3 - (46)
Provision for income
taxes - (2) (4) - (6)
---- ---- ---- ---- ----
Net loss (47) (4) (1) - (52)
Preferred stock dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to common
shareholders $(47) $(4) $(2) $- $(53)
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on a retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $2 for the three months
ended December 31, 2008.
(3) For the three months ended December 31, 2008 $2 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Additionally, $3 of costs incurred to operate the GC Impsat Segment data
center business, primarily employee-related expenses, were reclassified
from selling, general and administrative to real estate, network and
operations as they represent service delivery costs and therefore are
appropriately reported as cost of revenue.
Global Crossing Limited and Subsidiaries Table 6
Unaudited Summary of Consolidated Revenue
($ in millions)
Year Ended December 31, 2009
--------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales channel $460 $483 $1,216 $- $2,159
Carrier voice 10 12 352 - 374
Other - - 3 - 3
Intersegment revenue - 9 15 (24) -
------ ------ ------ ------ ------
Consolidated revenue $470 $504 $1,586 $(24) $2,536
====== ====== ====== ====== ======
Year Ended December 31, 2008
-------------------------------------------
GCUK GC Impsat(2) ROW (1) Eliminations Total
---- ------------ ------- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales channel $588 $466 $1,117 $- $2,171
Carrier voice 11 9 404 - 424
Other - - 4 - 4
Intersegment revenue - 7 11 (18) -
------ ------ ------ ------ ------
Consolidated revenue $599 $482 $1,536 $(18) $2,599
====== ====== ====== ====== ======
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) For the year ended December 31, 2008 $7 of sales taxes netted against
revenue were reclassified to selling, general and administrative expenses
to be consistent with the presentation of other similar taxes.
Global Crossing Limited and Subsidiaries Table 7
Unaudited Summary of Consolidated Revenue
($ in millions)
Quarter Ended December 31, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $123 $128 $306 $- $557
Carrier voice 2 3 88 - 93
Other - - 1 - 1
Intersegment revenue - 3 10 (13) -
---- ---- ---- ---- ----
Consolidated revenue $125 $134 $405 $(13) $651
==== ==== ==== ==== ====
Quarter Ended September 30, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $117 $125 $311 $- $553
Carrier voice 3 2 84 - 89
Other - - 1 - 1
Intersegment revenue - 2 1 (3) -
---- ---- ---- ---- ----
Consolidated revenue $120 $129 $397 $(3) $643
==== ==== ==== === ====
Quarter Ended December 31, 2008
------------------------------------------------
GCUK GC Impsat (2) ROW (1) Eliminations Total
---- ------------- ------- ------------ -----
Revenue:
Enterprise, carrier data
and indirect sales
channel $132 $120 $291 $- $543
Carrier voice 2 2 96 - 100
Other - - 1 - 1
Intersegment revenue - 2 6 (8) -
---- ---- ---- ---- ----
Consolidated revenue $134 $124 $394 $(8) $644
==== ==== ==== === ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) For the three months ended December 31, 2008 $2 of sales taxes netted
against revenue were reclassified to selling, general and administrative
expenses to be consistent with the presentation of other similar taxes.
Global Crossing Limited Table 8
Unaudited Reconciliation of OIBDA to Income (Loss) Applicable
to Common Shareholders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of OIBDA, which is considered a non-GAAP (Generally
Accepted Accounting Principles) financial measure, to income (loss)
applicable to common shareholders.
OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from operating income (loss) 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, interest income, interest expense, income
taxes, other non-operating income or expense items, preferred stock
dividends, and gains and losses on pre-confirmation contingencies. 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.
Year Ended December 31, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
OIBDA $93 $160 $89 $- $342
Depreciation and
amortization (66) (87) (187) - (340)
----- ----- ----- ----- -----
Operating income (loss) 27 73 (98) - 2
Interest income 8 6 9 (16) 7
Interest expense (53) (33) (90) 16 (160)
Other income (expense),
net 18 - (7) - 11
Benefit (provision) for
income taxes (1) 2 (2) - (1)
Preferred stock dividends - - (4) - (4)
----- ----- ----- ----- -----
Income (loss) applicable
to common shareholders $(1) $48 $(192) $- $(145)
===== ===== ===== ===== =====
Year Ended December 31, 2008
----------------------------------------------
GCUK GC Impsat ROW (1,2) Eliminations Total
---- --------- --------- ------------ -----
OIBDA $134 $138 $1 $- $273
Depreciation and
amortization (84) (81) (161) - (326)
----- ----- ----- ----- -----
Operating income (loss) 50 57 (160) - (53)
Interest income 8 3 6 (7) 10
Interest expense (65) (35) (83) 7 (176)
Other income (expense),
net (57) (20) 51 - (26)
Net gain on
preconfirmation
contingencies - 4 6 - 10
Provision for income
taxes (1) (17) (31) - (49)
Preferred stock dividends - - (4) - (4)
----- ----- ----- ----- ------
Loss applicable to common
shareholders $(65) $(8) $(215) $- $(288)
===== ===== ===== ===== =====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $7 for the year ended
December 31, 2008.
Global Crossing Limited Table 9
Unaudited Reconciliation of OIBDA to Income (Loss) Applicable
to Common Shareholders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of OIBDA, which is considered a non-GAAP (Generally
Accepted Accounting Principles) financial measure, to income (loss)
applicable to common shareholders.
OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from operating income (loss) 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, interest income, interest expense, income
taxes, other non-operating income or expense items, preferred stock
dividends, and gains and losses on pre-confirmation contingencies. 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.
Quarter Ended December 31, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
OIBDA $24 $33 $26 $- $83
Depreciation and
amortization (17) (24) (49) - (90)
---- ---- ---- ---- ----
Operating income
(loss) 7 9 (23) - (7)
Interest income 2 1 4 (7) -
Interest expense (14) (8) (32) 7 (47)
Other income (expense),
net 1 1 (2) - -
Benefit for income
taxes - 17 - - 17
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Income (loss)
applicable to
common shareholders $(4) $20 $(54) $- $(38)
==== ==== ==== ==== ====
Quarter Ended September 30, 2009
----------------------------------------------
GCUK GC Impsat ROW (1) Eliminations Total
---- --------- ------- ------------ -----
OIBDA $25 $44 $22 $- $91
Depreciation and
amortization (18) (22) (49) - (89)
---- ---- ---- ---- ----
Operating income
(loss) 7 22 (27) - 2
Interest income 3 2 - (3) 2
Interest expense (14) (8) (20) 3 (39)
Other expense, net (8) (13) (11) - (32)
Provision for income
taxes - (6) - - (6)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to
common shareholders $(12) $(3) $(59) $- $(74)
==== ==== ==== ==== ====
Quarter Ended December 31, 2008
----------------------------------------------
GCUK GC Impsat ROW (1,2) Eliminations Total
---- --------- --------- ------------ -----
OIBDA $25 $40 $37 $- $102
Depreciation and
amortization (19) (21) (42) - (82)
---- ---- ---- ---- ----
Operating income
(loss) 6 19 (5) - 20
Interest income 2 1 1 (2) 2
Interest expense (14) (8) (20) 2 (40)
Other income (expense),
net (41) (14) 26 - (29)
Net gain on
preconfirmation
contingencies - - 1 - 1
Provision for income
taxes - (2) (4) - (6)
Preferred stock
dividends - - (1) - (1)
---- ---- ---- ---- ----
Loss applicable to
common shareholders $(47) $(4) $(2) $- $(53)
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) On January 1, 2009, the Company adopted FASB ASC Subtopic 470-20. ASC
Subtopic 470-20 specifies that issuers of convertible instruments should
separately account for the liability and equity components in a manner
that will reflect the entity's non-convertible debt borrowing rate when
interest cost is recognized in subsequent periods. ASC Subtopic 470-20
must be applied on retrospective basis. As a result of applying ASC
Subtopic 470-20, interest expense has increased $2 for the three months
ended December 31, 2008.
Global Crossing Limited and Subsidiaries Table 10
Unaudited Reconciliations of Free Cash Flow to Net Cash
Provided by Operating Activities
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Free Cash Flow, which is considered a non-GAAP
(Generally Accepted Accounting Principles) financial measure, to net cash
provided by operating activities.
We define Free Cash Flow as net cash provided by (used in) operating
activities less purchases of property and equipment as disclosed in the
statement of cash flows. Free Cash Flow differs from the net change in
cash and cash equivalents in the statement of cash flows in that it
excludes the cash impact of: all investing activities (other than capital
expenditures, which are a fundamental and recurring part of our business);
all financing activities; and exchange rate changes on cash and cash
equivalents balances.
Management uses Free Cash Flow as a relevant indicator of our ability to
generate cash to pay debt. Free Cash Flow also is an important part of
our internal reporting and a key measure used by management to evaluate
liquidity from period to period. We believe 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 Free Cash Flow may differ from similarly titled measures
used by other companies, and may not be comparable to those other
measures. Moreover, we do not currently pay a significant amount of
income taxes due to net operating losses, and we therefore generate higher
Free Cash Flow than comparable businesses that do pay income taxes.
Additionally, Free Cash Flow is subject to variability quarter over
quarter as a result of the timing of payments related to accounts
receivable and accounts payable and capital expenditures. Free Cash Flow
also does not include certain significant cash items such as purchases and
sales out of the ordinary course of business, proceeds from financing
activities, repayments of capital lease obligations and other debt, and
the effect of exchange rate changes on cash and cash equivalents balances.
Free Cash Flow should be considered in addition to, and not as a
substitute for, net change in cash and cash equivalents in the statement
of cash flows reported in accordance with GAAP.
Management believes that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday
business operations and the ability to pay debt.
Year Ended
December 31,
2009
------------
Free Cash Flow $82
Purchases of property and equipment 174
----
Net cash provided by operating activities $256
====
Year Ended
December 31,
2008
------------
Free Cash Flow $11
Purchases of property and equipment 192
----
Net cash provided by operating activities $203
====
Global Crossing Limited and Subsidiaries Table 11
Unaudited Reconciliations of Free Cash Flow to Net Cash
Provided by Operating Activities
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Free Cash Flow, which is considered a non-GAAP
(Generally Accepted Accounting Principles) financial measure, to net cash
provided by operating activities.
We define Free Cash Flow as net cash provided by (used in) operating
activities less purchases of property and equipment as disclosed in the
statement of cash flows. Free Cash Flow differs from the net change in
cash and cash equivalents in the statement of cash flows in that it
excludes the cash impact of: all investing activities (other than capital
expenditures, which are a fundamental and recurring part of our business);
all financing activities; and exchange rate changes on cash and cash
equivalents balances.
Management uses Free Cash Flow as a relevant indicator of our ability to
generate cash to pay debt. Free Cash Flow also is an important part of
our internal reporting and a key measure used by management to evaluate
liquidity from period to period. We believe 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 Free Cash Flow may differ from similarly titled measures
used by other companies, and may not be comparable to those other
measures. Moreover, we do not currently pay a significant amount of
income taxes due to net operating losses, and we therefore generate higher
Free Cash Flow than comparable businesses that do pay income taxes.
Additionally, Free Cash Flow is subject to variability quarter over
quarter as a result of the timing of payments related to accounts
receivable and accounts payable and capital expenditures. Free Cash Flow
also does not include certain significant cash items such as purchases and
sales out of the ordinary course of business, proceeds from financing
activities, repayments of capital lease obligations and other debt, and
the effect of exchange rate changes on cash and cash equivalents balances.
Free Cash Flow should be considered in addition to, and not as a
substitute for, net change in cash and cash equivalents in the statement
of cash flows reported in accordance with GAAP.
Management believes that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday
business operations and the ability to pay debt.
Quarter Ended
December 31,
2009
-------------
Free Cash Flow $72
Purchases of property and equipment 49
----
Net cash provided by operating activities $121
====
Quarter Ended
September 30,
2009
-------------
Free Cash Flow $52
Purchases of property and equipment 33
---
Net cash provided by operating activities $85
===
Quarter Ended
December 31,
2008
-------------
Free Cash Flow $30
Purchases of property and equipment 49
---
Net cash provided by operating activities $79
===
Global Crossing Limited and Subsidiaries Table 12
Unaudited Reconciliations of 2010 OIBDA and Free Cash
Flow Guidance
($ in millions)
When providing projections for non-GAAP measures, we are required to
provide a reconciliation of the non-GAAP measure to the most directly
comparable GAAP metric to the extent available without unreasonable
efforts. In such cases, we may indicate an amount or range for GAAP
measures that are components of the reconciliation. The provision of such
amounts or ranges must not be interpreted as explicit or implicit
projections of those GAAP components. To reconcile the non-GAAP financial
metric to GAAP, we must use amounts or ranges for the GAAP components that
arithmetically add up to the non-GAAP financial metric. While we feel
reasonably comfortable with the methodology used to generate the
projections of our non-GAAP financial metrics, we fully expect that the
amounts or ranges used for the GAAP components will vary from actual
results. We have made numerous assumptions in preparing our projections.
These assumptions, including the amounts of the various components that
comprise a financial metric, may or may not prove to be correct. We will
consider our projections of non-GAAP financial metrics to have been
achieved if the specific non-GAAP measure is met or exceeded, even if the
GAAP components of the reconciliation are materially different from those
provided in an earlier reconciliation.
This reconciliation was prepared based on the Company's guidance as
provided on February 16, 2010, which is included in the preceding
press release for informational purposes only.
Twelve months ended
December 31, 2010
------------------------------------------
Low End of Guidance High End of Guidance
OIBDA $390 $440
Depreciation and
amortization (380) (383)
--- --- Operating income 10 57
Interest expense, net (200) (200)
Provision for income taxes (25) (25)
Preferred stock dividends (4) (4)
--- ---
Net loss applicable to
common shareholders $(219) $(172)
=== ===
Free Cash Flow $10 $60
Purchases of property and
equipment 165 195
--- ---
Net cash provided by
operating activities $175 $255
=== ===
For definitions and further description of these non-GAAP measures see
table 13.
Global Crossing Limited and Subsidiaries Table 13
Definitions of Non-GAAP measures
Operating Income (Loss) Before Depreciation and Amortization ("OIBDA"):
OIBDA is defined as operating income (loss) before depreciation and
amortization. OIBDA differs from operating income (loss), as calculated in
accordance with GAAP and reflected on our consolidated financial
statements, 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, interest income, interest expense, income
taxes, other non-operating income or expense items, preferred stock
dividends, and gains and losses on preconfirmation contingencies. 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.
Free Cash Flow:
Free Cash Flow is a non-GAAP financial measure. We define Free Cash Flow
as net cash provided by (used in) operating activities less purchases of
property and equipment as disclosed in the statement of cash flows. Free
Cash Flow differs from the net change in cash and cash equivalents in the
statement of cash flows in that it excludes the cash impact of: all
investing activities (other than capital expenditures, which are a
fundamental and recurring part of our business); all financing activities;
and exchange rate changes on cash and cash equivalents balances.
Management uses Free Cash Flow as a relevant indicator of our ability to
generate cash to pay debt. Free Cash Flow also is an important part of
our internal reporting and a key measure used by management to evaluate
liquidity from period to period. We believe 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 Free Cash Flow may differ from similarly titled measures
used by other companies, and may not be comparable to those other
measures. Moreover, we do not currently pay a significant amount of
income taxes due to net operating losses, and we therefore generate higher
Free Cash Flow than comparable businesses that do pay income taxes.
Additionally, Free Cash Flow is subject to variability quarter over
quarter as a result of the timing of payments related to accounts
receivable and accounts payable and capital expenditures. Free Cash Flow
also does not include certain significant cash items such as purchases and
sales out of the ordinary course of business, proceeds from financing
activities, repayments of capital lease obligations and other debt, and
the effect of exchange rate changes on cash and cash equivalents balances.
Free Cash Flow should be considered in addition to, and not as a
substitute for, net change in cash and cash equivalents in the statement
of cash flows reported in accordance with GAAP.
Management believes that Free Cash Flow is useful to our investors as it
provides an indication of the underlying cash position of our everyday
business operations and the ability to pay debt.
SOURCE Global Crossing
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