Current Report
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
GLOBAL CROSSING LTD.
(Exact Name of Registrant as Specified in Charter)
Bermuda 000-24565 98-0189783
____________________________ ___________ ___________________
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
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Registrant's telephone number, including area code (441) 296-8600
NOT APPLICABLE
Item 5. Other Events.
On February 1, 1999, the Registrant issued the press release attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7. Exhibits.
The following exhibit is filed as part of this Current Report on Form 8-K:
Exhibit Number Exhibit
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99.1 Press Release of the Registrant, dated February 1, 1999
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GLOBAL CROSSING LTD.
(Registrant)
/s/ Dan J. Cohrs
____________________________
Dan J. Cohrs
Senior Vice President and
Chief Financial Officer
Date: February 2, 1999
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EXHIBIT 99.1
FOR CONTRACT SALES ON GLOBAL FIBER OPTIC NETWORK
. Fourth quarter revenue of $205 million and net income of $56 million are records.
. Fourth quarter contract sales total $285 million as backlog grows to $634 million.
. Global network buildout is on schedule.
Hamilton, Bermuda February 1, 1999 -- Global Crossing Ltd. (NASDAQ, BSX:
GBLX), the owner and operator of the world's first independent global fiber
optic network, today reported record results for the fourth quarter ended
December 31, 1998. Global Crossing announced that firm commitments for
purchases of capacity on the network, through the end of the fourth quarter,
totaled $1.052 billion. Global Crossing reported record contract sales (new
orders) of $285 million for the quarter, as the sales backlog grew to $634
million. Fourth quarter revenues of $205.1 million, net income of $56.0
million, and net income applicable to common shareholders of $51.6 million also
reached new highs.
For the twelve months ended December 31, 1998, revenues were $424.1 million and net income before preference share dividends, and excluding non-recurring items, was $71.5 million.
Demand for global bandwidth drives sales growth
"The continuing demand from telecommunications and internet service providers for global high-speed bandwidth exceeds forecasts and fueled our growth to $1 billion of contract sales," said Global Crossing Chief Executive Officer Jack Scanlon. "To meet that demand, we're aggressively rolling out our global network, moving from the sea onto the land with our announcements of terrestrial networks in Europe and Japan. Our announced network, when completed, will span three continents and address 80% of the world's international traffic."
"In 1999, we will introduce customized services including virtual private networks, leased private lines, and internet transit services which will be a new source of revenues," added Scanlon. "We expect sales, customer growth, and cash flow to continue to be strong."
Of the $1.052 billion of contract sales, Global Crossing recognized $418 million as revenue in 1998, leaving $634 million as sales backlog not yet recognized as revenue. This backlog is expected to be recognized as revenue over approximately the next three years. This growth in sales of capacity reflects continued strong demand for capacity on Atlantic Crossing 1 (AC-1), and includes more than $100 million of commitments to purchase capacity and dark fiber on Pan-European Crossing.
Connecting continents and cities
Creating the first independent, seamless global communications network, Global Crossing has extended its subsea cable network to include land-based systems with the announcement of Pan-European Crossing (PEC), and Global Access Limited, Japan (GAL).
This global network will be managed by the Company's state-of-the-art Network Operations Center in London, expected to be operational in 1999.
GAL, a 49% owned joint venture with Marubeni Corporation of Japan, will build a high-capacity fiber-optic network of approximately 1,300 route kilometers connecting Tokyo, Osaka and Nagoya with the cable stations of PC-1, Global Crossing's trans-Pacific cable. This system, addressing 80 percent of the Japanese long-haul market, will link these cities to the United States, Europe and Latin America over Global Crossing's worldwide network. Construction of the GAL network started in September 1998 and operation is expected to commence by December 1999.
Global Crossing's first terrestrial network, PEC, was announced at the beginning of the quarter. Since then, Global Crossing has signed contracts for rights-of-way and conduit for Germany, the Netherlands, and Belgium, representing about one-quarter of the 8,200 route kilometers of the 18-city network. Also during the quarter, Global Crossing announced the sale of more than $100 million of dark fiber on PEC.
As planned, the segments of Global Crossing's AC-1 cable system extending from the United States to Germany and the Netherlands began carrying commercial traffic during December. Full ring completion is on schedule for February 1999.
Financial highlights
Of the $1.052 billion of cumulative contract sales through the end of the fourth quarter, $201 million was recognized as revenue during the quarter, representing contracts for circuits that were activated during this quarter. Revenues from operations, administration, and maintenance (OA&M) totaled approximately $4 million. For the year, total revenue was $424 million, including OA&M.
Financial highlights for the three and twelve months ended December 31, 1998 were:
Three Months Ended Twelve Months Ended
December 31, 1998 December 31, 1998
(in millions, except per share data)
Contract Sales:
---------
Through December 31, 1998 $ 1,052 $ 1,052
During the period $ 285 $ 911
Backlog $ 634 $ 634
Results of Operations:*
---------
Revenues $ 205.1 $ 424.1
Net income (loss) $ 51.6 $ (134.7)
Net income before preference share
dividends, and excluding non-
recurring items $ 56.0 $ 71.5
Earnings (loss) per share $ 0.24 $ (0.75)
Earnings (loss) per share before
preference share dividends, and
excluding non-recurring items $ 0.26 $ 0.40
*See Statements of Operations and accompanying footnotes
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Highlights for the quarter
. A broad agreement with Lucent Technologies, Inc., under which Global Crossing will receive priority access to the advanced optical technologies of Lucent and Bell Laboratories, as well as financing for Pan European Crossing, for which Lucent was
chosen to supply optical fiber and opto-electronic equipment. Lucent also agreed to provide financing for future systems, if it is chosen as a supplier for those systems.
. The completion of an offering of preferred stock, raising approximately $483 million, as well as $240 million of non-recourse bank financing for Mid- Atlantic Crossing (MAC). In 1998, Global Crossing has raised more than $3.5 billion in capital through the capital markets, project financing and project equity from partners, providing full funding for its announced network segments.
. The extension of the network to include 61,100 announced kilometers, of which 54,200 kilometers were under contract and 13,400 kilometers were in service.
Accounting for new initiatives
Accounting policies for the Company's terrestrial systems and new services will be different from those currently applied to its subsea systems, which will be unaffected. Consistent with industry practice, Global Crossing will amortize capacity revenues from its new initiatives (PEC, GAL, and new services) over the lives of sales contracts, with cash received but not yet recognized as revenues recorded on the balance sheet as deferred revenue. Network investments for these new initiatives will be depreciated over the estimated useful lives of the assets. The new initiatives are expected to contribute to operating cash flow during 1999, but are expected to reduce net income by approximately $45 - $50 million.
Accounting for start-up activities
As required for all companies operating under U.S. GAAP, Global Crossing will adopt Statement of Position 98-5 (SOP 98-5), "Reporting on the Cost of Start-Up Activities," issued by the American Institute of Certified Public Accountants, effective in the first quarter of 1999.
SOP 98-5 requires that certain start-up expenditures previously capitalized during system development must now be expensed. All companies involved in developing new projects will be affected by SOP 98-5. Global Crossing's cash flow will not be affected by the new standard, but net income in 1999 is expected to be reduced by $55 - $60 million, including a one-time charge in the first quarter of approximately $15 million, which represents startup costs spent and capitalized during previous periods.
About Global Crossing
Global Crossing is building and operating the world's first independent
global fiber optic network. Global Crossing's operations are headquartered in
Hamilton, Bermuda, with holding company headquarters in Los Angeles, and offices
in Morristown, New Jersey; San Francisco; Miami; London; Amsterdam; and Buenos
Aires.
# # #
Note: Condensed Financial Statements Are Attached
Statements made in this press release that state the Company's or management intentions, beliefs, expectations or predictions for the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's filings with the U.S. Securities and Exchange Commission (SEC). Copies of these filings may be obtained by contacting the Company or the SEC.
# # #
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Investors and analysts may contact: Reporters and editors may contact:
Jensen Chow Tom Goff
310/385-5270 or 310/385-5283 310/385-5231
E-mail: jchow@globalcrossing.com E-mail: tgoff@globalcrossing.com
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FOR MORE INFORMATION ABOUT GLOBAL CROSSING, VISIT OUR WEBSITE:
www.globalcrossing.bm
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands of US dollars, except share information)
Period from
Three months ended Twelve months March 19, 1997
December 31 December 31 Ended (Date of inception)
1998 1997 Dec 31, 1998 to Dec. 31, 1997
------------------- ------------- ---------------- ------------------
TOTAL REVENUES $ 205,150 $ - $ 424,099 $ -
EXPENSES
Cost of capacity sold 88,054 178,492
Operations and maintenance 7,404 18,056
Sales and marketing 12,539 1,224 26,194 1,366
Network development 3,728 78 10,962 78
General and administrative 9,363 988 26,844 1,657
Termination of advisory services agreement - 139,669
Stock related expense 6,316 39,374
Provision for doubtful accounts 2,022 4,233
----------------------------- -------------------------
Total expenses 129,426 2,290 443,824 3,101
----------------------------- -------------------------
OPERATING INCOME (LOSS) 75,724 (2,290) (19,725) (3,101)
EQUITY IN LOSS OF AFFILIATES (1,471) - (2,508) -
INTEREST INCOME (EXPENSE)
Interest Income 15,726 440 29,986 2,941
Interest Expense (17,220) - (42,880) -
----------------------------- -------------------------
(1,494) 440 (12,894) 2,941
INCOME (LOSS) BEFORE INCOME TAXES
----------------------------- -------------------------
AND EXTRAORDINARY ITEM 72,759 (1,850) (35,127) (160)
----------------------------- -------------------------
Provision for income taxes (16,735) - (33,067) -
----------------------------- -------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 56,024 (1,850) (68,194) (160)
----------------------------- -------------------------
Extraordinary loss on retirement of senior notes - - (19,709) -
----------------------------- -------------------------
NET INCOME (LOSS) 56,024 (1,850) (87,903) (160)
----------------------------- -------------------------
Preference share dividends (4,375) (4,277) (12,681) (12,690)
Redemption of preference shares (34,140)
----------------------------- -------------------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ 51,649 $ (6,127) $ (134,724) $ (12,850)
----------------------------- -------------------------
a) Adjusted EBITDA $142,757 $ (2,290) $ 261,376 $ (3,062)
b) Net income (loss) before preference share dividends
and excluding non-recurring items $ 56,024 $ (1,850) $ 71,475 $ (160)
INCOME (LOSS) PER COMMON SHARE
Net income/(loss) before extraordinary item
applicable to common stockholders:
Basic $0.25 ($0.04) ($0.64) ($0.08)
Diluted $0.24 ($0.04) ($0.64) ($0.08)
Extraordinary item
Basic $0.00 $0.00 ($0.11) $0.00
Diluted $0.00 $0.00 ($0.11) $0.00
Net income/(loss) applicable to common stockholders:
Basic $0.25 ($0.04) ($0.75) ($0.08)
Diluted $0.24 ($0.04) ($0.75 ($0.08)
Shares for computing basic income/(loss) applicable to
common stockholders per share 205,139,407 162,886,967 179,367,670 162,886,967
Shares for computing diluted income/(loss) applicable to
common stockholders per share 218,251,139 162,886,967 179,367,670 162,886,967
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a) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) is calculated as operating income (loss), plus depreciation and amortization, cost of undersea capacity sold, and amounts relating to the termination of the advisory services agreement.
b) Net income (loss) before preference share dividends and excluding non- recurring items is calculated as net income (loss) applicable to common stockholders, plus amounts related to preference share dividends and redemption of preference shares, plus extraordinary loss on retirement of senior notes, plus amounts related to the termination of advisory services agreement.
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of US dollars, except share information)
December 31, 1998 December 31, 1997
-------------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 806,593 $ 1,453
Restricted cash and cash equivalents 77,190 25,275
Accounts receivable, net of allowance for doubtful accounts of $4,233 71,195 -
Other assets and prepaid costs 47,137 1,016
------------------ ---------------
1,002,115 27,744
Long term restricted cash and cash equivalents 367,600 -
Long term accounts receivable 43,315 -
Capacity available for sale 574,849 21,200
Construction in progress 428,207 497,319
Deferred finance and organization costs, net of
accumulated amortization of $9,899 ($2,247 as of December 31, 1997) 45,757 25,934
Investment in Affiliates 177,334 -
------------------ ---------------
$ 2,639,177 $ 572,197
================== ===============
LIABILITIES
Current liabilities:
Accrued construction costs $ 129,081 $ 52,004
Accounts payable and accrued liabilities 31,990 1,658
Accrued interest and preference share dividends 14,428 2,922
Deferred revenue 44,197 5,325
Income taxes payable 15,604 -
Current portion of long term debt 6,393 -
Current portion of obligations under inland services agreements and capital leases 14,572 30,189
------------------ ---------------
256,265 92,098
Long term debt 269,598 162,325
Senior notes 796,495 150,000
Long term deferred revenue 25,325 -
Obligations under inland services agreements and capital leases 24,520 3,009
Deferred income taxes 9,654 -
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Total liabilities 1,381,857 407,432
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Mandatorily Redeemable Preference Shares (5,000,000 shares as of
December 31, 1998, $100 liquidation per share (net of unamortized issuance
costs of $17,000)) 483,000 -
Mandatorily Redeemable Preference Shares (109,830 shares as of
December 31, 1997, $1,000 liquidation per share (net of unamortized discount
and issuance costs of $12,224 and $6,962)) - 90,644
STOCKHOLDERS EQUITY
Common stock (205,371,244 shares outstanding) 2,054 1,629
Treasury Stock (209,414) -
Other stockholders' equity 1,069,743 72,652
Accumulated deficit (88,063) (160)
------------------ ---------------
774,320 74,121
$ 2,639,177 $ 572,197
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End of Filing
