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Bermuda
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980189783
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(State or other jurisdiction of
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(IRS Employer
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incorporation)
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Identification No.)
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Global Crossing Announces
Second Quarter 2011 Results
FOR IMMEDIATE RELEASE: WEDNESDAY, JULY 27, 2011
Florham Park, N.J. -- Global Crossing (NASDAQ: GLBC), a leading global IP solutions provider, today announced unaudited second-quarter 2011 results. The company said it will discuss its consolidated financial and operational results for the second-quarter 2011 on a conference call this morning.
"Strong demand and continued enterprise-wide focus on customer experience drove solid progress toward the achievement of our annual guidance," said John Legere, chief executive officer of Global Crossing. "We are building strong operating momentum as we prepare for our strategic combination with Level 3."
Results at a Glance
(Dollars in Millions)
Change vs. 1Q 2011
Change vs. 2Q 2010
2Q 2011
Reported
Constant
Reported
Constant
Currency
Currency
Consolidated Revenues
$ 692
5%
3%
10%
6%
"Invest & Grow" Revenues
$ 622
6%
4%
12%
8%
OIBDA
$ 96
14%
13%
3%
0%
Free Cash Flow
$ 10
$ 103
$ 23
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 in the attached financial tables.
Second Quarter Results
Global Crossing's strategic "invest and grow" services generated revenue of $622 million in the second quarter, an increase of 6 percent sequentially and 12 percent year over year. "Invest and grow" revenue in the second quarter included $9 million for customer buyouts of certain long-term obligations under two existing contracts. The sequential and year-over-year increases in "invest and grow" revenue were driven by growth in the GC Impsat and "Rest of World" (ROW) segments.
On a segment basis, ROW, GC Impsat and GCUK generated "invest and grow" revenue of $349 million, $163 million, and $116 million, respectively. In constant currency terms, ROW increased 5 percent sequentially and 10 percent year over year, GC Impsat increased 7 percent sequentially and 15 percent year over year, and GCUK decreased 1 percent sequentially and 6 percent year over year.
The company's consolidated revenue, which includes non-strategic wholesale voice services, was $692 million in the second quarter of 2011, an increase of 5 percent sequentially and 10 percent year over year. The company's wholesale voice business generated revenue of $69 million in the second quarter, a 7 percent decrease sequentially and year over year.
Global Crossing reported $96 million of OIBDA in the second quarter, compared with $84 million in the first quarter of 2011 and $93 million in the second quarter of 2010. Sequentially, OIBDA growth was driven by higher revenue and improved revenue mix. Year over year, margin contributed by revenue growth and improved revenue mix was largely offset by higher sales, general and administrative (SG&A) costs related to investment in sales resources, salary increases and restoration of the 401(k) company match. Sequentially and year over year, margin contributed by the customer buyouts of long-term obligations was more than offset by an increase in accrued annual incentive compensation and $3 million for professional fees related to the Level 3 combination. On a segment basis, ROW, GC Impsat and GCUK contributed OIBDA of $29 million, $50 million and $17 million, respectively.
Cash and Liquidity
As of June 30, 2011, Global Crossing had $259 million of unrestricted cash, compared with $265 million at March 31, 2011 and $328 million at June 30, 2010. Including $10 million of restricted cash, Global Crossing had total cash of $269 million at June 30, 2011.
Cash from operating activities for the second quarter was $56 million. Global Crossing received $38 million in proceeds from the sale of IRUs and prepaid services . Uses of cash for the quarter included $21 million for operating working capital, $37 million for cash interest payments and $59 million for capital expenditures and principal payments on capital leases.
The company reported Free Cash Flow of $10 million in the quarter, compared with negative $93 million in the prior quarter and negative $13 million in the year-ago period. The sequential improvement was primarily driven by better working capital performance, higher receipts from IRUs and prepaid services, an increase in OIBDA and a timing-driven decrease in cash interest. Year over year, the increase was principally driven by higher receipts from IRUs and prepaid services and an increase in OIBDA.
2011 Guidance
On February 22, 2011, the company provided 2011 guidance for "invest and grow" revenue to increase by approximately 6 to 9 percent. At the midpoint of the revenue growth range, the company expected OIBDA to increase to roughly $425 million.
Setting aside incremental costs associated with effecting the Level 3 combination, management continues to forecast 2011 revenue and OIBDA performance in line with annual guidance. The guidance reflects various assumptions and projections 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 below.
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, July 27, 2011, at 9:00 a.m. EDT
A replay of the call will be available on July 27, 2011, beginning at 11:00 a.m. EDT and will be accessible until August 3, 2011 at 11:00 a.m. EDT. To access the replay, North American callers may dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21532848. Callers in the United Kingdom may dial +44 870 000 3081 or +1 800 692 0831 and enter reservation number 21532848.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) is a leading global IP, Ethernet, data center and video solutions provider with the world's first integrated global IP-based network. The company offers a full range of data, voice, collaboration, broadcast and media services delivered with superior customer service.
Global Crossing provides services to enterprises (including approximately 40 percent of the Fortune 500); government departments and agencies; and 700 carriers, mobile operators and ISPs. It delivers converged IP services to more than 700 cities in more than 70 countries, and has 17 world-class data centers in major business centers around the globe.
Please visit www.globalcrossing.com for more information about Global Crossing.
# # #
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, 8-K, and in respect of GCUK's Forms 20-F and 6-K, as soon as reasonably practicable after those filings are made with the SEC. Copies of the charters for each of the standing committees of Global Crossing's Board of Directors, its Corporate Governance Guidelines, Ethics Policy, press releases and analysts presentations are all available through the Investors web pages.
Please note that the information contained on any of Global Crossing's websites is not incorporated by reference in, or considered to be a part of, any document unless expressly incorporated by reference therein.
IMPORTANT INFORMATION FOR INVESTORS
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed amalgamation involving Level 3 Communications, Inc. ("Level 3") and Global Crossing Limited ("Global Crossing") announced on April 11, 2011 has been submitted to the stockholders of Level 3 and the stockholders of Global Crossing for their consideration. Level 3 and Global Crossing have filed with the SEC a registration statement on Form S-4 that includes a joint proxy statement of Level 3 and Global Crossing that also constitutes a prospectus of Level 3, and may in the future file with the SEC other relevant documents concerning the proposed transaction. Level 3 and Global Crossing have each provided the final joint proxy statement/prospectus to its respective stockholders. Investors and security holders are urged to read the registration statement and the joint proxy statement/prospectus and any other relevant documents filed with the SEC when they become available, as well as any amendments or supplements to those documents, because they contain and will contain important information about Level 3, Global Crossing and the proposed transaction. Investors and security holders may obtain a copy of the registration statement and joint proxy statement/prospectus, as well as other filings containing information about Level 3 and Global Crossing, free of charge at the SEC's Web Site at http://www.sec.gov. In addition, the joint proxy statement/prospectus, the SEC filings that are or will be incorporated by reference in the joint proxy statement/prospectus and the other documents filed or to be filed with the SEC by Level 3 may be obtained free of charge by directing such request to: Investor Relations, Level 3, Inc., 1025 Eldorado Boulevard, Broomfield, Colorado 80021 or from Level 3's Investor Relations page on its corporate website at http://www.Level3.com and the joint proxy statement/prospectus, the SEC filings that are or will be incorporated by reference in the joint proxy statement/prospectus and the other documents filed or to be filed with the SEC by Global Crossing may be obtained free of charge by directing such request to: Global Crossing by telephone at (800) 836-0342 or by submitting a request by e-mail to glbc@globalcrossing.com or a written request to the Secretary, Wessex House, 45 Reid Street, Hamilton HM12 Bermuda or from Global Crossing's Investor Relations page on its corporate website at http://www.globalcrossing.com.
Level 3, Global Crossing and their respective directors, executive officers, and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in favor of the proposed transaction from the stockholders of Level 3 and from the stockholders of Global Crossing, respectively. Information about the directors and executive officers of Level 3 is set forth in the proxy statement on Schedule 14A for Level 3's 2011 Annual Meeting of Stockholders, which was filed with the SEC on April 4, 2011 and information about the directors and executive officers of Global Crossing is set forth in the proxy statement on Schedule 14A for Global Crossing's 2011 Annual General Meeting of Shareholders, which was filed with the SEC on April 29, 2011. Additional information regarding participants in the proxy solicitation may be obtained by reading the joint proxy statement/prospectus regarding the proposed transaction.
# # #
This press release contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties that could cause the actual results to differ materially, including: the failure to occur of any condition to the closing of the acquisition of Global Crossing by Level 3 and uncertainties as to the timing of the closing; the failure to achieve or any delay in achieving expected synergies and other financial benefits from the acquisition; changes in Global Crossing's risk profile resulting from the acquisition; limitations on Global Crossing's financial and operational flexibility that arise under the covenants in the amalgamation agreement that could restrict it from taking advantage of opportunities to strategically enhance its business or improve its capital structure; delays or reductions in purchases from Global Crossing by customers because of their perceived uncertainty about its ability to meet their needs after closing of the acquisition; disruptions in Global Crossing's business due to current and prospective employees experiencing uncertainty about their future roles with the company and the diversion of their time and attention from ongoing business operations; Global Crossing's history of substantial operating losses and the fact that, in the near term, funds from operations will not satisfy cash requirements; the availability of future borrowings in an amount sufficient to pay Global Crossing's indebtedness and to fund its other liquidity needs; legal and contractual restrictions on the inter-company transfer of funds by Global Crossing's subsidiaries; Global Crossing'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 Global Crossing'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 Global Crossing'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 that would prevail on an open market; potential weaknesses in internal controls of acquired businesses, and difficulties in integrating internal controls of those businesses with Global Crossing's own internal controls; exposure to contingent liabilities; and other risks referenced from time to time in Global Crossing'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
Michael.Schneider@globalcrossing.com
Analysts/Investors Contact
Mark Gottlieb
+ 1 800 836 0342
glbc@globalcrossing.com
Gino Mathew
+1 973 937 0133
Gino.Mathew@globalcrossing.com
IR/PR1
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Global Crossing Limited and Subsidiaries |
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Table 1 |
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Condensed Consolidated Balance Sheets |
|
|
|
|
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($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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June 30, 2011 |
|
December 31, 2010 |
|
|
|
(unaudited) |
|
|
|
ASSETS: |
|
|
|
|
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Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ 259 |
|
$ 372 |
|
Restricted cash and cash equivalents - current portion |
|
5 |
|
4 |
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Accounts receivable, net of allowances of $46 and $45 |
|
370 |
|
324 |
|
Prepaid costs and other current assets |
|
110 |
|
91 |
|
|
|
|
|
|
|
Total current assets |
|
744 |
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791 |
|
|
|
|
|
|
|
Restricted cash and cash equivalents - long term |
|
5 |
|
5 |
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Property and equipment, net of accumulated depreciation of $1,691 and $1,514 |
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1,191 |
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1,179 |
|
Intangible assets, net (including goodwill of $217 and $208) |
|
234 |
|
227 |
|
Other assets |
|
110 |
|
108 |
|
|
|
|
|
|
|
Total assets |
|
$ 2,284 |
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$ 2,310 |
|
|
|
|
|
|
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LIABILITIES: |
|
|
|
|
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Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ 273 |
|
$ 297 |
|
Accrued cost of access |
|
90 |
|
78 |
|
Short term debt and current portion of long term debt |
|
48 |
|
27 |
|
Obligations under capital leases - current portion |
|
54 |
|
51 |
|
Deferred revenue - current portion |
|
173 |
|
184 |
|
Other current liabilities |
|
346 |
|
376 |
|
|
|
|
|
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Total current liabilities |
|
984 |
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1,013 |
|
|
|
|
|
|
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Long term debt |
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1,346 |
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1,311 |
|
Obligations under capital leases |
|
81 |
|
72 |
|
Deferred revenue |
|
365 |
|
338 |
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Other deferred liabilities |
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56 |
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53 |
|
|
|
|
|
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Total liabilities |
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2,832 |
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2,787 |
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SHAREHOLDERS' DEFICIT: |
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Common stock, 110,000,000 shares authorized, $.01 par value, |
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61,187,796 and 60,497,709 shares issued and outstanding as of |
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June 30, 2011 and December 31, 2010, respectively |
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1 |
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1 |
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Preferred stock with controlling shareholder, 45,000,000 shares authorized, |
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$.10 par value, 18,000,000 shares issued and outstanding |
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2 |
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2 |
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Additional paid-in capital |
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1,448 |
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1,443 |
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Accumulated other comprehensive income |
|
6 |
|
15 |
|
Accumulated deficit |
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(2,005) |
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(1,938) |
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|
|
|
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Total shareholders' deficit |
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(548) |
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(477) |
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|
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|
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Total liabilities and shareholders' deficit |
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$ 2,284 |
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$ 2,310 |
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