- Generated 4 million pounds Sterling in cash after debt service.
- Signed key contracts with Lockheed Martin and the Forestry Commission.
- Solidified revenue from largest commercial customer for remaining term
of 10-year contract.
LONDON, Sept. 13 /PRNewswire-FirstCall/ -- Global Crossing (Nasdaq: GLBC)
today reported financial results for the second quarter of 2005 for its Global
Crossing (UK) Telecommunications Limited (GCUK) subsidiary. GCUK's second
quarter results were previously announced as part of Global Crossing's
consolidated results, which were reported on August 10, 2005, in accordance
with U.S. Generally Accepted Accounting Principles (US GAAP).
"Our UK business made several notable gains during the second quarter,
including signing significant contracts with Lockheed Martin and the Forestry
Commission, securing our 10-year contract with the Foreign and Commonwealth
Office and generating cash," said John Legere, Global Crossing's chief
executive officer. "These key achievements show that our UK business is on
track and tightly aligned with company strategy to provide converged IP
solutions to global enterprises and carriers."
Management will hold a conference call on Tuesday, September 13, 2005 at
2:00 p.m. BST/9:00 a.m. ET to review these results.
Second Quarter Results
GCUK's results below are presented according to UK Generally Accepted
Accounting Principles (UK GAAP) and are reported in British pounds sterling.
GCUK's second quarter report to noteholders, being filed today by GCUK on Form
6-K, includes a reconciliation to US GAAP.
During the financial close process for the second quarter of 2005, GCUK
identified a 2.8 million pound overstatement of depreciation expense in its UK
GAAP financial statements for the three months ended March 31, 2005. GCUK has
therefore adjusted depreciation expense within cost of sales for the first
quarter of 2005, and this adjustment has been reflected in the attached
financial statement schedules. The depreciation adjustment does not affect
GCUK's or its parent company's financial statements prepared in accordance
with US GAAP. See Item 3 of GCUK's second quarter report to noteholders for a
discussion of internal control deficiencies related to this adjustment.
Revenue
GCUK revenue for the second quarter of 2005 was 60 million pounds,
compared with 69 million pounds in the second quarter of 2004 and flat
compared to the first quarter of 2005. The year-over-year decline reflects the
same losses reported in the first quarter of 2005, which were described in the
company's annual report to noteholders for the year ended December 31, 2004.
GCUK's "invest and grow" revenue -- that is, revenue from the core part of
Global Crossing's business focused on global, enterprise and government
customers requiring IP services -- declined 5 million pounds year over year.
GCUK's wholesale voice revenue declined 4 million pounds year over year, as a
result of the parent company's actions to manage for better margins.
GCUK entered into 253 new and renewal contracts during the second quarter
of 2005, including a new agreement with the Forestry Commission that is
expected to generate 14 million pounds over seven years, and an extension with
Lockheed Martin, which is expected to generate 7 million pounds over three
years. The company also concluded a final, planned review with its largest
customer, the Foreign and Commonwealth Office, securing the existing 10-year
contract term and associated revenue through May 2010.
During the second quarter, GCUK continued to expand its product portfolio,
with key product offerings linked directly to the company's strategy to
provide converged IP services to enterprises and the carriers that serve them.
These new product offerings included the introduction of Carrier VoIP Inbound
and Carrier VoIP Outbound. Global Crossing more recently announced the launch
of Hosted IP Voice service in the region and an upgrade of RailNet, one of the
largest private networks in Europe, creating a next-generation converged
services platform for the UK rail industry.
Cost of Access
Cost of access expense was 20 million pounds in the second quarter of
2005, compared to 24 million pounds in the second quarter of 2004 and 19
million pounds in the first quarter of 2005. The year-over-year reduction
resulted from lower mobile phone termination rates, lower wholesale voice
volume and the company's initiatives to reduce facility costs.
Gross Margin
For the second quarter of 2005, gross margin (defined as revenue less cost
of access) was 67 percent of revenue, compared to 65 percent in the second
quarter of 2004 and 69 percent in the first quarter of 2005. The
year-over-year improvement resulted primarily from improvements in cost of
access expense and the reduction of lower margin wholesale voice revenue.
Gross margin in absolute terms declined to 41 million pounds in the second
quarter, compared to 45 million pounds in the same quarter last year and 42
million pounds in the first quarter of 2005. The year-over-year change was
the result of lower revenue, partially offset by cost of access savings.
Operating Expenses
Operating expenses for the second quarter of 2005 were 24 million pounds,
compared to 20 million pounds in the second quarter of 2004 and 24 million
pounds in the first quarter of 2005. The year-over-year increase was
primarily attributable to higher real estate costs in the second quarter of
2005, as well as credits received in the second quarter of 2004 for rent costs
and intercompany management fees. None of those items recurred in the second
quarter of 2005.
GCUK's third party maintenance was 4 million pounds in the second quarter
of 2005, compared to 5 million pounds in both the second quarter of 2004 and
the first quarter of 2005.
Earnings
GCUK's earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter of 2005, as defined in Table 5 that follows,
were 8 million pounds, compared with 18 million pounds in the second quarter
of 2004 and 10 million pounds in the first quarter of 2005. UK GAAP EBITDA
includes foreign exchange gains and losses which significantly affect EBITDA
in each quarter.
The year-over-year decline in EBITDA was partly due to the impact of
foreign exchange rate fluctuations on dollar-denominated debt, resulting in a
3 million pound variance year over year. The company incurred non-cash
foreign exchange losses of 5 million pounds on the company's senior secured
notes in the second quarter of 2005, compared to a 2 million pound loss on
intercompany balances in the second quarter of 2004. Additionally, the year-
over-year EBITDA decline included 4 million pounds in reduced gross margin and
a 4 million pound increase to operating expenses as described above; these
were partially offset by a 1 million pound decrease in third party
maintenance.
The sequential change in EBITDA was a result of 1 million pounds in
reduced gross margin and 2 million pounds in foreign exchange fluctuations on
dollar-denominated debt. The company incurred non-cash foreign exchange
losses of 3 million pounds on its dollar-denominated senior secured notes in
the first quarter of 2005. Excluding the impact of foreign exchange, EBITDA
was 1 million pounds lower sequentially.
GCUK's net loss for the second quarter of 2005 was 11 million pounds,
compared to net income of 6 million pounds in the second quarter of 2004 and a
net loss of 3 million pounds in the first quarter of 2005. The 3 million
pound net loss reflects correction of the approximately 3 million pound
overstatement of depreciation expense as previously reported in GCUK's first
quarter 2005 financial statements. This overstatement had no impact on the
parent company's financial statements, which are prepared in accordance with
US GAAP.
The year-over-year decrease in net income is attributable to the 10
million pound decline in EBITDA described above, an increase in interest
expense of 7 million pounds and a 2 million pound increase in tax expense,
partially offset by a 1 million pound decrease in depreciation and
amortization. Sequentially, net income reflected a 2 million pound change in
EBITDA as described above, a 5 million pound increase in tax expense due to a
reversal of a tax credit in the first quarter of 2005 and a slight increase in
interest expense.
Capital Expenditures
In the second quarter of 2005, cash used for capital expenditures and
leases was 3 million pounds, compared to 4 million pounds in the second
quarter of 2004 and 4 million pounds in the first quarter of 2005.
Cash and Financing
As of June 30, 2005, GCUK had 26 million pounds of cash on hand and
short-term deposits. During the second quarter of 2005, GCUK generated 4
million pounds of cash flow after payment of 11 million pounds of interest on
GCUK's senior secured notes.
Conference Call
Management has scheduled a conference call for Tuesday, September 13, 2005
at 2:00 p.m. BST/9:00 a.m. ET to discuss GCUK's financial results. The call
may be accessed by dialing +1 212-231-6046 or +44 (0) 870-001-3125. Callers
are advised to dial in 15 minutes prior to the 2:00 p.m. start time. The call
will also be Webcast at http://www.globalcrossing.com/xml/investors/index.xml.
A replay of the call will be available on Tuesday, September 13, 2005
beginning at 11:30 am ET and will be accessible until Tuesday, September 20,
2005 at 11:30 am ET. To access the replay, dial +1 402-977-9140 or +1 800-
633-8284 and entering reservation number 21258569. UK callers may access the
replay by dialing +44 (0) 870-000-3081 or 0800-692-0831 and entering
reservation number 21258569.
ABOUT GLOBAL CROSSING (UK) TELECOMMUNICATIONS LTD.
Global Crossing (UK) Telecommunications Ltd. provides a full range of
managed telecommunications services in a secure environment ideally suited for
IP-based business applications. The company provides managed voice, data,
Internet and e-commerce solutions to the strong and established commercial
customer base, including more than 100 UK government departments, as well as
systems integrators, rail sector customers and major corporate clients. In
addition, GCUK provides carrier services to national and international
communications service providers.
Global Crossing (UK) Telecommunications operates a high-capacity UK
network comprising more than 5,600 route miles of fiber optic cable connecting
150 towns and cities and reaching within just over one mile of 64 percent of
UK businesses. The UK network is linked into the wider Global Crossing network
that connects more than 300 cities and 30 countries worldwide, and delivers
services to more than 500 major cities, 50 countries and 6 continents around
the globe.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC) provides telecommunications solutions over
the world's first integrated global IP-based network. Its core network
connects more than 300 cities and 30 countries worldwide, and delivers
services to more than 500 major cities, 50 countries and 6 continents around
the globe. Global Crossing's global sales and support model matches the
network footprint and, like the network, delivers a consistent customer
experience worldwide.
Global Crossing IP services are global in scale, linking the world's
enterprises, governments and carriers with customers, employees and partners
worldwide in a secure environment that is ideally suited for IP-based business
applications, allowing e-commerce to thrive. Global Crossing offers a full
range of managed data and voice products including Global Crossing IP VPN
Service, Global Crossing Managed Services and Global Crossing VoIP services,
to more than 40 percent of the Fortune 500, as well as 700 carriers, mobile
operators and ISPs.
Please visit http://www.globalcrossing.com for more information about
Global Crossing.
Statements made in this press release that state Global Crossing's
intentions, beliefs, expectations, or predictions for the future are
forward-looking statements. These statements contain words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "believe,"
"will," "seek," or similar expressions. Such statements are subject to known
and unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements,
including the conditioning of Global Crossing's continued listing on the
NASDAQ National Market on its timely filing with the SEC of all periodic
reports for all reporting periods ending on or prior to September 30, 2005;
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 payment of dividends and the inter-
company transfer of funds by Global Crossing's subsidiaries, including
restrictions under the senior secured notes indenture applicable to Global
Crossing (UK) Telecommunications Limited ("GCUK"); the likelihood that the
prices Global Crossing charges for its services will continue to decrease;
Global Crossing's ability to continue to connect its network to incumbent
carriers' networks or maintain Internet peering arrangements on favorable
terms; the success of Global Crossing's business realignment plan and the
realization of anticipated cost savings; the consequences of any inadvertent
violation of Global Crossing's Network Security Agreement with the U.S.
Government; the impact of actual and potential customers' bankruptcies on
Global Crossing's sales prospects and results of operations; increased
competition and pricing pressures resulting from technology advances and
regulatory changes; competitive disadvantages relative to competitors with
superior resources; the impact on Global Crossing's competitiveness of its
technology choices; Global Crossing's dependence on third parties for many
functions; political, legal and other risks due to Global Crossing's
substantial international operations; risks arising out of Global Crossing's
material weaknesses in internal controls and possible difficulties and delays
in improving such controls; the concentration of GCUK's revenue in a limited
number of customers, and the rights of such customers to terminate their
contracts or to simply cease purchasing services thereunder; 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
Becky Yeamans
+ 1 973-937-0155
PR@globalcrossing.com
Kendra Langlie
+ 1 305-808-5912
LatAmPR@globalcrossing.com
Mish Desmidt
Europe
+ 44 (0) 1256 732-866
EuropePR@globalcrossing.com
Analysts/Investors Contact
Laurinda Pang
+ 1 800-836-0342
glbc@globalcrossing.com
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Summary of Consolidated Revenues
(Results below are in pounds sterling in thousands)
Quarter Ended
June 30, March 31, June 30,
2005 2005 2004
Revenues:
Enterprise and carrier data 59,980 59,992 64,721
Wholesale voice 419 412 4,138
Consolidated revenues 60,399 60,404 68,859
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Condensed Consolidated Statements of Operations (unaudited)
(Results below are in pounds sterling in thousands)
Quarter Ended
Adjusted
June 30, March 31, June 30,
UK GAAP in UK Reporting Format 2005 2005 2004
Turnover 60,399 60,404 68,859
Cost of sales (39,691) (39,420) (47,524)
Gross profit 20,708 20,984 21,335
Distribution costs (2,495) (2,552) (2,447)
Administrative expenses (19,664) (17,403) (11,554)
(22,159) (19,955) (14,001)
Operating profit/(loss) (1,451) 1,029 7,334
Finance charges, net (7,653) (7,123) (978)
Profit (loss) on ordinary activities
before taxation (9,104) (6,094) 6,356
Taxation on profit on ordinary
activities (2,153) 3,285 -
Profit/(loss) for the period (11,257) (2,809) 6,356
Quarter Ended
Adjusted
UK GAAP in US Reporting Format June 30, March 31, June 30,
2005 2005 2004
REVENUES 60,399 60,404 68,859
OPERATING EXPENSES:
Cost of access (19,686) (18,510) (24,156)
Third party maintenance (4,246) (4,745) (5,106)
Other operating expenses (24,072) (23,602) (19,880)
Depreciation and amortization (9,387) (9,425) (10,627)
(57,391) (56,282) (59,769)
OPERATING INCOME 3,008 4,122 9,090
OTHER EXPENSE:
Interest expense, net (7,653) (7,123) (978)
Other expense, net (4,459) (3,093) (1,756)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE BENEFIT
(PROVISION) FOR INCOME TAXES (9,104) (6,094) 6,356
Provision (benefit) for income taxes (2,153) 3,285 -
NET INCOME (LOSS) (11,257) (2,809) 6,356
Note: The classification differences between reporting under UK GAAP and
US GAAP are as follows:
Cost of sales: Under UK GAAP, the company presents cost of sales and
gross profit. Under US GAAP, the company segregates what is
constituted cost of sales under UK GAAP into the following and includes
them within operating expenses: cost of access, third party maintenance,
other operating expenses, and amortization and depreciation.
Foreign currency gains/(losses): Under UK GAAP the company includes
foreign currency gains and losses within operating profit/(loss)
whereas under US GAAP these amounts are included in other income
(expense), net.
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Condensed Consolidated Balance Sheets
(Results below are in pounds sterling in thousands)
June 30, December 31,
2005 2004
(unaudited)
Fixed assets
Goodwill - -
Tangible assets 174,159 186,477
Trade investment 4 4
174,163 186,481
Current assets
Debtors: amounts receivable in less
than one year (including amounts
receivable from group companies of
6,133 pounds and 3,802 pounds,
respectively) 51,240 65,138
Debtors: amounts receivable in more
than one year 12,795 18,422
Investment-short term deposits - 20,727
Cash at bank and in hand 26,039 466
90,074 104,753
Creditors: amounts falling due within
one year (including amounts owed to
group companies of 9,332 pounds and
5,743 pounds, respectively) (87,186) (94,407)
Net current assets 2,888 10,346
Total assets less current liabilities 177,051 196,827
Creditors: amounts falling due after
more than one year (340,370) (345,911)
Provisions for liabilities and
charges (13,141) (12,481)
Net liabilities (176,460) (161,565)
Capital and reserves
Called-up share capital 101 101
Share premium 21,895 21,895
Profit and loss account (198,456) (183,561)
Equity shareholder's deficit (176,460) (161,565)
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Condensed Consolidated Cash Flow Statements (unaudited)
(Results below are in pounds sterling in thousands)
Quarter Ended
June 30, March 31, June 30,
2005 2005 2004
Net cash inflow from operating
activities 18,171 5,676 17,614
Returns on investments and servicing
of finance (11,519) (417) (510)
Capital expenditure (2,168) (2,492) (2,029)
Cash inflow before management of
liquid resources and financing 4,484 2,767 15,075
Management of liquid resources - 20,727 10,000
Financing (876) (1,529) (26,525)
Increase/(decrease) in cash 3,608 21,965 (1,450)
Reconciliation of Net Cash Flow to
Reduction/(Increase) in Net Debt
Increase/(decrease) in cash in the
period 3,608 21,965 (1,450)
Cash inflow from decreases in short
term deposits - (20,727) (10,000)
Cash outflow from repayments of loans
provided by group companies - - 46,577
Cash inflow from loans provided by
group companies - - (21,832)
Cash outflow from repayment of
finance lease obligations 876 1,639 1,780
Change in net debt resulting from
cash flow 4,484 2,877 15,075
Foreign exchange movements on loans
to group companies - - (366)
Foreign exchange movements on senior
secured notes (4,271) (2,054) -
Intercompany debt waiver - - 3,275
Amortization of deferred finance fees (266) (272) -
Amortization of discount on senior
secured notes (76) (75) -
Changes in lease related accruals 4,039 (1,248) (538)
Disposal of finance leases - - -
New finance leases (228) (360) (615)
Reduction/(increase) in net debt 3,682 (1,132) 16,831
Net debt at beginning of period (214,889) (213,757) (316,522)
Net debt at end of period (211,207) (214,889) (299,691)
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Reconciliation of UK GAAP EBITDA to Profit (Loss) for the Period
(Results below are in pounds sterling in thousands)
Quarter Ended
Adjusted
June 30, March 31, June 30,
2005 2005 2004
Profit (loss) for the period (11,257) (2,809) 6,356
Finance charges, net 7,653 7,123 978
Taxes 2,153 (3,285) -
Depreciation and amortization 9,387 9,425 10,627
UK GAAP EBITDA 7,936 10,454 17,961
Pursuant to the SEC's Regulation G, the foregoing table provides a
reconciliation of EBITDA, which is considered a non-GAAP (Generally
Accepted Accounting Principals) financial metric, to profit (loss) for the
period, which is the most directly comparable GAAP measure. Management
believes that EBITDA is a relevant indicator of operating performance,
especially in a capital-intensive industry such as telecommunications.
EBITDA is an important aspect of the company's internal reporting and is
also used by the investment community in assessing financial performance.
This non-GAAP measure should be used in addition to, but not as a
substitute for, the analysis provided in the condensed consolidated
statement of operations.
Definition:
UK GAAP EBITDA consists of loss for the period before taxation, finance
charges, net, and depreciation and amortization expense.
Global Crossing (UK) Telecommunications Limited and Subsidiaries
UK GAAP - Reconciliation to US GAAP (unaudited)
(Results below are in pounds sterling in thousands)
Quarter Ended
Adjusted
June 30, March 31, June 30,
2005 2005 2004
Net Income (loss), under UK GAAP (11,257) (2,809) 6,356
Reconciling items:
Push down of Global Crossing's fresh
start accounting 2,347 2,571 3,735
Long-term IRU agreements (274) (274) (92)
Third party service agreements 5,697 (18) (250)
Restructuring costs (53) (48) 302
Share-based compensation (796) (227) (196)
Income taxes 1,689 (2,660) (3,020)
Other items 29 29 (54)
Net Income (loss) under US GAAP on a
standalone basis (2,618) (3,436) 6,781
SOURCE Global Crossing
 back to top
Related links:
http://www.globalcrossing.com
http://www.globalcrossing.com/xml/investors/index.xml
CONTACT:
Media: Becky Yeamans, +1-973-937-0155,
PR@globalcrossing.com, or, Kendra Langlie, +1-305-808-5912,
LatAmPR@globalcrossing.com, or, Mish Desmidt, Europe,
+44-0-1256-732-866, EuropePR@globalcrossing.com, or, Investors:
Laurinda Pang, +1-800-836-0342, glbc@globalcrossing.com, all for
Global Crossing
|
