LONDON, September 11 /PRNewswire/ --
Global Crossing (Nasdaq: GLBC), a leading global IP solutions provider, today announced second quarter financial results for its subsidiary, Global Crossing (UK) Telecommunications Limited (GCUK).
GCUK generated 81 million pounds in revenue in the second quarter, with adjusted gross margin of 69 percent or 56 million pounds and adjusted IFRS EBITDA of 21 million pounds. (Adjusted gross margin and adjusted IFRS EBITDA are both non-GAAP metrics that are defined and reconciled below.) The company also reported cash generated from operations of 19 million pounds before interest.
"GCUK's ongoing operational progress has continued to generate sound financial results," said John Legere, Global Crossing's chief executive officer. "Our focus continues on delivering an exceptional customer experience, providing differentiated service offerings, and retaining disciplined cost management to support growth initiatives and create shareholder value."
Revenue and Margin
During the second quarter of 2008, GCUK generated revenue of 81 million pounds, 98 percent of which was produced by the "invest and grow" business category -- namely that part of the business focused on serving enterprises and carrier customers excluding wholesale voice. Total revenue represented a 3 percent or 2 million pounds sequential increase over the previous quarter and an 11 percent or 8 million pounds increase over the second quarter of 2007. The sequential and year-over-year increases were primarily due to incremental billings from existing customers and revenues from new business.
Adjusted gross margin (as defined in table 6 that follows) for the second quarter of 2008 was 56 million pounds or 69 percent of revenue. This compares with adjusted gross margin of 54 million pounds or 69 percent of revenue in the first quarter of 2008 and 51 million pounds or 70 percent of revenue in the second quarter of 2007.
Cost of revenue, which includes cost of access, technical real estate, network and operations, third-party maintenance and cost of equipment sales, was essentially flat compared with the first quarter of 2008 at 51 million pounds in the second quarter of 2008 and increased from 47 million pounds in the second quarter of 2007. The year-over-year increase was primarily due to higher access costs associated with increased revenue, as well as higher equipment costs due to increased equipment sales as part of a recently signed large contract in the government sector.
Sales, general and administrative expenses (SG&A) for the second quarter were 10 million pounds, compared with 9 million pounds in the first quarter of this year and 11 million pounds in the second quarter of 2007. The sequential increase in SG&A is primarily attributable to an increase in the allocation of corporate overhead costs, higher sales commissions, as well as higher salary costs driven by augments to the sales force implemented earlier in the year.
GCUK's adjusted IFRS EBITDA for the second quarter was 21 million pounds, compared with 21 million pounds in the first quarter of this year and 17 million pounds in the second quarter of 2007.
GCUK recorded a profit of 1 million pounds for the second quarter of 2008, compared with a profit of 1 million pounds in the first quarter of 2008 and a loss of 1 million pounds in the second quarter of 2007. The year-over-year increase in net profit was primarily driven by an increase in IFRS EBITDA offset by less favorable exchange rate movement on U.S. dollar-denominated Senior Secured Notes in the second quarter of 2008 compared with the same period in 2007.
As of June 30, 2008, GCUK had 27 million pounds of cash and cash equivalents. Cash generated from operations during the second quarter totaled 19 million pounds. GCUK's net decrease in cash and cash equivalents was 6 million pounds in the second quarter, including interest paid of 16 million pounds and 8 million pounds for capital expenditures and principal payments on finance leases, respectively.
Non-GAAP Financial Measures
Pursuant to the U.S. Securities and Exchange Commission's (SEC's) Regulation G, the attached tables include definitions of adjusted IFRS EBITDA and adjusted gross margin measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB).
International Financial Reporting Standards
GCUK's results reported herein include unaudited consolidated financial results for the three months ended June 30, 2008 and 2007 and unaudited consolidated financial results for the three months ended March 31, 2008; the unaudited consolidated balance sheet as of June 30, 2008; and the audited consolidated balance sheet as of December 31, 2007, in accordance with IFRS. GCUK's results for the second quarters of 2008 and 2007 and the first quarter of 2008 were included in Global Crossing's consolidated results previously reported on August 5, 2008, in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and in U.S. dollars.
Management has scheduled a conference call for Thursday, September 11, 2008, at 9:00 a.m. EDT/2:00 p.m. BST to discuss GCUK's financial results. The call may be accessed by dialing +1-212-231-2900 or +44-(0)-800-528-0985. Callers are advised to dial in 15 minutes prior to the 9:00 a.m. EDT start time. The call will also be Webcast at http://investors.globalcrossing.com/results.cfm.
A replay of the call will be available on Thursday, September 11, 2008, beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until Thursday, September 18, 2008 at 11:00 a.m. EDT/4:00 p.m. BST. To access the replay, dial +1-402-977-9140 or +1-800-633-8284 and enter reservation number 21392074. UK callers may access the replay by dialing +44-(0)-870-000-3081 or +44-(0)-800-692-0831 and entering reservation number 21392074.
ABOUT GLOBAL CROSSING UK TELECOMMUNICATIONS LIMITED
Global Crossing UK Telecommunications Limited 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 a 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, Global Crossing UK provides carrier services to national and international communications service providers.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC) provides telecommunications solutions over the world's first integrated global IP-based network. Its core network connects approximately 400 cities in about 45 countries worldwide, and delivers services to more than 690 cities in more than 60 countries and six continents around the globe. The company's global sales and support model matches the network footprint and, like the network, delivers a consistent customer experience worldwide.
Global Crossing IP services are global in scale, linking the world's enterprises, governments and carriers with customers, employees and partners worldwide in a secure environment that is ideally suited for IP-based business applications, allowing e-commerce to thrive. The company offers a full range of data, voice and security products to approximately 40 percent of the Fortune 500, as well as 700 carriers, mobile operators and ISPs. Its Professional Services and Managed Solutions provide VoIP, security and network consulting and management services to support its Global Crossing IP VPN service and Global Crossing VoIP services. Global Crossing was the first global communications provider with IPv6 natively deployed in both its private and public backbone networks.
Please visit www.globalcrossing.com or blogs.globalcrossing.com/ for more information about Global Crossing.
This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties that could cause GCUK's actual results to differ materially, including: the level of competition in the marketplace; pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; the impact on the business of an economic downturn or recession; dependence on a number of key personnel; the concentration of revenue in a limited number of customers; customer contracts typically do not have firm commitments to purchase minimum levels of revenue or services; the reliance on a limited number of third party suppliers; a change of control could lead to the termination of many of the company's government contracts; insolvency could lead to termination of certain of the company's contracts; slower than anticipated adoption by customers of next generation products; risks relating to the operation, administration, maintenance and repair of our systems; terrorist attacks or other acts of violence or war that may adversely affect the financial markets and our business and operations; the accuracy of our real estate restructuring provision; the influence of the company's parent, and possible conflicts of interest of the parent or of certain of GCUK's directors and officers; the sharing of corporate and operational services with our parent; our ability to raise capital through financing activities and otherwise to access capital markets; and other risks referenced from time to time in the company's filings with the Securities and Exchange Commission. The company undertakes no duty to update information contained in this press release or in other public disclosures at any time.
CONTACT GLOBAL CROSSING: Press Contact Steve Cross +1-973-937-0245 email@example.com Analysts/Investors Contacts Suzanne Lipton +1-800-836-0342 firstname.lastname@example.org Gino Mathew United Kingdom +1-973-937-0133 email@example.com
Table 1 Global Crossing (UK) Telecommunications Limited and Subsidiaries Summary of Consolidated Revenue Results below are in pounds sterling in thousands. Three months ended June 30, March 31, June 30, 2008 2008 2007 (unaudited) (unaudited) (unaudited) Revenue: Enterprise and carrier data 78,930 76,958 71,451 Wholesale voice 1,618 1,319 1,267 80,548 78,277 72,718 Global Crossing group companies 125 125 125 Consolidated revenue 80,673 78,402 72,843
Table 2 Global Crossing (UK) Telecommunications Limited and Subsidiaries Condensed Consolidated Statements of Operations Results below are in pounds sterling in thousands. Three months ended June 30, March 31, June 30, IFRS in IFRS Reporting Format 2008 2008 2007 (unaudited) (unaudited) (unaudited) Revenue 80,673 78,402 72,843 Cost of sales (49,628) (48,592) (43,139) Gross profit 31,045 29,810 29,704 Distribution costs (4,660) (4,073) (3,872) Administrative expenses (17,597) (16,987) (20,173) Operating profit 8,788 8,750 5,659 Finance revenue 1,044 1,036 809 Finance charges (8,639) (8,735) (6,854) Profit (loss) before tax 1,193 1,051 (386) Tax benefit (charge) 51 (244) (645) Profit (loss) before tax 1,244 807 (1,031) Three months ended June 30, March 31, June 30, IFRS in U.S. Reporting Format 2008 2008 2007 (unaudited) (unaudited) (unaudited) REVENUE 80,673 78,402 72,843 Cost of revenue (excluding depreciation and amortization shown separately below) Cost of access (25,105) (24,048) (21,636) Real estate, network and operations (12,464) (12,735) (13,430) Third party maintenance (4,559) (4,417) (4,544) Cost of equipment sales (8,766) (8,882) (7,133) Total cost of revenue (50,894) (50,082) (46,743) Selling, general and administrative (10,025) (8,619) (10,740) Depreciation and amortization (10,976) (10,951) (9,887) Total operating expenses (71,895) (69,652) (67,370) OPERATING INCOME 8,778 8,750 5,473 OTHER INCOME (EXPENSE) Interest expense, net (7,591) (7,759) (7,577) Other income, net 6 60 1,718 INCOME (LOSS) BEFORE BENEFIT (PROVISION) FOR INCOME TAXES 1,193 1,051 (386) Benefit (provision) for income taxes 51 (244) (645) NET INCOME (LOSS) 1,244 807 (1,031)
Note: The classification differences between reporting under IFRS and U.S. Generally Accepted Accounting Principles (GAAP) are as follows:
Cost of sales:
Under IFRS, the company includes cost of access, third party maintenance, customer-specific costs and depreciation on network assets within cost of sales.
Cost of revenue:
Under U.S. GAAP, the company includes cost of access, real estate, network and operations, third party maintenance and cost of equipment sales within cost of revenue.
Foreign currency gains and losses:
Under IFRS, the company includes foreign currency gains and losses within operating profit, except for those related to the senior secured notes, which are included in finance charges, and those related to loans to related parties, which are included in finance revenue. Under U.S. GAAP, all foreign exchange gains and losses are included in other income (expense), net.
Table 3 Global Crossing (UK) Telecommunications Limited and Subsidiaries Condensed Consolidated Balance Sheets Results below are in pounds sterling in thousands. June 30, December 31, 2008 2007 (unaudited) (audited) Non current assets Intangible assets, net 12,391 13,351 Property, plant and equipment, net 180,666 185,719 Investment in associate 200 200 Retirement benefit asset 961 961 Trade and other receivables 28,298 28,511 222,516 228,742 Current assets Trade and other receivables 72,067 66,237 Cash and cash equivalents 27,368 23,954 99,435 90,191 Total assets 321,951 318,933 Current liabilities Trade and other payables (76,204) (65,619) Senior secured notes (5,982) (1,158) Deferred revenue (45,928) (47,126) Provisions (1,883) (2,137) Obligations under finance leases (11,125) (11,945) Other debt obligations (616) (463) Derivative financial instrument (852) (1,048) (142,590) (129,496) Non current liabilities Trade and other payables (492) (650) Senior secured notes (242,267) (247,788) Deferred revenue (103,080) (106,961) Retirement benefit obligation (2,943) (3,110) Provisions (3,816) (4,160) Obligations under finance leases (15,122) (20,242) Other debt obligations (472) (430) Derivative financial instrument (426) (1,048) (368,618) (384,389) Total liabilities (511,208) (513,885) Net liabilities (189,257) (194,952) Capital and reserves Equity share capital (101,000 shares outstanding at GBP1 each) 101 101 Capital reserve 30,501 27,648 Hedging reserve (1,244) (2,035) Accumulated deficit (218,615) (220,666) Total equity (189,257) (194,952)
Table 4 Global Crossing (UK) Telecommunications Limited and Subsidiaries Condensed Consolidated Cash Flow Statements Results below are in pounds sterling in thousands. Six Months Ended June 30, 2008 2007 (unaudited) (unaudited) Operating activities: Profit (loss) for the period 2,051 (511) Adjustments for: Finance costs, net 15,294 13,474 Income tax charge 193 905 Depreciation of property, plant and equipment 17,500 17,051 Amortization of intangible assets 1,060 1,572 Share based payment expense 2,853 1,932 Loss on disposal of property, plant and equipment - 266 Equity income from associate - (37) Change in provisions (730) (972) Change in operating working capital (661) (10,081) Change in other assets and liabilities (3,417) 656 Cash generated from operations 34,143 24,255 Interest paid (16,573) (16,870) Net cash provided by operating activities 17,570 7,385 Investing activities: Interest received 1,262 2,380 Purchase of property, plant and equipment (9,450) (15,901) Net cash used in investing activities (8,188) (13,521) Financing activities: Loans provided to group companies - (2,500) Loans repaid by group companies - 6,100 Repayment of Senior Secured notes (1,158) - Repayment of capital elements under finance leases (5,058) (4,053) Proceeds from other debt obligations 474 774 Repayment of capital element of other debt obligations (226) - Net cash (used in) provided by financing activities (5,968) 321 Net increase (decrease) in cash and cash equivalents 3,414 (5,815) Cash and cash equivalents at the beginning of period 23,954 40,309 Cash and cash equivalents at the end of period 27,368 34,494 Non cash financing activities: Capital lease and debt obligations incurred 860 5,887
Table 5 Global Crossing (UK) Telecommunications Limited and Subsidiaries Reconciliation of adjusted IFRS EBITDA to Profit (Loss) for the Period (unaudited) Results below are in pounds sterling in thousands. Three months ended June 30, March 31, June 30, 2008 2008 2007 (unaudited) (unaudited) (unaudited) Adjusted IFRS EBITDA 21,118 21,200 16,763 Non-cash stock compensation (1,354) (1,499) (1,217) Depreciation and amortization (10,976) (10,951) (9,887) Finance revenue 1,044 1,036 809 Finance costs (8,639) (8,735) (6,854) Taxation 51 (244) (645) Profit (loss) for period 1,244 807 (1,031)
Consistent with the SEC's Regulation G, the foregoing table provides a reconciliation of adjusted IFRS EBITDA, which is considered a non-GAAP financial metric, to profit (loss) for the period, which is the most directly comparable IFRS measure. Management believes that adjusted IFRS EBITDA is a relevant indicator of operating performance, especially in a capital-intensive industry such as telecommunications. Adjusted IFRS 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 consolidated statement of operations.
Adjusted IFRS EBITDA consists of profit (loss) for the period before non-cash stock compensation, taxation, finance costs, finance revenue and depreciation and amortization expense recorded to cost of sales and administrative expenses.
Table 6 Global Crossing (UK) Telecommunications Limited and Subsidiaries Reconciliation of Adjusted Gross Margin to Gross Profit (unaudited) Results below are in pounds sterling in thousands. Three months ended June 30, March 31, June 30, 2008 2008 2007 (unaudited) (unaudited) (unaudited) Adjusted Gross Margin 55,568 54,354 51,207 Less: Customer-specific costs (9,849) (10,020) (8,116) Third-party maintenance (4,559) (4,417) (4,544) Depreciation & amortization (included within cost of sales) (10,115) (10,107) (8,843) Gross Profit (IFRS) 31,045 29,810 29,704
Consistent with the SEC's Regulation G, the foregoing table provides a reconciliation of adjusted gross margin, which is considered a non-GAAP financial metric, to gross profit, which is the most directly comparable IFRS measure. Management believe that Adjusted Gross Margin is a relevant indicator of operating performance since it links revenue lines with the largest and most directly related costs incurred to generate such revenue. Adjusted Gross Margin should be used in addition to, but not as a substitute for, the analysis provided in the income statement and to provide comparability to the parent company's financial presentations, which include this metric.
Adjusted gross margin is revenue minus cost of access. Gross profit is revenue minus cost of access, customer-specific costs, third party maintenance and depreciation and amortization recorded to cost of sales.
Press Contact, Steve Cross, +1-973-937-0245, firstname.lastname@example.org, or Analysts-Investors, Suzanne Lipton, +1-800-836-0342, email@example.com, or Gino Mathew, United Kingdom, +1-973-937-0133, firstname.lastname@example.org, all of Global Crossing