- Global Crossing completes 2008 within guidance ranges for revenue, Adjusted Cash EBITDA and cash.
- "Invest and grow" revenue increased 21 percent in 2008. Consolidated revenue grew 15 percent to $2.59 billion.
- Full-year Adjusted Gross Margin percentage increased approximately 400 basis points to 53.3 percent.
- Full-year Adjusted Cash EBITDA improved 89 percent to $328 million.
- Global Crossing announces 2009 guidance with significant improvement in OIBDA and 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 fourth quarter and full-year results. The company said it will discuss its consolidated financial and operational results for the fourth quarter and full-year 2008 on a conference call tomorrow. The following table highlights financial results:
Results at a Glance
Dollars in millions)
Fourth Quarter Full Year
2008 2007 Growth 2008 2007 Growth
Consolidated Revenues $642 $616 4% $2,592 $2,261 15%
"Invest and Grow"
Revenues $541 $504 7% $2,164 $1,794 21%
Adjusted Gross Margin $346 $323 7% $1,381 $1,115 24%
Adjusted Gross Margin % 53.9% 52.4% 150 Bps 53.3% 49.3% 400 Bps
Adjusted Cash EBITDA $96 $100 -4% $ 328 $174 89%
Definitions of the company's Adjusted Cash EBITDA and Adjusted Gross
Margin non-GAAP financial measures and reconciliations to the most
directly comparable GAAP measures are included in the attached financial
tables.
Business Highlights
Global Crossing completed the year within its annual guidance ranges for revenue, Adjusted Cash EBITDA and cash. For 2008, the company reported consolidated revenue of $2.59 billion, an increase of 15 percent compared with 2007, and Adjusted Cash EBITDA of $328 million, an increase of nearly 90 percent compared with 2007. Consistent with guidance, unrestricted cash declined by $37 million for the year but increased by $42 million during the second half of the year.
"Global Crossing delivered a strong 2008, with double-digit growth in revenue and Adjusted Cash EBITDA, and we delivered on our annual guidance despite significant headwinds from foreign exchange in the fourth quarter," said John Legere, CEO of Global Crossing. "We enter 2009 well-positioned in the markets we serve, with a world-class network, leading customer satisfaction scores and an experienced team that continues to execute in this challenging global economy."
John Kritzmacher, CFO of Global Crossing commented on the fourth quarter results, saying "On a constant currency basis, our revenues and Adjusted Cash EBITDA grew sequentially by 3 percent and 16 percent, respectively, reflecting our sustained momentum in improving our financial performance."
Throughout 2008, Global Crossing made targeted investments in products and services that further support its strategy as a global provider of advanced IP solutions. The company launched six classes of IP VPN service and a suite of value-added VoIP features. Global Crossing invested in Ethernet transport and launched Hosted IP Telephony for both the government and commercial sectors in the UK. In addition, Global Crossing augmented its data center services and global network capacity, enhancing connectivity between North America, Latin America and Europe to meet demand for IP services. The company also began to globalize the former Impsat Managed Security Services product set, and launched High-Definition Videoconferencing. These investments in the company's capabilities provide enhanced value to our customers as they continue to deploy IP capabilities.
Fourth Quarter Results
Global Crossing's consolidated revenue was $642 million in the fourth quarter of 2008, representing a sequential decline of $25 million or 4 percent, including a $43 million unfavorable foreign exchange impact. Year-over-year consolidated revenue increased $26 million or 4 percent, including a $47 million unfavorable foreign exchange impact. The company's "invest and grow" category - that part of the business focused on serving global enterprises and carrier customers, excluding wholesale voice - generated revenue of $541 million for the fourth quarter. This represents a sequential decline of $19 million or 3 percent, including substantially all of the $43 million unfavorable sequential foreign exchange impact. On a constant currency basis, "invest and grow" revenue increased $24 million or 4 percent sequentially.
On a segment basis, GCUK generated $132 million in "invest and grow" revenue compared with $152 million in the prior quarter and $151 million in the fourth quarter of 2007. GC Impsat generated $120 million in "invest and grow" revenue compared with $122 million in the prior quarter and $101 million in the fourth quarter of 2007. Rest-of-World (ROW) generated $297 million in "invest and grow" revenue compared with $289 million in the prior quarter and $258 million in the fourth quarter of 2007. On a constant currency basis, all three segments demonstrated sequential and year-over-year revenue improvement.
For the fourth quarter, wholesale voice revenue decreased by $6 million on a sequential basis and $11 million year over year to $100 million. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.
Global Crossing reported Adjusted Gross Margin for the fourth quarter of $346 million or 53.9 percent of revenue. This compared with $357 million or 53.5 percent of revenue in the prior quarter and $323 million or 52.4 percent in the fourth quarter of 2007. The "invest and grow" business generated $335 million of Adjusted Gross Margin or 61.9 percent of revenue, compared with $344 million or 61.4 percent in the prior quarter and $305 million or 60.5 percent in the fourth quarter of 2007. The company's wholesale voice Adjusted Gross Margin was $11 million in the quarter or 11 percent compared with $12 million or 11 percent in the prior quarter, and $17 million or 15 percent in the fourth quarter of 2007.
Consolidated cost of access expense for the fourth quarter was $296 million, compared with $310 million in the prior quarter and $293 million in the fourth quarter of 2007. The sequential decrease in cost of access is primarily due to a favorable foreign exchange impact and, to a lesser extent, continued cost of access efficiencies. The year-over-year increase was attributable to higher revenue in the period, partially offset by a favorable foreign exchange impact.
Cost of revenue -- which includes cost of access; technical real estate, network and operations;
third-party maintenance; and cost of equipment sales -- was $429 million in the fourth quarter, compared with $472 million in the prior quarter and $436 million in the fourth quarter of 2007. Excluding cost of access, cost of revenue was $133 million in the fourth quarter compared with $162 million in the prior quarter and $143 million in the fourth quarter of 2007. The sequential decline was attributable to a $11 million reduction in accruals for stock-based incentive compensation, as well as a favorable foreign exchange impact of $14 million. The year-over-year decline was primarily attributable to a $14 million favorable foreign exchange impact, partially offset by higher technical real estate costs. As a percentage of revenue, cost of revenue was 67.4 percent in the fourth quarter compared to 70.8 percent in both the prior quarter and in the fourth quarter of 2007.
Sales, general and administrative (SG&A) expenses were $111 million in the fourth quarter of 2008, compared with $125 million in the prior quarter and $84 million in the fourth quarter of 2007. On a sequential basis, SG&A declined primarily due to a reduction in accruals for stock-based incentive compensation, as well as a $10 million favorable foreign exchange impact. The year-over-year increase was primarily attributable to a net $30 million non-cash benefit from real estate restructuring reserve reversals in the year-ago period. In addition, a $10 million favorable foreign exchange impact was effectively offset by an increase in payroll costs. As a percentage of revenue, SG&A was 17 percent in the fourth quarter compared to 19 percent in the prior quarter and 14 percent in the fourth quarter of 2007. The year-ago period included the previously mentioned real estate restructuring reserve benefit.
Global Crossing reported $96 million of Adjusted Cash EBITDA in the fourth quarter, a sequential increase of $8 million, including a $6 million unfavorable foreign exchange impact. On a year-over-year basis, Adjusted Cash EBITDA decreased $4 million, including an unfavorable foreign exchange impact of $9 million and the previously mentioned real estate restructuring reserve benefit of $30 million recorded in the year-ago period. On a segment basis, GCUK, GC Impsat and ROW contributed Adjusted Cash EBITDA of $24 million, $37 million and $35 million, respectively.
Global Crossing's consolidated net loss applicable to common shareholders was $51 million for the fourth quarter of 2008, compared with a net loss of $71 million in the prior quarter and net income of $1 million in the fourth quarter of 2007. On a sequential basis, net loss decreased principally due to the Adjusted Cash EBITDA improvement previously described and lower stock-based incentive compensation, partially offset by a higher income tax provision. Year over year, net loss was higher due to an unfavorable foreign exchange impact in 2008 and higher gains on pre-confirmation contingencies recorded in 2007, partially offset by a lower income tax provision recorded in 2008.
Full-Year Results
Global Crossing's consolidated business generated $2.59 billion of revenue in 2008, including a $15 million unfavorable foreign exchange impact. Consolidated revenue grew $331 million or 15 percent year over year. The company generated $2.16 billion of "invest and grow" revenue for 2008, an increase of $370 million or 21 percent year over year.
At the segment level, GCUK generated $588 million of "invest and grow" revenue in 2008 compared with $572 million in 2007, an increase of $16 million or 3 percent, including a $36 million unfavorable foreign exchange impact. GC Impsat generated $466 million in "invest and grow" revenue in 2008 compared to a partial-year total of $263 million in 2007. GC Impsat 2008 revenue included a $10 million favorable foreign exchange impact. ROW segment generated $1.13 billion of "invest and grow" revenue in 2008, compared with $971 million in 2007, an increase of $157 million or 16 percent, including an $11 million favorable foreign exchange impact.
Wholesale voice revenue declined by 8 percent or $38 million year over year to $424 million. As previously mentioned, substantially all of the wholesale voice revenue is in the United States, within the ROW segment.
Global Crossing reported Adjusted Gross Margin of $1.38 billion or 53.3 percent of consolidated revenue for 2008. This compared with $1.11 billion or 49.3 percent in 2007. The "invest and grow" segment generated $1.33 billion of Adjusted Gross Margin or 61.3 percent of "invest and grow" revenue, compared to $1.05 billion or 58.7 percent in 2007. The company's wholesale voice Adjusted Gross Margin was $51 million in 2008 or 12.0 percent of wholesale voice revenue compared with $58 million or 12.6 percent in 2007.
Consolidated cost of access expense for the year was $1.21 billion, compared with $1.15 billion in 2007. The year-over-year increase was associated with higher revenues and the inclusion of GC Impsat for a full year in 2008.
Cost of revenue was $1.82 billion in 2008 compared with $1.72 billion in 2007. The year-over-year increase in cost of revenue was primarily due to the inclusion of GC Impsat for a full year in 2008 as well as higher overall real estate costs.
SG&A expenses were $501 million in 2008, compared with $416 million in 2007. The year-over-year increase was primarily due to the inclusion of GC Impsat for a full year and the previously mentioned real estate restructuring reserve benefit in 2007. As a percentage of revenue, SG&A was 19 percent in 2008 compared to 18 percent in 2007. Excluding the restructuring reserve benefit, SG&A as a percentage of revenue was 20 percent in 2007.
The company reported $328 million of Adjusted Cash EBITDA for 2008 as compared to $174 million in 2007, an improvement of $154 million, including an $8 million unfavorable foreign exchange impact.
Global Crossing's consolidated net loss applicable to common shareholders was $281 million for 2008, compared with a consolidated net loss of $310 million in 2007. The decrease in net loss was primarily due to improvements in Adjusted Cash EBITDA previously described and a lower provision for income taxes, partially offset by higher depreciation and amortization and an unfavorable foreign exchange impact in the current year period.
Non-cash stock compensation includes approximately 3.2 million unrestricted shares being distributed to employees in March and April 2009 under the 2008 annual bonus program.
Cash and Liquidity
As of December 31, 2008, Global Crossing had unrestricted cash of $360 million compared to $346 million at September 30, 2008, and $397 million at December 31, 2007. The company had $378 million in total cash at December 31, 2008, compared to $380 million at September 30, 2008, and $450 million at December 31, 2007.
Cash flow from operating activities for the fourth quarter was $79 million. Global Crossing received $41 million in proceeds from the sale of indefeasible rights of use (IRUs) and prepaid services in the fourth quarter. In addition, the company entered into $14 million of debt and capital lease agreements to finance various equipment purchases and software licenses. Uses of cash for the quarter included $64 million for capital expenditures and principal payments on capital leases and $12 million for repayment of long term debt. During the fourth quarter, unrestricted cash increased by $14 million, including an unfavorable sequential foreign exchange impact of $12 million.
For the full year 2008, cash flow from operating activities was $203 million, including $138 million of interest on indebtedness. Global Crossing received $146 million in proceeds from the sale of IRUs and prepaid services in 2008. In addition, the company entered into $48 million of debt and capital lease agreements to finance various equipment purchases and software licenses. Uses of cash for 2008 included $251 million for capital expenditures and capital lease principal payments and $24 million for repayment of long-term debt. The company used $37 million of unrestricted cash during the year.
2009 Outlook
"On a constant currency basis, we expect 2009 revenue to grow in the mid- to-high single digits, although foreign exchange impacts are likely to cause reported revenue to appear flat to down." said John Legere. "In addition, we anticipate considerable growth in OIBDA and Free Cash Flow in 2009 as the underlying fundamentals of the business continue to improve."
John Legere also noted, "Even though our business continues to perform well and operate with a high degree of cost-efficiency, we are preparing for the uncertain economic environment ahead. Our company has launched targeted measures that will reduce our operating expenses and optimize our capital expenditures this year."
In 2009, Global Crossing will begin reporting OIBDA (in place of Adjusted Cash EBITDA) and Free Cash Flow as key measurements of our Company's performance. Definitions are outlined in the "Non-GAAP Measures" section of this release, and a more detailed explanation of these measures is contained in the attached financial tables.
Company guidance measures for 2009 are as follows:
Measures 2009 Guidance
($in millions)
Revenue $2,500 - $2,600
OIBDA $320 - $380
Free Cash Flow $50 - $100
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 Measures
Pursuant to the Securities and Exchange Commission's (SEC's) Regulation G, 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).
"OIBDA" is defined as operating income before depreciation and amortization.
"Free Cash Flow" is defined as "Net cash provided by operating activities" less "Purchases of property and equipment", as reported in our Consolidated Statements of Cash Flows.
Conference Call
The company will hold a conference call on Tuesday, February 17, 2009 at 9:00 a.m. EST to discuss its financial results. The call may be accessed by dialing +1 212 231 2906 or, if calling from within the United Kingdom, by dialing (0) 800 496 1091. Callers are advised to access the call 15 minutes prior to 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 Tuesday, February 17, 2009 beginning at 11:30 a.m. EST and will be accessible until Tuesday, February 24, 2009 at 11:30 a.m. EST. To access the replay, callers should dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21414828. Callers in the United Kingdom should dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21414828.
ABOUT GLOBAL CROSSING
Global Crossing (Nasdaq: GLBC) is a leading global IP solutions provider with the world's first integrated global IP-based network. The company offers a full range of secure data, voice, and video products to approximately 40 percent of the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It delivers services to more than 690 cities in more than 60 countries and six continents around the globe.
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; 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; downward pressure on the Company's common stock price that may result from sales of the significant number of shares being paid to employees under incentive compensation arrangements, including approximately 3.2 million unrestricted shares being delivered to employees in March and April 2009 under the 2008 annual bonus program; and other risks referenced from time to time in the company's and GCUK'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
Suzanne Lipton
+ 1 800 836 0342
glbc@globalcrossing.com
Antonio Suarez
+1 973 937 0233
Antonio.Suarez@globalcrossing.com
IR/PR1
15 PAGES OF FINANCIAL INFORMATION FOLLOW
Global Crossing Limited Table 1
Consolidated Balance Sheets
($ in millions)
December 31, December 31,
2008 2007
---- ----
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $360 $397
Restricted cash and cash
equivalents - current portion 7 18
Accounts receivable, net of
allowances of $58 and $52 336 345
Prepaid costs and other current assets 103 121
------ ------
Total current assets 806 881
------ ------
Restricted cash and cash
equivalents - long term 11 35
Property and equipment, net of accumulated
depreciation of $851 and $664 1,300 1,467
Intangible assets, net (including
goodwill of $147 and $158) 172 193
Other assets 61 91
------ ------
Total assets $2,350 $2,667
====== ======
LIABILITIES:
Current liabilities:
Accounts payable $329 286
Accrued cost of access 92 107
Short term debt and current
portion of long term debt 26 26
Accrued restructuring costs -
current portion 13 17
Deferred revenue - current portion 138 164
Other current liabilities 361 395
------ ------
Total current liabilities 959 995
------ ------
Long term debt 1,149 1,249
Obligations under capital leases 93 123
Deferred revenue 308 262
Accrued restructuring costs 14 20
Other deferred liabilities 68 81
------ ------
Total liabilities 2,591 2,730
------ ------
SHAREHOLDERS' DEFICIT:
Common stock, 110,000,000 shares
authorized, $.01 par value,
56,696,312 and 54,552,045 shares
issued and outstanding as of
December 31, 2008 and 2007, respectively 1 1
Preferred stock with controlling
shareholder, 45,000,000 shares
authorized, $.10 par value,
18,000,000 shares issued and outstanding
as of December 31, 2008 and 2007 2 2
Additional paid-in capital 1,387 1,307
Accumulated other comprehensive loss (23) (42)
Accumulated deficit (1,608) (1,331)
------ ------
Total shareholders' deficit (241) (63)
------ ------
Total liabilities and
shareholders' deficit $2,350 $2,667
====== ======
Global Crossing Limited Table 2
Consolidated Statements of Operations
($ in millions)
Year Ended December 31,
-----------------------
2008 2007
---- ----
(unaudited)
Revenue $2,592 $2,261
Cost of revenue (excluding depreciation
and amortization, shown separately below):
Cost of access (1,211) (1,146)
Real estate, network and operations (406) (385)
Third party maintenance (107) (103)
Cost of equipment sales (94) (88)
----------- -----------
Total cost of revenue (1,818) (1,722)
Selling, general and administrative (501) (416)
Depreciation and amortization (326) (264)
----------- -----------
Total operating expenses (2,645) (2,402)
----------- -----------
Operating loss (53) (141)
Other income (expense):
Interest income 10 21
Interest expense (169) (171)
Other income (expense), net (26) 15
----------- -----------
Loss before preconfirmation
contingencies and provision for
income taxes (238) (276)
Net gain on preconfirmation contingencies 10 33
----------- -----------
Loss before provision for income taxes (228) (243)
Provision for income taxes (49) (63)
----------- -----------
Net loss (277) (306)
Preferred stock dividends (4) (4)
----------- -----------
Loss applicable to common shareholders $(281) $(310)
=========== ===========
Income per common share, basic and diluted:
Loss applicable to common shareholders $(5.04) $(7.30)
=========== ===========
Weighted average number of common shares 55,771,867 42,461,853
=========== ===========
Global Crossing Limited Table 3
Consolidated Statements of Cash Flows
($ in millions)
Year Ended December 31,
-----------------------
2008 2007
---- ----
(unaudited)
Cash flows provided by (used in) operating activities:
Net loss $(277) $(306)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss (gain) on sale of property
and equipment (4) 1
Gain on sale of marketable securities 2 -
Non-cash income tax provision 35 45
Deferred income tax (1) 9
Non-cash stock compensation expense 55 51
Non-cash inducement charge for
conversion of debt - 30
Gain on settlement of contracts due to
Impsat acquisition - (27)
Depreciation and amortization 326 264
Provision for doubtful accounts 6 6
Amortization of prior period IRUs (15) (12)
Deferred reorganization costs (3) (3)
Gain on preconfirmation contingencies (10) (33)
Change in long term deferred revenue 83 102
Change in operating working capital (32) (53)
Other 38 (90)
---- ----
Net cash provided by (used in)
operating activities 203 (16)
---- ----
Cash flows provided by (used in)
investing activities:
Purchases of property and equipment (192) (214)
Purchases of marketable securities (11) -
Impsat acquisition, net of cash acquired - (76)
Proceeds from sale of property and equipment 10 -
Proceeds from sale of marketable securities 16 7
Change in restricted cash and cash equivalents 31 (47)
---- ----
Net cash used in investing activities (146) (330)
---- ----
Cash flows provided by (used in) financing activities:
Proceeds from long term debt 5 597
Repayment of capital lease obligations (59) (43)
Proceeds from short term debt 5 -
Repayment of long term debt
(including current portion) (24) (251)
Finance costs incurred - (24)
Proceeds from exercise of stock options 1 4
Payment of employee taxes on share-based
compensation (3) -
---- ----
Net cash provided by (used in) financing activities (75) 283
---- ----
Effect of exchange rate changes on cash and
cash equivalents (19) 1
---- ----
Net decrease in cash and cash equivalents (37) (62)
Cash and cash equivalents, beginning of year 397 459
---- ----
Cash and cash equivalents, end of year $360 $397
==== ====
Global Crossing Limited and Subsidiaries Table 4
Unaudited Consolidated Statements of Operations
($ in millions)
Year Ended December 31, 2008
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
REVENUE $599 $475 $1,536 $(18) $2,592
Cost of revenue
Cost of access (184) (115) (929) 17 (1,211)
Real estate, network
and operations (93) (58) (256) 1 (406)
Third party
maintenance (32) (20) (55) - (107)
Cost of equipment
sales (69) (11) (14) - (94)
----- ----- ----- ----- -----
Total cost of
revenue (378) (204) (1,254) 18 (1,818)
Selling, general and
administrative (87) (133) (281) - (501)
Depreciation and
amortization (84) (81) (161) - (326)
----- ----- ----- ----- -----
OPERATING INCOME
(LOSS) 50 57 (160) - (53)
OTHER INCOME
(EXPENSE)
Interest expense,
net (57) (32) (70) - (159)
Other income
(expense), net (57) (20) 51 - (26)
----- ----- ----- ----- -----
LOSS BEFORE
REORGANIZATION
ITEMS, NET AND
INCOME TAXES (64) 5 (179) - (238)
Net gain on
preconfirmation
contingencies - 4 6 - 10
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
PROVISION FOR
INCOME TAXES (64) 9 (173) - (228)
Provision for income
taxes (1) (17) (31) - (49)
----- ----- ----- ----- -----
NET LOSS (65) (8) (204) - (277)
Preferred stock
dividends - - (4) - (4)
----- ----- ----- ----- -----
LOSS APPLICABLE TO
COMMON SHAREHOLDERS $(65) $(8) $(208) $- $(281)
===== ===== ===== ===== =====
Year Ended December 31, 2007
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as (as
restated restated restated
(2)) (2)) (2))
REVENUE $582 $269 $1,422 $(12) $2,261
Cost of revenue
Cost of access (169) (75) (913) 11 (1,146)
Real estate, network
and operations (96) (40) (250) 1 (385)
Third party
maintenance (35) (14) (54) - (103)
Cost of equipment
sales (62) (3) (23) - (88)
----- ----- ----- ----- -----
Total cost of
revenue (362) (132) (1,240) 12 (1,722)
Selling, general and
administrative (78) (76) (262) - (416)
Depreciation and
amortization (84) (44) (136) - (264)
----- ----- ----- ----- -----
OPERATING INCOME
(LOSS) 58 17 (216) - (141)
OTHER INCOME
(EXPENSE)
Interest expense,
net (60) (22) (68) - (150)
Other income
(expense), net 2 - 13 - 15
----- ----- ----- ----- -----
LOSS BEFORE
REORGANIZATION
ITEMS, NET AND
INCOME TAXES - (5) (271) - (276)
Net gain on
preconfirmation
contingencies - - 33 - 33
----- ----- ----- ----- -----
LOSS BEFORE PROVISION
FOR INCOME TAXES - (5) (238) - (243)
Provision for income
taxes (11) (10) (42) - (63)
----- ----- ----- ----- -----
NET LOSS (11) (15) (280) - (306)
Preferred stock
dividends - - (4) - (4)
----- ----- ----- ----- -----
LOSS APPLICABLE TO
COMMON SHAREHOLDERS $(11) $(15) $(284) $- $(310)
===== ===== ===== ===== =====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment to
the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's results
to include the GC Brazil and GC Chile operations and removed the GC Brazil
and GC Chile operations from ROW's results for all periods presented.
Global Crossing Limited and Subsidiaries Table 5
Unaudited Consolidated Statements of Operations
($ in millions)
Quarter Ended December 31, 2008
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
REVENUE $134 $122 $394 $(8) $642
Cost of revenue
Cost of access (42) (30) (232) 8 (296)
Real estate, network
and operations (19) (11) (56) - (86)
Third party
maintenance (7) (5) (12) - (24)
Cost of equipment
sales (16) (3) (4) - (23)
----- ----- ----- ----- -----
Total cost of
revenue (84) (49) (304) 8 (429)
Selling, general and
administrative (25) (33) (53) - (111)
Depreciation and
amortization (19) (21) (42) - (82)
----- ----- ----- ----- -----
OPERATING INCOME
(LOSS) 6 19 (5) - 20
OTHER INCOME (EXPENSE)
Interest expense, net (12) (7) (17) - (36)
Other income
(expense), net (41) (14) 26 - (29)
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS,
NET AND INCOME TAXES (47) (2) 4 - (45)
Net gain on
preconfirmation
contingencies - - 1 - 1
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES (47) (2) 5 - (44)
Provision for income
taxes - (2) (4) - (6)
----- ----- ----- ----- -----
NET INCOME (LOSS) (47) (4) 1 - (50)
Preferred stock
dividends - - (1) - (1)
----- ----- ----- ----- -----
LOSS APPLICABLE TO
COMMON SHAREHOLDERS $(47) $(4) $- $- $(51)
===== ===== ===== ===== =====
Quarter Ended September 30, 2008
--------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
REVENUE $155 $125 $390 $(3) $667
Cost of revenue
Cost of access (48) (28) (237) 3 (310)
Real estate, network
and operations (25) (15) (69) - (109)
Third party
maintenance (7) (6) (15) - (28)
Cost of equipment
sales (18) (3) (4) - (25)
----- ----- ----- ----- -----
Total cost of
revenue (98) (52) (325) 3 (472)
Selling, general and
administrative (20) (33) (72) - (125)
Depreciation and
amortization (22) (20) (42) - (84)
----- ----- ----- ----- -----
OPERATING INCOME
(LOSS) 15 20 (49) - (14)
OTHER INCOME (EXPENSE)
Interest expense,
net (14) (8) (18) - (40)
Other income
(expense), net (17) (9) 1 - (25)
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS,
NET AND INCOME TAXES (16) 3 (66) - (79)
Net gain on
preconfirmation
contingencies - 4 1 - 5
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
BENEFIT FOR INCOME
TAXES (16) 7 (65) - (74)
Benefit for income
taxes - 2 2 - 4
----- ----- ----- ----- -----
NET INCOME (LOSS) (16) 9 (63) - (70)
Preferred stock
dividends - - (1) - (1)
----- ----- ----- ----- -----
INCOME (LOSS)
APPLICABLE TO
COMMON SHAREHOLDERS $(16) $9 $(64) $- $(71)
===== ===== ===== ===== =====
Quarter Ended December 31, 2007
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as (as
restated restated restated
(2)) (2)) (2))
REVENUE $153 $104 $365 $(6) $616
Cost of revenue
Cost of access (45) (31) (223) 6 (293)
Real estate, network
and operations (20) (17) (56) - (93)
Third party
maintenance (8) (5) (15) - (28)
Cost of equipment
sales (17) - (5) - (22)
----- ----- ----- ----- -----
Total cost of
revenue (90) (53) (299) 6 (436)
Selling, general and
administrative (20) (29) (35) - (84)
Depreciation and
amortization (22) (19) (37) - (78)
----- ----- ----- ----- -----
OPERATING INCOME
(LOSS) 21 3 (6) - 18
OTHER INCOME (EXPENSE)
Interest expense, net (15) (9) (10) - (34)
Other income
(expense), net (3) 1 15 - 13
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS,
NET AND INCOME TAXES 3 (5) (1) - (3)
Net gain on
preconfirmation
contingencies - - 31 - 31
----- ----- ----- ----- -----
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES 3 (5) 30 - 28
Provision for income
taxes (9) (2) (15) - (26)
----- ----- ----- ----- -----
NET INCOME (LOSS) (6) (7) 15 - 2
Preferred stock
dividends - - (1) - (1)
----- ----- ----- ----- -----
INCOME (LOSS)
APPLICABLE TO
COMMON SHAREHOLDERS $(6) $(7) $14 $- $1
===== ===== ===== ===== =====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2)In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment
to the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's
results to include the GC Brazil and GC Chile operations and removed the
GC Brazil and GC Chile operations from ROW's results for all periods
presented.
Global Crossing Limited and Subsidiaries Table 6
Unaudited Summary of Consolidated Revenues, Cost of Access,
and Adjusted Gross Margin
($ in millions)
Year Ended December 31, 2008
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Revenues:
Enterprise, carrier
data and indirect
channels $588 $459 $1,117 $- $2,164
Wholesale voice 11 9 404 - 424
Other - - 4 - 4
Intersegment
revenue - 7 11 (18) -
----- ----- ----- ----- -----
Consolidated
revenues $599 $475 $1,536 $(18) $2,592
----- ----- ----- ----- -----
Cost of access:
Enterprise, carrier
data and indirect
channels $(175) $(98) $(564) $- $(837)
Wholesale voice (8) (7) (358) - (373)
Other - - (1) - (1)
Intersegment
cost of access (1) (10) (6) 17 -
----- ----- ----- ----- -----
Consolidated
cost of access $(184) $(115) $(929) $17 $(1,211)
----- ----- ----- ----- -----
Adjusted
Gross
Margin:
Enterprise, carrier
data and indirect
channels $413 $361 $553 $- $1,327
Wholesale voice 3 2 46 - 51
Other - - 3 - 3
Intersegment
adjusted gross
margin (1) (3) 5 (1) -
----- ----- ----- ----- -----
Consolidated
adjusted gross
margin $415 $360 $607 $(1) $1,381
===== ===== ===== ===== ======
Year Ended December 31, 2007
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as (as
restated restated restated
(2)) (2)) (2))
Revenues:
Enterprise, carrier
data and indirect
channels $572 $260 $962 $- $1,794
Wholesale voice 10 6 446 - 462
Other - - 5 - 5
Intersegment
revenue - 3 9 (12) -
------- ------- ------- ------- -------
Consolidated
revenues $582 $269 $1,422 $(12) $2,261
------- ------- ------- ------- -------
Cost of access:
Enterprise, carrier
data and indirect
channels $(161) $(62) $(518) $- $(741)
Wholesale voice (8) (4) (392) - (404)
Other - - (1) - (1)
Intersegment
cost of access - (9) (2) 11 -
------- ------- ------- ------- -------
Consolidated
cost of access $(169) $(75) $(913) $11 $(1,146)
------- ------- ------- ------- -------
Adjusted
Gross
Margin:
Enterprise, carrier
data and indirect
channels $411 $198 $444 $- $1,053
Wholesale voice 2 2 54 - 58
Other - - 4 - 4
Intersegment
adjusted gross
margin - (6) 7 (1) -
------- ------- ------- ------- -------
Consolidated
adjusted gross
margin $413 $194 $509 $(1) $1,115
======= ======= ======= ======= =======
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment to
the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's
results to include the GC Brazil and GC Chile operations and removed the
GC Brazil and GC Chile operations from ROW's results for all periods
presented.
Definition: Adjusted gross margin is revenue minus cost of access. See
Table 10 for the reconciliation of adjusted gross margin to gross margin.
Global Crossing Limited and Subsidiaries Table 7
Unaudited Summary of Consolidated Revenues, Cost of Access,
and Adjusted Gross Margin
($ in millions)
Quarter Ended December 31, 2008
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Revenues:
Enterprise, carrier
data and indirect
channels $132 $118 $291 $- $541
Wholesale voice 2 2 96 - 100
Other - - 1 - 1
Intersegment revenue - 2 6 (8) -
----- ----- ----- ----- -----
Consolidated revenues $134 $122 $394 $(8) $642
----- ----- ----- ----- -----
Cost of access:
Enterprise, carrier
data and indirect
channels $(40) $(24) $(142) $- $(206)
Wholesale voice (1) (1) (87) - (89)
Other - - (1) - (1)
Intersegment cost of
access (1) (5) (2) 8 -
----- ----- ----- ----- -----
Consolidated cost of
access $(42) $(30) $(232) $8 $(296)
----- ----- ----- ----- -----
Adjusted Gross
Margin:
Enterprise, carrier
data and indirect
channels $92 $94 $149 $- $335
Wholesale voice 1 1 9 - 11
Other - - - - -
Intersegment adjusted
gross margin (1) (3) 4 - -
----- ----- ----- ----- -----
Consolidated adjusted
gross margin $92 $92 $162 $- $346
===== ===== ===== ===== =====
Quarter Ended September 30, 2008
--------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Revenues:
Enterprise, carrier
data and indirect
channels $152 $121 $287 $- $560
Wholesale voice 3 3 100 - 106
Other - - 1 - 1
Intersegment revenue - 1 2 (3) -
----- ----- ----- ----- -----
Consolidated revenues $155 $125 $390 $(3) $667
----- ----- ----- ----- -----
Cost of access:
Enterprise, carrier
data and indirect
channels $(45) $(24) $(147) $- $(216)
Wholesale voice (3) (2) (89) - (94)
Other - - - - -
Intersegment cost of
access - (2) (1) 3 -
----- ----- ----- ----- -----
Consolidated cost of
access $(48) $(28) $(237) $3 $(310)
----- ----- ----- ----- -----
Adjusted Gross
Margin:
Enterprise, carrier
data and indirect
channels $107 $97 $140 $- $344
Wholesale voice - 1 11 - 12
Other - - 1 - 1
Intersegment adjusted
gross margin - (1) 1 - -
----- ----- ----- ----- -----
Consolidated adjusted
gross margin $107 $97 $153 $- $357
===== ===== ===== ===== =====
Quarter Ended December 31, 2007
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as (as
restated restated restated
(2)) (2)) (2))
Revenues:
Enterprise, carrier
data and indirect
channels $151 $101 $252 $- $504
Wholesale voice 2 3 106 - 111
Other - - 1 - 1
Intersegment revenue - - 6 (6) -
Consolidated revenues ----- ----- ----- ----- -----
$153 $104 $365 $(6) $616
----- ----- ----- ----- -----
Cost of access:
Enterprise, carrier
data and indirect
channels $(43) $(23) $(133) $- $(199)
Wholesale voice (2) (2) (90) - (94)
Other - - - - -
Intersegment cost of
access - (6) - 6 -
Consolidated cost of
access ----- ----- ----- ----- -----
$(45) $(31) $(223) $6 $(293)
----- ----- ----- ----- -----
Adjusted Gross
Margin:
Enterprise, carrier
data and indirect
channels
Wholesale voice $108 $78 $119 $- $305
Other - 1 16 - 17
Intersegment adjusted
gross margin - - 1 - 1
Consolidated adjusted
gross margin - (6) 6 - -
----- ----- ----- ----- -----
$108 $73 $142 $- $323
===== ===== ===== ===== =====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment
to the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's
results to include the GC Brazil and GC Chile operations and removed the
GC Brazil and GC Chile operations from ROW's results for all periods
presented.
Definition: Adjusted gross margin is revenue minus cost of access. See
Table 11 for the reconciliation of adjusted gross margin to gross
margin.
Global Crossing Limited Table 8
Unaudited Reconciliation of Adjusted Cash EBITDA to Net (Income) Loss
Applicable to Common Shareholders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Adjusted Cash EBITDA, which is considered a non-GAAP
(Generally Accepted Accounting Principles) financial measure, to income
(loss) applicable to common shareholders, which is the most directly
comparable GAAP measure. Global Crossing's calculation of its Adjusted
Cash EBITDA measure may not be consistent with EBITDA measures of other
companies. Management believes that Adjusted Cash EBITDA is a relevant
indicator of operating performance, especially in a capital-intensive
industry such as telecommunications. Adjusted Cash 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 statement of operations.
Year Ended December 31, 2008
----------------------------
GCUK GC Impsat ROW(1) Total
---- --------- ------ -----
Adjusted Cash EBITDA $140 $143 $45 $328
Non-cash stock compensation
expense (6) (5) (44) (55)
Depreciation and amortization (84) (81) (161) (326)
Interest expense, net (57) (32) (70) (159)
Other income (expense), net (57) (20) 51 (26)
Net gain on preconfirmation
contingencies - 4 6 10
Income tax provision (1) (17) (31) (49)
Preferred stock dividends - - (4) (4)
----- ----- ------ ------
Net loss applicable to common
shareholders $(65) $(8) $(208) $(281)
===== ===== ====== ======
Year Ended December 31, 2007
----------------------------
GCUK GC Impsat ROW(1) Total
---- --------- ------ -----
(as restated(2)) (as restated(2))
Adjusted Cash EBITDA $147 $63 $(36) $174
Non-cash stock compensation
expense (5) (2) (44) (51)
Depreciation and amortization (84) (44) (136) (264)
Interest expense, net (60) (22) (68) (150)
Other income, net 2 - 13 15
Net gain on preconfirmation
contingencies - - 33 33
Income tax provision (11) (10) (42) (63)
Preferred stock dividends - - (4) (4)
----- ----- ------ ------
Net loss applicable to common
shareholders $(11) $(15) $(284) $(310)
===== ===== ====== ======
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment to
the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's
results to include the GC Brazil and GC Chile operations and removed the
GC Brazil and GC Chile operations from ROW's results for all periods
presented.
Definition: Adjusted cash EBITDA is earnings before interest, taxes,
depreciation and amortization, other income (expense) net, net gain on
pre-confirmation contingencies, preferred stock dividends and non-cash
stock compensation.
Global Crossing Limited Table 9
Unaudited Reconciliation of Adjusted Cash EBITDA to Net (Income) Loss
Applicable to Common Shareholders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Adjusted Cash EBITDA, which is considered a non-GAAP
financial measure, to income (loss) applicable to common shareholders,
which is the most directly comparable GAAP measure. Global Crossing's
calculation of its Adjusted Cash EBITDA measure may not be consistent
with EBITDA measures of other companies. Management believes that
Adjusted Cash EBITDA is a relevant indicator of operating performance,
especially in a capital-intensive industry such as telecommunications.
Adjusted Cash 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 statement
of operations.
Quarter Ended December 31, 2008
-------------------------------
GCUK GC Impsat ROW(1) Total
---- --------- ------ -----
Adjusted Cash EBITDA $24 $37 $35 $96
Non-cash stock
compensation expense 1 3 2 6
Depreciation and
amortization (19) (21) (42) (82)
Interest expense, net (12) (7) (17) (36)
Other income (expense), net (41) (14) 26 (29)
Net gain on preconfirmation
contingencies - - 1 1
Income tax provision - (2) (4) (6)
Preferred stock dividends - - (1) (1)
---- ---- ---- ----
Net loss applicable to
common shareholders $(47) $(4) $- $(51)
==== ==== ==== ====
Quarter Ended September 30, 2008
--------------------------------
GCUK GC Impsat ROW(1) Total
---- --------- ------ -----
Adjusted Cash EBITDA $39 $42 $7 $88
Non-cash stock
compensation expense (2) (2) (14) (18)
Depreciation and
amortization (22) (20) (42) (84)
Interest expense, net (14) (8) (18) (40)
Other income (expense), net (17) (9) 1 (25)
Net gain on preconfirmation
contingencies - 4 1 5
Income tax benefit - 2 2 4
Preferred stock dividends - - (1) (1)
---- ---- ---- ----
Net income (loss) applicable
to common shareholders $(16) $9 $(64) $(71)
==== ==== ==== ====
Quarter Ended December 31, 2007
-------------------------------
GCUK GC Impsat ROW(1) Total
---- --------- ------ -----
(as (as
Restated(2)) restated(2))
Adjusted Cash EBITDA $43 $23 $34 $100
Non-cash stock
compensation expense - (1) (3) (4)
Depreciation and
amortization (22) (19) (37) (78)
Interest expense, net (15) (9) (10) (34)
Other income (expense), net (3) 1 15 13
Net gain on preconfirmation
contingencies - - 31 31
Income tax provision (9) (2) (15) (26)
Preferred stock dividends - - (1) (1)
---- ---- ---- ----
Net income (loss) applicable
to common shareholders $(6) $(7) $14 $1
==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment to
the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's results
to include the GC Brazil and GC Chile operations and removed the GC Brazil
and GC Chile operations from ROW's results for all periods presented.
Definition: Adjusted cash EBITDA is earnings before interest, taxes,
depreciation and amortization, other income (expense) net, net gain on
pre-confirmation contingencies, preferred stock dividends and non-cash
stock compensation.
Global Crossing Limited and Subsidiaries Table 10
Unaudited Reconciliation of Adjusted Gross Margin to Gross Margin
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides
reconciliation of Adjusted Gross Margin, which is considered a non-GAAP
financial measure, to Gross Margin, which is the most directly comparable
GAAP measure. Management believes 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 statement of operations.
Year Ended December 31, 2008
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Adjusted gross
margin $415 $360 $607 $(1) $1,381
Real estate,
network and
operations (93) (58) (256) 1 (406)
Third party
maintenance (32) (20) (55) - (107)
Cost of equipment
sales (69) (11) (14) - (94)
---- ---- ---- ---- ----
Gross margin $221 $271 $282 $- $774
==== ==== ==== ==== ====
Year Ended December 31, 2007
----------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as (as
Restated(2)) restated(2)) restated(2))
Adjusted gross
margin $413 $194 $509 $(1) $1,115
Real estate,
network and
operations (96) (40) (250) 1 (385)
Third party
maintenance (35) (14) (54) - (103)
Cost of equipment
sales (62) (3) (23) - (88)
---- ---- ---- ---- ----
Gross margin $220 $137 $182 $- $539
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC
Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment to
the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's results
to include the GC Brazil and GC Chile operations and removed the GC Brazil
and GC Chile operations from ROW's results for all periods presented.
Definition: Adjusted gross margin is revenue minus cost of access.
Global Crossing Limited and Subsidiaries Table 11
Unaudited Pro Forma Reconciliation of Adjusted Gross Margin to Gross
Margin
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides
reconciliation of Adjusted Gross Margin, which is considered a non-GAAP
financial measure, to Gross Margin, which is the most directly comparable
GAAP measure. Management believes 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 statement of operations.
Quarter Ended December 31, 2008
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Adjusted gross
margin $92 $92 $162 $- $346
Real estate,
network
and operations (19) (11) (56) - (86)
Third party
maintenance (7) (5) (12) - (24)
Cost of equipment
sales (16) (3) (4) - (23)
---- ---- ---- ---- ----
Gross margin $50 $73 $90 $- $213
==== ==== ==== ==== ====
Quarter Ended September 30, 2008
--------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
Adjusted gross
margin $107 $97 $153 $- $357
Real estate,
network
and operations (25) (15) (69) - (109)
Third party
maintenance (7) (6) (15) - (28)
Cost of equipment
sales (18) (3) (4) - (25)
---- ---- ---- ---- ----
Gross margin $57 $73 $65 $- $195
==== ==== ==== ==== ====
Quarter Ended December 31, 2007
-------------------------------
GCUK GC Impsat ROW(1) Eliminations Total
---- --------- ------ ------------ -----
(as (as
Restated(2)) restated(2))
Adjusted gross
margin $108 $73 $142 $- $323
Real estate,
network
and operations (20) (17) (56) - (93)
Third party
maintenance (8) (5) (15) - (28)
Cost of equipment
sales (17) - (5) - (22)
---- ---- ---- ---- ----
Gross margin $63 $51 $66 $- $180
==== ==== ==== ==== ====
(1) Rest of World (ROW) represents operations of Global Crossing Limited
and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd.
and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries
(GC Impsat).
(2) In May 2008 and August 2008, Global Crossing Limited transferred its
GC Brazil and GC Chile operations, respectively, from the ROW Segment
to the GC Impsat Segment. Since the transfer is between entities under
common control, the Company has retroactively restated GC Impsat's
results to include the GC Brazil and GC Chile operations and removed the
GC Brazil and GC Chile operations from ROW's results for all periods
presented.
Definition: Adjusted gross margin is revenue minus cost of access.
Global Crossing Limited and Subsidiaries Table 12
Unaudited Reconciliations of 2009 OIBDA and Free Cash Flow Guidance
($ 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 measure 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
measure to GAAP, we must use amounts or ranges for the GAAP components
that arithmetically add up to the non-GAAP financial measure. While we
feel reasonably comfortable with the methodology used to generate the
projections of our non-GAAP financial measures, 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 measure, may or may not prove to be correct. We will
consider our projections of non-GAAP financial measures 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.
Twelve months ended
December 31, 2009
-------------------
Low End of Guidance High End of Guidance
OIBDA $320 $380
Depreciation and amortization (330) (331)
----- -----
Operating income (loss) (10) 49
Interest expense, net (147) (147)
Provision for income taxes (27) (27)
Preferred stock dividends (4) (4)
----- -----
Net loss applicable to
common shareholders $(188) $(129)
===== =====
Free Cash Flow $50 $100
Purchases of property
and equipment 145 155
----- -----
Net cash provided by
operating activities $195 $255
===== =====
For definitions and further description of these non-GAAP measures see
table 15.
Global Crossing Limited and Subsidiaries Table 13
Unaudited Reconciliations of OIBDA to Net Income (Loss) applicable to
Common share holders
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of OIBDA to net income (loss) applicable to common
shareholders.
Twelve months Three months ended
ended ------------------
Dec. 31, Dec. 31, Sept. 30, June 30, March 31,
2008 2008 2008 2008 2008
----- ----- ----- ----- -----
OIBDA $273 $102 $70 $56 $45
Depreciation and
amortization (326) (82) (84) (84) (76)
----- ----- ----- ----- -----
Operating income
(loss) (53) 20 (14) (28) (31)
Interest income 10 2 2 2 4
Interest expense (169) (38) (42) (45) (44)
Other income
(expense), net (26) (29) (25) 8 20
Net gain on
preconfirmation
contingencies 10 1 5 4 -
Benefit (provision)
for income taxes (49) (6) 4 (29) (18)
Preferred stock
dividends (4) (1) (1) (1) (1)
----- ----- ----- ----- -----
Net loss applicable to
common shareholders $(281) $(51) $(71) $(89) $(70)
===== ===== ===== ===== =====
Twelve months Three months ended
ended ------------------
Dec. 31, Dec. 31, Sept. 30, June 30, March 31,
2007 2007 2007 2007 2007
----- ----- ----- ----- -----
OIBDA $123 $96 $61 $(11) $(23)
Depreciation and
amortization (264) (78) (73) (63) (50)
----- ----- ----- ----- -----
Operating income
(loss) (141) 18 (12) (74) (73)
Interest income 21 4 5 6 6
Interest expense (171) (38) (51) (47) (35)
Other income
(expense), net 15 13 (16) 24 (6)
Net gain on
preconfirmation
contingencies 33 31 2 - -
Provision for
income taxes (63) (26) (16) (9) (12)
Preferred stock
dividends (4) (1) (1) (1) (1)
----- ----- ----- ----- -----
Net income (loss)
applicable to
common shareholders $(310) $1 $(89) $(101) $(121)
===== ===== ===== ===== =====
For a definition and further description of this non-GAAP measure see
table 15.
Global Crossing Limited and Subsidiaries Table 14
Unaudited Reconciliations of Free Cash Flow to Net Cash
Provided by (used in) Operating Activities
($ in millions)
Pursuant to the SEC's Regulation G, the following table provides a
reconciliation of Free Cash Flow to net cash provided by (used in)
operating activities.
Twelve months Three months ended
ended ------------------
Dec. 31, Dec. 31, Sept. 30, June 30, March 31,
2008 2008 2008 2008 2008
---- ---- ---- ---- ----
Free Cash Flow $11 $30 $33 $(33) $(19)
Purchases of property
and equipment 192 49 51 48 44
---- ---- ---- ---- ----
Net cash provided by
operating activities $203 $79 $84 $15 $25
==== ==== ==== ==== ====
Twelve months Three months ended
ended ------------------
Dec. 31, Dec. 31, Sept. 30, June 30, March 31,
2007 2007 2007 2007 2007
---- ---- ---- ---- ----
Free Cash Flow $(230) $33 $(70) $(110) $(83)
Purchases of property
and equipment 214 60 77 44 33
---- ---- ---- ---- ----
Net cash provided by
(used in) operating
activities $(16) $93 $7 $(66) $(50)
==== ==== ==== ==== ====
For a definition and further description of this non-GAAP measure see
table 15.
Global Crossing Limited and Subsidiaries Table 15
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.
