LONDON, June 16 /PRNewswire-FirstCall/ -- Global Crossing (NASDAQ:GLBC), a leading global IP solutions provider, today announced first quarter financial results for its subsidiary, Global Crossing (UK) Telecommunications Limited (GCUK).
Highlights GCUK generated 78 million pounds in revenue in the first quarter, with adjusted gross margin of 69 percent or 54 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 generated 15 million pounds in cash from operations.
"GCUK continues to be a strong contributor to the company's results and an important part of the company's overall global strategy," said John Legere, Global Crossing's chief executive officer. "Our focus on delivering the best customer experience and giving customers world-class IP services is driving steady progress in the UK." Revenue and Margin GCUK generated revenue of 78 million pounds, compared with 76 million pounds in the prior quarter and 75 million pounds for the same period in the prior year. This represents an increase of 2 million pounds or 3 percent on a sequential basis and an increase of 3 million pounds or 4 percent year over year. Both the sequential and year-over-year increases came from strength in the company's "invest and grow" category -- namely that part of the business focused on serving enterprises and carrier customers excluding wholesale voice. Sales order values in the first quarter of 2008 remained consistent with those seen in 2007.
Adjusted gross margin (as defined in table 6 that follows) for the first quarter of 2008 was 54 million pounds or 69 percent of revenue, consistent with the prior quarter in which adjusted gross margin was 53 million pounds or 70 percent of revenue and 52 million pounds or 69 percent of revenue in the first quarter of 2007.
Costs Cost of revenue, which includes cost of access, technical real estate, network and operations, third party maintenance and cost of equipment sales, was 50 million pounds for the quarter, compared to 45 million pounds in the fourth quarter of 2007 and 49 million pounds in the first quarter of 2007. The sequential increase was due to higher access costs associated with increased revenue as well as an increase in stock-based compensation costs resulting from annual resetting of the annual bonus program accrual to target levels and an increase in cost of equipment sales. In addition, the fourth quarter of 2007 included a real estate rebate. The year-over-year increase in cost of revenue was primarily due to a higher cost of access expense relating to increased revenue and was largely associated with the new contract signed with HM Revenue & Customs (HMRC), which was announced last quarter.
Sales, general and administrative expenses (SG&A) remained relatively flat on a sequential and year-over-year basis.
Earnings GCUK's adjusted IFRS EBITDA for the first quarter was 21 million pounds, compared with 22 million pounds in the fourth quarter of 2007 and 18 million pounds in the first quarter of 2007.
GCUK recorded net profit of 1 million pounds for the first quarter of 2008, compared with a net loss of 2 million pounds in the fourth quarter of 2007 and a net profit of 1 million pounds in the first quarter of 2007. The sequential variance in net profit was primarily due to a 4 million pound tax charge in the fourth quarter associated with a write-down of a deferred tax asset.
Cash Position As of March 31, 2008, GCUK had 33 million pounds of cash and cash equivalents. Net cash provided by operating activities during the first quarter totaled 15 million pounds. GCUK's net increase in cash and cash equivalents was 9 million pounds in the first quarter, including 6 million pounds for capital expenditures and principal payments on finance leases.
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 here include unaudited consolidated financial results for the three months ended March 31, 2008 and 2007 and unaudited consolidated financial results for the three months ended December 31, 2007; the unaudited consolidated balance sheet as of March 31, 2008; and the audited consolidated balance sheet as of December 31, 2007, in accordance with IFRS. GCUK's results for the first quarters of 2008 and 2007 and the fourth quarter of 2007 were included in Global Crossing's consolidated results previously reported on May 8, 2008, in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and in U.S. dollars.
Conference Call Management has scheduled a conference call for Monday, June 16, 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 Monday, June 16, 2008, beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until Monday, June 23, 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 21385046. UK callers may access the replay by dialing +44 (0) 870 000 3081 or +44 (0) 800 692 0831 and entering reservation number 21385046.
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 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 390 cities in more than 30 countries worldwide, and delivers services to approximately 690 cities in more than 60 countries and 6 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 http://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; 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 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
Becky Yeamans
+ 1 973 937 0155
Analysts/Investors Contacts
Suzanne Lipton
+ 1 800 836 0342
Gino Mathew
Europe
+ 1 973 937 0133
IR/PR1
6 Financial Tables Follow
Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 1
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands.
Three months ended
March 31, December 31, March 31,
2008 2007 2007
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise and carrier data 76,958 74,797 73,597
Wholesale voice 1,319 1,141 1,368
78,277 75,938 74,965
Global Crossing group companies 125 125 125
Consolidated revenues 78,402 76,063 75,090 Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 2
Consolidated Statements of Operations
Results below are in pounds sterling in thousands.
Three months ended
March 31, December 31, March 31,
IFRS in IFRS Reporting Format 2008 2007 2007
(unaudited) (unaudited) (unaudited) Revenue 78,402 76,063 75,090
Cost of sales (48,592) (45,157) (46,307)
Gross profit 29,810 30,906 28,783 Distribution costs (4,073) (4,232) (3,721)
Administrative expenses (16,987) (14,969) (16,853)
Operating profit 8,750 11,705 8,209 Finance revenue 1,036 1,608 1,279
Finance charges (8,735) (10,303) (8,708)
Profit before tax 1,051 3,010 780 Tax charge (244) (4,646) (260)
Profit (loss) for the period 807 (1,636) 520 Three months ended
March 31, December 31, March 31,
IFRS in U.S. GAAP Reporting Format 2008 2007 2007
(unaudited) (unaudited) (unaudited) REVENUES 78,402 76,063 75,090 Cost of revenue (excluding
depreciation and amortization shown
separately below)
Cost of access (24,048) (22,727) (23,048)
Real estate, network and operations (12,735) (10,322) (11,916)
Third party maintenance (4,417) (4,121) (4,676)
Cost of equipment sales (8,882) (7,900) (9,128)
Total cost of revenue (50,082) (45,070) (48,768)
Selling, general and administrative (8,619) (8,424) (8,224)
Depreciation and amortization (10,951) (10,877) (9,565)
Total operating expenses (69,652) (64,371) (66,557) OPERATING INCOME 8,750 11,692 8,533 OTHER INCOME (EXPENSE)
Interest expense, net (7,759) (7,439) (7,436)
Other income (expense), net 60 (1,243) (317)
INCOME BEFORE PROVISION FOR INCOME
TAXES 1,051 3,010 780
Provision for income taxes (244) (4,646) (260)
NET INCOME (LOSS) 807 (1,636) 520 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/(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/(losses) are included in other income
(expense), net. Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 3
Consolidated Balance Sheets
Results below are in pounds sterling in thousands.
March 31, December 31,
2008 2007
(unaudited) (audited) Non-current assets
Intangible assets, net 13,081 13,351
Property, plant and equipment, net 182,328 185,719
Investment in associate 200 200
Retirement benefit asset 961 961
Trade and other receivables 28,830 28,511
225,400 228,742 Current assets
Trade and other receivables 62,059 66,237
Cash and cash equivalents 33,038 23,954
95,097 90,191
Total assets 320,497 318,933 Current liabilities
Trade and other payables (69,410) (65,619)
Senior secured notes (1,158) (1,158)
Deferred revenue (47,390) (47,126)
Provisions (1,960) (2,137)
Obligations under finance leases (11,609) (11,945)
Other debt obligations (641) (463)
Derivative financial instrument (970) (1,048)
(133,138) (129,496) Non-current liabilities
Trade and other payables (572) (650)
Senior secured notes (247,980) (247,788)
Deferred revenue (104,711) (106,961)
Retirement benefit obligation (3,033) (3,110)
Provisions (3,931) (4,160)
Obligations under finance leases (17,759) (20,242)
Other debt obligations (602) (430)
Derivative financial instrument (727) (1,048)
(379,315) (384,389)
Total liabilities (512,453) (513,885)
Net liabilities (191,956) (194,952) Capital and reserves
Equity share capital (101,000 shares
outstanding at 1 pound sterling each) 101 101
Capital reserve 29,147 27,648
Hedging reserve (1,345) (2,035)
Accumulated deficit (219,859) (220,666)
Total equity (191,956) (194,952)
Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 4
Consolidated Cash Flow Statements
Results below are in pounds sterling in thousands.
Three months ended
March 31, March 31,
2008 2007
(unaudited) (unaudited)
Operating activities:
Profit for the period 807 520
Adjustments for:
Finance costs, net 7,699 7,429
Income tax 244 260
Depreciation of property, plant and
equipment 8,668 8,299
Amortization of intangible assets 554 856
Share based payment expense 1,499 715
Loss on disposal of property, plant
and equipment - 266
Change in provisions (472) (1,859)
Change in operating working capital (2,113) (10,169)
Change in other assets and
liabilities (1,750) 960
Cash generated from operations 15,136 7,277
Interest paid (446) (996)
Net cash provided by operating
activities 14,690 6,281 Investing activities:
Interest received 220 1,168
Purchase of property, plant and
equipment (4,550) (8,439) Net cash used in investing activities (4,330) (7,271) Financing activities:
Repayments of capital elements under
finance leases (1,653) (2,132)
Proceeds from debt obligations, net 474 774
Repayment of capital element of other
debt obligations (97) -
Net cash used in financing activities (1,276) (1,358)
Net increase/(decrease) in cash and
cash equivalents 9,084 (2,348)
Cash and cash equivalents at
beginning of period 23,954 40,309
Cash and cash equivalents at end of
period 33,038 37,961
Non-cash in financing activities:
Capital lease and debt obligations
incurred 694 3,984
Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 5
Reconciliation of adjusted IFRS EBITDA to Profit (Loss)
for the Period (unaudited)
Results below are in pounds sterling in thousands.
Three months ended
March 31, December 31, March 31,
2008 2007 2007
(unaudited) (unaudited) (unaudited)
Adjusted IFRS EBITDA 21,200 22,424 18,489
Non-cash stock compensation (1,499) 158 (715)
Depreciation and amortization (10,951) (10,877) (9,565)
Finance revenue 1,036 1,608 1,279
Finance charges (8,735) (10,303) (8,708)
Taxation (244) (4,646) (260)
Profit (loss) for period 807 (1,636) 520 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.
Definition:
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. Global Crossing (UK) Telecommunications Limited and
Subsidiaries Table 6
Reconciliation of Adjusted Gross Margin to Gross Profit (unaudited)
Results below are in pounds sterling in thousands.
Three months ended
March 31, December 31, March 31,
2008 2007 2007
(unaudited) (unaudited) (unaudited) Adjusted Gross Margin 54,354 53,336 52,042
Less:
Customer-specific costs (10,020) (8,426) (10,128)
Third-party maintenance (4,417) (4,121) (4,676)
Depreciation & amortization
(included within cost of sales) (10,107) (9,883) (8,455)
Gross Profit (IFRS) 29,810 30,906 28,783 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 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 income statement
and to provide comparability to the parent company's financial
presentations, which include this metric.
Definitions:
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. DATASOURCE: Global Crossing CONTACT: Press, Becky Yeamans, +1-973-937-0155, , or Analysts-Investors, Suzanne Lipton, +1-800-836-0342, , or Gino Mathew, Europe, +1-973-937-0133, , all of Global Crossing Web site: http://www.globalcrossing.com/
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