TLGB Teleglobe International Holdings Ltd. - Common Shares (MM)

Teleglobe International Holdings Ltd (NASDAQ:TLGB), a leading provider of international telecommunications services to Internet service providers and to fixed and mobile network operators, announced today unaudited third quarter 2005 results for the period ended September 30, 2005. Third quarter 2005 revenue was $243.8 million versus $239.2 million in the second quarter of 2005 and $276.8 million in the third quarter of 2004. Net loss for third quarter 2005 was $7.9 million, or $(0.20) per share, versus $0.4 million, or $(0.01) per share, in the second quarter of 2005 and $11 million, or $(0.28) per share in the third quarter of 2004. Third quarter 2005 earnings before interest, taxes, depreciation and amortization (EBITDA) were $3.1 million including a $77,000 loss from foreign exchange translations versus $9.8 million including a $1.6 million loss from foreign exchange translations in the second quarter of 2005. Third quarter results include non-recurring special charges incurred in SG&A in connection with the Plan of Amalgamation with VSNL totaling $6.8 million. Second quarter 2005 results include a $2.2 million pretax gain on the disposal of a Vancouver facility associated with the company's plan to reduce operating expenses. The second quarter also includes the impact of major favorable settlements with carriers. Liam Strong, president and CEO of Teleglobe, stated, "Excluding the non-recurring special charges of $6.8 million incurred in connection with the Plan of Amalgamation with VSNL, Teleglobe's third quarter results were consistent overall with our performance year-to-date as we made progress in evolving our revenue mix toward higher-margin products. Increases in voice and data volumes were offset by sustained pricing pressure, while our value-added services business continued to perform above expectations. During Q3, we continued to expand our services and won new customers to our value-added services offering, further differentiating Teleglobe as a comprehensive wholesale telecommunications services provider." Non-GAAP Results EBITDA (Earnings before interest, taxes, depreciation, and amortization) for third quarter 2005 was $3.1 million versus $9.8 million in the second quarter of 2005 and $5.0 million in the third quarter of 2004. EBITDA is a non-GAAP concept, differing from GAAP measures in that it excludes net interest expense, taxes, depreciation and amortization. A more detailed reconciliation of the differences between GAAP and non-GAAP results is included in the financial tables in this press release. Non-GAAP Financial Data We are presenting EBITDA (Earnings before interest, taxes, depreciation and amortization) and Gross Margin because management considers them to be important supplemental measures of our performance and believes that they are frequently used by interested parties in the evaluation of companies in our industry. However, EBITDA and Gross Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include the following: -- EBITDA does not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments; -- EBITDA does not reflect changes in, or cash requirements for, working capital needs; -- EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt; -- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; -- EBITDA reflects the impact on earnings of charges resulting from matters we consider not to be indicative of our ongoing operations; and -- Other companies in our industry may calculate EBITDA and Gross Margin differently than we do, limiting their usefulness as a comparative measure. -- The Gross Margin calculation excludes any depreciation or amortization relating to property, equipment and intangible assets required to generate revenues. Because of these limitations, we rely primarily on the GAAP results and use EBITDA and Gross Margin only as supplemental measures of our performance. Adjusted EBITDA is a further supplemental measure of our performance. We compute Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items that management does not consider indicative of our ongoing operating performance. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Acquisition of Teleglobe by VSNL On October 25, 2005, Teleglobe held a Special General Meeting of shareholders to vote on the Plan of Amalgamation with VSNL. At the meeting, Teleglobe shareholders approved the acquisition, with over 99% of votes cast, representing over 78% of Teleglobe's shares outstanding, voted in favor. A majority was required to approve the transaction. Pending regulatory approvals and notices and other customary closing conditions, the transaction is expected to close in the first quarter of 2006. Pursuant to the amalgamation, Teleglobe shareholders will receive consideration of $4.50 per common share in cash. More details are available on the Agreement and Plan of Amalgamation in Teleglobe's Definitive Proxy Statement that was filed with the SEC on September 26, 2005. About Teleglobe: Teleglobe (NASDAQ: TLGB) is a leading provider of international voice, data, Internet and mobile roaming services with over 50 years of industry expertise in international telecommunications. Teleglobe owns and operates one of the world's most extensive telecommunications networks, reaching over 240 countries and territories with advanced voice, mobile, and data services. Teleglobe is the carrier of choice to more than 1,400 wholesale customers representing the world's leading telecommunications, mobile operators and Internet service providers. With an annual run-rate of over 13 billion minutes, and a significant portion of the world's Internet traffic, Teleglobe's network is consistently ranked among the most robust and reliable, performing at the high end of industry standards. Detailed information about Teleglobe is available on the company's web site at www.Teleglobe.com. Forward-looking Statements Teleglobe has included in this press release forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including all statements concerning future or expected events or results. Actual results could differ materially from those projected in the companies' forward-looking statements due to numerous known and unknown risks and uncertainties, including, among other things, the risks and uncertainties described in the Form 10-Q that was filed by Teleglobe on November 9, 2005, as well as other Teleglobe periodic filings with the Securities and Exchange Commission. -0- *T Teleglobe International Holdings Ltd - Selected Financial Highlights for the periods indicated (USD$, 000's) (Unaudited): Consolidated Statement of Operations - Selected Information Q3-2005 Q2-2005 Q3-2004 ---------------------------------------------------------------------- Revenues $243,778 $239,173 $276,789 Telecommunication expenses 177,656 169,596 208,322 Network expenses, exclusive of amortization and Depreciation 22,199 22,729 23,379 ---------------------------- Total telecommunication and network expenses $199,855 $192,325 $231,701 Selling, general & administrative, bad debt expenses, stock based compensation, restructuring charges, foreign exchange loss (gain) and other income $ 40,821 $ 37,037 $ 40,085 ---------------------------- Net loss $ (7,868) $ (401) $(11,031) ---------------------------- Teleglobe International Holdings Ltd - Selected Financial Highlights for the periods indicated (USD$, 000's) (Unaudited): Consolidated Balance Sheet - September December Selected Information 30, 2005 31, 2004 ---------------------------------------------------------------------- Cash, Marketable Securities and Restricted Cash $ 34,285 $ 34,060 Accounts Receivable 192,974 210,588 Other Current Assets 11,560 10,189 ----------------- Total Current Assets 238,819 254,837 Property and Equipment 132,222 134,083 Intangible Assets 144,851 143,231 Other Non-Current Assets 20,589 21,638 ----------------- Total Assets $536,481 $553,789 ----------------- Accounts Payable and Accrued Liabilities $273,211 $275,645 Other Current Liabilities 6,557 6,065 Current Portion of Senior Notes Payable 25,000 -- ----------------- Total Current Liabilities 304,768 281,710 Other Non-Current Liabilities 15,053 13,929 Senior Notes Payable 75,000 100,000 Total Shareholders' Equity 141,660 158,150 ----------------- Total Liabilities and Shareholders' Equity $536,481 $553,789 ----------------- Teleglobe International Holdings Ltd - Selected Financial Highlights for the periods indicated (USD$, 000's) (Unaudited): *Reconciliation of EBITDA to GAAP Measure for the periods indicated Q3-2005 Q2-2005 Q3-2004 ---------------------------------------------------------------------- Net loss $(7,868) $ (401) $(11,031) Add: Interest expense, net 2,369 2,101 6,271 Income tax expense (recovery) 133 (299) (165) Depreciation 5,559 5,762 7,059 Amortization of intangible assets 2,909 2,648 2,869 -------------------------- EBITDA $ 3,102 $ 9,811 $ 5,003 Add: Non-recurring special charges in connection with the Plan of Amalgamation with VSNL 6,785 1,099 -- ITXC Integration costs -- -- 3,200 Professional fees incurred in connection with Foreign Corrupt Practices Act investigation -- -- 1,360 -------------------------- Adjusted EBITDA $ 9,887 $10,910 $ 9,563 -------------------------- *T The EBITDA for the three months ended September 30, 2005 includes the favorable impact of $1.8 million in telecommunication expense due to the revision of estimates on disputed accounts payables and accrued liabilities with certain carriers and the benefit associated with negotiated retroactive rate adjustments totaling $1.6 million on certain contracts. The EBITDA for the three months ended June 30, 2005 includes a non-recurring gain of $2.2 million relating to the disposal of the Burnaby Vancouver Station, $3.0 million of revenue due to favorable settlement agreements with certain carriers and $0.9 million of similar favorable agreements in network expenses. Additionally, for the three months ended June 30, 2005, the Company's telecommunication expenses were reduced by major favorable settlements with certain carriers for approximately $2.7 million compared to $3.0 million in the first quarter of 2005. -0- *T *Reconciliation of Gross Margin to GAAP Measure for the periods indicated Q3-2005 Q2-2005 Q3-2004 ---------------------------------------------------------------------- Loss before income taxes $(7,735) $ (700) $(11,196) Add: Interest expense, net and other income 2,022 (122) 5,962 Foreign exchange loss (gain) 77 1,594 (233) Depreciation 5,559 5,762 7,059 Amortization of intangible assets 2,909 2,648 2,869 Bad debt expense 1,180 221 620 SG&A and stock based compensation 39,911 37,445 40,007 -------------------------- Gross Margin $43,923 $46,848 $ 45,088 -------------------------- Gross Margin as a Percentage of Revenue 18.0% 19.6% 16.3% -------------------------- Revenue Information The following table presents relevant revenue-related information for the periods indicated for Teleglobe International Holdings Ltd (Unaudited) Three Months Three Months Three Months Ended Ended Ended September 30, June 30, September 30, 2005 2005 2004 ---------------------------------------------------------------------- Revenues per line of business (in millions of U.S. dollars) Voice - transport $ 191 $ 190 $ 226 Data - transport 25 25 26 Value - added services 28 24 25 --------------------------------- Total $ 244 $ 239 $ 277 --------------------------------- Total revenues excluding Bell Canada (1) revenues $ 222 $ 215 $ 251 Percentage of revenues from Bell Canada (1) 8.8% 10.1% 9.3% Minutes of traffic (in millions) Voice - transport 3,470 3,328 3,297 Other 78 70 61 --------------------------------- Total 3,548 3,398 3,358 --------------------------------- Average voice revenue per minute $ 0.055 $ 0.057 $ 0.069 Geographic distribution of revenues Asia 7% 7% 8% Canada 14% 15% 13% Europe 34% 32% 29% USA 31% 31% 33% Latin America 4% 4% 4% Other 11% 11% 13% --------------------------------- Total 100% 100% 100% --------------------------------- 1 Bell Canada is Canada's largest telecommunications company. *T