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Global Crossing Reports GCUK's Second Quarter 2008 Results
London - September 11, 2008 -- Global Crossing (NASDAQ: GLBC), a leading global IP solutions provider, today announced second quarter financial results for its subsidiary, Global Crossing (UK) Telecommunications Limited (GCUK).
Highlights
GCUK generated 81 million pounds in revenue in the second quarter, with adjusted gross margin of 69 percent or 56 million pounds and adjusted IFRS EBITDA of 21 million pounds. (Adjusted gross margin and adjusted IFRS EBITDA are both non-GAAP metrics that are defined and reconciled below.) The company also reported cash generated from operations of 19 million pounds before interest.
"GCUK's ongoing operational progress has continued to generate sound financial results," said John Legere, Global Crossing's chief executive officer. "Our focus continues on delivering an exceptional customer experience, providing differentiated service offerings, and retaining disciplined cost management to support growth initiatives and create shareholder value."
Revenue and Margin
During the second quarter of 2008, GCUK generated revenue of 81 million pounds, 98 percent of which was produced by the "invest and grow" business category - namely that part of the business focused on serving enterprises and carrier customers excluding wholesale voice. Total revenue represented a 3 percent or 2 million pounds sequential increase over the previous quarter and an 11 percent or 8 million pounds increase over the second quarter of 2007. The sequential and year-over-year increases were primarily due to incremental billings from existing customers and revenues from new business.
Adjusted gross margin (as defined in table 6 that follows) for the second quarter of 2008 was 56 million pounds or 69 percent of revenue. This compares with adjusted gross margin of 54 million pounds or 69 percent of revenue in the first quarter of 2008 and 51 million pounds or 70 percent of revenue in the second quarter of 2007.
Costs
Cost of revenue, which includes cost of access, technical real estate, network and operations, third-party maintenance and cost of equipment sales, was essentially flat compared with the first quarter of 2008 at 51 million pounds in the second quarter of 2008 and increased from 47 million pounds in the second quarter of 2007. The year-over-year increase was primarily due to higher access costs associated with increased revenue, as well as higher equipment costs due to increased equipment sales as part of a recently signed large contract in the government sector.
Sales, general and administrative expenses (SG&A) for the second quarter were 10 million pounds, compared with 9 million pounds in the first quarter of this year and 11 million pounds in the second quarter of 2007. The sequential increase in SG&A is primarily attributable to an increase in the allocation of corporate overhead costs, higher sales commissions, as well as higher salary costs driven by augments to the sales force implemented earlier in the year.
Earnings
GCUK's adjusted IFRS EBITDA for the second quarter was 21 million pounds, compared with 21 million pounds in the first quarter of this year and 17 million pounds in the second quarter of 2007.
GCUK recorded a profit of 1 million pounds for the second quarter of 2008, compared with a profit of 1 million pounds in the first quarter of 2008 and a loss of 1 million pounds in the second quarter of 2007. The year-over-year increase in net profit was primarily driven by an increase in IFRS EBITDA offset by less favorable exchange rate movement on U.S. dollar-denominated Senior Secured Notes in the second quarter of 2008 compared with the same period in 2007.
Cash Position
As of June 30, 2008, GCUK had 27 million pounds of cash and cash equivalents. Cash generated from operations during the second quarter totaled 19 million pounds. GCUK's net decrease in cash and cash equivalents was 6 million pounds in the second quarter, including interest paid of 16 million pounds and 8 million pounds for capital expenditures and principal payments on finance leases, respectively.
Non-GAAP Financial Measures
Pursuant to the U.S. Securities and Exchange Commission's (SEC's) Regulation G, the attached tables include definitions of adjusted IFRS EBITDA and adjusted gross margin measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB).
International Financial Reporting Standards
GCUK's results reported herein include unaudited consolidated financial results for the three months ended June 30, 2008 and 2007 and unaudited consolidated financial results for the three months ended March 31, 2008; the unaudited consolidated balance sheet as of June 30, 2008; and the audited consolidated balance sheet as of December 31, 2007, in accordance with IFRS. GCUK's results for the second quarters of 2008 and 2007 and the first quarter of 2008 were included in Global Crossing's consolidated results previously reported on August 5, 2008, in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and in U.S. dollars.
Conference Call
Management has scheduled a conference call for Thursday, September 11, 2008, at 9:00 a.m. EDT/2:00 p.m. BST to discuss GCUK's financial results. The call may be accessed by dialing +1 212 231 2900 or +44 (0) 800 528 0985. Callers are advised to dial in 15 minutes prior to the 9:00 a.m. EDT start time. The call will also be Webcast at investors.globalcrossing.com/results.cfm.
A replay of the call will be available on Thursday, September 11, 2008, beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until Thursday, September 18, 2008 at 11:00 a.m. EDT/4:00 p.m. BST. To access the replay, dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21392074. UK callers may access the replay by dialing +44 (0) 870 000 3081 or +44 (0) 800 692 0831 and entering reservation number 21392074.
ABOUT GLOBAL CROSSING UK TELECOMMUNICATIONS LIMITED
Global Crossing UK Telecommunications Limited provides a full range of managed telecommunications services in a secure environment ideally suited for IP-based business applications. The company provides managed voice, data, Internet and e-commerce solutions to a strong and established commercial customer base, including more than 100 UK government departments, as well as systems integrators, rail sector customers and major corporate clients. In addition, Global Crossing UK provides carrier services to national and international communications service providers.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) provides telecommunications solutions over the world's first integrated global IP-based network. Its core network connects approximately 400 cities in about 45 countries worldwide, and delivers services to more than 690 cities in more than 60 countries and six continents around the globe. The company's global sales and support model matches the network footprint and, like the network, delivers a consistent customer experience worldwide.
Global Crossing IP services are global in scale, linking the world's enterprises, governments and carriers with customers, employees and partners worldwide in a secure environment that is ideally suited for IP-based business applications, allowing e-commerce to thrive. The company offers a full range of data, voice and security products to approximately 40 percent of the Fortune 500, as well as 700 carriers, mobile operators and ISPs. Its Professional Services and Managed Solutions provide VoIP, security and network consulting and management services to support its Global Crossing IP VPN service and Global Crossing VoIP services. Global Crossing was the first global communications provider with IPv6 natively deployed in both its private and public backbone networks.
Please visit www.globalcrossing.com or blogs.globalcrossing.com for more information about Global Crossing.
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This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties that could cause GCUK's actual results to differ materially, including: the level of competition in the marketplace; pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; the impact on the business of an economic downturn or recession; dependence on a number of key personnel; the concentration of revenue in a limited number of customers; customer contracts typically do not have firm commitments to purchase minimum levels of revenue or services; the reliance on a limited number of third party suppliers; a change of control could lead to the termination of many of the company's government contracts; insolvency could lead to termination of certain of the company's contracts; slower than anticipated adoption by customers of next generation products; risks relating to the operation, administration, maintenance and repair of our systems; terrorist attacks or other acts of violence or war that may adversely affect the financial markets and our business and operations; the accuracy of our real estate restructuring provision; the influence of the company's parent, and possible conflicts of interest of the parent or of certain of GCUK's directors and officers; the sharing of corporate and operational services with our parent; our ability to raise capital through financing activities and otherwise to access capital markets; and other risks referenced from time to time in the company's filings with the Securities and Exchange Commission. The company undertakes no duty to update information contained in this press release or in other public disclosures at any time.
CONTACT GLOBAL CROSSING:
Press Contacts
Steve Cross
+ 1 973 937 0245
steve.cross@globalcrossing.com
Analysts/Investors Contact
Suzanne Lipton
+ 1 800 836 0342
glbc@globalcrossing.com
Gino Mathew
Europe
+ 1 973 937 0133
gino.mathew@globalcrossing.com
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