Global Crossing Announces First Quarter 2010 Results

Results at a Glance

Change vs. 1Q 2009

(Dollars in Millions)

1Q 2010

Reported

Constant

Currency

Consolidated Revenues

$ 648

6%

2%

"Invest & Grow" Revenues

$ 554

9%

4%

OIBDA

$ 77

3%

(4)%

Free Cash Flow

$ (72)

$ (40)

The company's OIBDA, Free Cash Flow and constant currency measures are non-GAAP measures.  See "Non-GAAP Metrics," below, and the reconciliations of OIBDA and Free Cash Flow to the most directly comparable GAAP measures included in the attached financial tables.

Metric

2010 Guidance

($ in millions)

"Invest & Grow" Revenue

$2,300 – $2,375  

OIBDA

$390 – $440

Free Cash Flow

$10 – $60

CONTACT GLOBAL CROSSING:

Press Contacts

Michael Schneider

+ 1 973 937 0146

[email protected]

Analysts/Investors Contact

Mark Gottlieb

+ 1 800 836 0342

[email protected]

Antonio Suarez

+1 973 937 0233

[email protected]

Global Crossing Limited

Table 1

Condensed Consolidated Balance Sheets

($ in millions)

March 31, 2010

December 31, 2009

(unaudited)

ASSETS:

Current assets:

Cash and cash equivalents

$              359

$               477

Restricted cash and cash equivalents - current portion

7

9

Accounts receivable, net of allowances of $57 and $50

360

328

Prepaid costs and other current assets

103

101

Total current assets

829

915

Restricted cash and cash equivalents - long term

7

7

Property and equipment, net of accumulated depreciation of

$1,268 and $1,216

1,229

1,280

Intangible assets, net (including goodwill of $172 and $175)

193

198

Other assets

85

88

Total assets

$           2,343

$            2,488

LIABILITIES:

Current liabilities:

Accounts payable

$              287

$               312

Accrued cost of access

99

87

Short term debt and current portion of long term debt

35

37

Obligations under capital leases - current portion

50

49

Accrued restructuring costs - current portion

11

12

Deferred revenue - current portion

181

174

Other current liabilities

344

372

Total current liabilities

1,007

1,043

Long term debt

1,284

1,295

Obligations under capital leases

84

90

Deferred revenue

333

334

Accrued restructuring costs

8

13

Other deferred liabilities

76

73

Total liabilities

2,792

2,848

SHAREHOLDERS' DEFICIT:

Common stock,  110,000,000 shares authorized, $.01

par value, 60,410,486 and 60,219,817 shares issued and

outstanding as of  March 31, 2010 and December 31,

2009, respectively

1

1

Preferred stock with controlling shareholder, 45,000,000

shares authorized, $.10 par value, 18,000,000 shares

issued and outstanding  

2

2

Additional paid-in capital

1,430

1,427

Accumulated other comprehensive loss

3

(24)

Accumulated deficit

(1,885)

(1,766)

Total shareholders' deficit

(449)

(360)

Total liabilities and shareholders' deficit

$           2,343

$            2,488

Global Crossing Limited

Table 2

Unaudited Condensed Consolidated Statements of Operations

($ in millions)

Three Months Ended

March 31,

2010

2009

Revenue

$           648

$           609

Cost of revenue (excluding depreciation and amortization, shown separately below):

Cost of access

(305)

(286)

Real estate, network and operations

(99)

(97)

Third party maintenance

(27)

(24)

Cost of equipment and other sales

(24)

(23)

Total cost of revenue

(455)

(430)

Gross margin

193

179

Selling, general and administrative

(116)

(104)

Depreciation and amortization

(88)

(79)

Operating loss

(11)

(4)

Other income (expense):

Interest income

-

1

Interest expense

(49)

(36)

Other expense, net

(52)

(15)

Loss before provision for income taxes

(112)

(54)

Provision for income taxes

(7)

(4)

Net loss

(119)

(58)

Preferred stock dividends

(1)

(1)

Loss applicable to common shareholders

$         (120)

$           (59)

Loss per common share, basic and diluted:

Loss applicable to common shareholders

$        (1.99)

$        (1.04)

Weighted average number of common shares

60,267,487

56,923,415

Global Crossing Limited

Table 3

Unaudited Condensed Consolidated Statements of Cash Flows

($ in millions)

Three Months Ended

March 31,

2010

2009

Cash flows provided by (used in) operating activities:

Net loss

$ (119)

$    (58)

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities:

Gain on sale of property and equipment

(1)

-

Non-cash stock compensation expense

5

5

Depreciation and amortization

88

79

Provision for doubtful accounts

2

2

Amortization of prior period IRUs

(6)

(5)

Change in long term deferred revenue

10

27

Other

62

20

Change in operating working capital:

- Changes in accounts receivable

(47)

-

- Changes in accounts payable and accrued cost of access

(6)

(55)

- Changes in other current assets

(7)

(19)

- Changes in other current liabilities

(12)

10

Net cash provided by (used in) operating activities

(31)

6

Cash flows provided by (used in) investing activities:

Purchases of property and equipment

(41)

(38)

Change in restricted cash and cash equivalents

2

2

Net cash used in investing activities

(39)

(36)

Cash flows provided by (used in) financing activities:

Proceeds from short and long term debt

-

3

Repayment of capital lease obligations

(14)

(15)

Repayment of long term debt (including current portion)

(4)

(6)

Finance costs incurred

(1)

-

Payment of employee taxes on share-based compensation

(1)

(4)

Net cash used in financing activities

(20)

(22)

Effect of exchange rate changes on cash and cash equivalents

(28)

(2)

Net decrease in cash and cash equivalents

(118)

(54)

Cash and cash equivalents, beginning of period

477

360

Cash and cash equivalents, end of period

$  359

$   306

Global Crossing Limited and Subsidiaries

Table 4

Unaudited Condensed Consolidated Statements of Operations

($ in millions)

Quarter Ended March 31, 2010

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue

$ 120

$       132

$ 402

$     (6)

$  648

Cost of revenue

Cost of access

(38)

(31)

(242)

6

(305)

Real estate, network and operations

(10)

(22)

(67)

-

(99)

Third party maintenance

(5)

(7)

(15)

-

(27)

Cost of equipment and other sales

(17)

(4)

(3)

-

(24)

Total cost of revenue

(70)

(64)

(327)

6

(455)

Gross margin

50

68

75

-

193

Selling, general and administrative

(20)

(28)

(68)

-

(116)

Depreciation and amortization

(17)

(24)

(47)

-

(88)

Operating income (loss)

13

16

(40)

-

(11)

Other income (expense):

Interest income

2

1

4

(7)

-

Interest expense

(14)

(7)

(35)

7

(49)

Other income (expense), net

(13)

(28)

(11)

-

(52)

Income (loss) before benefit (provision) for income taxes

(12)

(18)

(82)

-

(112)

Benefit (provision) for income taxes

-

(6)

(1)

-

(7)

Net income (loss)

(12)

(24)

(83)

-

(119)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$ (12)

$       (24)

$ (84)

$-

$ (120)

Quarter Ended December 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue

$ 125

$       134

$ 405

$   (13)

$  651

Cost of revenue

Cost of access

(37)

(37)

(238)

12

(300)

Real estate, network and operations

(18)

(24)

(64)

1

(105)

Third party maintenance

(5)

(7)

(14)

-

(26)

Cost of equipment and other sales

(22)

(6)

(2)

-

(30)

Total cost of revenue

(82)

(74)

(318)

13

(461)

Gross margin

43

60

87

-

190

Selling, general and administrative

(19)

(27)

(61)

-

(107)

Depreciation and amortization

(17)

(24)

(49)

-

(90)

Operating income (loss)

7

9

(23)

-

(7)

Other income (expense):

Interest income

2

1

4

(7)

-

Interest expense

(14)

(8)

(32)

7

(47)

Other income (expense), net

1

1

(2)

-

-

Income (loss) before benefit (provision) for income taxes

(4)

3

(53)

-

(54)

Benefit (provision) for income taxes

-

17

-

-

17

Net income (loss)

(4)

20

(53)

-

(37)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$   (4)

$         20

$ (54)

$-

$   (38)

Quarter Ended March 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue

$ 110

$       116

$ 387

$     (4)

$  609

Cost of revenue

Cost of access

(34)

(27)

(229)

4

(286)

Real estate, network and operations

(18)

(18)

(61)

-

(97)

Third party maintenance

(5)

(5)

(14)

-

(24)

Cost of equipment and other sales

(15)

(2)

(6)

-

(23)

Total cost of revenue

(72)

(52)

(310)

4

(430)

Gross margin

38

64

77

-

179

Selling, general and administrative

(15)

(25)

(64)

-

(104)

Depreciation and amortization

(15)

(20)

(44)

-

(79)

Operating income (loss)

8

19

(31)

-

(4)

Other income (expense):

Interest income

2

1

1

(3)

1

Interest expense

(12)

(8)

(19)

3

(36)

Other income (expense), net

(3)

5

(17)

-

(15)

Income (loss) before benefit (provision) for income taxes

(5)

17

(66)

-

(54)

Benefit (provision) for income taxes

-

(4)

-

-

(4)

Net income (loss)

(5)

13

(66)

-

(58)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$   (5)

$         13

$ (67)

$-

$   (59)

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).

Global Crossing Limited and Subsidiaries

Table 5

Unaudited Summary of Consolidated Revenue

($ in millions)

Quarter Ended March 31, 2010

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 119

$         127

$ 308

$       -

$   554

Carrier voice

1

3

90

-

94

Intersegment revenue

-

2

4

(6)

-

Consolidated revenue

$ 120

$         132

$ 402

$    (6)

$   648

Quarter Ended December 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 123

$         128

$ 306

$       -

$   557

Carrier voice

2

3

88

-

93

Other

-

-

1

-

1

Intersegment revenue

-

3

10

(13)

-

Consolidated revenue

$ 125

$         134

$ 405

$  (13)

$   651

Quarter Ended March 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 107

$         111

$ 292

$       -

$   510

Carrier voice

3

3

92

-

98

Other

-

-

1

-

1

Intersegment revenue

-

2

2

(4)

-

Consolidated revenue

$ 110

$         116

$ 387

$    (4)

$   609

¹Rest 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).

Global Crossing Limited

Table 6

Unaudited Reconciliation of OIBDA to Income (Loss) Applicable to Common Shareholders

($ in millions)

Pursuant to the SEC's Regulation G, the following table provides a reconciliation of OIBDA, which is considered a non-GAAP (Generally Accepted Accounting Principles) financial measure, to income (loss) applicable to common shareholders.

OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from operating income (loss) 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 and preferred stock dividends.  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.

Quarter Ended March 31, 2010

GCUK

GC Impsat

ROW ¹

Eliminations

Total

OIBDA

$  30

$           40

$     7

$               -

$     77

Depreciation and amortization

(17)

(24)

(47)

-

(88)

Operating income (loss)

13

16

(40)

-

(11)

Interest income

2

1

4

(7)

-

Interest expense

(14)

(7)

(35)

7

(49)

Other expense, net

(13)

(28)

(11)

-

(52)

Provision for income taxes

-

(6)

(1)

-

(7)

Preferred stock dividends

-

-

(1)

-

(1)

Loss applicable to common shareholders

$ (12)

$          (24)

$ (84)

$               -

$  (120)

Quarter Ended December 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

OIBDA

$  24

$           33

$   26

$               -

$     83

Depreciation and amortization

(17)

(24)

(49)

-

(90)

Operating income (loss)

7

9

(23)

-

(7)

Interest income

2

1

4

(7)

-

Interest expense

(14)

(8)

(32)

7

(47)

Other income (expense), net

1

1

(2)

-

-

Benefit for income taxes

-

17

-

-

17

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$   (4)

$           20

$ (54)

$               -

$    (38)

Quarter Ended March 31, 2009

GCUK

GC Impsat

ROW ¹

Eliminations

Total

OIBDA

$  23

$           39

$   13

$               -

$     75

Depreciation and amortization

(15)

(20)

(44)

-

(79)

Operating income (loss)

8

19

(31)

-

(4)

Interest income

2

1

1

(3)

1

Interest expense

(12)

(8)

(19)

3

(36)

Other income (expense), net

(3)

5

(17)

-

(15)

Provision for income taxes

-

(4)

-

-

(4)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$   (5)

$           13

$ (67)

$               -

$    (59)

¹Rest 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).

Global Crossing Limited and Subsidiaries

Table 7

Unaudited Reconciliations of Free Cash Flow to Net Cash Provided by Operating Activities

($ in millions)

Pursuant to the SEC's Regulation G, the following table provides a reconciliation of Free Cash Flow, which is considered a non-GAAP (Generally Accepted Accounting Principles) financial measure, to net cash provided by operating activities.

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.

Quarter Ended

March 31,

2010

Free Cash Flow

$                  (72)

Purchases of property and equipment

41

Net cash used in operating activities

$                  (31)

Quarter Ended

December 31,

2009

Free Cash Flow

$                    72

Purchases of property and equipment

49

Net cash provided by operating activities

$                  121

Quarter Ended

March 31,

2009

Free Cash Flow

$                  (32)

Purchases of property and equipment

38

Net cash provided by operating activities

$                      6

Global Crossing Limited and Subsidiaries

Table 8

Unaudited Reconciliations of 2010 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 metric 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 metric to GAAP, we must use amounts or ranges for the GAAP components that arithmetically add up to the non-GAAP financial metric. While we feel reasonably comfortable with the methodology used to generate the projections of our non-GAAP financial metrics, 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 metric, may or may not prove to be correct. We will consider our projections of non-GAAP financial metrics 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.

This reconciliation was prepared based on the Company's guidance as provided on February 16, 2010, which is included in the preceding press release for informational purposes only.

Twelve months ended

December  31, 2010

Low End of Guidance

High End of Guidance

OIBDA

$                                390

$                                440

Depreciation and amortization

(380)

(383)

Operating income

10

57

Interest expense, net

(200)

(200)

Provision for income taxes

(25)

(25)

Preferred stock dividends

(4)

(4)

Net loss applicable to common shareholders

$                              (219)

$                              (172)

Free Cash Flow

$                                  10

$                                  60

Purchases of property and equipment

165

195

Net cash provided by operating activities

$                                175

$                                255

For definitions and a further description of these non-GAAP measures see tables 6 and 7.