Global Crossing Announces Third Quarter 2010 Results

Results at a Glance

(Dollars in Millions)

Change vs. 2Q 2010

Change vs. 3Q 2009

3Q 2010

Reported

Constant
Currency

Reported

Constant
Currency

Consolidated Revenues

$ 648

3%

2%

1%

2%

"Invest & Grow" Revenues

$ 568

2%

2%

3%

4%

OIBDA

$ 109

17%

16%

20%

19%

Free Cash Flow

$   (1)

$  12

$  (53)

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
($ in millions)

Original
2010 Guidance

Updated
2010 Guidance

“Invest & Grow” Revenue

$2,300 – $2,375

$2,275 - $2,300

OIBDA

$390 – $440

$400 - $415

Free Cash Flow

$10 – $60

($10) - $10

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)

September 30, 2010

December 31, 2009

(unaudited)

ASSETS:

Current assets:

Cash and cash equivalents

$                 311

$                   477

Restricted cash and cash equivalents - current portion

14

9

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

343

328

Prepaid costs and other current assets

90

101

Total current assets

758

915

Restricted cash and cash equivalents - long term

5

7

Property and equipment, net of accumulated depreciation of $1,442 and $1,216

1,207

1,280

Intangible assets, net (including goodwill of $178 and $175)

197

198

Other assets

75

88

Total assets

$              2,242

$                2,488

LIABILITIES:

Current liabilities:

Accounts payable

$                 238

$                   312

Accrued cost of access

108

87

Short term debt and current portion of long term debt

168

37

Obligations under capital leases - current portion

54

49

Deferred revenue - current portion

172

174

Other current liabilities

361

384

Total current liabilities

1,101

1,043

Long term debt

1,172

1,295

Obligations under capital leases

82

90

Deferred revenue

330

334

Other deferred liabilities

59

86

Total liabilities

2,744

2,848

SHAREHOLDERS' DEFICIT:

Common stock, 110,000,000 shares authorized, $.01 par value, 60,477,709 and 60,219,817 shares issued and outstanding as of September 30, 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

1,438

1,427

Accumulated other comprehensive loss

(5)

(24)

Accumulated deficit

(1,938)

(1,766)

Total shareholders' deficit

(502)

(360)

Total liabilities and shareholders' deficit

$              2,242

$                2,488

Global Crossing Limited

Table 2

Unaudited Condensed Consolidated Statements of Operations

($ in millions)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Revenue

$           648

$           643

$        1,926

$        1,885

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

Cost of access

(289)

(288)

(870)

(859)

Real estate, network and operations

(101)

(106)

(303)

(301)

Third party maintenance

(25)

(26)

(78)

(77)

Cost of equipment and other sales

(25)

(23)

(75)

(68)

Total cost of revenue

(440)

(443)

(1,326)

(1,305)

Gross margin

208

200

600

580

Selling, general and administrative

(99)

(109)

(321)

(321)

Depreciation and amortization

(82)

(89)

(252)

(250)

Operating income

27

2

27

9

Other income (expense):

Interest income

-

2

1

7

Interest expense

(44)

(39)

(141)

(113)

Other income (expense), net

21

(32)

(37)

11

Income (loss) before provision for income taxes

4

(67)

(150)

(86)

Provision for income taxes

(10)

(6)

(22)

(18)

Net loss

(6)

(73)

(172)

(104)

Preferred stock dividends

(1)

(1)

(3)

(3)

Loss applicable to common shareholders

$             (7)

$           (74)

$         (175)

$         (107)

Loss per common share, basic and diluted:

Loss applicable to common shareholders

$        (0.12)

$        (1.23)

$        (2.90)

$        (1.81)

Weighted average number of common shares

60,477,559

60,135,114

60,393,860

58,999,359

Global Crossing Limited

Table 3

Unaudited Condensed Consolidated Statements of Cash Flows

($ in millions)

Nine Months Ended

September 30,

2010

2009

Cash flows provided by (used in) operating activities:

Net loss

$ (172)

$  (104)

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

Gain on sale of property and equipment

(1)

-

Loss on sale of marketable securities

2

-

Non-cash loss on extinguishment of debt

-

15

Non-cash stock compensation expense

15

15

Depreciation and amortization

252

250

Provision for doubtful accounts

1

5

Amortization of prior period IRUs

(19)

(18)

Change in long term deferred revenue

17

51

Other

59

(27)

Change in operating working capital:

- Changes in accounts receivable

(21)

8

- Changes in accounts payable and accrued cost of access

(52)

(78)

- Changes in other current assets

(2)

(20)

- Changes in other current liabilities

(45)

38

Net cash provided by operating activities

34

135

Cash flows provided by (used in) investing activities:

Purchases of property and equipment

(120)

(125)

Purchase of marketable securities

(10)

-

Proceeds from sale of marketable securities

8

4

Change in restricted cash and cash equivalents

(1)

(2)

Net cash used in investing activities

(123)

(123)

Cash flows provided by (used in) financing activities:

Proceeds from short and long term debt

-

741

Repayment of capital lease obligations

(41)

(47)

Repayment of long term debt (including current portion)

(9)

(592)

Premium paid on extinguishment of debt

-

(14)

Finance costs incurred

(2)

(24)

Payment of employee taxes on share-based compensation

(1)

(12)

Net cash provided by (used in) financing activities

(53)

52

Effect of exchange rate changes on cash and cash equivalents

(24)

5

Net increase (decrease) in cash and cash equivalents

(166)

69

Cash and cash equivalents, beginning of period

477

360

Cash and cash equivalents, end of period

$  311

$   429

Global Crossing Limited and Subsidiaries

Table 4

Unaudited Condensed Consolidated Statements of Operations

($ in millions)

Quarter Ended September 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue

$   113

$            146

$    395

$            (6)

$      648

Cost of revenue

Cost of access

(34)

(31)

(230)

6

(289)

Real estate, network and operations

(17)

(24)

(60)

-

(101)

Third party maintenance

(4)

(7)

(14)

-

(25)

Cost of equipment and other sales

(17)

(5)

(3)

-

(25)

Total cost of revenue

(72)

(67)

(307)

6

(440)

Gross margin

41

79

88

-

208

Selling, general and administrative

(19)

(30)

(50)

-

(99)

Depreciation and amortization

(15)

(18)

(49)

-

(82)

Operating income (loss)

7

31

(11)

-

27

Other income (expense):

Interest income

1

1

5

(7)

-

Interest expense

(14)

(3)

(34)

7

(44)

Other income (expense), net

9

(1)

13

-

21

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

3

28

(27)

-

4

Benefit (provision) for income taxes

-

(10)

-

-

(10)

Net income (loss)

3

18

(27)

-

(6)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$       3

$              18

$    (28)

$-

$        (7)

Quarter Ended June 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue

$   115

$            137

$    384

$            (6)

$      630

Cost of revenue

Cost of access

(35)

(31)

(215)

5

(276)

Real estate, network and operations

(18)

(24)

(62)

1

(103)

Third party maintenance

(6)

(6)

(14)

-

(26)

Cost of equipment and other sales

(17)

(5)

(4)

-

(26)

Total cost of revenue

(76)

(66)

(295)

6

(431)

Gross margin

39

71

89

-

199

Selling, general and administrative

(19)

(30)

(57)

-

(106)

Depreciation and amortization

(15)

(20)

(47)

-

(82)

Operating income (loss)

5

21

(15)

-

11

Other income (expense):

Interest income

2

-

6

(7)

1

Interest expense

(14)

(6)

(35)

7

(48)

Other income (expense), net

(1)

1

(6)

-

(6)

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

(8)

16

(50)

-

(42)

Benefit (provision) for income taxes

-

(6)

1

-

(5)

Net income (loss)

(8)

10

(49)

-

(47)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$      (8)

$              10

$    (50)

$-

$      (48)

Quarter Ended September 30, 2009

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue

$   120

$            129

$    397

$            (3)

$      643

Cost of revenue

Cost of access

(33)

(27)

(231)

3

(288)

Real estate, network and operations

(22)

(20)

(65)

1

(106)

Third party maintenance

(5)

(6)

(15)

-

(26)

Cost of equipment and other sales

(16)

(4)

(3)

-

(23)

Total cost of revenue

(76)

(57)

(314)

4

(443)

Gross margin

44

72

83

1

200

Selling, general and administrative

(19)

(28)

(61)

(1)

(109)

Depreciation and amortization

(18)

(22)

(49)

-

(89)

Operating income (loss)

7

22

(27)

-

2

Other income (expense):

Interest income

3

2

-

(3)

2

Interest expense

(14)

(8)

(20)

3

(39)

Other income (expense), net

(8)

(13)

(11)

-

(32)

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

(12)

3

(58)

-

(67)

Benefit (provision) for income taxes

-

(6)

-

-

(6)

Net income (loss)

(12)

(3)

(58)

-

(73)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$    (12)

$               (3)

$    (59)

$-

$      (74)

(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 September 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 112

$         142

$ 314

$            -

$   568

Carrier voice

1

1

77

-

79

Other

-

-

1

-

1

Intersegment revenue

-

3

3

(6)

-

Consolidated revenue

$ 113

$         146

$ 395

$          (6)

$   648

Quarter Ended June 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 113

$         132

$ 310

$            -

$   555

Carrier voice

2

3

69

-

74

Other

-

-

1

-

1

Intersegment revenue

-

2

4

(6)

-

Consolidated revenue

$ 115

$         137

$ 384

$          (6)

$   630

Quarter Ended September 30, 2009

GCUK

GC Impsat

ROW (1)

Eliminations

Total

Revenue:

Enterprise, carrier data and indirect sales channel

$ 117

$         125

$ 311

$            -

$   553

Carrier voice

3

2

84

-

89

Other

-

-

1

-

1

Intersegment revenue

-

2

1

(3)

-

Consolidated revenue

$ 120

$         129

$ 397

$          (3)

$   643

(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

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 September 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

OIBDA

$  22

$           49

$   38

$          -

$   109

Depreciation and amortization

(15)

(18)

(49)

-

(82)

Operating income (loss)

7

31

(11)

-

27

Interest income

1

1

5

(7)

-

Interest expense

(14)

(3)

(34)

7

(44)

Other income (expense), net

9

(1)

13

-

21

Provision for income taxes

-

(10)

-

-

(10)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$    3

$           18

$ (28)

$          -

$      (7)

Quarter Ended June 30, 2010

GCUK

GC Impsat

ROW (1)

Eliminations

Total

OIBDA

$  20

$           41

$   32

$          -

$     93

Depreciation and amortization

(15)

(20)

(47)

-

(82)

Operating income (loss)

5

21

(15)

-

11

Interest income

2

-

6

(7)

1

Interest expense

(14)

(6)

(35)

7

(48)

Other income (expense), net

(1)

1

(6)

-

(6)

Benefit (provision) for income taxes

-

(6)

1

-

(5)

Preferred stock dividends

-

-

(1)

-

(1)

Income (loss) applicable to common shareholders

$   (8)

$           10

$ (50)

$          -

$    (48)

Quarter Ended September 30, 2009

GCUK

GC Impsat

ROW (1)

Eliminations

Total

OIBDA

$  25

$           44

$   22

$          -

$     91

Depreciation and amortization

(18)

(22)

(49)

-

(89)

Operating income (loss)

7

22

(27)

-

2

Interest income

3

2

-

(3)

2

Interest expense

(14)

(8)

(20)

3

(39)

Other expense, net

(8)

(13)

(11)

-

(32)

Provision for income taxes

-

(6)

-

-

(6)

Preferred stock dividends

-

-

(1)

-

(1)

Loss applicable to common shareholders

$ (12)

$            (3)

$ (59)

$          -

$    (74)

(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 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

September 30,

2010

Free Cash Flow

$                      (1)

Purchases of property and equipment

30

Net cash provided by operating activities

$                      29

Quarter Ended

June 30,

2010

Free Cash Flow

$                    (13)

Purchases of property and equipment

49

Net cash provided by operating activities

$                      36

Quarter Ended

September 30,

2009

Free Cash Flow

$                      52

Purchases of property and equipment

33

Net cash provided by operating activities

$                      85

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 updated guidance as provided on November 1, 2010, which is included in the preceding press release.

Twelve months ended

December 31, 2010

Low End of Guidance

High End of Guidance