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• 2009 results in line with guidance for Revenue, OIBDA and Free Cash Flow.
• 2009 Free Cash Flow increased to $82 million, an improvement of $71 million year over year.
• Full-year OIBDA increased to $342 million, a 31 percent improvement year-over-year in constant currency terms.
• Full-year “Invest and grow” revenue increased to $2.16 billion, a 6 percent improvement year-over-year in constant currency terms.
• 2010 guidance reflects strong growth in OIBDA and continued positive full-year Free Cash Flow.
Florham Park, N.J., Tuesday, February 16, 2010 -- Global Crossing (NASDAQ: GLBC), a leading global IP solutions provider, today announced unaudited fourth quarter and full-year 2009 results. The company said it will discuss its consolidated financial and operational results for the fourth quarter and full-year 2009 on a conference call tomorrow. The following table highlights financial results:
Business Highlights
Global Crossing completed the year within its annual guidance ranges for Revenue, OIBDA and Free Cash Flow. The company reported Free Cash Flow of $82 million, an increase of $71 million compared to 2008. Global Crossing also reported “invest and grow” revenue of $2.16 billion, an increase of 6 percent compared with 2008 in constant currency terms. The company generated $342 million of OIBDA for 2009, an increase of 31 percent compared with 2008 in constant currency terms.
“Global Crossing delivered on its 2009 guidance despite a challenging economic environment,” said John Legere, CEO of Global Crossing. “We enter 2010 with a world-class global network and a differentiated set of product capabilities that provide a platform for continued growth and unparalleled customer satisfaction.”
Full Year Results
Global Crossing’s consolidated business generated $2.54 billion of revenue in 2009, representing a $63 million decline year over year, including a $138 million unfavorable foreign exchange impact. The company’s “invest and grow” services – namely that part of the business focused on serving global enterprises and carrier customers, excluding wholesale voice – generated revenue of $2.16 billion in 2009, including a $135 million unfavorable foreign exchange impact. Excluding the foreign exchange impact, “invest and grow” revenue increased $123 million, or 6 percent, year over year.
On a segment basis, the company’s “rest of world” (ROW), GC Impsat and GCUK segments generated “invest and grow” revenue of $1.23 billion, $492 million, and $460 million, respectively. In constant currency terms, ROW and GC Impsat “invest and grow” revenue increased by 10 percent and 9 percent, respectively, as compared to 2008. GCUK’s “invest and grow” revenue decreased 5 percent in constant currency terms as compared to 2008, principally due to the completion of the Camelot contract at the end of 2008.
Wholesale voice revenue declined 12 percent, or $50 million, year over year to $374 million. The decline reflects continued focus on managing the wholesale voice business for margin. Substantially all of the wholesale voice revenue is earned in the United States, within the ROW segment.
Global Crossing reported gross margin of $770 million or 30.4 percent of consolidated revenue for 2009, an increase of $6 million compared with 2008 including a $46 million unfavorable foreign exchange impact. Gross margin of $764 million in 2008 was 29.4 percent of consolidated revenue. Year-over-year the improvement in gross margin as a percent of consolidated revenue was driven by revenue growth in constant currency terms, improved revenue mix, lower cost of access and lower incentive compensation, partly offset by higher cost of equipment and other sales, real estate expense and payroll costs.
Sales, general and administrative (SG&A) expenses were $428 million in 2009, a $63 million decrease from $491 million in 2008, including a $30 million favorable foreign exchange impact. Excluding the impact of foreign exchange, the year-over-year improvement was driven primarily by cost reduction initiatives and, to a lesser degree, lower professional fees and incentive compensation accruals.
The company reported $342 million of OIBDA for 2009, a year-over-year improvement of $69 million, including an unfavorable foreign exchange impact of $16 million. Excluding the impact of foreign exchange, OIBDA grew $85 million or 31 percent year over year. On a segment basis, ROW, GC Impsat and GCUK contributed $89 million, $160 million and $93 million of OIBDA, respectively.
Global Crossing’s consolidated net loss applicable to common shareholders was $145 million for 2009, compared with a loss of $288 million in 2008. The year-over-year improvement was primarily driven by the improvement in OIBDA previously described, favorable foreign exchange impacts reflected in other income, net, and a lower provision for income tax and interest expense.
Fourth Quarter Results
Global Crossing’s consolidated revenue was $651 million in the fourth quarter of 2009, representing a 1 percent increase both sequentially and year over year. The sequential increase included a $4 million favorable foreign exchange impact and the year-over-year increase included a $13 million favorable foreign exchange impact. In constant currency terms, consolidated revenue increased 1 percent sequentially and declined 1 percent year over year. The year-over-year revenue comparison was adversely impacted by the completion of the Camelot contract at the end of 2008 within the GCUK segment.
The company’s “invest and grow” services generated revenue of $557 million in the fourth quarter. This represents an increase of 1 percent sequentially and 3 percent year over year, including substantially all of the favorable foreign exchange impacts referenced above. In constant currency terms, “invest and grow” revenue was essentially flat sequentially and year-over-year. Sequentially, “invest and grow” revenue was unfavorably impacted by a non-recurring benefit of $4 million in the third quarter within the ROW segment for one customer’s buyout of certain long-term obligations under an existing contract.
On a segment basis, ROW, GC Impsat and GCUK generated “invest and grow” revenue of $316 million, $131 million, and $123 million, respectively. In constant currency terms, this represented a sequential increase of 1 percent for both ROW and GC Impsat and an increase of 6 percent for GCUK. Year-over-year, in constant currency terms, ROW increased 5 percent and GC Impsat and GCUK declined 2 percent and 5 percent, respectively.
The company’s wholesale voice business generated revenue of $93 million in the fourth quarter, a 4 percent increase sequentially and a 7 percent decline year over year.
Global Crossing reported gross margin for the fourth quarter of $190 million compared with $200 million in the third quarter of 2009 and $212 million in the fourth quarter of 2008. The sequential decrease of $10 million in gross margin was driven by revenue mix, the non-recurring third quarter benefit from one customer’s contract buyout, and an increase in accrued incentive compensation. The year-over-year decrease of $22 million in gross margin was primarily driven by a $10 million increase in accrued incentive compensation, as the year-ago period included a net reversal of accrued incentive compensation. In addition, changes in revenue mix resulted in higher cost of equipment and other sales compared with the year-ago period.
SG&A expenses were $107 million in the fourth quarter of 2009, compared with $109 million in the third quarter of 2009 and $110 million in the fourth quarter of 2008. Foreign currency unfavorably impacted SG&A by $1 million sequentially and $2 million year over year. Excluding foreign exchange impacts, the sequential decline was due to lower commissions, professional fees and restructuring costs, partly offset by other miscellaneous costs increases. Year-over-year, the decline in SG&A was associated with lower commissions and professional fees, partly offset by a $4 million increase in accrued incentive compensation.
Global Crossing reported $83 million of OIBDA in the fourth quarter, compared with $91 million in the third quarter of 2009 and $102 million in the fourth quarter of 2008. The year-over-year decrease included a $14 million increase in accrued incentive compensation, partly offset by a favorable foreign exchange impact of $3 million. On a segment basis, ROW, GC Impsat and GCUK contributed $26 million, $33 million and $24 million, respectively.
Global Crossing’s consolidated net loss applicable to common shareholders was $38 million for the fourth quarter of 2009. On a sequential basis, net loss decreased $36 million, principally due to a non-recurring $29 million loss on the extinguishment of debt in the prior quarter and a benefit in the provision for income taxes in the current quarter, partly offset by higher interest expense and lower OIBDA described above. On a year-over-year basis, net loss decreased $15 million, principally due to favorable foreign exchange impacts and a benefit in the provision for income taxes, partly offset by higher depreciation and amortization and lower OIBDA described above.
Cash and Liquidity
As of December 31, 2009, Global Crossing had $477 million of unrestricted cash and cash equivalents, compared with $360 at December 31, 2008 and $429 at September 30, 2009. Including $16 million of restricted cash, Global Crossing had total cash of $493 million at December 31, 2009.
For 2009, cash flow from operating activities was $256 million, including $117 million of interest on indebtedness. Global Crossing received $130 million in proceeds from the sale of indefeasible rights of use (IRUs) and prepaid services in 2009. The company reported Free Cash Flow of $82 million for 2009. Uses of cash for the year included $249 million used for capital expenditures and for principal payments on capital leases.
Cash flow from operating activities for the fourth quarter was $121 million. Global Crossing received $38 million in proceeds from the sale of IRUs and prepaid services in the fourth quarter. The company reported Free Cash Flow of $72 million. Uses of cash for the quarter included $77 million for capital expenditures and for principal payments on capital leases.
2010 Guidance
“We expect to grow again in 2010, fueled by investments in our products, network and sales force. We will continue to make investments for growth, as we did in 2009, using internally-generated cash from operations while delivering another year of positive Free Cash Flow in 2010,” added John Legere.
Based on foreign exchange rates as of February 15, 2010, company guidance measures for 2010 are as follows:
Free Cash Flow Guidance reflects $55 million of additional interest expense as well as lower sales of IRUs and prepaid services compared to 2009.
The above guidance represents management’s current good faith estimates for the designated measures and is based on various assumptions which may or may not materialize. Some of the risks and uncertainties that could cause actual results to differ materially from these estimates are referenced at the end of this press release.
Non-GAAP Metrics
Pursuant to the Securities and Exchange Commission’s (SEC’s) Regulation G and Item 10(e)(1)(i) of Regulation S-X, the attached financial tables include definitions of non-GAAP financial measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). In addition, measures referred to in this press release as being calculated “in constant currency terms” are non-GAAP measures intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such measures are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.
Conference Call
The company will hold a conference call on Wednesday, February 17, 2009 at 9:00 a.m. EST to discuss its financial results. The call may be accessed by dialing +1 212 271 4651 or, if calling from within the United Kingdom, by dialing +44 203 300 0097. Callers are advised to access the call 15 minutes before the start time. A Webcast with presentation slides will be available at http://investors.globalcrossing.com/events.cfm.
A replay of the call will be available on Wednesday, February 17, 2010 beginning at 11:30 a.m. EST and will be accessible until Friday, February 26, 2010 at 11:30 a.m. EST. To access the replay, North American callers may dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21455839. Callers in the United Kingdom may dial +44 (0) 870 000 3081 or (0) 800 692 0831 and enter reservation number 21455839.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) is a leading global IP and Ethernet solutions provider with the world's first integrated global IP-based network. The company offers a full range of data, voice and collaboration services with an industry leading customer experience and delivers service to approximately 40 percent of the Fortune 500, as well as to 700 carriers, mobile operators and ISPs. It delivers converged IP services to more than 700 cities in more than 70 countries around the world.
Website Access to Company Information
Global Crossing maintains a corporate website at www.globalcrossing.com, and you can find additional information
about the company through the Investors pages on that website at http://investors.globalcrossing.com. Global Crossing utilizes its website as a channel of distribution of important information about the company. Global Crossing routinely posts financial and other important information regarding the company and its business, financial condition and operations on the Investors web pages.
Visitors to the Investors web pages can view and print copies of Global Crossing's SEC filings, including periodic and current reports on Forms 10-K, 10-Q and 8-K, as soon as reasonably practicable after those filings are made with the SEC. Copies of the charters for each of the standing committees of Global Crossing's Board of Directors, its Corporate Governance Guidelines, Ethics Policy, press releases and analysts presentations are all available through the Investors web pages.
Please note that the information contained on any of Global Crossing's websites is not incorporated by reference in, or considered to be a part of, any document unless expressly incorporated by reference therein.
# # #
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 the actual results to differ materially, including: Global Crossing's history of substantial operating losses and the fact that, in the near term, funds from operations will not satisfy cash requirements; legal and contractual restrictions on the inter-company transfer of funds by the company's subsidiaries; the company's ability to continue to connect its network to incumbent carriers' networks or maintain Internet peering arrangements on favorable terms; the consequences of any inadvertent violation of the company's Network Security Agreement with the U.S. Government; increased competition and pricing pressures resulting from technology advances and regulatory changes; competitive disadvantages relative to competitors with superior resources; political, legal and other risks due to the company's substantial international operations; risks associated with movements in foreign currency exchange rates; risks related to restrictions on the conversion of the Venezuelan bolivar into U.S. dollars and to the resultant buildup of a material excess bolivar cash balance, which is carried on Global Crossing’s books at the official exchange rate, attributing to the bolivar a value that is significantly greater than the value prevailing on the parallel market; potential weaknesses in internal controls of acquired businesses, and difficulties in integrating internal controls of those businesses with the company’s own internal controls; the concentration of revenue in a limited number of customers, and the rights of such customers to terminate their contracts or to simply cease purchasing services thereunder; exposure to contingent liabilities; and other risks referenced from time to time in the company's filings with the Securities and Exchange Commission. Global Crossing undertakes no duty to update information contained in this press release or in other public disclosures at any time.
CONTACT GLOBAL CROSSING:
Press Contacts
Michael Schneider
+ 1 973 937 0146
Michael.Schneider@globalcrossing.com
Analysts/Investors Contact
Mark Gottlieb
+ 1 800 836 0342
glbc@globalcrossing.com
Antonio Suarez
+1 973 937 0233
Antonio.Suarez@globalcrossing.com
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