EARNINGS NEWS.
Fez
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Global Crossing's Recurring Adjusted EBITDA up 91%, Cash Revenue up 46%, from Third Quarter of 1999, Pro Forma for M&A Activity
Data Products comprise 59% of Telecommunications Services Segment Cash Revenue for the quarter, up from 46% one year ago, Pro Forma for acquisitions and dispositions.
Announced sale of GlobalCenter to Exodus Communications for shares currently valued at approximately $3.2 billion, together with a 10-year agreement estimated to exceed $4 billion to be the primary provider of bandwidth to Exodus.
Announced agreement with Garban Intercapital to outsource its European and Asian communications network.
Financing to build the Global Crossing Network completed with the proceeds from Asia Global Crossing's recent IPO and debt financing.
The inauguration of service on South America Crossing and to Panama advances Latin America Network.
Commercial service initiated on Global Crossing's Voice over Internet Protocol (VoIP) backbone with seven VoIP gateway centers in North America now operational.
Hamilton, Bermuda - November 13, 2000 - Global Crossing Ltd. (NYSE: GX), which is building and offering services over the world's most extensive global IP-based fiber optic network, today reported third quarter 2000 financial results that exceeded the consensus estimates of analysts who follow the company. The Company reported, for its continuing operations, Cash Revenue of $1,367 million, Recurring Adjusted EBITDA of $355 million, and a Recurring Net Loss of $572 million, or $0.65 per share.
Tom Casey, Chief Executive Officer of Global Crossing, said, "We are very pleased to have once again exceeded our financial targets, and we continue to see strong demand. As we complete the sales of the ILEC and GlobalCenter, we will continue to sharpen our focus on our targeted customer sets: multinational corporations (MNC's), carriers, next-generation Internet service providers, and governments. Our top priority is to drive revenue growth from these customers, and increase margins by streamlining our organization and cost structure to match the requirements of serving these key customers."
SUMMARY OF QUARTERLY RESULTS
Results for continuing operations exclude Global Crossing's incumbent local exchange carrier business (ILEC), which the Company has agreed to sell to Citizens Communications for an estimated $3.65 billion in cash. GlobalCenter, which the Company has agreed to sell to Exodus Communications, is included in the reported results from continuing operations, due to Global Crossing's continuing equity investment in Exodus. The Company's investment in Exodus will be accounted for on the equity basis following completion of the transaction.
Thus, the "Continuing Operations" section of the table below summarizes the quarterly results of the Company and its subsidiaries excluding the ILEC for the three months ended September 30, 2000 and June 30, 2000. Results for the three months ended June 30, 2000 include the results of IPC Communications and IXnet from June 15, 2000.
The "Discontinued Operations-ILEC" section of the table summarizes the quarterly operating results of the discontinued operations of the ILEC for the three months ended September 30, 2000 and June 30, 2000.
Summary of Operations: Sequential
Three Months Ended
Change
September 30,
2000
June 30, 2000
Amount
Percent
(Unaudited)
(Unaudited)
(in millions)
Continuing Operations (1)
Cash Revenue
$1,367
$ 1,226
$141
12%
Recurring Adjusted EBITDA
$ 355
$ 336
$ 19
6%
Discontinued Operations – ILEC*
Cash Revenue
$ 187
$ 189
($ 2)
(1%)
Recurring Adjusted EBITDA
$ 95
$ 99
($ 4)
(4%)
*See accompanying schedules attached hereto.
(1) The Reported amounts in the table above reflect the Company's quarterly results for continuing operations for the three months ended September 30, 2000 and June 30, 2000. Results for the three months ended June 30, 2000 include the results of IPC Communications and IXnet from June 15, 2000.
For comparability, most period-to-period comparisons throughout this press release will be discussed giving Pro Forma effect to all acquisitions (Frontier, Global Marine, Racal, Hutchison Global Crossing and IPC/IXnet) and for the dispositions of both the ILEC and GlobalCenter, as if each had occurred on January 1, 1999. Proforma year-over-year comparisons are summarized in the table below, and detailed proforma quarter-to-quarter comparisons are shown in the attached schedules.
Proforma Year-over-Year Comparisons (1)
Three Months Ended
Change
September 30,
2000
September 30, 1999
Amount
Percent
(Unaudited)
(Unaudited)
(in millions)
Global Crossing
Service Revenue
$ 909
$ 710
$ 199
28%
Cash Revenue
$1,316
$ 902
$ 414
46%
Recurring Adjusted EBITDA
$ 379
$ 198
$ 181
91%
Telecommunications Services Segment:
Service Revenue
$ 791
$ 625
$166
27%
Cash Revenue
$1,198
$ 818
$380
46%
Recurring Adjusted EBITDA
$ 345
$ 180
$165
92%
Telecommunications Services-Customers:
Carrier Cash Revenue
$ 756
$ 397
$359
90%
Carrier Service Revenue
$ 349
$ 205
$144
70%
Commercial Service Revenue
$ 402
$ 375
$ 27
7%
Consumer Service Revenue
$ 39
$ 46
($ 7)
(15%)
Telecommunications Services-Products:
Data Cash Revenue
$ 712
$ 379
$333
88%
Data Service Revenue
$ 306
$ 187
$119
64%
Switched Voice Service Revenue
$ 383
$ 336
$ 47
14%
CLEC Service Revenue
$ 63
$ 57
$ 6
11%
Consumer LD Service Revenue
$ 39
$ 46
($ 7)
(15%)
(1) The Pro Forma amounts in the table above reflect, for both periods presented, the Company's acquisitions of Frontier, Global Marine, Racal, Hutchison Global Crossing and IPC/IXnet and the dispositions of both the ILEC and GlobalCenter, as if each had occurred on January 1, 1999.
HIGHLIGHTS OF THE QUARTER
Pro Forma Cash Revenue of $1,316 million was up 46% from the third quarter of 1999, and 4% sequentially from the second quarter 2000, while Pro Forma Recurring Adjusted EBITDA of $379 million increased 91% from the previous year's third quarter, and 6% sequentially.
Cash Revenue and Revenue for discontinued operations, consisting of the ILEC, was $187 million, and Recurring Adjusted EBITDA relating to these operations was $95 million.
Pro Forma Service Revenue of $909 million, which reflects neither the cash portion of the change in deferred revenue nor any sales-type lease revenue, increased 28% from the third quarter of 1999, and 6% sequentially. Pro Forma Revenue of $962 million was up 11% from the third quarter of 1999 and 1% sequentially, reflecting the continuing trend of circuit sales under contract terms that require revenue to be recognized over the life of the circuit rather than upon activation.
NETWORK BUILD & SERVICE OFFERINGS
During the quarter, Global Crossing continued its successful record of completing on budget the announced segments of its 101,000 route mile worldwide network, which is 60% complete and will serve five continents, 27 countries and more than 200 major cities by the middle of 2001. During the quarter, the Company completed the landing of the South America Crossing (SAC) undersea system in Argentina, Rio de Janeiro, Brazil, and Valparaiso, Chile. After the quarter-end, circuits between the U.S. and Buenos Aires, Argentina, were activated for five customers on SAC, representing initiation of service on that system. The Company inaugurated service in Fort Amador, Panama completing a key link in the Pan American Crossing (PAC) undersea system which connects Panama to Mexico and the Mid-Atlantic Crossing (MAC) undersea system. In Europe, Global Crossing completed the Irish and Southern Rings, extending the reach of the Pan European Crossing (PEC) system to 37 of the 46 cities planned for service by mid-2001.
Global Crossing continued its expansion of product capabilities across its global fiber optic network. At the end of the third quarter, private line services were available in 16 European cities, Tokyo, Hong Kong, the major cities of North America and Mexico. Additionally, data products such as ATM, Frame Relay and IP services are now available in North America, the United Kingdom, continental Europe, Tokyo and Hong Kong.
Global Crossing began its migration to a next-generation voice-over-packet network by initiating commercial service over its Voice over Internet Protocol (VoIP) backbone on its North American Crossing (NAC) terrestrial system. Core VoIP gateway centers are now located in seven U.S. cities, with core VoIP gateway centers to be placed in 15 additional cities in the U.S. and seven internationally by the end of 2000. The Company plans to transfer all of its backbone voice traffic from the circuit-switched network to the packet-based network by the end of 2002. The migration to VoIP enables Global Crossing to build new revenue streams through the creation and delivery of new and innovative voice and data services, and to significantly reduce the capital, real estate, and operating costs of voice transmission.
GLOBALCENTER SALE TO EXODUS
The sale of GlobalCenter to Exodus Communications, announced on September 28, 2000, for 99.5 million to 115.7 million shares of Exodus common stock, creates the premier complex web hosting company with unmatched scale and global presence. The combined company will have 32 Internet data centers exceeding 2.6 million square feet and more than 4,000 customers. As part of the transaction,
Exodus and Global Crossing signed a 10-year network services agreement pursuant to which Exodus will purchase 50% or more of its future network needs outside of Asia from Global Crossing. In addition, Exodus and the Company's Asia Global Crossing affiliate agreed to form a joint venture to provide complex web hosting and managed services in Asia. Exodus will manage and operate the joint venture with an ownership interest of 67%, with Asia Global Crossing owning 33%. The joint venture is expected to purchase at least 67% of its capacity requirements from Asia Global Crossing. The value of the combined network services agreement is estimated to exceed $4 billion over the ten-year contract life. Exodus and Global Crossing also signed a marketing services agreement whereby Global Crossing will offer and co-brand Exodus' web hosting services to Global Crossing customers.
NEW CUSTOMER ADDITIONS
Global Crossing expanded its services to the worldwide financial community by signing a network outsourcing agreement with Garban-Intercapital, the world's leading derivatives, securities and money broker. Garban is outsourcing its European and Asian communications network to Global Crossing, enabling Garban to replace its disparate legacy networks with a state-of-the-art IP-protocol virtual private
Network (VPN). The agreement provides Garban access to the latest technology without significant capital investments, and allows Garban to migrate more rapidly from voice-based brokering to the delivery of IP-based transaction services across multiple continents. Global Crossing's expertise in global trading systems, combined with its unique global integrated optical IP network, enable Global Crossing to offer unmatched capabilities in providing global VPN's.
CAPITAL RAISING & STRATEGIC INVESTMENTS
The Company and its affiliates arranged approximately $2,137 million in financing by increasing the size of its corporate credit facility ($1,250 million), by completing Asia Global Crossing's initial public offering of its common stock ($479 million, including exercise of the underwriters' over-allotment option), and AGC's issuance of 13.375% Senior Notes ($408 million). When combined with the $3.65 billion in estimated pre-tax cash proceeds from the sale of the ILEC, the Company's existing sources, and the Company's expected operating cash flow, Global Crossing expects to be in a position to fully fund all of its anticipated business expansion plans without further financing activities.
Global Crossing continues to make a number of strategic investments in companies that are developing new technologies and/or products complementary to Global Crossing's worldwide products and services. At the end of the third quarter, the Company had unrealized gains of approximately $700 million from its investment portfolio.
PRO FORMA SEGMENT RESULTS
TELECOMMUNICATIONS SERVICES SEGMENT (excludes ILEC, Installation and Maintenance Segment, and Global Center)
During the third quarter of 2000, the Company continued to see significant growth in the Telecommunications Services Segment, which is comprised of commercial, consumer and carrier businesses for bandwidth, data, voice, audio/video conferencing and other value-added services. This segment excludes the ILEC and the Installation and Maintenance Segment (and excludes GlobalCenter for proforma presentation). As highlighted in the table above, the Company continued to experience strong growth in Pro Forma Cash Revenue from data products which now account for 59% of Telecommunications Services Cash Revenue, up from 57% in the second quarter of 2000 and from 46% in the third quarter of 1999. Service Revenue, which excludes all of the effects of IRU sales, also grew strongly in the Telecommunications Services segment, driven by growth in the carrier customer sector and in all data products, which were sold to both carrier and commercial customers.
INSTALLATION AND MAINTENANCE SERVICES SEGMENT
The installation and maintenance business segment, consisting of the Company's Global Marine subsidiary, reported revenue of $118 million, a decline of approximately 1% as compared to the second quarter of 2000. Recurring Adjusted EBITDA increased to $34 million in the third quarter from $24 million in the second quarter of 2000. During the quarter, the Company experienced an increase in installation revenue from $79 million in the second quarter to $83 million due to the commencement of the intra-Asian submarine cable network (APCN) and an increase in Recurring Adjusted EBITDA due to the completion of a major installation contract. The increase in installation revenue was offset by a decrease of maintenance revenue due to the redeployment of vessels from maintenance activities to installation projects.
DISCONTINUED OPERATIONS - INCUMBENT LOCAL EXCHANGE CARRIER
The Company's discontinued operations, consisting of its ILEC segment, reported revenue of $187 million for the quarter with Recurring Adjusted EBITDA of $95 million. On July 12, Global Crossing announced an agreement to sell this business, acquired as part of its acquisition of Frontier, to Citizens Communications for an estimated $3.65 billion in cash. The transaction, which is subject to regulatory approvals, is expected to be completed within six months.
DEFINITION OF TERMS USED
Throughout this press release, Pro Forma results have been discussed, which give effect to all acquisitions (Frontier, Global Marine, Racal, Hutchison Global Crossing and IPC/IXnet) and for the dispositions of both the ILEC and GlobalCenter, as if each had occurred on January 1, 1999.
In this press release, Revenue refers to revenue reported on the Company's statements of operations under Generally Accepted Accounting Principles. Cash Revenue refers to Revenue plus the cash portion of the change in deferred revenue. Service Revenue excludes all impacts of IRU sales, and refers to Revenue less any revenue recognized immediately for circuit activations that qualified as sales type leases. Adjusted EBITDA refers to operating income (loss) plus goodwill and intangibles amortization, depreciation and amortization, non-cash cost of capacity sold, stock related expense and the cash portion of the change in deferred revenue, which definition is consistent with the financial covenants contained in the Company's major financing agreements. Recurring Adjusted EBITDA refers to Adjusted EBITDA plus one-time merger and integration expenses and other non-recurring expenses. For all periods presented, net income generated by the ILEC business is reported as "Income from discontinued operations, net of taxes" on the Condensed Consolidated Statements of Operations.
ABOUT GLOBAL CROSSING
Global Crossing Ltd. (NYSE: GX) is building and offering services over the world's most extensive global IP-based fiber optic network, which will have more than 101,000 route miles, serving five continents, 27 countries and more than 200 major cities. Global Crossing's operations are headquartered in Hamilton, Bermuda, with principal offices in Los Angeles, California; London, England; Amsterdam, The Netherlands; Madison, New Jersey; Rochester, New York; Dublin, Ireland and Miami, Florida. Visit Global Crossing at www.globalcrossing.com on the Web.
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Statements made in this press release that state the Company's or management's intentions, beliefs, expectations, or predictions for the future are forward-looking statements. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the Company's actual results to differ materially from those projected in such forward-looking statements. These risks, assumptions and uncertainties include: the ability to complete systems within currently estimated time frames and budgets; the ability to compete effectively in a rapidly evolving and price competitive marketplace; changes in the nature of telecommunications regulation in the United States and other countries; changes in business strategy; the successful integration of newly-acquired businesses; the impact of technological change; and other risks referenced from time to time in the Company's filings with the Securities and Exchange Commission.
CONTACT GLOBAL CROSSING
Analysts / Investors
Ken Simril
+1 310 385 5200
investors@globalcrossing.com Press
Kim Polan
+ 1 212 687 8080
kpolan@sardverb.com
Tom Goff
+ 1 310 385 5231
tgoff@globalcrossing.com |
