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Press Release -- April 8th, 2010
Source: Global Crossing
Tags: Equipment, Ethernet, Exchange

Global Crossing Reports GCUK’s Fourth Quarter and Full Year 2009 Results

LONDON, April 8 /PRNewswire-FirstCall/ -- Global Crossing Limited (NASDAQ: GLBC), a leading global IP solutions provider, today announced fourth quarter and full year 2009 financial results for its subsidiary, Global Crossing (UK) Telecommunications Limited (GCUK).

Highlights

GCUK generated 78 million pounds of revenue in the fourth quarter and Operating Income Before Depreciation and Amortization (OIBDA) of 16 million pounds. (OIBDA is a non-GAAP measure defined and reconciled below.) The company also reported cash generated from operations of 29 million pounds before interest payments of 15 million pounds.

"Despite a challenging economic environment, we observed healthy demand for our robust suite of IP-based services in GCUK," said John Legere, Global Crossing's chief executive officer. "We see an opportunity to grow the business and further diversify our customer base in 2010, supported by an augmented sales force, our continued investment in the products and services demanded by the marketplace, and our recognized ability to provide a differentiated customer experience."

Fourth Quarter Results

The results discussed below are prepared in accordance with International Financial Reporting Standards and presented in U.S. Generally Accepted Accounting Principles (U.S. GAAP) format. GCUK generated revenue of 78 million pounds, a sequential increase of 3 million pounds, or 4 percent, and a year-over-year decrease of 4 million pounds, or 4 percent. The sequential increase in revenue was primarily due to increased sales in the company's "invest and grow" business – that part of the business focused on serving enterprise, carrier and government customers excluding wholesale voice – including an increase in non-recurring fees.  The year-over-year decline in revenue was primarily due to the completion of the Camelot contract in December 2008, partially offset by growth in other "invest and grow" revenue.

Gross margin was 27 million pounds for the quarter, a 4 million pound decrease sequentially and year over year. Sequentially, gross margin was unfavorably impacted by benefits in the third quarter from a 4 million pound favorable regulatory ruling related to access costs paid in periods prior to 2009 and a 2 million pound non-recurring reduction in property tax charges.   The unfavorable sequential impact of these items was partially offset by increased revenue. The year-over-year decline in gross margin was principally due to lower revenue.

Sales, general and administrative expenses (SG&A) were 11 million pounds for the quarter, compared with 10 million pounds in the prior quarter and 14 million pounds in the fourth quarter of 2008. The year-over-year variance was primarily due to a decrease in allocated corporate overhead costs.

GCUK's OIBDA for the fourth quarter was 16 million pounds, compared with 20 million pounds in the third quarter of 2009 and 16 million pounds in the fourth quarter of 2008. The sequential decrease in OIBDA was primarily due to the non-recurring items benefitting gross margin in the third quarter. Year over year, lower gross margin was offset by a decrease in allocated corporate overhead costs.

GCUK recorded a net loss of 2 million pounds for the fourth quarter, compared with a net loss of 2 million pounds in the third quarter of 2009 and a net loss of 25 million pounds in the fourth quarter of 2008. The year-over-year decrease in net loss was primarily due to an unfavorable foreign exchange impact on net U.S. dollar-denominated debt in the year-ago period.

Full Year Results

GCUK generated revenue of 309 million pounds in 2009, compared with 323 million pounds for 2008. The year-over-year decline in revenue was primarily due to the completion of the Camelot contract, which was partially offset by increases in other "invest and grow" revenue.

Gross margin for 2009 was 106 million pounds, or 34 percent of revenue, compared with the prior year in which gross margin was 119 million pounds, or 37 percent of revenue. The year-over-year decline in gross margin was principally due to lower revenue as described above and higher cost of equipment and professional services costs. These movements were somewhat offset by lower cost of access and third party maintenance costs.

SG&A was 40 million pounds for the year, compared with 43 million pounds in the prior year. The year-over-year variance was primarily due to a decrease in allocated corporate overhead costs.

GCUK's OIBDA for 2009 was 66 million pounds, compared with 76 million pounds in 2008. The year-over-year decline in OIBDA was principally due to lower gross margin due to the factors described above, partially offset by a decrease in allocated corporate overhead costs.

GCUK recorded net income of 5 million pounds for 2009, compared with a net loss of 30 million pounds in 2008. The year-over-year improvement was primarily due to an unfavorable foreign exchange impact on net U.S. dollar-denominated debt in the prior year.

Cash and Liquidity

As of December 31, 2009, GCUK had cash and cash equivalents of 37 million pounds compared with 26 million pounds at the end of September 30, 2009, and 36 million pounds at the end of December 31, 2008.

GCUK's cash and cash equivalents increased 11 million pounds in the fourth quarter. Net cash from operating activities during the fourth quarter totaled 14 million pounds, including cash flow from operating working capital of 13 million pounds and interest payments of 15 million pounds. During the quarter, GCUK recorded purchases of property, plant and equipment of 3 million pounds, principal payments on finance leases and other debt of 4 million pounds and proceeds from refinancing a capital lease of 4 million pounds.

GCUK's cash and cash equivalents increased by 1 million pounds during 2009. Net cash from operating activities during 2009 totaled 18 million pounds, including operating working capital use of 9 million pounds and interest payments of 32 million pounds. During 2009, GCUK recorded purchases of property, plant and equipment of 12 million pounds, principal payments on finance leases and other debt of 12 million pounds and proceeds from refinancing a capital lease of 4 million pounds.

During the year, the company also repurchased 7 million pounds of the Senior Secured Notes, excluding accrued interest. To support this debt repurchase and other working capital needs, GCUK borrowed 15 million dollars (approximately 10 million pounds) from GC Impsat.

International Financial Reporting Standards

GCUK's results reported here include audited consolidated financial results for the year ended December 31, 2008; unaudited consolidated financial results for the year ended December 31, 2009 and the three months ended December 31, 2009, September 30, 2009 and December 31, 2008; unaudited consolidated balance sheet as of December 31, 2009; and audited consolidated balance sheet as of December 31, 2008, all in accordance with IFRS, as published by the International Accounting Standards Board (IASB). GCUK's fourth quarter 2009 and 2008 and third quarter of 2009 results, as well as those for the full years 2009 and 2008, were included in Global Crossing's consolidated results previously reported on February 16, 2010, in accordance with U.S. GAAP and in U.S. dollars.

Non-GAAP Financial Measures

Consistent with the U.S. Securities and Exchange Commission's (SEC's) Regulation G, the attached tables include a definition of OIBDA, as well as a reconciliation of such measure to the most directly comparable financial measure calculated in accordance with IFRS and presented in the US GAAP reporting format.

Conference Call

Management has scheduled a conference call for Thursday, April 8, 2010, 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 2911 or +44 (0) 20 8196 2883. 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 http://investors.globalcrossing.com/results.cfm.

A replay of the call will be available on Thursday, April 8, 2010, beginning at 11:00 a.m. EDT/4:00 p.m. BST and will be accessible until Thursday, April 15, 2010, 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 21463689. UK callers may access the replay by dialing +44 (0) 87 0000 3081 or (0) 80 0692 0831 and entering reservation number 21463689.

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) 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 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 globe.

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, 8-K, and in respect of GCUK's Forms 20-F and 6-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: the impact on the business of current global economic conditions and the tightening in global credit markets; increased competition and 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, and the rights of such customers to terminate their contracts or to simply cease purchasing services thereunder; the influence of the company's parent, and possible conflicts of interest of the parent or of certain of GCUK's directors and officers; our ability to raise capital through financing activities; exposure to contingent liabilities; and other risks referenced from time to time in GCUK'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 Contact
Michael Schneider
+ 1 973 937 0146
Michael.Schneider@globalcrossing.com
Analysts/Investors Contacts
Mark Gottlieb
+ 1 800 836 0342
glbc@globalcrossing.com
Gino Mathew
United Kingdom
+ 1 973 937 0133
gino.mathew@globalcrossing.com

IR/PR

Table 1

Global Crossing (UK) Telecommunications Limited and Subsidiaries

Consolidated Statements of Financial Position

Results below are in pounds sterling in thousands

December 31,    December 31,

2009            2008

------------    ------------

(unaudited)

Non-current assets

Intangible assets, net                         11,417        11,955

Property, plant and equipment, net            157,526       179,544

Investment in associate                           210           178

Retirement benefit asset                          468         1,020

Trade and other receivables                    33,230        37,006

-------       -------

202,851       229,703

-------       -------

Current assets

Trade and other receivables                    58,125        56,276

Derivative financial instrument                     -         2,787

Cash and cash equivalents                      37,331        36,100

------        ------

95,456        95,163

-------       -------

Total assets                                      298,307       324,866

=======       =======

Current liabilities

Trade and other payables                      (81,085)     (81,909)

Senior secured notes                          (11,819)      (7,382)

Deferred revenue                              (37,313)     (38,751)

Provisions                                     (1,281)      (1,590)

Obligations under finance leases               (7,310)     (10,182)

Other debt obligations                           (285)        (740)

--------      --------

(139,093)    (140,554)

--------      --------

Non-current liabilities

Trade and other payables                      (10,830)        (335)

Senior secured notes                         (255,496)    (279,546)

Deferred revenue                              (90,326)    (100,694)

Retirement benefit obligation                  (2,551)      (2,880)

Provisions                                     (2,211)      (3,786)

Obligations under finance leases              (12,262)     (14,043)

Other debt obligations                             (9)        (240)

--------      --------

(373,685)    (401,524)

--------      --------

Total liabilities                                (512,778)    (542,078)

--------      --------

Net liabilities                                  (214,471)    (217,212)

========      ========

Capital and reserves

Equity share capital (101,000 shares

outstanding at 1 pound each)                     101           101

Capital reserve                                31,271        30,504

Hedging reserve                                     -         2,694

Accumulated deficit                          (245,843)    (250,511)

--------      --------

Total equity                                     (214,471)    (217,212)

========      ========

Table 2

Global Crossing (UK) Telecommunications Limited and Subsidiaries

Consolidated Statements of Operations

Results below are in pounds sterling in thousands

Three months ended

------------------

IFRS in IFRS          December 31,    September 30,         December 31,

Reporting Format         2009             2009                2008

------------    -------------     -----------------

(unaudited)      (unaudited)          (unaudited)

Revenue                   78,126           74,841               81,647

Cost of sales            (50,457)         (45,257)             (51,435)

------           ------               ------

Gross profit              27,669           29,584               30,212

Distribution costs        (5,417)          (4,775)              (4,723)

Administrative

expenses                (16,839)         (15,666)             (22,694)

------           ------               ------

Operating profit           5,413            9,143                2,795

Finance revenue            1,026            1,510                1,212

Finance charges           (8,538)          (8,557)              (8,413)

Net foreign

exchange gain/

(loss) on foreign

currency

borrowings, net             686           (3,576)             (20,706)

------           ------              -------

(Loss)

before tax               (1,413)          (1,480)             (25,112)

Tax charge                  (149)             (89)                (142)

------           ------               ------

(Loss) for

the period               (1,562)          (1,569)             (25,254)

=========        =========           ==========

Year ended

----------

IFRS in IFRS                December 31,             December 31,

Reporting Format               2009                     2008

-------------            ------------

(unaudited)

Revenue                         308,864                 322,832

Cost of sales                  (197,160)               (200,487)

-------                 -------

Gross profit                    111,704                 122,345

Distribution costs              (19,352)                (18,361)

Administrative expenses         (68,708)                (75,037)

------                  ------

Operating profit                 23,644                  28,947

Finance revenue                   4,924                   4,436

Finance charges                 (34,311)                (34,422)

Net foreign

exchange gain/

(loss) on foreign

currency

borrowings, net                 11,009                 (28,374)

------                 -------

Profit/(loss)

before tax                       5,266                 (29,413)

Tax charge                         (598)                   (432)

------                  ------

Profit/(loss) for

the period                       4,668                 (29,845)

========               ==========

Three months ended

IFRS in U.S. GAAP                       ------------------

Reporting Format             December 31, September 30, December 31,

2009         2009          2008

-----------  ------------  ------------

(unaudited)  (unaudited)    (unaudited)

REVENUES                          78,126      74,841          81,647

Cost of revenue (excluding

depreciation and

amortization shown

separately below)

Cost of access                 (23,966)    (20,780)        (26,058)

Real estate, network and

Operations                    (11,387)    (10,144)        (11,568)

Third party maintenance         (3,094)     (3,417)         (3,681)

Cost of equipment and

other sales                  (13,140)    (10,295)         (9,954)

-------     -------          -------

Total cost of revenue       (51,587)    (44,636)        (51,261)

-------     -------          -------

Gross margin                      26,539      30,205          30,386

Selling, general and

administrative                 (10,679)     (9,861)        (14,143)

Depreciation and amortization    (10,657)    (10,742)        (11,393)

-------     -------          -------

OPERATING INCOME                   5,203       9,602           4,850

OTHER INCOME (EXPENSE)

Interest expense, net           (7,512)     (7,047)         (7,201)

Other income (expense), net        896      (4,035)        (22,761)

-------     -------          -------

(LOSS) BEFORE PROVISION

FOR INCOME TAXES                (1,413)     (1,480)        (25,112)

Provision for income taxes       (149)        (89)           (142)

-------     -------          -------

NET (LOSS)                        (1,562)     (1,569)        (25,254)

=======     =======          =======

Year ended

----------

IFRS in U.S. GAAP

Reporting Format                  December 31,        December 31,

2009                 2008

-------------        ------------

(unaudited)          (unaudited)

REVENUES                              308,864              322,832

Cost of revenue (excluding

depreciation and amortization

shown separately below)

Cost of access                      (94,731)            (101,092)

Real estate, network and

operations                         (49,389)             (49,409)

Third party maintenance             (13,875)             (16,577)

Cost of equipment and other sales   (44,966)             (36,866)

-------              -------

Total cost of revenue             (202,961)            (203,944)

-------              -------

Gross margin                          105,903              118,888

Selling, general and administrative   (39,983)             (42,937)

Depreciation and amortization         (43,124)             (44,699)

-------              -------

OPERATING INCOME                       22,796               31,252

OTHER INCOME (EXPENSE)

Interest expense, net               (29,387)             (29,986)

Other income (expense), net          11,857              (30,679)

-------              -------

INCOME (LOSS) BEFORE PROVISION

FOR INCOME TAXES                       5,266              (29,413)

Provision for income taxes             (598)                (432)

-------              -------

NET INCOME (LOSS)                       4,668              (29,845)

=======              =======

Note: The classification differences between reporting under IFRS and

U.S. GAAP reporting format are as follows:

Cost of sales:

Under IFRS reporting format, the company includes cost of access, third

party maintenance, customer-specific costs and depreciation on network

assets within cost of sales.

Cost of revenue:

Under U.S. GAAP reporting format, the company includes cost of access,

real estate, network and operations, third party maintenance and cost

of equipment and other sales within cost of revenue.

Foreign currency gains and losses:

Under IFRS reporting format, the company includes foreign currency

gains and losses within operating profit, except for those related to

the senior secured notes and loans from and to related parties, which

are included in net foreign exchange gain/(loss) on foreign currency

borrowings, net. Under U.S. GAAP reporting format, all foreign exchange

gains and losses are included in other income (expense), net.

Table 3

Global Crossing (UK) Telecommunications Limited and Subsidiaries

Consolidated Statements of Cash Flows

Results below are in pounds sterling in thousands

For the year ended

------------------

December 31,  December 31,

2009         2008

---------    --------

(unaudited)

Operating activities

Profit/(loss) for the period                        4,668     (29,845)

Adjustments for:

Finance costs, net                                 18,378       58,360

Income tax charges                                    598          432

Depreciation of property, plant and equipment      35,256       35,466

Amortization of intangible assets                   1,803        2,201

Amortization of prepaid connection costs            8,637        9,588

Share based payment expense                           767        2,856

Gain on disposal of property, plant and

equipment                                            (19)         (11)

Equity (income)/loss for associate                    (32)          22

Change in provisions                               (2,098)      (1,181)

Change in operating working capital                (9,111)         605

Change in other assets and liabilities             (8,294)      (4,562)

-------     --------

Cash generated from operations                     50,553       73,931

Interest paid                                     (32,208)     (33,062)

-------     --------

Net cash provided by operating activities          18,345       40,869

-------      -------

Investing activities

Interest received                                   1,230        4,438

Proceeds from disposal of property, plant and

equipment                                             58           12

Purchase of property, plant and equipment         (12,000)     (21,860)

-------      -------

Net cash used in investing activities            (10,712)     (17,410)

--------     --------

Financing activities

Loans provided by group companies                   9,908            -

Repayment of senior secured notes                  (7,382)      (1,158)

Repayment of employee taxes on share-based

payments                                          (1,047)           -

Proceeds from sale/leaseback                        4,455            -

Repayments of capital elements under finance

leases                                           (11,649)     (10,108)

Proceeds from debt obligations                          -          474

Repayment of capital element of other debt

obligations                                         (687)        (521)

-------     --------

Net cash used in financing activities              (6,402)     (11,313)

-------     --------

Net increase in cash and cash equivalents           1,231       12,146

Cash and cash equivalents at beginning of

period                                            36,100       23,954

------       ------

Cash and cash equivalents at end of period         37,331       36,100

=======      =======

Non-cash investing activities:

Capital lease and debt obligations incurred         2,542        4,917

======       ======

Table 4

Global Crossing (UK) Telecommunications Limited and Subsidiaries

Summary of Consolidated Revenues

Results below are in pounds sterling in thousands

Three months ended

--------------------------------------------------------

December 31,     September 30,      December 31,

2009             2009               2008

----------------   ----------------  ----------------

(unaudited)       (unaudited)        (unaudited)

Revenues:

Enterprise,

carrier data

and indirect

sales channels         76,618           73,379           79,674

Carrier voice            1,383            1,337            1,848

------           ------           ------

Revenues from

third party

customers              78,001           74,716            81,522

Revenues from Global

Crossing group

companies                 125              125               125

------           ------            ------

Consolidated revenues   78,126           74,841            81,647

======           ======            ======

Year ended

--------------------------------------------------------

December 31,         December 31,

2009                2008

----------------     ---------------

(unaudited)

Revenues:

Enterprise, carrier

data and indirect

sales channels                 301,924              316,222

Carrier voice                     6,440                6,110

-------              -------

Revenues from third

party customers                308,364               322,332

Revenues from Global

Crossing group companies            500                   500

-------               -------

Consolidated revenues           308,864               322,832

=======              ========

Table 5

Global Crossing (UK) Telecommunications Limited and Subsidiaries

Reconciliation of OIBDA to Net (Loss) Income

Results below are in pounds sterling in thousands

Pursuant to the SEC's Regulation G, the following table provides a

reconciliation of OIBDA, which is considered a non-GAAP financial measure,

to net (loss) income under U.S. GAAP reporting format.

OIBDA is defined as operating income before depreciation and amortization,

based upon our IFRS results in U.S. GAAP reporting format consolidated

statements of operations.  OIBDA differs from operating income, 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 and other non-operating income or expense items.  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.

Three months ended

------------------

December     September        December

31, 2009     30, 2009         31, 2008

---------    ----------       ---------

(unaudited)   (unaudited)     (unaudited)

OIBDA                          15,860        20,344          16,243

Depreciation and

amortization                 (10,657)      (10,742)        (11,393)

-------       -------         -------

Operating income                5,203         9,602           4,850

Interest expense, net          (7,512)       (7,047)         (7,201)

Other income

(expense), net                   896        (4,035)        (22,761)

Provision for income

taxes                           (149)          (89)           (142)

-------       -------         --------

Net (loss) income              (1,562)       (1,569)        (25,254)

=======       =======         ========

Year ended

------------------

December 31, 2009      December 31, 2008

------------------      -----------------

(unaudited)           (unaudited)

OIBDA                                65,920                75,951

Depreciation and amortization       (43,124)              (44,699)

-------               -------

Operating income                     22,796                31,252

Interest expense, net               (29,387)              (29,986)

Other income (expense), net          11,857               (30,679)

Provision for income taxes             (598)                 (432)

-------               -------

Net (loss) income                     4,668               (29,845)

=======               =======

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