Mar. 31, 2011 (Marketwire) —
HERNDON, VA — (Marketwire) — 03/31/11 — XO Holdings, Inc. (OTCBB: XOHO) today announced
its 2010 fourth quarter and full year financial and operational results.
Total revenue for 2010 was $1.5 billion, an increase of $8.0 million, or
less than 1%, compared to 2009. Adjusted EBITDA (a non-GAAP financial
measure) increased 25% to $191.1 million for 2010 compared to $152.6
million for 2009. Net loss for 2010 was $11.8 million compared to $21.8
million net income in 2009. The company’s net loss for 2010 was primarily
due to a $20.0 million impairment charge related to our LMDS licenses. The
company’s net income for 2009 principally resulted from gains from the sale
of marketable securities of approximately $60.0 million, partially offset
by an $8.3 million impairment charge related to our LMDS licenses. As of
December 31, 2010, cash and cash equivalents was $69.6 million, a decrease
of $293.6 million compared to December 31, 2009. The cash decrease was due
to the redemption of the Class A preferred stock of $258.9 million, as well
as continued capital investments and other working capital requirements in
excess of cash from operations.
Total revenue for the fourth quarter of 2010 was $390.3 million, an
increase of $14.5 million, or 4%, compared to the year-ago period. Adjusted
EBITDA was $59.2 million in the fourth quarter of 2010 compared to $43.3
million in the year-ago period. Net loss for the fourth quarter of 2010 was
$6.5 million compared to $13.3 million net income for the year-ago period.
The company’s net loss for the fourth quarter 2010 was primarily due to a
$20.0 million impairment charge related to our LMDS licenses. The company’s
net income for the fourth quarter of 2009 principally resulted from gains
from the sale of marketable securities of approximately $25.7 million.
“In the fourth quarter and throughout 2010, we remained focused on
executing our long-term business strategy and growing our broadband
offerings and services,” said Carl Grivner, chief executive officer of XO.
Fourth Quarter and Full Year 2010 Financial Results
($ in millions) Q4 2010 Q3 2010 Q4 2009 2010 2009
--------- --------- --------- --------- ---------
Revenue $ 390.3 $ 385.7 $ 375.8 $ 1,529.2 $ 1,521.3
--------- --------- --------- --------- ---------
Adjusted EBITDA (1) $ 59.2 $ 60.8 $ 43.3 $ 191.1 $ 152.6
--------- --------- --------- --------- ---------
Adjusted EBITDA % (2) 15% 16% 12% 12% 10%
--------- --------- --------- --------- ---------
Net Income (Loss) $ (6.5) $ 12.4 $ 13.3 $ (11.8) $ 21.8
--------- --------- --------- --------- ---------
Preferred Stock
Accretion $ (17.9) $ (17.5) $ (20.3) $ (73.3) $ (79.6)
--------- --------- --------- --------- ---------
Net Loss Allocable
to Common
Shareholders $ (24.3) $ (5.1) $ (7.1) $ (85.1) $ (57.8)
--------- --------- --------- --------- ---------
Capital Expenditures $ 39.9 $ 50.1 $ 50.1 $ 211.7 $ 199.0
--------- --------- --------- --------- ---------
Ending Cash and
Cash Equivalents $ 69.6 $ 49.3 $ 363.2 $ 69.6 $ 363.2
--------- --------- --------- --------- ---------
(1) Adjusted EBITDA is a Non-GAAP financial measure. See the footnote
discussion accompanying the financial statements.
(2) Adjusted EBITDA % is adjusted EBITDA divided by revenue. See the
footnote discussion accompanying the financial statements.
Service Revenues
During the fourth quarter, XO continued to experience growth within its
Broadband Services offerings, including Ethernet, IP-VPN and dedicated
internet access. In the fourth quarter of 2010, Broadband Services revenue
was $237.3 million, an increase of $27.5 million, or 13%, from the year-ago
period. Total Broadband Services revenue for 2010 was $895.8 million, an
increase of 12% from 2009.
The Broadband Services revenue growth was partially offset by the continued
and expected decline of XO’s Integrated Voice and Legacy/TDM services.
Fourth quarter revenue for Integrated Voice services was $47.2 million, a
20% decrease from the year-ago period. Legacy/TDM services declined 1% in
the fourth quarter compared to the year-ago period, with fourth quarter
revenues of $105.8 million. Year-over-year, Integrated Voice and Legacy/TDM
Services declined 22% and 7%, respectively.
Fourth Quarter and Full Year 2010 Service Revenue
% Change
--------------
Q4
2010 -
Q4 2010 -
($ in millions) Q4 2010 Q3 2010 Q4 2009 2010 2009 2009 2009
------- ------- ------- --------- --------- ------ ------
Broadband
Services $ 237.3 $ 228.8 $ 209.8 $ 895.8 $ 798.4 13% 12%
------- ------- ------- --------- --------- ------ ------
Integrated
Voice $ 47.2 $ 51.7 $ 59.2 $ 211.7 $ 271.8 -20% -22%
------- ------- ------- --------- --------- ------ ------
Legacy/TDM
Services $ 105.8 $ 105.2 $ 106.8 $ 421.7 $ 451.1 -1% -7%
------- ------- ------- --------- --------- ------ ------
Total Revenue $ 390.3 $ 385.7 $ 375.8 $ 1,529.2 $ 1,521.3 4% 1%
------- ------- ------- --------- --------- ------ ------
Fourth Quarter Network and Operations Highlights
During the fourth quarter of 2010, XO continued to expand its nationwide
presence and solidify its position as a leading provider of broadband
services to carriers, businesses and enterprises across the United States.
This included expanding its metro network coverage across Phoenix, enabling
it to serve thousands of new businesses and offer a more competitive
alternative for local and nationwide communications and networking needs.
XO’s Business Services division, whose customers comprise more than half of
the Fortune 500, gained several notable enterprise clients during the
fourth quarter, including Transwestern, one of the largest privately held
commercial real estate organizations in the United States. XO will provide
a wide area networking solution connecting 26 of Transwestern’s locations
across the country.
XO’s Carrier Services division was selected by Transaction Network Services
(TNS) to provide its award-winning Ethernet Hub Service, a
point-to-multipoint service that leverages XO’s expansive fiber footprint
and Ethernet over Copper network, to transport a significant amount of data
traffic across multiple platforms securely and effectively.
During the fourth quarter, XO also participated in a Carrier Ethernet
Global Interconnect demonstration during Light Reading’s Ethernet Expo
Americas, further demonstrating its international capabilities and reach.
The only U.S.-based service provider to participate, XO demonstrated its
Ethernet capabilities by originating traffic on its network and delivering
it to an exchange in Frankfurt before its termination to end users
throughout Europe.
Corporate Highlights
On October 8, 2010, XO entered into a Revolving Promissory Note (the
“Promissory Note”) with Arnos Corp., an affiliate of Carl C. Icahn, the
Chairman of the Board of Directors and majority shareholder, pursuant to
which Arnos Corp. provided access to a $50.0 million revolving credit
facility at an annual interest rate equal to the greater of LIBOR plus 525
basis points or 6.75%. The Promissory Note includes a fee of 0.75% on
undrawn amounts and initially matured on the earliest of (i) October 8,
2011, (ii) the date on which any financing transaction, whether debt or
equity, is consummated by XO or certain of XO’s affiliates in an amount
equal to or greater than $50.0 million, or (iii), at XO’s option, a date
selected by XO that is earlier than October 8, 2011.
On February 11, 2011, at XO’s request, XO and Arnos Corp. entered into a
First Amendment to the Revolving Promissory Note (the “Amendment”). The
Amendment extends the maturity date of the Promissory Note from October 8,
2011 to May 1, 2012. Accordingly, the maturity date of the Promissory Note
is the earliest of (i) May 1, 2012, (ii) the date on which any financing
transaction, whether debt or equity, is consummated by XO or certain of
XO’s affiliates in an amount equal to or greater than $50.0 million, and
(iii), at XO’s option, a date selected by XO that is earlier than May 1,
2012.
On January 19, 2011, XO received an offer from ACF Industries Holding
Corp., an affiliate of the Chairman of the Board of Directors, to acquire,
either directly or through an affiliate, ownership of 100% of XO Holdings
in a transaction in which holders of common stock, other than ACF Holding
and its affiliates, would receive consideration of $0.70 net per share in
cash. On January 21, 2011, XO announced the formation of a Special
Committee of the Board of Directors composed of independent directors to
consider, review, and evaluate the proposal.
Based on XO’s level of operations, the company believes that cash flow from
operations, cash on hand, marketable securities and cash available from the
Revolving Promissory Note will enable it to meet its working capital and
other obligations for at least the next 12 months. However, the company
believes that additional capital, including cash available under the
Promissory Note, is necessary to continue to implement its transformation
plan and also give the company the resources to take advantage of strategic
growth opportunities. XO’s ability to fund its capital needs depends on
the company’s future operating performance and cash flow, which are subject
to prevailing economic conditions and other factors, many of which are
beyond the company’s control. Heretofore, XO has not generated sufficient
free cash flows to allow it to continue to fully fund the transformation
plan or to pursue other strategic opportunities. Accordingly, XO believes
it is necessary to raise additional capital.
About XO Holdings
XOH is a leading provider of 21st century communications services for
businesses and communications services providers, including 50 percent of
the Fortune 500 and leading cable companies, carriers, content providers
and mobile operators. Utilizing its unique and powerful nationwide IP
network, extensive local metro networks and broadband wireless facilities,
XOH offers customers a broad range of managed voice, data and IP services
in more than 85 metropolitan markets across the United States. For more
information, visit www.xo.com.
Cautionary Language Concerning Forward-Looking Statements
The statements contained in this release that are not historical facts are
“forward-looking statements” (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. These statements include those describing XO’s ability to
execute upon its business strategy, remain focused on advancing high-growth
sectors of its business, pursue growth and acquisition opportunities and
generate funds from operations or from future financing sufficient to fund
XO’s business plan and also give the company the resources necessary to
take advantage of strategic growth opportunities. Management cautions the
reader that these forward-looking statements are only predictions and are
subject to a number of both known and unknown risks and uncertainties, and
actual results, performance, and/or achievements of XO Holdings, Inc. may
differ materially from the future results, performance, and/or achievements
expressed or implied by these forward-looking statements as a result of a
number of factors. Other factors to consider also include the risk factors
described from time to time in the reports filed by XO Holdings, Inc. with
the Securities and Exchange Commission, including its Annual Report on Form
10-K for the year ended December 31, 2010 and its quarterly reports on Form
10-Q. XO Holdings, Inc. undertakes no obligation to update any
forward-looking statements, except as otherwise required by law.
This press release contains certain non-GAAP financial measures.
Reconciliations between the non-GAAP financial measures and the GAAP
financial measures are available below in the accompanying financial
statements.
Accompanying financial statements located at
http://www.xo.com/about/Pages/investor.aspx
XO HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Revenue $ 390,345 $ 375,839 $ 1,529,241 $ 1,521,288
Cost of service
(exclusive of
depreciation and
amortization) 223,683 212,698 869,370 879,979
Selling, general and
administrative 107,471 120,009 469,120 489,427
Depreciation and
amortization 47,544 50,551 183,732 180,144
Impairment of LMDS
licenses 20,000 - 20,000 8,282
Loss on disposal of
assets 1,829 5,699 5,781 10,688
----------- ----------- ----------- -----------
Total costs and
expenses 400,527 388,957 1,548,003 1,568,520
----------- ----------- ----------- -----------
Loss from operations (10,182) (13,118) (18,762) (47,232)
Investment gain, net 1,470 25,695 6,846 59,986
Interest income
(expense), net 1,166 521 (117) 10,276
----------- ----------- ----------- -----------
Net income (loss)
before income taxes (7,546) 13,098 (12,033) 23,030
Income tax benefit
(expense) 1,073 167 191 (1,195)
----------- ----------- ----------- -----------
Net income (loss) (6,473) 13,265 (11,842) 21,835
Preferred stock
accretion (17,869) (20,318) (73,272) (79,642)
----------- ----------- ----------- -----------
Net loss allocable to
common shareholders $ (24,342) $ (7,053) $ (85,114) $ (57,807)
=========== =========== =========== ===========
Net loss allocable to
common shareholders
per common share,
basic and diluted $ (0.14) $ (0.04) $ (0.46) $ (0.32)
=========== =========== =========== ===========
Weighted average
shares, basic and
diluted 182,075 182,075 182,075 182,075
=========== =========== =========== ===========
Total adjusted EBITDA
(1) $ 59,236 $ 43,267 $ 191,083 $ 152,565
=========== =========== =========== ===========
XO HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, December 31,
2010 2009
------------ ------------
Cash, cash equivalents and marketable
securities $ 69,811 $ 364,479
Accounts receivable, net 142,663 153,745
Other current assets 22,600 29,248
Property and equipment, net 814,408 749,930
Intangible assets, net 25,233 45,233
Other assets 58,714 67,123
------------ ------------
Total assets $ 1,133,429 $ 1,409,758
============ ============
Accounts payable and other current liabilities $ 282,466 $ 297,799
Other long-term liabilities 136,247 125,731
Class A convertible preferred stock - 255,011
Class B convertible preferred stock 658,982 614,912
Class C perpetual preferred stock 249,312 223,958
Total stockholders' deficit (193,578) (107,653)
------------ ------------
Total liabilities, preferred stock and
stockholders' deficit $ 1,133,429 $ 1,409,758
============ ============
XO HOLDINGS, INC.
Reconciliation of Net Loss to Adjusted EBITDA
(Dollars in thousands)
Three Months Ended Twelve Months Ended
---------------------------------- --------------------
December September December December December
31, 30, 31, 31, 31,
2010 2010 2009 2010 2009
---------- ----------- ---------- --------- ---------
(Unaudited) (Unaudited) (Unaudited)
Net income (loss)
before income
taxes $ (7,546) $ 12,707 $ 13,098 $ (12,033) $ 23,030
Depreciation and
amortization 47,544 46,016 50,551 183,732 180,144
Loss on disposal
of assets 1,829 830 5,699 5,781 10,688
Impairment of
LMDS licenses 20,000 - - 20,000 8,282
Investment gain,
net (1,470) - (25,695) (6,846) (59,986)
Interest (income)
expense, net (1,166) 1,202 (521) 117 (10,276)
---------- ----------- ---------- --------- ---------
EBITDA 59,191 60,755 43,132 190,751 151,882
Stock-based
compensation 45 57 135 332 683
---------- ----------- ---------- --------- ---------
Adjusted EBITDA
(1) $ 59,236 $ 60,812 $ 43,267 $ 191,083 $ 152,565
========== =========== ========== ========= =========
(1) Adjusted EBITDA is defined as net income or loss before depreciation,
amortization, (gain)/loss on disposal of assets, interest expense, interest
income, investment gains or losses, income tax expense or benefit,
cumulative effect of change in accounting principle, and stock-based
compensation. Adjusted EBITDA is not intended to replace operating income
(loss), net income (loss), cash flow, and other measures of financial
performance reported in accordance with generally accepted accounting
principles in the United States. Rather, Adjusted EBITDA is an important
measure used by management to assess operating performance of the Company.
Adjusted EBITDA as defined here may not be comparable to similarly titled
measures reported by other companies due to differences in accounting
policies. Additionally, adjusted EBITDA as defined here does not have the
same meaning as EBITDA as defined in XO's SEC filings.
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Contact:
Courtney Harper/Monica Heckman/Charlotte Walker
Reputation Partners (for XO Communications)
T: 312-819-5722
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