SEPTEMBER 3, 2009 -- Global Crossing Ltd. (NASDAQ: GLBC) has announced second quarter results for its subsidiary, Global Crossing (UK) Telecommunications Ltd. (GCUK).
Business highlights
GCUK generated 77 million pounds of revenue in the second quarter and Operating Income Before Depreciation and Amortization (OIBDA) of 12 million pounds. (OIBDA is defined as operating income before depreciation and amortization, based upon the company’s 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.) The company also reported cash generated from operations of 4 million pounds before interest.
"Demand for our value-added products and services continues to be robust despite a challenging economic and competitive environment," said John Legere, Global Crossing's CEO. "We continue to see healthy levels of new orders and good opportunities in the UK market as customers pursue productivity gains and cost reductions through the deployment of advanced IP-based networking solutions."
Second 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 77 million pounds, a decrease of 1 million pounds or 2 percent sequentially and a decrease of 3 million pounds or 4 percent on a year-over-year basis. The sequential decrease in revenue was primarily due to lower equipment sales compared to the previous quarter. The year-over-year decrease in revenue was primarily due to attrition from the Camelot contract, partially offset by growth from other customers across its enterprise and carrier sales channels. For the six months ended June 30, 2009, a year-over-year decline in revenue from the Camelot relationship of 12 million pounds was largely offset by revenue growth from other customers across enterprise and carrier sales channels of 9 million pounds.
Cost of revenue, which includes cost of access, technical real estate, network and operations, third-party maintenance, and cost of equipment sales, was 54 million pounds for the quarter, compared with 52 million pounds in the prior quarter and 51 million pounds in the second quarter of 2008. The sequential increase was primarily due to the impact of a 3 million pound retroactive real estate tax assessment revision for the cumulative period of December 2006 through June 2009. The year-over-year increase was primarily due to the aforementioned real estate tax assessment.
Sales, general, and administrative expenses (SG&A) were 10 million pounds for the quarter, an increase of 1 million pounds from the prior quarter and essentially flat on a year-over-year basis. The sequential increase was primarily due to higher restructuring provisions for real estate.
GCUK's OIBDA for the second quarter was 12 million pounds, compared with 17 million pounds in the first quarter of 2009 and 20 million pounds in the second quarter of 2008. The sequential decrease in OIBDA was primarily due to lower gross margin from equipment sales, higher real estate taxes, and higher restructuring provisions for real estate. The year-over-year decrease in OIBDA was due to lower revenue, primarily due to the attrition of the Camelot contract, and higher real estate taxes.
GCUK recorded net income of 10 million pounds for the second quarter of 2009, compared with a net loss of 2 million pounds in the first quarter of 2009 and net income of 1 million pounds in the second quarter of 2008. In addition to the variances described above, the increase in net income was primarily due to foreign exchange gains on the GCUK's U.S. dollar-denominated Senior Secured Notes in the second quarter of 2009 as compared with the prior comparable quarters.
Cash and liquidity
As of June 30, 2009, GCUK had cash and cash equivalents of 17 million pounds compared with 33 million pounds at March 31, 2009, and 27 million pounds at June 30, 2008.
Net cash used in operating activities during the second quarter totaled 12 million pounds after operating working capital use of 8 million pounds and interest paid of 16 million pounds. GCUK's cash and cash equivalents decreased by 16 million pounds in the second quarter, after purchases of property, plant, and equipment of 4 million pounds and principal payments on finance leases and other debt obligations of 2 million pounds.
In accordance with the indenture governing the senior secured notes, the company repurchased 7 million pounds of the Senior Secured Notes, excluding accrued interest, on May 29, 2009. To support this debt repurchase and other working capital needs, GCUK borrowed 10 million pounds from GC Impsat during the quarter.