LONDON, June 9, 2011 /PRNewswire/ --
Global Crossing Limited (NASDAQ: GLBC), a leading global IP
solutions provider, today announced first-quarter results for its
subsidiary, Global Crossing (UK) Telecommunications Limited
(GCUK).
Highlights
For the first quarter of 2011, GCUK generated revenue of 74
million pounds and Operating Income Before Depreciation and
Amortization (OIBDA) of 13 million pounds. (OIBDA is a non-GAAP
measure defined and reconciled below.) The company also reported
net cash used in operations of 11 million pounds.
"We continue to diversify our commercial enterprise customer
base in the UK while broadening our position with UK government
customers," said John Legere, chief
executive officer of Global Crossing. "We are well positioned to
meet demand as customers continue to seek improved performance and
efficiencies by adopting advanced IP-based solutions."
First Quarter Results
GCUK generated revenue of 74 million pounds in the first
quarter, a sequential decrease of 11 percent and a year-over-year
decrease of 5 percent. The sequential decrease was primarily due to
non-recurring benefits in the prior quarter of 4 million pounds
from the completion of a customer contract and 5 million pounds
from the sale of equipment in connection with a new managed
services contract. The year-over-year decrease was primarily due to
price reductions associated with recent contracts to renew and
extend services to existing customers, accompanied by lower
government spending.
Gross profit was 26 million pounds for the quarter, a sequential
decrease of 5 million pounds and a year-over-year decrease of 3
million pounds. The sequential decrease was primarily driven by 4
million pounds of margin benefits in the prior quarter associated
with the previously mentioned contract completion and equipment
sale. The year-over-year decrease was primarily driven by lower
revenue.
GCUK's OIBDA for the first quarter was 13 million pounds,
compared to 18 million pounds in the fourth quarter of 2010 and 20
million pounds in the first quarter of 2010. The sequential
decrease was primarily attributable to lower gross profit due to
the aforementioned benefit in the prior quarter from the contract
completion and equipment sale, accompanied by higher accrued
incentive compensation and severance charges related to efficiency
initiatives. The year-over-year decrease was primarily driven by 6
million pounds of property tax and insurance recoveries in the
year-ago period and lower revenue.
GCUK recorded a net loss of 1 million pounds for the first
quarter, compared with a net loss of 2 million pounds in the fourth
quarter of 2010 and a net loss of 5 million pounds in the first
quarter of 2010. The year-over-year decrease in net loss was
primarily due to favorable foreign exchange impacts on net U.S
dollar denominated debt, partially offset by a decrease in
OIBDA.
Cash and Liquidity
As of March 31, 2011, GCUK had
cash and cash equivalents of 37 million pounds, compared with 49
million pounds on December 31, 2010
and 33 million pounds on March 31,
2010.
GCUK's cash and cash equivalents decreased 12 million pounds in
the first quarter. Net cash used in operating activities during the
first quarter totaled 11 million pounds, after cash used in
operating working capital of 18 million pounds and interest
payments of 2 million pounds. During the quarter, GCUK recorded
purchases of property, plant and equipment of 4 million pounds and
principal payments on finance leases and other debt of 2 million
pounds.
In accordance with the indenture governing GCUK's senior secured
notes, on April 26, 2011 GCUK
commenced an offer to purchase 11 million pounds in aggregate
principal amount of such notes, including accrued interest, using
50 percent of GCUK's excess operating cash flow for the year ended
December 31, 2010. The offer expired
at 4:00 p.m. London time on May 26,
2011, and GCUK Finance reported that no tenders had been
received prior to expiration.
International Financial Reporting Standards
GCUK's results reported here include unaudited consolidated
financial results for the three months ended March 31, 2011, December
31, 2010 and March 31, 2010;
the unaudited consolidated balance sheet as of March 31, 2011; and the audited consolidated
balance sheet as of December 31,
2010, all in accordance with IFRS and in pounds sterling, as
published by the International Accounting Standards Board (IASB).
GCUK's results for the first quarters of 2011 and 2010 and the
fourth quarter of 2010 were included in Global Crossing's
consolidated results previously reported on May 3, 2011, 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.
Conference Call
Management has decided to discontinue conducting separate
quarterly conference calls to report GCUK's standalone financial
results in light of Global Crossing's April
11, 2011, announcement that it has entered into a definitive
agreement with Level 3 Communications, Inc. ("Level 3") under which
Level 3 will acquire Global Crossing. However, Global Crossing will
continue to issue quarterly releases of GCUK financial results and
make periodic filings with the SEC as may be required by law or
under the applicable indenture for the notes issued by Global
Crossing (UK) Finance Plc.
ABOUT GLOBAL CROSSING
Global Crossing (NASDAQ: GLBC) is a leading global IP, Ethernet,
data center and video solutions provider with the world's first
integrated global IP-based network. The company offers a full range
of data, voice, collaboration, broadcast and media services
delivered with superior customer service.
Global Crossing provides services to enterprises (including
approximately 40 percent of the Fortune 500); government
departments and agencies; and 700 carriers, mobile operators and
ISPs. It delivers converged IP services to more than 700 cities in
more than 70 countries, and has 17 world-class data centers in
major business centers around the globe.
Please visit http://www.globalcrossing.com for more information
about Global Crossing.
Website Access to Company Information
Global Crossing maintains a corporate website at
http://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.
IMPORTANT INFORMATION FOR INVESTORS
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. The proposed amalgamation involving Level 3
Communications, Inc. ("Level 3") and Global Crossing Limited
("Global Crossing") announced on April 11,
2011 will be submitted to the stockholders of Level 3 and
the stockholders of Global Crossing for their consideration. Level
3 and Global Crossing have filed with the SEC a registration
statement on Form S-4 that includes a preliminary joint proxy
statement of Level 3 and Global Crossing that also constitutes a
preliminary prospectus of Level 3, and may in the future file with
the SEC other relevant documents concerning the proposed
transaction. Level 3 and Global Crossing will each provide the
final joint proxy statement/prospectus to its respective
stockholders. Investors and security holders are urged to read the
registration statement and the joint proxy statement/prospectus and
any other relevant documents filed with the SEC when they become
available, as well as any amendments or supplements to those
documents, because they contain and will contain important
information about Level 3, Global Crossing and the proposed
transaction. Investors and security holders may obtain a free copy
of the registration statement and joint proxy statement/prospectus,
as well as other filings containing information about Level 3 and
Global Crossing, free of charge at the SEC's Web Site at
http://www.sec.gov. In addition, the joint proxy
statement/prospectus, the SEC filings that are or will be
incorporated by reference in the joint proxy statement/prospectus
and the other documents filed or to be filed with the SEC by Level
3 may be obtained free of charge by directing such request to:
Investor Relations, Level 3, Inc., 1025 Eldorado Boulevard,
Broomfield, Colorado 80021 or from
Level 3's Investor Relations page on its corporate website at
http://www.Level3.com and the joint proxy statement/prospectus, the
SEC filings that are or will be incorporated by reference in the
joint proxy statement/prospectus and the other documents filed or
to be filed with the SEC by Global Crossing may be obtained free of
charge by directing such request to: Global Crossing by telephone
at (800) 836-0342 or by submitting a request by e-mail to
glbc@globalcrossing.com or a written request to the Secretary,
Wessex House, 45 Reid Street, Hamilton HM12 Bermuda or from Global Crossing's Investor
Relations page on its corporate website at
http://www.globalcrossing.com.
Level 3, Global Crossing and their respective directors,
executive officers, and certain other members of management and
employees may be deemed to be participants in the solicitation of
proxies in favor of the proposed transaction from the stockholders
of Level 3 and from the stockholders of Global Crossing,
respectively. Information about the directors and executive
officers of Level 3 is set forth in the proxy statement on Schedule
14A for Level 3's 2011 Annual Meeting of Stockholders, which was
filed with the SEC on April 4, 2011
and information about the directors and executive officers of
Global Crossing is set forth in the proxy statement on Schedule 14A
for Global Crossing's 2011 Annual General Meeting of Shareholders,
which was filed with the SEC on April 29,
2011. Additional information regarding participants in the
proxy solicitation may be obtained by reading the joint proxy
statement/prospectus regarding the proposed transaction.
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 failure to occur of any condition
to the closing of the acquisition of Global Crossing by Level 3 and
uncertainties as to the timing of the closing; the failure to
achieve or any delay in achieving expected synergies and other
financial benefits from the acquisition; changes in Global
Crossing's risk profile resulting from the acquisition; limitations
on Global Crossing's financial and operational flexibility that
arise under the covenants in the amalgamation agreement that could
restrict it from taking advantage of opportunities to strategically
enhance its business or improve its capital structure; delays or
reductions in purchases from Global Crossing by customers because
of their perceived uncertainty about its ability to meet their
needs after closing of the acquisition; disruptions in Global
Crossing's business due to current and prospective employees
experiencing uncertainty about their future roles with the company
and the diversion of their time and attention from ongoing business
operations; Global Crossing's history of substantial operating
losses and the fact that, in the near term, funds from operations
will not satisfy cash requirements; the availability of future
borrowings in an amount sufficient to pay Global Crossing's
indebtedness and to fund its other liquidity needs; legal and
contractual restrictions on the inter-company transfer of funds by
Global Crossing's subsidiaries; Global Crossing'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 Global Crossing'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 Global Crossing'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 that would prevail on an open market; potential
weaknesses in internal controls of acquired businesses, and
difficulties in integrating internal controls of those businesses
with Global Crossing's own internal controls; exposure to
contingent liabilities; and other risks referenced from time to
time in Global Crossing'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 Contact
Mark Gottlieb
+1-800-836-0342
glbc@globalcrossing.com
Gino Mathew
United Kingdom
+1-973-937-0133
gino.mathew@globalcrossing.com
IR/PR1
6 Schedules to Follow
Schedule 1: Consolidated Statements of Financial Position
Schedule 2: Consolidated Statements of Operations
Schedule 3: Consolidated Statements of Cash Flows
Schedule 4: Summary of Consolidated Revenues
Schedule 5: Supplemental Information provided pursuant to the indenture
governing the GCUK senior secured notes
Schedule 6: Reconciliation of OIBDA to Net Loss
Schedule 1
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Financial Position
Results below are in pounds sterling in thousands
March 31, December 31,
2011 2010
------- -------
(unaudited)
Non-current assets
Intangible assets, net 10,902 10,524
Property, plant and equipment, net 134,439 139,269
Investment in associate 182 218
Retirement benefit asset 299 299
Trade and other receivables 38,171 38,768
------ ------
183,993 189,078
------- -------
Current assets
Trade and other receivables, net 45,020 49,718
Cash and cash equivalents 36,875 49,224
------ ------
81,895 98,942
------ ------
Total assets 265,888 288,020
======= =======
Current liabilities
Trade and other payables (65,780) (72,680)
Senior secured notes (10,857) (10,857)
Deferred revenue (34,162) (39,608)
Provisions (1,655) (2,011)
Obligations under finance leases (6,676) (7,111)
Other debt obligations - (18)
(119,130) (132,285)
-------- --------
Non-current liabilities
Trade and other payables (21,972) (22,874)
Senior secured notes (257,727) (262,538)
Deferred revenue (75,618) (79,099)
Retirement benefit obligation (1,842) (1,842)
Provisions (1,686) (1,636)
Obligations under finance leases (9,337) (8,109)
------ ------
(368,182) (376,098)
-------- --------
Total liabilities (487,312) (508,383)
-------- --------
Net liabilities (221,424) (220,363)
======== ========
Capital and reserves
Equity share capital (101,000 shares
outstanding at BPS1 each) 101 101
Capital reserve 32,430 32,330
Accumulated deficit (253,955) (252,794)
-------- --------
Total equity (221,424) (220,363)
======== ========
Schedule 2
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Operations
Results below are in pounds sterling in thousands
Three Months Ended
------------------
March 31, December 31, March 31,
2011 2010 2010
---------- ------------- ----------
(unaudited) (unaudited) (unaudited)
Revenue 73,855 82,804 77,880
Cost of sales (47,570) (51,630) (49,095)
Gross profit 26,285 31,174 28,785
Distribution costs (7,030) (6,580) (6,528)
Administrative expenses (17,117) (16,365) (12,509)
Operating profit 2,138 8,229 9,748
Finance revenue 1,119 1,108 1,253
Finance charges (9,155) (8,967) (9,153)
Net foreign exchange gain/(loss)
on foreign currency borrowings,
net 4,711 (2,276) (6,565)
Loss before tax (1,187) (1,906) (4,717)
Tax benefit (charge) 26 (28) (147)
--- --- ----
Loss for the period (1,161) (1,934) (4,864)
====== ====== ======
Schedule 3
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Consolidated Statements of Cash Flows
Results below are in pounds sterling in thousands
For the Three Months Ended
--------------------------
March 31, December 31, March 31,
2011 2010 2010
---------- ------------- ----------
(unaudited) (unaudited) (unaudited)
Operating activities
Loss for the period (1,161) (1,934) (4,864)
Adjustments for:
Finance costs, net 3,325 10,135 14,465
Income tax charges 26 28 147
Depreciation of property,
plant and equipment 8,449 8,537 8,585
Amortization of intangible
assets 609 466 506
Amortization of prepaid
connection costs 1,541 1,680 1,701
Share based payment expense/
(credit) 100 (67) 126
Loss on disposal of
property, plant and
equipment 12 17 126
Impairment of property,
plant and equipment - 650 -
Equity income for associate 36 - (8)
Change in long term deferred
revenue (3,481) (3,341) (2,023)
Change in long term other
assets and liabilities (1,097) (4,801) (209)
Change in operating working
capital:
-Change in trade accounts
receivable and accrued
income 3,806 10,533 (10,860)
-Change in trade accounts
payable and accrued cost of
access (5,115) (21) (7,845)
-Change in other
receivables current (2,320) 7,178 (7,950)
-Change in other payables
current (14,424) (2,983) (175)
------- ------ ----
Cash generated from
operations (9,694) 26,077 (8,278)
Interest paid (1,599) (15,960) (1,113)
------ ------- ------
Net cash (used in)/provided
by operating activities (11,293) 10,117 (9,391)
------- ------ ------
Investing activities
Interest received 2,790 29 15
Purchase of property, plant
and equipment (4,317) (1,774) (5,435)
------ ------ ------
Net cash used in investing
activities (1,527) (1,745) (5,420)
------ ------ ------
Financing activities
Loans provided by group
companies - - 13,100
Proceeds from sale/leaseback 2,513 - -
Repayments of capital
elements under finance
leases (2,024) (1,311) (2,519)
Repayment of capital element
of other debt obligations (18) (17) (183)
--- --- ----
Net cash provided by/(used
in) financing activities 471 (1,328) 10,398
--- ------ ------
Net (decrease)/increase in
cash and cash equivalents (12,349) 7,044 (4,413)
Cash and cash equivalents at
beginning of period 49,224 42,180 37,331
------ ------ ------
Cash and cash equivalents at
end of period 36,875 49,224 32,918
====== ====== ======
Schedule 4
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Summary of Consolidated Revenues
Results below are in pounds sterling in thousands
Three Months Ended
------------------
March 31, December 31, March 31,
2011 2010 2010
---------- --------- ----------
(unaudited) (unaudited) (unaudited)
Revenues:
Enterprise, carrier data
and indirect sales
channels 73,328 82,067 76,575
Carrier voice 419 629 1,180
--- --- -----
Revenues from third party
customers 73,747 82,696 77,755
Revenues from Global
Crossing group companies 108 108 125
--- --- ---
Consolidated revenues 73,855 82,804 77,880
====== ====== ======
Schedule 5
SUPPLEMENTAL INFORMATION PROVIDED PURSUANT TO THE INDENTURE
GOVERNING THE GCUK SENIOR SECURED NOTES
GCUK is required to provide the holders of its Senior Secured
Notes due 2014 with quarterly information pursuant to Section
4.17(a)(2) of the indenture governing such notes. For quarters
prior to the first quarter of 2010, GCUK satisfied this requirement
by providing the note holders with a quarterly report separate and
apart from its quarterly earnings press releases. Starting with the
first quarter of 2010, GCUK has satisfied this requirement by
providing the note holders with its quarterly earnings press
releases. This schedule of supplemental information is being
included with the earnings press release to ensure that the
information being provided complies with Section 4.17(a)(2) of the
indenture.
Liquidity and Capital Resources
GCUK's ability to make payments on and to refinance its
indebtedness and to fund planned capital expenditures will depend
on its ability to generate cash in the future. This depends to a
degree on general economic, financial, competitive, legislative,
regulatory and other factors that are beyond GCUK's control.
Based on GCUK's current level of operations, expected revenue
growth trends and anticipated cost management and operating
improvements, GCUK believes its future cash flow from operations,
available cash and cash available from financing activities will be
adequate to meet its future liquidity needs for at least the next
twelve months. However, GCUK currently expects its cash and cash
equivalents to decrease in 2011 as a result of relatively flat
operating performance and greater working capital requirements as
compared to 2010.
There can be no assurance that GCUK's business will generate
sufficient cash flow from operations, that currently anticipated
operating improvements will be realized on schedule or that future
borrowings will be available to GCUK in an amount sufficient to
enable it to pay its indebtedness or to fund its other liquidity
needs. GCUK will need to refinance all or a substantial portion of
its indebtedness on or before maturity. GCUK cannot provide
assurances that it will be able to refinance any of its
indebtedness on commercially reasonable terms or at all.
GCUK monitors its capital structure on an ongoing basis and from
time to time considers financing and refinancing options to improve
its capital structure and to enhance its financial flexibility.
GCUK's ability to enter into new financing arrangements is subject
to restrictions in its outstanding debt instruments and
restrictions imposed on GCUK by its parent company in light of
contractual restrictions applicable to the parent company under the
terms of its senior preferred shares and under the Plan of
Amalgamation described below. Subject to the foregoing
restrictions, at any given time GCUK may pursue a variety of
financing opportunities, and its decision to proceed with any
financing will depend, among other things, on prevailing market
conditions, near term maturities and available terms.
From time to time GCUK reviews its operations and may consider
opportunities to strategically enhance, expand or change its
operations and leverage its capabilities. Initiatives that may
result from such reviews may include, among others, plans to reduce
operating expenses and/or optimize existing operating resources,
expansion of existing or entry into complementary lines of
business, additional capital investment in GCUK's network and
service infrastructure and opportunistic acquisitions. At any given
time in connection with the foregoing GCUK may be engaged in
varying levels of analyses or negotiations with potential
counterparties. The below-described covenants in GCUK's parent
company's Plan of Amalgamation may limit GCUK's flexibility to take
advantage of such opportunities unless its parent obtains Level 3
Communications, Inc.'s consent. If GCUK pursues any such
initiatives or transactions, it may require additional equity or
debt financing, and there can be no assurance that it will be able
to obtain such financing on favorable terms or at all, or that
Level 3 will provide any necessary consent to pursue such
financings. Undertaking any such initiatives may place greater
demands on GCUK's cash flows due to increased capital and operating
expenses and debt service.
At March 31, 2011, GCUK's
available liquidity consisted of 37 million pounds of unrestricted
cash and cash equivalents.
In the long term, GCUK expects its operating results and cash
flows to improve as a result of growth of its revenues, including
the economies of scale expected to result from such growth, and
from ongoing cost management initiatives, including initiatives to
optimize the access network and effectively lower unit prices.
Thus, in the long term, GCUK expects to generate positive cash flow
from operating activities in an amount sufficient to fund all
investing and financing requirements, subject to the need to
refinance the GCUK Senior Secured Notes. However, its ability to
improve cash flows is subject to the risks and uncertainties
described in GCUK's periodic reports filed with the SEC and in the
press release to which this Schedule is attached.
In addition, GCUK's short term liquidity and more specifically
its quarterly cash flows are subject to considerable variability as
a result of the timing of interest payments as well as the
following factors.
- Working capital variability significantly impacts its cash
flows and can cause its intra-quarter cash balances to drop to levels
significantly lower than those levels prevailing at the end of a
quarter.
- The UK government is implementing austerity measures aimed at
reducing costs in a wide range of areas, including telecommunications.
The implementation of pricing actions and the reduction of spending by
governmental entities have had a negative effect on GCUK's revenue
performance and that impact could become more significant in the
future.
- Within 120 days after each calendar year, GCUK must offer to
purchase a portion of the Senior Secured Notes at 100% of their
principal amount using 50% of the Operating Cash Flow (as defined in
the Indenture) for that year. In respect of 2010, GCUK offered to
purchase 11 million pounds of the Notes, including accrued interest
and the offer expired with no GCUK Notes tendered.
- Cash outlays for purchases of property, plant and equipment
can vary significantly from quarter to quarter primarily due to the
timing of major network upgrades. Although GCUK has the flexibility to
reduce expected capital expenditures in future periods to conserve
cash, the majority of its capital expenditures are directly related to
customer requirements and therefore ultimately generate long-term cash
flows.
Financing activities
On March 31, 2011, GCUK received 3
million pounds of proceeds under a lease facility with Close
Leasing Limited. The arrangement is subject to an applicable rate
of interest of approximately 9% per annum, with payments monthly
until April 2013.
Commitments
During the quarter the Company entered into a ten year
right-of-way agreement with a minimum commitment of 2 million
pounds.
Other
During 2008, GCUK and others entered into a dispute with BT in
relation to BT's adherence with its regulatory pricing obligations
for wholesale leased lines ("PPCs") during the period since
June 2004 and this dispute was filed
with Ofcom. Ofcom issued its Final Determination in October 2009 and ordered BT to settle with GCUK.
This ruling was appealed by BT to the Competition Appeal Tribunal
("CAT") in December 2009 and hearings
were held in May and October 2010. In
March 2011, the CAT issued its
determination and found against BT in all instances. In
April 2011, BT initiated an appeal of
the CAT ruling to the Court of Appeal.
On April 10, 2011, GCUK's parent
Global Crossing Limited entered into an Agreement and Plan of
Amalgamation (the "Plan of Amalgamation") with Level 3
Communications, Inc., a Delaware
corporation ("Level 3"), and Apollo Amalgamation Sub, Ltd., a
Bermuda company and wholly owned
subsidiary of Level 3 ("Amalgamation Sub"), pursuant to which
GCUK's parent and Amalgamation Sub will be amalgamated under
Bermuda law with the surviving
amalgamated company continuing as a subsidiary of Level 3 (the
"Amalgamation"). Under the terms and subject to the conditions of
the Plan of Amalgamation, each share of capital stock of GCUK's
parent will be converted into 16 shares of common stock of Level 3
(and, in the case of the parent's preferred shares, the right to
receive accrued and unpaid dividends thereon). The Plan of
Amalgamation contains customary representations and warranties and
covenants, and is subject to certain closing conditions including
receipt of certain regulatory and governmental approvals. The
covenants in the Plan of Amalgamation include, among others,
agreements by GCUK's parent (i) to continue, and to ensure that its
subsidiaries continue, conducting their businesses in the ordinary
course, consistent with past practice and in compliance with
applicable law, during the interim period between the execution of
the Plan of Amalgamation and consummation of the Amalgamation and
(ii) not to engage in, and not to allow any of its subsidiaries to
engage in, certain specified kinds of transactions during that
period without Level 3's consent, including equity and debt
financings, including any such financings that may be needed for
general corporate purposes during the period prior to the
consummation of the Amalgamation, which could be delayed due to the
need for regulatory approvals or otherwise.
The consummation of the Amalgamation would constitute a "Change
of Control" under and as defined in the indenture for GCUK's Senior
Secured Notes. Pursuant to Section 4.09 of the indenture, within 30
days following any Change of Control, GCUK is required to commence
an offer to purchase all of the then outstanding Senior Secured
Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest, if any, thereon to the date of
purchase.
Schedule 6
Global Crossing (UK) Telecommunications Limited and Subsidiaries
Reconciliation of Net (Loss) Profit to OIBDA
Results below are in pounds sterling in thousands
Pursuant to the SEC's Regulation G, the following table provides
a reconciliation of net (loss)/profit under IFRS to OIBDA, which is
considered a non-GAAP (Generally Accepted Accounting Principles)
financial measure.
OIBDA is defined as operating profit before depreciation and
amortization and foreign exchange (losses) gains on operating
working capital movements, based upon our consolidated statements
of operations. OIBDA differs from operating profit, 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, finance
revenue, finance charges, foreign exchange (losses) gains, income
taxes and other non-operating profit or loss 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
------------------
March 31, December 31, March 31,
2011 2010 2010
---- -------- ----
(unaudited) (unaudited) (unaudited)
Net loss (1,161) (1,934) (4,864)
Tax (benefit) charge (26) 28 147
Finance revenue (1,119) (1,108) (1,253)
Finance charges 9,155 8,967 9,153
Net foreign exchange
(gain)/loss on foreign (4,711) 2,276 6,565
currency borrowings, net ------ ----- -----
Operating profit 2,138 8,229 9,748
Depreciation and
amortization 10,127 10,042 10,219
Other foreign exchange gain/
(loss), loss on 370 203 396
disposal of fixed assets and
other income --- --- ---
OIBDA 12,635 18,474 20,363
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