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Global Crossing Announces First Quarter 2010 Results
Apr 28, 2010 (04:04 PM EDT)


- Consolidated revenue of $648 million, representing a year-over-year increase of 6 percent as reported and an increase of 2 percent in constant currency terms.

- "Invest and grow" revenue of $554 million, representing a year-over-year increase of 9 percent as reported and an increase of 4 percent in constant currency terms.

- OIBDA of $77 million, representing a year-over-year increase of 3 percent as reported and a decrease of 4 percent in constant currency terms.

- Company confirms 2010 guidance for "Invest & Grow" revenue, OIBDA and Free Cash Flow.

FLORHAM PARK, N.J., April 28 /PRNewswire-FirstCall/ -- Global Crossing (Nasdaq: GLBC), a leading global IP solutions provider, today announced unaudited first quarter 2010 results.  The company said it will discuss its consolidated financial and operational results for the first quarter 2010 on a conference call tomorrow.

"Our 'Invest and Grow' revenue increased nine percent year over year, consistent with the assumptions underlying our annual guidance," said John Legere, chief executive officer of Global Crossing. "We are investing in our product and service capabilities, as well as our sales resources, and we are seeing encouraging signs of improving order volumes.  We remain confident about the full-year outlook and our strategic positioning for long-term growth."

Results at a Glance


Change vs. 1Q 2009

(Dollars in Millions)

1Q 2010

Reported

Constant

Currency






Consolidated Revenues

$ 648

6%

2%

"Invest & Grow" Revenues

$ 554

9%

4%

OIBDA

$ 77

3%

(4)%





Free Cash Flow

$ (72)

$ (40)



The company's OIBDA, Free Cash Flow and constant currency measures are non-GAAP measures.  See "Non-GAAP Metrics," below, and the reconciliations of OIBDA and Free Cash Flow to the most directly comparable GAAP measures included in the attached financial tables.




First Quarter Results

Global Crossing's consolidated revenue was $648 million in the first quarter of 2010, essentially flat on a sequential basis and an increase of 6 percent year over year.  The sequential comparison included an $8 million unfavorable foreign exchange impact and the year-over-year increase included a $26 million favorable foreign exchange impact.  In constant currency terms, consolidated revenue increased 1 percent sequentially and 2 percent year over year.  

The company's "invest and grow" services generated revenue of $554 million in the first quarter.  This represents a decrease of 1 percent sequentially and an increase of 9 percent year over year, including substantially all of the foreign exchange impacts referenced above.  In constant currency terms, "invest and grow" revenue grew 1 percent sequentially and 4 percent year over year.

On a segment basis, ROW, GC Impsat and GCUK generated "invest and grow" revenue of $312 million, $129 million, and $119 million, respectively.  Sequentially, in constant currency terms, ROW decreased 1 percent and both GC Impsat and GCUK were flat.  Sequentially, "invest and grow" revenue in the ROW segment was unfavorably impacted by a $6 million reduction in intercompany sales.  Year over year, in constant currency terms, ROW, GC Impsat and GCUK increased 5 percent, 4 percent, and 1 percent, respectively.

The company's wholesale voice business generated revenue of $94 million in the first quarter, a 1 percent increase sequentially and a 4 percent decline year over year.

Global Crossing reported gross margin for the first quarter of $193 million, compared with $190 million in the fourth quarter of 2009 and $179 million in the first quarter of 2009.  Foreign currency unfavorably impacted gross margin by $2 million sequentially and favorably impacted gross margin by $9 million year over year.  Excluding foreign exchange impacts, the sequential improvement in gross margin was driven by an increase in revenue and $10 million of property tax and insurance recoveries in the quarter, partially offset by a $6 million increase in accrued incentive compensation as well as costs incurred for a subsea cable repair.  Excluding foreign exchange impacts, the year over year increase in gross margin was primarily driven by an increase in revenue and the previously mentioned property tax and insurance recoveries, partially offset by higher real estate expenses, a $4 million increase in accrued incentive compensation and the cost incurred on the previously mentioned subsea cable repair.

SG&A expenses were $116 million in the first quarter of 2010, compared with $107 million in the fourth quarter of 2009 and $104 million in the first quarter of 2009.  Foreign currency favorably impacted SG&A by $1 million sequentially and unfavorably impacted SG&A by $4 million year over year.  Excluding foreign exchange impacts, the sequential increase was principally due to a $4 million increase in accrued incentive compensation, as well as higher sales commissions.  Excluding foreign exchange impacts, the year over year increase was principally due to a $3 million increase in accrued incentive compensation, as well as higher sales commissions.

Global Crossing reported $77 million of OIBDA in the first quarter, compared with $83 million in the fourth quarter of 2009 and $75 million in the first quarter of 2009.  On a segment basis, ROW, GC Impsat and GCUK contributed $7 million, $40 million and $30 million, respectively.

Global Crossing's consolidated net loss applicable to common shareholders was $120 million for the first quarter of 2010.  On a sequential basis, net loss increased $82 million, principally due to unfavorable foreign exchange impacts and a benefit in the provision for income taxes in the prior quarter.  On a year-over-year basis, net loss increased $61 million, principally due to unfavorable foreign exchange impacts, an increase in interest expense and higher depreciation and amortization.

Cash and Liquidity

As of March 31, 2010, Global Crossing had $359 million of unrestricted cash, compared with $477 million at December 31, 2009 and $306 million at March 31, 2009.  Including $14 million of restricted cash, Global Crossing had total cash of $373 million at March 31, 2010.  The devaluation of the Venezuelan Bolivar in January had a $27 million unfavorable impact on our unrestricted cash balances as of March 31, 2010.

Cash used in operating activities for the first quarter was $31 million.  Global Crossing received $23 million in proceeds from the sale of IRUs and prepaid services in the first quarter.  Uses of cash for the quarter included $55 million for capital expenditures and principal payments on capital leases.

The company reported negative Free Cash Flow of $72 million in the quarter, compared with positive $72 million in the prior quarter and negative $32 million in the year-ago period.  The sequential decrease was primarily driven by a use of cash for working capital, higher cash interest and lower sales of IRUs and prepaid services, as anticipated. Year over year, the variance was principally driven by an increase in cash interest expense and lower sales of IRUs and prepaid services.

2010 Guidance

The company's 2010 guidance, which was originally provided on February 16, 2010 and assumed foreign exchange rates as of February 15, 2010, is as follows:


Metric

2010 Guidance

($ in millions)

"Invest & Grow" Revenue

$2,300 – $2,375  

OIBDA

$390 – $440

Free Cash Flow

$10 – $60




Management continues to forecast 2010 performance within the above guidance ranges for the designated measures based on various assumptions which may or may not materialize. Some of the risks and uncertainties that could cause actual results to differ materially from these estimates are referenced at the end of this press release.

Non-GAAP Metrics

Pursuant to the Securities and Exchange Commission's (SEC's) Regulation G and Item 10(e)(1)(i) of Regulation S-X, the attached financial tables include definitions of non-GAAP financial measures, as well as reconciliations of such measures to the most directly comparable financial measures calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP).  In addition, measures referred to in this press release as being calculated "in constant currency terms" are non-GAAP measures intended to present the relevant information assuming a constant exchange rate between the two periods being compared.  Such measures are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.

Conference Call

The company will hold a conference call on Thursday, April 29, 2010 at 9:00 a.m. EDT to discuss its financial results.  The call may be accessed by dialing +1 212 231 2929 or, if calling from within the United Kingdom, by dialing +44 208 196 2883.  Callers are advised to access the call 15 minutes before the start time.  A Webcast with presentation slides will be available at http://investors.globalcrossing.com/events.cfm.

A replay of the call will be available on Thursday, April 29, 2010 beginning at 11:30 a.m. EDT and will be accessible until Thursday May 6, 2010 at 11:30 a.m. EDT.  To access the replay, North American callers may dial +1 402 977 9140 or +1 800 633 8284 and enter reservation number 21466389.  Callers in the United Kingdom may dial +44 870 000 3081 or +1 800 692 0831 and enter reservation number 21466389.

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 and delivers service 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 world.

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 and 8-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: 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 our indebtedness and to fund our other liquidity needs; legal and contractual restrictions on the inter-company transfer of funds by the company's subsidiaries; the company'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 the company'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 the company'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 prevailing on the parallel market; potential weaknesses in internal controls of acquired businesses, and difficulties in integrating internal controls of those businesses with the company's own internal controls; 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; exposure to contingent liabilities; and other risks referenced from time to time in the company'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 Contacts

Michael Schneider

+ 1 973 937 0146

Michael.Schneider@globalcrossing.com


Analysts/Investors Contact

Mark Gottlieb

+ 1 800 836 0342

glbc@globalcrossing.com


Antonio Suarez

+1 973 937 0233

Antonio.Suarez@globalcrossing.com



IR/PR1

Global Crossing Limited




Table 1

Condensed Consolidated Balance Sheets





($ in millions)

















March 31, 2010


December 31, 2009



(unaudited)



ASSETS:





Current assets:





Cash and cash equivalents


$              359


$               477

Restricted cash and cash equivalents - current portion


7


9

Accounts receivable, net of allowances of $57 and $50


360


328

Prepaid costs and other current assets


103


101






Total current assets


829


915






Restricted cash and cash equivalents - long term


7


7

Property and equipment, net of accumulated depreciation of

$1,268 and $1,216


1,229


1,280

Intangible assets, net (including goodwill of $172 and $175)


193


198

Other assets


85


88






Total assets


$           2,343


$            2,488






LIABILITIES:





Current liabilities:





Accounts payable


$              287


$               312

Accrued cost of access


99


87

Short term debt and current portion of long term debt


35


37

Obligations under capital leases - current portion


50


49

Accrued restructuring costs - current portion


11


12

Deferred revenue - current portion


181


174

Other current liabilities


344


372






Total current liabilities


1,007


1,043






Long term debt


1,284


1,295

Obligations under capital leases


84


90

Deferred revenue


333


334

Accrued restructuring costs


8


13

Other deferred liabilities


76


73






Total liabilities


2,792


2,848






SHAREHOLDERS' DEFICIT:





Common stock,  110,000,000 shares authorized, $.01

par value, 60,410,486 and 60,219,817 shares issued and

outstanding as of  March 31, 2010 and December 31,

2009, respectively


1


1

Preferred stock with controlling shareholder, 45,000,000

shares authorized, $.10 par value, 18,000,000 shares

issued and outstanding  


2


2

Additional paid-in capital


1,430


1,427

Accumulated other comprehensive loss


3


(24)

Accumulated deficit


(1,885)


(1,766)






Total shareholders' deficit


(449)


(360)






Total liabilities and shareholders' deficit


$           2,343


$            2,488








Global Crossing Limited




Table 2

Unaudited Condensed Consolidated Statements of Operations





($ in millions)












Three Months Ended



March 31,



2010


2009






Revenue


$           648


$           609






Cost of revenue (excluding depreciation and amortization, shown separately below):





Cost of access


(305)


(286)

Real estate, network and operations


(99)


(97)

Third party maintenance


(27)


(24)

Cost of equipment and other sales


(24)


(23)

Total cost of revenue


(455)


(430)

Gross margin


193


179

Selling, general and administrative


(116)


(104)

Depreciation and amortization


(88)


(79)

Operating loss


(11)


(4)

Other income (expense):





Interest income


-


1

Interest expense


(49)


(36)

Other expense, net


(52)


(15)

Loss before provision for income taxes


(112)


(54)

Provision for income taxes


(7)


(4)

Net loss


(119)


(58)

Preferred stock dividends


(1)


(1)

Loss applicable to common shareholders


$         (120)


$           (59)






Loss per common share, basic and diluted:





Loss applicable to common shareholders


$        (1.99)


$        (1.04)

Weighted average number of common shares


60,267,487


56,923,415



Global Crossing Limited




Table 3

Unaudited Condensed Consolidated Statements of Cash Flows





($ in millions)












Three Months Ended



March 31,



2010


2009




Cash flows provided by (used in) operating activities:





Net loss


$ (119)


$    (58)

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities:





Gain on sale of property and equipment


(1)


-

Non-cash stock compensation expense


5


5

Depreciation and amortization


88


79

Provision for doubtful accounts


2


2

Amortization of prior period IRUs


(6)


(5)

Change in long term deferred revenue


10


27

Other


62


20

Change in operating working capital:





- Changes in accounts receivable


(47)


-

- Changes in accounts payable and accrued cost of access


(6)


(55)

- Changes in other current assets


(7)


(19)

- Changes in other current liabilities


(12)


10

Net cash provided by (used in) operating activities


(31)


6











Cash flows provided by (used in) investing activities:





Purchases of property and equipment


(41)


(38)

Change in restricted cash and cash equivalents


2


2

Net cash used in investing activities


(39)


(36)






Cash flows provided by (used in) financing activities:





Proceeds from short and long term debt


-


3

Repayment of capital lease obligations


(14)


(15)

Repayment of long term debt (including current portion)


(4)


(6)

Finance costs incurred


(1)


-

Payment of employee taxes on share-based compensation


(1)


(4)

Net cash used in financing activities


(20)


(22)






Effect of exchange rate changes on cash and cash equivalents


(28)


(2)

Net decrease in cash and cash equivalents


(118)


(54)

Cash and cash equivalents, beginning of period


477


360

Cash and cash equivalents, end of period


$  359


$   306








Global Crossing Limited and Subsidiaries









Table 4

Unaudited Condensed Consolidated Statements of Operations

($ in millions)



Quarter Ended March 31, 2010


GCUK


GC Impsat


ROW 1


Eliminations


Total





















Revenue

$ 120


$       132


$ 402


$     (6)


$  648

Cost of revenue










Cost of access

(38)


(31)


(242)


6


(305)

Real estate, network and operations

(10)


(22)


(67)


-


(99)

Third party maintenance

(5)


(7)


(15)


-


(27)

Cost of equipment and other sales

(17)


(4)


(3)


-


(24)

Total cost of revenue

(70)


(64)


(327)


6


(455)

Gross margin

50


68


75


-


193

Selling, general and administrative

(20)


(28)


(68)


-


(116)

Depreciation and amortization

(17)


(24)


(47)


-


(88)

Operating income (loss)

13


16


(40)


-


(11)

Other income (expense):










Interest income

2


1


4


(7)


-

Interest expense

(14)


(7)


(35)


7


(49)

Other income (expense), net

(13)


(28)


(11)


-


(52)

Income (loss) before benefit (provision) for income taxes

(12)


(18)


(82)


-


(112)

Benefit (provision) for income taxes

-


(6)


(1)


-


(7)

Net income (loss)

(12)


(24)


(83)


-


(119)

Preferred stock dividends

-


-


(1)


-


(1)

Income (loss) applicable to common shareholders

$ (12)


$       (24)


$ (84)


$-


$ (120)
































Quarter Ended December 31, 2009


GCUK


GC Impsat


ROW 1


Eliminations


Total





















Revenue

$ 125


$       134


$ 405


$   (13)


$  651

Cost of revenue










Cost of access

(37)


(37)


(238)


12


(300)

Real estate, network and operations

(18)


(24)


(64)


1


(105)

Third party maintenance

(5)


(7)


(14)


-


(26)

Cost of equipment and other sales

(22)


(6)


(2)


-


(30)

Total cost of revenue

(82)


(74)


(318)


13


(461)

Gross margin

43


60


87


-


190

Selling, general and administrative

(19)


(27)


(61)


-


(107)

Depreciation and amortization

(17)


(24)


(49)


-


(90)

Operating income (loss)

7


9


(23)


-


(7)

Other income (expense):










Interest income

2


1


4


(7)


-

Interest expense

(14)


(8)


(32)


7


(47)

Other income (expense), net

1


1


(2)


-


-

Income (loss) before benefit (provision) for income taxes

(4)


3


(53)


-


(54)

Benefit (provision) for income taxes

-


17


-


-


17

Net income (loss)

(4)


20


(53)


-


(37)

Preferred stock dividends

-


-


(1)


-


(1)

Income (loss) applicable to common shareholders

$   (4)


$         20


$ (54)


$-


$   (38)
































Quarter Ended March 31, 2009


GCUK


GC Impsat


ROW 1


Eliminations


Total





















Revenue

$ 110


$       116


$ 387


$     (4)


$  609

Cost of revenue










Cost of access

(34)


(27)


(229)


4


(286)

Real estate, network and operations

(18)


(18)


(61)


-


(97)

Third party maintenance

(5)


(5)


(14)


-


(24)

Cost of equipment and other sales

(15)


(2)


(6)


-


(23)

Total cost of revenue

(72)


(52)


(310)


4


(430)

Gross margin

38


64


77


-


179

Selling, general and administrative

(15)


(25)


(64)


-


(104)

Depreciation and amortization

(15)


(20)


(44)


-


(79)

Operating income (loss)

8


19


(31)


-


(4)

Other income (expense):










Interest income

2


1


1


(3)


1

Interest expense

(12)


(8)


(19)


3


(36)

Other income (expense), net

(3)


5


(17)


-


(15)

Income (loss) before benefit (provision) for income taxes

(5)


17


(66)


-


(54)

Benefit (provision) for income taxes

-


(4)


-


-


(4)

Net income (loss)

(5)


13


(66)


-


(58)

Preferred stock dividends

-


-


(1)


-


(1)

Income (loss) applicable to common shareholders

$   (5)


$         13


$ (67)


$-


$   (59)


1 Rest of World (ROW) represents operations of Global Crossing Limited and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd. and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC Impsat).



Global Crossing Limited and Subsidiaries





Table 5

Unaudited Summary of Consolidated Revenue






($ in millions)



















Quarter Ended March 31, 2010



GCUK


GC Impsat


ROW 1


Eliminations


Total












Revenue:











Enterprise, carrier data and indirect sales channel


$ 119


$         127


$ 308


$       -


$   554

Carrier voice


1


3


90


-


94

Intersegment revenue


-


2


4


(6)


-

Consolidated revenue


$ 120


$         132


$ 402


$    (6)


$   648




































Quarter Ended December 31, 2009



GCUK


GC Impsat


ROW 1


Eliminations


Total












Revenue:











Enterprise, carrier data and indirect sales channel


$ 123


$         128


$ 306


$       -


$   557

Carrier voice


2


3


88


-


93

Other


-


-


1


-


1

Intersegment revenue


-


3


10


(13)


-

Consolidated revenue


$ 125


$         134


$ 405


$  (13)


$   651




































Quarter Ended March 31, 2009



GCUK


GC Impsat


ROW 1


Eliminations


Total












Revenue:











Enterprise, carrier data and indirect sales channel


$ 107


$         111


$ 292


$       -


$   510

Carrier voice


3


3


92


-


98

Other


-


-


1


-


1

Intersegment revenue


-


2


2


(4)


-

Consolidated revenue


$ 110


$         116


$ 387


$    (4)


$   609












1Rest of World (ROW) represents operations of Global Crossing Limited and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd. and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC Impsat).



Global Crossing Limited

Table 6

Unaudited Reconciliation of OIBDA to Income (Loss) Applicable to Common Shareholders

($ in millions)


Pursuant to the SEC's Regulation G, the following table provides a reconciliation of OIBDA, which is considered a non-GAAP (Generally Accepted Accounting Principles) financial measure, to income (loss) applicable to common shareholders.


OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from operating income (loss) 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, other non-operating income or expense items and preferred stock dividends.  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.






Quarter Ended March 31, 2010



GCUK


GC Impsat


ROW 1


Eliminations


Total























OIBDA


$  30


$           40


$     7


$               -


$     77

Depreciation and amortization


(17)


(24)


(47)


-


(88)

Operating income (loss)


13


16


(40)


-


(11)

Interest income


2


1


4


(7)


-

Interest expense


(14)


(7)


(35)


7


(49)

Other expense, net


(13)


(28)


(11)


-


(52)

Provision for income taxes


-


(6)


(1)


-


(7)

Preferred stock dividends


-


-


(1)


-


(1)

Loss applicable to common shareholders


$ (12)


$          (24)


$ (84)


$               -


$  (120)

























Quarter Ended December 31, 2009



GCUK


GC Impsat


ROW 1


Eliminations


Total























OIBDA


$  24


$           33


$   26


$               -


$     83

Depreciation and amortization


(17)


(24)


(49)


-


(90)

Operating income (loss)


7


9


(23)


-


(7)

Interest income


2


1


4


(7)


-

Interest expense


(14)


(8)


(32)


7


(47)

Other income (expense), net


1


1


(2)


-


-

Benefit for income taxes


-


17


-


-


17

Preferred stock dividends


-


-


(1)


-


(1)

Income (loss) applicable to common shareholders


$   (4)


$           20


$ (54)


$               -


$    (38)

























Quarter Ended March 31, 2009



GCUK


GC Impsat


ROW 1


Eliminations


Total























OIBDA


$  23


$           39


$   13


$               -


$     75

Depreciation and amortization


(15)


(20)


(44)


-


(79)

Operating income (loss)


8


19


(31)


-


(4)

Interest income


2


1


1


(3)


1

Interest expense


(12)


(8)


(19)


3


(36)

Other income (expense), net


(3)


5


(17)


-


(15)

Provision for income taxes


-


(4)


-


-


(4)

Preferred stock dividends


-


-


(1)


-


(1)

Income (loss) applicable to common shareholders


$   (5)


$           13


$ (67)


$               -


$    (59)












1Rest of World (ROW) represents operations of Global Crossing Limited and subsidiaries excluding Global Crossing (UK) Telecommunications Ltd. and subsidiaries (GCUK) and GC Impsat Holdings I Plc and subsidiaries (GC Impsat).



Global Crossing Limited and Subsidiaries



Table 7

Unaudited Reconciliations of Free Cash Flow to Net Cash Provided by Operating Activities


($ in millions)








Pursuant to the SEC's Regulation G, the following table provides a reconciliation of Free Cash Flow, which is considered a non-GAAP (Generally Accepted Accounting Principles) financial measure, to net cash provided by operating activities.


We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment as disclosed in the statement of cash flows.  Free Cash Flow differs from the net change in cash and cash equivalents in the statement of cash flows in that it excludes the cash impact of: all investing activities (other than capital expenditures, which are a fundamental and recurring part of our business); all financing activities; and exchange rate changes on cash and cash equivalents balances.

Management uses Free Cash Flow as a relevant indicator of our ability to generate cash to pay debt.  Free Cash Flow also is an important part of our internal reporting and a key measure used by management to evaluate liquidity from period to period. We believe 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 Free Cash Flow may differ from similarly titled measures used by other companies, and may not be comparable to those other measures.  Moreover, we do not currently pay a significant amount of income taxes due to net operating losses, and we therefore generate higher Free Cash Flow than comparable businesses that do pay income taxes.  Additionally, Free Cash Flow is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and capital expenditures.  Free Cash Flow also does not include certain significant cash items such as purchases and sales out of the ordinary course of business, proceeds from financing activities, repayments of capital lease obligations and other debt, and the effect of exchange rate changes on cash and cash equivalents balances.  Free Cash Flow should be considered in addition to, and not as a substitute for, net change in cash and cash equivalents in the statement of cash flows reported in accordance with GAAP.

Management believes that Free Cash Flow is useful to our investors as it provides an indication of the underlying cash position of our everyday business operations and the ability to pay debt.











Quarter Ended




March 31,




2010







Free Cash Flow

$                  (72)



Purchases of property and equipment

41



Net cash used in operating activities

$                  (31)












Quarter Ended




December 31,




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