1
EXHIBIT 99.1
[GTS LOGO]
FOR IMMEDIATE RELEASE
GTS REPORTS SECOND QUARTER 2000 RESULTS
Quarterly revenues up 46 percent, 9 percent sequentially
EBITDA loss narrows to (6.3) percent of revenues
HIGHLIGHTS
o Reports strong financial results
- Grows quarterly revenues 46 percent year-over-year, and 9 percent
sequentially on a euro basis, to Euro 277.3 million, or US$259.3
million
- Reports EBITDA(1) of (Euro 17.5) million, or (US$16.3) million,
improving from (7.7) percent of revenues to (6.3) percent on a
sequential basis
- Drives data/IP revenues up approximately 20 percent sequentially with
data/IP and managed bandwidth now representing approximately 46
percent of core revenues
- Enters into US$550 million credit agreement
o Extends infrastructure
- Accelerates roll out of pan-European ISP infrastructure adding 27
cities and 8 countries
- Opens hosting centers in London, Paris, Frankfurt and Amsterdam
- Core network extended by six cities and 500 kilometers
o Expands "content initiative" announcing IP transit agreement with epicRealm
o Wins major new data business
- Profil ARBED Distribution for IP Virtual Private Networks (VPNs)
- NORDUnet for IP transit
- Network Solutions adds two top-level domain-name-registry servers to
hosting centers
o Enters strategic alliance with Cisco to introduce new IP services
WASHINGTON, AUGUST 8, 2000 - Global TeleSystems, Inc. (GTS) (NYSE: GTS; Easdaq:
GTSG; Frankfurt: GTS), the leading European e*Business and borderless broadband
services company, today reported its results for the second quarter of 2000.
Consolidated revenues in the quarter grew to Euro 277.3 million, or US$259.3
million, up 46 percent from Euro 189.5 million, or US$200.3 million, in the
second quarter of 1999. Sequentially, revenues increased by 9 percent. The
company's EBITDA losses for the second quarter of 2000 were (Euro 17.5) million,
or (US$16.3) million, or (6.3) percent of revenues, narrowing from (Euro 19.6)
million, or (US$19.4) million, or (7.7) percent of revenues for the first
quarter of 2000.
H. Brian Thompson, GTS's chairman and chief executive officer, said: "We are
beginning to see the benefits of the repositioning we began late last year. Our
data and IP sales continue to accelerate as we roll out our pan-European IP
infrastructure, to now reach 84 cities and 18 countries. This greatly expands
the number of business customers to whom we can now offer our bundled package of
pan-European voice and data services."
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GTS Reports 2nd Quarter 2000 Results
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ORGANIZATIONAL REALIGNMENT
Broadband Services
In the second quarter, the company realigned its divisions along customer-facing
lines and to be more consistent with industry practices. The company has
combined its traditional managed bandwidth business and wholesale business to
form GTS Broadband Services. This division is focused on selling managed
bandwidth and wholesale products to a common customer set including other
telecommunications companies, ISPs and Web-centric customers. Previously, the
wholesale business was included in GTS Business Services. Refer to Schedule A
(attached) for a historical presentation of this business for comparison
purposes.
Business Services--Core and Non-Core
During the second quarter, the company also realigned its retail brand (Business
Services) in 12 Western European countries and four Central European countries
with a focus on better serving its large corporate customers and
small-to-medium-sized enterprises (SMEs). The company split its retail business
into core services consisting of IP, data, hosting and pan-European voice; and
non-core services, consisting of low margin voice products such as prepaid
cards, residential and resellers. Refer to Schedule B (attached) for a
historical presentation for comparison purposes.
By the end of this year, the company expects to maximize the value of these
non-core businesses by: 1) eliminating certain product lines and re-deploying
assets; or 2) harvesting the business.
OPERATIONS
Revenues--Broadband Services
Broadband Services grew revenues to Euro 118.3 million, or US$110.6 million,
up 37 percent versus the year-ago quarter and up 16 percent sequentially. The
traditional managed bandwidth and IP transit businesses (previously referred to
as Carrier Services) grew to Euro 85.2 million, up 34 percent from the year-ago
quarter and were up slightly from the first quarter. The wholesale business had
a strong quarter as it doubled the on-net pan-European portion of its volumes
sequentially from the first quarter of 2000.
Revenues--Business Services
The Business Services division grew revenues to Euro 130.4 million, or US$122.0
million, up 61 percent versus the year-ago quarter and 2 percent on a sequential
basis. As shown in Schedule B, core Business Services revenues were Euro 90.5
million, up 3 percent sequentially, and, within this segment, data revenues
increased approximately 20 percent sequentially. The non-core business had
revenue of Euro 39.9 million, down 0.5 percent sequentially, consistent with
objectives.
Revenues--Data/IP Mix
Data and IP revenues were up approximately 20 percent on a sequential basis for
the total core business; comprised approximately 16 percent of the company's
total core quarterly revenues; and represented approximately Euro 145 million in
revenues on an annualized basis. Data/IP revenue, together with managed
bandwidth, represented 46 percent of total core revenues for the quarter.
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GTS Reports 2nd Quarter 2000 Results
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Gross Margins
Gross margins in the quarter were Euro 105.3 million, up from Euro 98.4 million
in the first quarter, and represented 38.0 percent of quarterly revenues. Gross
margin percentage of revenue in the core business was 40.4 percent in second
quarter 2000 compared to 41.3 percent in the first quarter. Gross margin
percentage of revenue for the core was impacted by the revenue mix of wholesale
increasing as a percent of total revenues. Gross margin percentage of revenue in
the non-core business remained relatively flat at 23.6 percent of revenues in
the second quarter.
Selling, general and administrative (SG&A)
Total SG&A was Euro 122.8 million or 44.3 percent of revenue in the second
quarter, improving from 46.3 percent in the first quarter of 2000. Core SG&A was
Euro 110.2 million, which represented 46.4 percent of core revenues in the
second quarter compared to Euro 103.2 million, or 48.0 percent of core revenues
in the first quarter. e*Business initiatives, including data, IP, hosting and
advertising accounted for a significant portion of the absolute sequential
increase in core SG&A. As a percent of revenue, core SG&A declined by 1.6
percent, which was mainly attributable to improved cost control coupled with an
increase in revenues in the second quarter over the first quarter. Non-core SG&A
was Euro 12.6 million, down from Euro 14.8 million in the first quarter of 2000
as the company reduced costs related to these products.
EBITDA
In the second quarter of 2000, GTS generated EBITDA losses of (Euro 17.5)
million, or (US$16.3) million, representing (6.3) percent of revenues. This was
an improvement from an EBITDA loss of (Euro 19.6) million, or (US$19.4) million,
in the first quarter of 2000, which represented (7.7) percent of revenue. EBITDA
for the core business was (Euro 14.3) million or (6.0) percent of core revenues
in the second quarter, an improvement from (6.7) percent in the first quarter.
EBITDA for the non-core business in the second quarter was (Euro 3.2) million
compared to (Euro 5.1) million in the first quarter.
Capital Expenditures, Net Loss Applicable to Common Shareholders and Net Loss
Per Share
In the second quarter capital expenditures totaled US $300.4 million. Total
capital expenditures in the first six months of 2000 were US$538.1 million.
Net loss applicable to common shareholders was (US$152.4) million for the second
quarter of 2000 compared to (US$153.9) million for the first quarter of 2000 and
(US$109.8) million for the year-ago quarter.
Recurring net loss per share based on the weighted average shares outstanding in
the quarter of 197.9 million was (US$0.77) for the second quarter of 2000
compared to (US$0.82) for the first quarter of 2000 and (US$0.66) for the
year-ago quarter.
RESTRUCTURING ACTIONS
As part of separating GTS's non-core businesses from its core businesses and
streamlining operations, including headcount reductions/redeployment, the
centralization of finance and billing operations and sales office consolidation,
the company expects estimated annual pro forma savings in the range of Euro 25
million to Euro 30 million. These actions will result in the reduction of
approximately 400 positions from our current staffing levels by year end. It is
currently anticipated that a one-time charge for severance, lease termination
and other items will be taken in the third quarter, which is estimated to be in
the range of Euro 15 million to Euro 20 million.
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GTS Reports 2nd Quarter 2000 Results
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OUTLOOK FOR REMAINDER OF 2000
The company expects sequential growth rates in the core business (see Schedule
B) to be in the range of 7 percent to 8 percent in the third quarter and in the
range of 10 percent to 12 percent in the fourth quarter. Non-core revenues in
the third and fourth quarters will be dependent upon whether we sell these
businesses or pursue other alternatives.
The company currently expects to meet EBITDA estimates for the third and fourth
quarters of 2000.
EXCHANGE RATES
The average dollar:euro exchange rate during the second quarter of 2000 was
0.935, down from 0.987 in the first quarter of 2000. In early August 2000, the
dollar:euro exchange rate was approximately 0.907.
ABOUT GTS (WWW.GTSGROUP.COM)
Global TeleSystems, Inc., is the leading provider of e*Business and borderless
broadband services across Europe, serving businesses and carriers with a range
of broadband, hosting, Internet/IP and voice services. As an industry leader in
Europe, the company has the largest cross-border fiber optic network; the
largest Tier-1 IP backbone (GTS Ebone); the most widely deployed pan-European
e*Business sales and service staff; and the largest pan-European customer base.
GTS's first and most extensive trans-European broadband fiber network includes
on-net points of presence in 38 European cities (50 cities planned) and
stretches across 17,500 route kilometers (25,000 route kilometers planned) with
six city enterprise networks (CENs), providing intra-city bandwidth (with plans
for a total of 16). GTS is also developing an advanced trans-Atlantic dual-cable
system in a joint venture with FLAG Telecom. GTS has its corporate operating
headquarters in London; maintains corporate offices in the metropolitan
Washington, D.C., area as well as Brussels and Cork, Ireland; and has sales and
support offices in 20 countries.
GTS Investors
Jim Shields, Director, Investor Relations
Tel.: +44-207-769-8264; fax: +44-207-769-8068; e-mail: jim.shields@gtsgroup.com
Patti Grohs, Senior Manager, Investor Relations
Tel.: +1-703-236-3170; fax: +1-703-236-3606; e-mail: patti.grohs@gtsgroup.com
GTS Media
Glenn Manoff, Director of Communications
Tel.: +44-(0)-207-769-8290; fax: +44-(0)-207-769-8084;
e-mail: glenn.manoff@gtsgroup.com
THIS PRESS RELEASE MAY INCLUDE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK AND
UNCERTAINTY. ALTHOUGH THE COMPANY BELIEVES ITS EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO ASSURANCE CAN
BE GIVEN THAT SUCH PROJECTIONS WILL BE FULFILLED. ANY SUCH FORWARD-LOOKING
STATEMENT MUST BE CONSIDERED ALONG WITH KNOWLEDGE THAT ACTUAL EVENTS OR RESULTS
MAY VARY MATERIALLY FROM SUCH PREDICTIONS DUE TO, AMONG OTHER THINGS, POLITICAL,
ECONOMIC OR LEGAL CHANGES IN THE MARKETS IN WHICH GTS DOES BUSINESS, COMPETITIVE
DEVELOPMENTS OR RISKS INHERENT IN THE COMPANY'S BUSINESS PLAN. READERS ARE
REFERRED TO THE DOCUMENTS FILED BY GTS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION, SPECIFICALLY THE MOST RECENT REPORTS FILED UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND REGISTRATION STATEMENTS FILED PURSUANT TO THE
SECURITIES ACT OF 1933, WHICH IDENTIFY IMPORTANT RISK FACTORS.
- TABLES ATTACHED -
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SCHEDULE A
GTS Reports 2nd Quarter 2000 Results
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GLOBAL TELESYSTEMS, INC.
SUPPLEMENTAL RECURRING INCOME STATEMENT INFORMATION
(UNAUDITED)
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00
-------- -------- -------- -------- -------- --------
Average quarterly dollar per euro exchange rate 1.112 1.057 1.049 1.038 0.987 0.935
Millions of euros
REVENUE
Broadband Services 68.3 86.6 96.7 102.0 102.1 118.3
Business Services 63.7 81.0 96.6 117.3 128.4 130.4
Golden Telecom (CIS) 21.8 21.9 23.9 24.6 24.5 28.6
-------- -------- -------- -------- -------- --------
TOTAL REVENUE(2) 153.8 189.5 217.2 243.9 255.0 277.3
Sequential revenue growth 23.2% 14.6% 12.3% 4.6% 8.7%
Annual revenue growth 65.8% 46.3%
GROSS MARGIN 61.5 82.3 83.6 93.2 98.4 105.3
% of revenue 40.0% 43.4% 38.5% 38.2% 38.6% 38.0%
SELLING, GENERAL & ADMINISTRATIVE 70.7 85.9 91.4 110.1 118.0 122.8
% of revenue 46.0% 45.3% 42.1% 45.1% 46.3% 44.3%
EBITDA(1) (9.2) (3.6) (7.8) (16.9) (19.6) (17.5)
% of revenue (6.0)% (1.9)% (3.6)% (6.9)% (7.7)% (6.3)%
Millions of US dollars
REVENUE
Broadband Services 76.0 91.5 101.5 105.9 100.8 110.6
Business Services 70.7 85.6 101.3 121.7 126.7 122.0
Golden Telecom (CIS) 24.2 23.2 25.1 25.5 24.2 26.7
-------- -------- -------- -------- -------- --------
TOTAL REVENUE(2) 170.9 200.3 227.9 253.1 251.7 259.3
GROSS MARGIN 68.4 87.0 87.7 96.7 97.1 98.5
SELLING, GENERAL & ADMINISTRATIVE 78.6 90.8 95.9 114.3 116.5 114.8
EBITDA(1) (10.2) (3.8) (8.2) (17.6) (19.4) (16.3)
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SCHEDULE B
GTS Reports 2nd Quarter 2000 Results
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GLOBAL TELESYSTEMS, INC.
SUPPLEMENTAL INCOME STATEMENT INFORMATION
CORE AND NON-CORE
(UNAUDITED)
4Q99 1Q00 2Q00
---------------------------- ---------------------------- ----------------------------
Average quarterly dollar per euro
exchange rate 1.038 1.038 1.038 0.987 0.987 0.987 0.935 0.935 0.935
Millions of euros CORE NON-CORE TOTAL CORE NON-CORE TOTAL CORE NON-CORE TOTAL
------ -------- ------ ------ -------- ------ ------ -------- ------
REVENUE
Broadband Services 102.0 -- 102.0 102.1 -- 102.1 118.3 -- 118.3
Business Services 80.7 36.6 117.3 88.3 40.1 128.4 90.5 39.9 130.4
Golden Telecom (CIS) 24.6 -- 24.6 24.5 -- 24.5 28.6 -- 28.6
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL REVENUE(2) 207.3 36.6 243.9 214.9 40.1 255.0 237.4 39.9 277.3
Sequential growth rates 3.7% 9.6% 4.6% 10.5% (0.5)% 8.7%
GROSS MARGIN 84.5 8.7 93.2 88.7 9.7 98.4 95.9 9.4 105.3
% of revenue 40.8% 23.8% 38.2% 41.3% 24.2% 38.6% 40.4% 23.6% 38.0%
SELLING, GENERAL & ADMINISTRATIVE 98.6 11.5 110.1 103.2 14.8 118.0 110.2 12.6 122.8
% of revenue 47.6% 31.4% 45.1% 48.0% 36.9% 46.3% 46.4% 31.6% 44.3%
EBITDA(1) (14.1) (2.8) (16.9) (14.5) (5.1) (19.6) (14.3) (3.2) (17.5)
% of revenue (6.8)% (7.7)% (6.9)% (6.7)% (12.7)% (7.7)% (6.0)% (8.0)% (6.3)%
Millions of US dollars
REVENUE
Broadband Services 105.9 -- 105.9 100.8 -- 100.8 110.6 -- 110.6
Business Services 83.7 38.0 121.7 87.1 39.6 126.7 84.7 37.3 122.0
Golden Telecom (CIS) 25.5 -- 25.5 24.2 -- 24.2 26.7 -- 26.7
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL REVENUE(2) 215.1 38.0 253.1 212.1 39.6 251.7 222.0 37.3 259.3
GROSS MARGIN 87.7 9.0 96.7 87.5 9.6 97.1 89.7 8.8 98.5
SELLING, GENERAL & ADMINISTRATIVE 102.3 12.0 114.3 101.9 14.6 116.5 103.0 11.8 114.8
EBITDA(1) (14.6) (3.0) (17.6) (14.4) (5.0) (19.4) (13.3) (3.0) (16.3)
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GTS Report 2nd Quarter 2000 Results
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GLOBAL TELESYSTEMS, INC.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------ ------------------------
1999 2000 1999 2000
---------- ---------- ---------- ----------
(In US$ millions, except per share data)
Revenues $ 200.3 $ 259.3 $ 371.2 $ 511.0
Access and network services 113.3 160.8 215.8 315.4
Selling, general & administrative 90.8 114.8 169.4 231.3
---------- ---------- ---------- ----------
EBITDA(1) (3.8) (16.3) (14.0) (35.7)
Depreciation and amortization 48.4 68.3 87.7 137.8
Merger, restructuring and non-recurring costs -- -- 63.7 --
---------- ---------- ---------- ----------
Loss from operations (52.2) (84.6) (165.4) (173.5)
Other income (expense):
Interest expense (49.3) (57.8) (96.9) (118.7)
Interest income 15.9 22.3 31.0 45.8
Foreign currency loss (6.0) (19.3) (14.1) (34.5)
Other (expense) income, net(3) (6.4) 0.2 (11.0) 1.1
---------- ---------- ---------- ----------
Total other expense (45.8) (54.6) (91.0) (106.3)
---------- ---------- ---------- ----------
Net loss before taxes (98.0) (139.2) (256.4) (279.8)
Income taxes (4.2) (4.2) (8.0) (8.4)
---------- ---------- ---------- ----------
Net loss $ (102.2) $ (143.4) $ (264.4) $ (288.2)
Preferred dividend (7.6) (9.0) (7.6) (18.1)
---------- ---------- ---------- ----------
Net loss applicable to
common shareholders $ (109.8) $ (152.4) $ (272.0) $ (306.3)
========== ========== ========== ==========
Net loss per share applicable
to common shareholders $ (0.66) $ (0.77) $ (1.65) $ (1.58)
========== ========== ========== ==========
Recurring net loss applicable
to common shareholders $ (109.8) $ (152.4) $ (208.3) $ (306.3)
========== ========== ========== ==========
Recurring net loss per share
applicable to common shareholders $ (0.66) $ (0.77) $ (1.26) $ (1.58)
========== ========== ========== ==========
Weighted avg. common shares(4) 167.6 197.9 164.8 193.4
---------- ---------- ---------- ----------
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GTS Reports 2nd Quarter 2000 Results
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GLOBAL TELESYSTEMS, INC.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, JUNE 30,
1999 2000
------------ ------------
(In US$ millions)
ASSETS
CURRENT ASSETS
Cash and restricted cash equivalents $ 1,341.4 $ 901.4
Accounts receivable, net 239.0 262.0
Prepaid expenses and other assets 106.5 137.6
TOTAL CURRENT ASSETS 1,686.9 1,301.0
Property and equipment, gross 1,222.6 1,632.1
Accumulated depreciation (218.1) (286.9)
Property and equipment, net 1,004.5 1,345.2
Goodwill and intangible assets, net 1,172.9 1,220.4
Other assets 137.5 106.5
------------ ------------
TOTAL ASSETS $ 4,001.8 $ 3,973.1
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 493.9 $ 522.9
Debt maturing within one year and current portion of capital leases 122.2 43.7
Deferred revenue and other current liabilities 86.6 91.8
------------ ------------
TOTAL CURRENT LIABILITIES 702.7 658.4
Long-term debt and capital leases 2,430.0 2,485.6
Deferred revenue and other non-current liabilities 123.9 160.4
------------ ------------
TOTAL LIABILITIES 3,256.6 3,304.4
Commitments and Contingencies
Minority interest 114.6 109.4
Redeemable convertible preferred securities 502.3 502.3
SHAREHOLDERS' EQUITY
Common stock 18.4 19.9
Additional paid-in capital 1,280.8 1,496.5
Notes receivable due from shareholder (10.4) (10.7)
Accumulated deficit (1,160.5) (1,448.7)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 128.3 57.0
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,001.8 $ 3,973.1
============ ============
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GTS Reports 2nd Quarter 2000 Results
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Notes:
1. EBITDA is earnings/(loss) from operations before interest, taxes,
depreciation and amortization, foreign currency gains/(losses), other
(expense)/income and non-recurring expenses. EBITDA is a measure of a
company's performance commonly used in the telecommunications industry but
should not be construed as an alternative to net income/(loss) determined
in accordance with generally accepted accounting principles (GAAP) as an
indicator of operating performance or as an alternative to cash from
operating activities determined in accordance with GAAP as a measure of
liquidity.
2. Subtotaled revenue figures may not convert with euro exchange rates shown
due to rounding, whereas individual lines of business do.
3. Includes earnings/(losses) from equity in ventures and minority interest.
4. Reflects a 2-for-1 stock split effective July 21, 1999.
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