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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 001-16201
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GLOBAL CROSSING LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-0189783
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(Address of principal executive offices)
(441) 296-8600
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
The number of shares, $0.01 par value each, of the registrant's common stock
outstanding as of August 1, 2001: 909,357,264 shares, including 22,033,758
treasury shares.
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GLOBAL CROSSING LTD. AND SUBSIDIARIES
For the Quarter Ended June 30, 2001
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets.......................... 1
Condensed Consolidated Statements of Operations................ 2
Condensed Consolidated Statements of Cash Flows................ 3
Condensed Consolidated Statements of Comprehensive Loss........ 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 25
Item 2. Changes in Securities and Use of Proceeds...................... 26
Item 3. Defaults Upon Senior Securities................................ 26
Item 4. Submission of Matters to a Vote of Security Holders............ 27
Item 5. Other Information.............................................. 27
Item 6. Exhibits and Reports on Form 8-K............................... 27
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share information)
June 30, December 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS:
-------
Cash and cash equivalents............................. $ 1,923 $ 1,477
Restricted cash and cash equivalents.................. 167 146
Accounts receivable, net.............................. 758 880
Other assets and prepaid costs........................ 661 679
------- -------
Total current assets.............................. 3,509 3,182
Property and equipment, net........................... 11,823 10,030
Goodwill and intangibles, net......................... 10,085 10,481
Other assets.......................................... 1,372 1,523
Net assets of discontinued operations................. -- 4,969
------- -------
Total assets...................................... $26,789 $30,185
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
-------------------------------------
Short-term borrowings................................. $ 61 $ 1,000
Accounts payable...................................... 344 401
Accrued construction costs............................ 942 811
Other current liabilities............................. 2,425 2,455
------- -------
Total current liabilities......................... 3,772 4,667
Long-term debt........................................ 6,048 6,271
Deferred revenue...................................... 2,694 1,700
Other deferred liabilities............................ 1,427 1,740
------- -------
Total liabilities................................. 13,941 14,378
------- -------
MINORITY INTEREST..................................... 874 949
------- -------
MANDATORILY REDEEMABLE AND CUMULATIVE CONVERTIBLE
PREFERRED STOCK...................................... 3,159 3,158
------- -------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares authorized, par
value $0.01 per share, 908,681,193 and 906,339,273
shares issued as of June 30, 2001, and December 31,
2000, respectively................................. 9 9
Treasury stock, 22,033,758 shares................... (209) (209)
Additional paid-in capital and other shareholders'
equity............................................. 12,127 13,766
Accumulated deficit................................. (3,112) (1,866)
------- -------
8,815 11,700
------- -------
Total liabilities and shareholders' equity........ $26,789 $30,185
======= =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
1
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share information)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
REVENUES................ $ 1,069 $ 898 $ 2,151 $ 1,805
OPERATING EXPENSES:
Cost of access and
maintenance.......... 545 413 1,064 829
Other operating
expenses............. 613 456 1,276 832
Depreciation and
amortization......... 450 318 863 597
------------- ------------- ------------- -------------
1,608 1,187 3,203 2,258
------------- ------------- ------------- -------------
OPERATING LOSS.......... (539) (289) (1,052) (453)
OTHER INCOME (EXPENSE):
Equity in loss of
affiliates........... (8) (14) (19) (20)
Minority interest..... 39 3 79 (13)
Interest income....... 16 33 43 48
Interest expense...... (140) (94) (282) (178)
Other expense, net.... (4) (8) (13) (12)
------------- ------------- ------------- -------------
LOSS FROM CONTINUING
OPERATIONS BEFORE
BENEFIT FOR INCOME
TAXES.................. (636) (369) (1,244) (628)
Benefit for income
taxes................ 77 65 123 72
------------- ------------- ------------- -------------
LOSS FROM CONTINUING
OPERATIONS............. (559) (304) (1,121) (556)
Discontinued
operations, net of
tax.................. (71) (61) (125) (112)
------------- ------------- ------------- -------------
NET LOSS................ (630) (365) (1,246) (668)
Preferred stock
dividends............ (59) (59) (118) (104)
Charge for conversion
of preferred stock... -- (92) -- (92)
------------- ------------- ------------- -------------
LOSS APPLICABLE TO
COMMON SHAREHOLDERS.... $ (689) $ (516) $(1,364) $ (864)
============= ============= ============= =============
LOSS PER COMMON SHARE,
BASIC AND DILUTED:
Loss from continuing
operations applicable
to common
shareholders......... $ (0.70) $ (0.55) $ (1.40) $ (0.93)
============= ============= ============= =============
Loss from discontinued
operations, net of
tax.................. $ (0.08) $ (0.07) $ (0.14) $ (0.14)
============= ============= ============= =============
Loss applicable to
common shareholders.. $ (0.78) $ (0.62) $ (1.54) $ (1.07)
============= ============= ============= =============
Shares used in
computing basic and
diluted loss per
share................ 886,109,573 830,903,109 885,409,765 804,779,705
============= ============= ============= =============
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
2
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months
Ended June 30,
---------------
2001 2000
------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(1,246) $ (668)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Loss from discontinued operations......................... (1) 112
Loss on sale of ILEC...................................... 208 --
Gain on sale of GlobalCenter.............................. (82) --
Loss on sale of marketable securities, net................ 14 --
Equity in loss of affiliates.............................. 19 19
Depreciation and amortization............................. 863 597
Provision for doubtful accounts........................... 64 36
Stock related expenses.................................... 9 27
Deferred income taxes..................................... 112 4
Minority interest......................................... (79) 13
Other..................................................... (17) --
Changes in operating assets and liabilities............... 813 190
------- ------
Net cash provided by operating activities............... 677 330
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................... (2,286) (1,575)
Proceeds from sale of ILEC.................................. 3,369 --
Investments in and advances to/from affiliates, net......... (37) (112)
Cash acquired in acquisitions............................... -- 10
Change in restricted cash and cash equivalents.............. (22) 79
Sales (purchases) of marketable equity securities, net...... 63 (144)
Other....................................................... -- (20)
------- ------
Net cash provided by (used in) investing activities..... 1,087 (1,762)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net................. 6 747
Proceeds from issuance of preferred stock, net.............. -- 1,112
Proceeds from long-term debt................................ 2,385 444
Proceeds from short-term borrowings......................... 61 --
Repayment of long-term debt................................. (2,643) (100)
Repayment of short-term borrowings.......................... (1,000) --
Preferred dividends......................................... (117) (77)
Minority interest investment in subsidiary.................. 10 60
Other....................................................... (20) --
------- ------
Net cash (used in) provided by financing activities..... (1,318) 2,186
------- ------
CASH FLOWS FROM DISCONTINUED OPERATIONS....................... -- (88)
------- ------
NET INCREASE IN CASH AND CASH EQUIVALENTS..................... 446 666
CASH AND CASH EQUIVALENTS, beginning of period................ 1,477 1,629
------- ------
CASH AND CASH EQUIVALENTS, end of period...................... $ 1,923 $2,295
======= ======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months
Ended
June 30,
--------------
2001 2000
------ ------
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Non-cash costs incurred for purchases of property and
equipment.................................................... $ 175 $ 432
====== ======
Acquisitions:
Assets acquired............................................. $ -- $3,694
Liabilities assumed and fair market value of stock options
issued..................................................... -- (796)
------ ------
$ -- $2,898
====== ======
Shares acquired upon sale of GlobalCenter..................... $1,918 $ --
====== ======
Investments in affiliates:
Effects of PCL Consolidation................................ $ -- $ (263)
====== ======
Preferred stock issued for investment in joint venture...... $ -- $ 400
====== ======
Preferred Stock:
Common stock issued for preferred dividends................. $ -- $ 5
====== ======
Conversion of preferred stock into common stock............. $ -- $ 442
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid and capitalized................................. $ 323 $ 268
====== ======
Interest paid (net of capitalized interest)................... $ 239 $ 169
====== ======
Income taxes (received) paid, net............................. $ (84) $ 34
====== ======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- --------------
2001 2000 2001 2000
------- ----- ------- -----
Net loss...................................... $ (630) $(365) $(1,246) $(668)
Unrealized (loss) gain on securities, net of
tax.......................................... (806) 354 (1,319) 354
Unrealized loss on derivative instruments, net
of tax....................................... (11) -- (15) --
Foreign currency translation adjustment....... (14) (70) (205) (92)
------- ----- ------- -----
Comprehensive loss............................ $(1,461) $ (81) $(2,785) $(406)
======= ===== ======= =====
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions unless otherwise stated)
1. Background and Organization
Global Crossing Ltd., a Bermuda Company ("GCL" and, together with its
consolidated subsidiaries, the "Company") provides telecommunications solutions
over the world's first integrated global Internet Protocol ("IP") based
network, which reaches 27 countries and more than 200 major cities around the
globe. The Company serves many of the world's largest corporations and
organizations, providing a full range of managed data and voice products and
services as well as integrated telecommunications solutions, including network
outsourcing. The Company operates throughout the Americas and Europe, and
provides services in Asia through its subsidiary, Asia Global Crossing (NYSE:
AX).
Global Crossing's strategy is to be the premier provider of global broadband
services to global enterprises. The Company has adopted this strategy to take
advantage of its extensive IP-based fiber-optic network. The Global Crossing
Network offers its customers an exceptional combination of global reach and
bandwidth. Through its Global Marine Systems subsidiary, the Company also
provides installation and maintenance services for subsea telecommunications
systems.
Global Crossing Ltd. serves as a holding company for its subsidiaries'
operations.
2. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements as of June 30, 2001, and for the three and six months ended June 30,
2001 and 2000, include the accounts of Global Crossing Ltd. and its
consolidated subsidiaries. All material inter-company balances and transactions
have been eliminated. The unaudited interim condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring items, which
are, in the opinion of management, necessary to present a fair statement of the
results of the interim period presented. The results of operations for any
interim period are not necessarily indicative of results for the full year.
These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenue and expenses during the reporting
period. Actual amounts and results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements do
not include all footnotes and certain financial presentations normally required
under generally accepted accounting principles. Therefore, these financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
3. Reclassifications
Certain prior year amounts have been reclassified in the condensed
consolidated financial statements for consistent presentation to current year
amounts.
4. Recently Issued Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other
6
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Intangible Assets". SFAS No. 141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method of
accounting. SFAS 142, which will be adopted by the Company on January 1, 2002,
requires that goodwill and certain intangible assets resulting from business
combinations entered into prior to June 30, 2001 no longer be amortized, but
instead be reviewed for impairment. Any write-down of goodwill would be charged
to results of operations in the period in which the recorded value of goodwill
and certain intangibles is more than its fair value. The adoption of SFAS 142
will reduce the amortization of existing goodwill and intangibles commencing
January 1, 2002; however, impairment reviews may result in periodic write-downs
subsequent to the date of adoption.
5. Merger
The Company entered into a merger with IXnet, Inc. ("IXnet") and its parent
company, IPC Communications, Inc. ("IPC") during 2000, which has been accounted
for in the accompanying consolidated financial statements under the purchase
method of accounting for business combinations. The purchase price and net
liabilities assumed of $3,395 have been allocated to goodwill and other
intangible assets and are being amortized on the straight-line method over 10
years.
Pro Forma Condensed Financial Information
The following unaudited pro forma condensed consolidated financial
information of the Company has been prepared to demonstrate how results of
operations might have looked if the IPC and IXnet mergers had been completed at
the beginning of the periods presented.
The pro forma information does not attempt to show how the Company, after
effecting the transactions described above, would actually have performed had
the transactions occurred prior to the commencement of these periods. If the
transactions had actually occurred in prior periods, the financial performance
of the Company and its constituent businesses would likely have been different.
The pro forma financial information is not necessarily indicative of the future
results that the Company will experience after the completion of these
transactions.
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues.................. $ 1,069 $ 979 $ 2,151 $ 1,973
=========== =========== =========== ===========
Loss from continuing
operations............... $ (559) $ (430) $ (1,121) $ (854)
=========== =========== =========== ===========
Loss from continuing
operations applicable to
common shareholders...... $ (618) $ (581) $ (1,239) $ (1,069)
=========== =========== =========== ===========
Net loss.................. $ (630) $ (491) $ (1,246) $ (966)
=========== =========== =========== ===========
Loss applicable to common
shareholders............. $ (689) $ (642) $ (1,364) $ (1,181)
=========== =========== =========== ===========
Loss per common share,
basic and diluted:
Loss from continuing
operations applicable to
common shareholders...... $ (0.70) $ (0.67) $ (1.40) $ (1.25)
=========== =========== =========== ===========
Loss applicable to common
shareholders............. $ (0.78) $ (0.74) $ (1.54) $ (1.38)
=========== =========== =========== ===========
Shares used in computing
basic and diluted loss
per share................ 886,109,573 873,134,665 885,409,765 855,009,032
=========== =========== =========== ===========
7
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Discontinued Operations
On January 10, 2001, the Company completed the sale of its complex web
hosting services business, GlobalCenter, Inc., to Exodus Communications
("Exodus") for 108.2 million Exodus common shares. A gain of $82, net of tax of
$44, was recorded upon the sale and has been reflected in the accompanying
condensed consolidated financial statements. The value of the shares was $1,918
at the date of closing and $223 at June 30, 2001. The Company is monitoring the
value of this investment in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company's beneficial ownership is less than 20% and the
Company has no significant influence over Exodus. While it is not the Company's
current intention to do so and contractual obligations to Exodus restrict its
ability to do so, the Company may in the future dispose of some or all of its
investment in Exodus in privately negotiated transactions, through a public
offering upon exercise of its contractual registration rights, or otherwise,
depending on market conditions and other factors. The Company's financial
statements reflect GlobalCenter as a discontinued operation.
On June 29, 2001, the Company completed the sale of its incumbent local
exchange carrier ("ILEC") business, acquired as part of its acquisition of
Frontier Corporation in September 1999, to Citizens Communications Company
("Citizens"). The sale of the ILEC was consummated pursuant to the Stock
Purchase Agreement, dated as of July 11, 2000 (the "Agreement"), as amended,
among GCL, Global Crossing North America, Inc., an indirect wholly-owned
subsidiary of GCL, and Citizens. In April 2001, the Company and Citizens
amended the Agreement to provide for, among other things, (i) an acceleration
of the anticipated closing date for the transaction and (ii) an adjustment to
the purchase price, which reflected a reduction in the amount of cash to be
received by the Company at closing in connection with the transaction from
$3,650 to $3,500, subject to adjustments concerning closing date liabilities
and working capital balances, and a $100 credit, which will be applied against
future services to be rendered to Citizens over a five year period. Pursuant to
the transaction, the parties also entered into an agreement under which
Citizens will purchase long distance services from the Company for resale to
the ILEC's customers. As a result of customary adjustments based on closing
date liabilities and working capital balances, the Company received gross
proceeds of $3,369 at closing and recorded an after tax-loss from the sale of
approximately $208 million.
Net assets of discontinued operations, loss on discontinued operations, and
loss on disposal of discontinued operations consist of the following:
June 30, December 31,
2001 2000
-------- ------------
Balance Sheet Data:
Assets............................................... $ -- $5,609
Liabilities.......................................... -- (640)
----- ------
Net assets of discontinued operations................ $ -- $4,969
===== ======
8
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Three
Months Six Months
Ended Ended
June 30, June 30,
---------- ------------
2001 2000 2001 2000
---- ---- ----- -----
Income Statement Data:
Revenue.......................................... $194 $233 $ 385 $ 458
Expenses......................................... 165 287 313 557
---- ---- ----- -----
Operating income (loss).......................... 29 (54) 72 (99)
Interest income, net............................. -- 5 -- 11
Other expenses................................... (11) -- (51) --
Provision for income taxes....................... (11) (12) (20) (24)
---- ---- ----- -----
Income (loss) from discontinued operations....... 7 (61) 1 (112)
Net loss on disposal of discontinued operations,
net of tax (provision) benefit of $(6) and $20,
respectively.................................... (78) -- (126) --
---- ---- ----- -----
Total loss from discontinued operations........ $(71) $(61) $(125) $(112)
==== ==== ===== =====
7. Sale of Accounts Receivable
On June 15, 2001, certain of the Company's indirect, wholly-owned
subsidiaries (the "Subsidiaries") entered into a receivables sale agreement
(the "Sale Agreement"), under which the Subsidiaries agreed to sell a defined,
revolving pool of trade accounts receivable to GC Mart LLC ("GCM"), a wholly-
owned, special purpose subsidiary of the Company. GCM was formed for the sole
purpose of buying and selling receivables generated by the Subsidiaries. Under
the Sale Agreement, the Subsidiaries agreed to irrevocably and without recourse
sell their accounts receivable to GCM. Under a separate receivables purchase
agreement, dated the same date (the "Purchase Agreement"), GCM agreed to sell,
in turn, an undivided percentage ownership interest in these receivables to an
independent issuer of receivables-backed commercial paper. Under the Purchase
Agreement, the receivables will continue to be serviced by Global Crossing
North America, Inc. ("GCNA"), an indirect, wholly-owned subsidiary of the
Company. Certain of the Subsidiaries' and GCNA's obligations under the
receivables facility are guaranteed by Global Crossing Holdings Ltd., a direct
wholly-owned subsidiary of the Company.
This two-step transaction is accounted for as a sale of receivables under
the provisions of SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities", which the Company adopted
in June 2001. During the three months ended June 30, 2001, GCM sold an
undivided interest in an aggregate of $183 of accounts receivable, which has
been removed from the accompanying consolidated balance sheet.
8. Derivative Instruments and Hedging Activities
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended. The statements
require that that an entity recognize all derivatives as either assets or
liabilities measured at fair value. The accounting for the changes in fair
value of a derivative depends on the use of the derivative. The cumulative
effect of adopting these new accounting standards did not have a material
effect on the Company's results of operations or its financial position for the
periods presented in the financial statements included herein.
The Company utilizes certain derivative financial instruments to enhance its
ability to manage risk, including market price risk of equity securities it
holds as investments, interest rate risk and foreign currency exchange risk,
which exist as part of ongoing business operations. Derivative instruments are
entered into for
9
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
periods consistent with related underlying exposures and do not constitute
positions independent of those exposures. These derivative financial
instruments take the form of collars, interest rate swap agreements and foreign
currency forward contracts. The fair value of these instruments was not
material at June 30, 2001.
The Company designates derivatives as either fair value hedges or cash flow
hedges. If the derivative is designated as a fair value hedge, the changes in
the fair value of the derivative and of the hedged item attributable to the
hedged risk are recognized in earnings. If the derivative is designated as a
cash flow hedge, the effective portions of changes in the fair value of the
derivative are recorded in other comprehensive loss ("OCL") and are recognized
in the income statement when the hedged item affects earnings. Ineffective
portions of changes in the fair value of cash flow hedges are recognized in
earnings. At June 30, 2001, the Company only utilized cash flow hedges. The
amounts recorded into earnings for the three and six months ended June 30, 2001
were not material. The Company also does not expect the net derivative losses
included in comprehensive loss that will be reclassified into earnings within
the next twelve months to be material.
9. Net Loss Applicable to Common Shareholders
Basic Earnings Per Share ("EPS") is computed by dividing net loss applicable
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted. The dilutive effect of the assumed exercise of stock
options and convertible securities did not have an effect on the computation of
diluted loss per share for the three and six months ended June 30, 2001 and
2000, since they were anti-dilutive.
10. Commitments and Contingencies
The Company remained as guarantor with respect to certain GlobalCenter real
estate lease agreements following the sale of GlobalCenter to Exodus in January
2001. The agreements are for administrative and technical facilities located
throughout the United States, Europe, and the Asia/Pacific region. On an
aggregated basis, the annual lease payments average approximately $70 per year
over the life of the leases. In the opinion of management, in the event that
the Company is required to satisfy some or all of the guaranteed lease
commitments, annual payments would be significantly reduced to an amount that
is not material through negotiated termination of the guarantees, discounted
landlord buyouts, permitted sub-leases, and other mitigating actions, and, in
any event, the satisfaction of these lease commitments would not have a
material effect on the Company's financial condition. The remaining lease terms
are between approximately 5 and 18 years.
During the quarter, the Company entered into several agreements with various
carrier customers for the purchase or lease of capacity and co-location space.
These transactions were implemented in order to acquire cost-effective local
network expansions; to provide for cost-effective alternatives to new
construction in certain markets in which the Company anticipates shortages of
capacity; and to provide additional levels of physical diversity in the network
as the Company implements its global mesh architecture. The cash commitments
totaled $358 and $625 for the three months ended June 30, 2001 and March 31,
2001, respectively, including the cost of the possible construction of the
Caribbean System as discussed in "Liquidity and Capital Resources" on page 20.
11. Segment Information and Recurring Adjusted EBITDA
The Company is a global provider of managed data and voice products and
services and, through its Global Marine Systems subsidiary, provides cable
installation and maintenance services. The Company's reportable segments
include telecommunications services and installation and maintenance services.
The Company's chief decision maker monitors the revenue streams of the various
products and geographic locations. In addition, operations are managed and
financial performance is evaluated based on the delivery of multiple,
integrated services to customers over a single network.
10
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The information below summarizes certain financial data of the Company by
Segment:
Three Months Six Months
Ended Ended
June 30, June 30,
------------- -------------
2001 2000 2001 2000
------ ------ ------ ------
Revenue:
Commercial......................................... $ 443 $ 316 $ 865 $ 616
Consumer........................................... 38 43 78 88
Carrier:
Service revenue.................................. 409 316 798 635
Sales type lease revenue......................... -- 99 18 266
Amortization of prior period IRU's............... 16 5 34 8
------ ------ ------ ------
Total carrier................................... 425 420 850 909
------ ------ ------ ------
Telecommunications services segment revenue........ 906 779 1,793 1,613
Installation and maintenance segment revenue(1).... 177 146 386 237
------ ------ ------ ------
Consolidated revenue(1)............................ 1,069 898 2,151 1,805
Cash portion of the change in deferred revenue..... 551 308 1,082 474
------ ------ ------ ------
Consolidated cash revenue.......................... $1,620 $1,206 $3,233 $2,279
====== ====== ====== ======
Three Months
Ended Six Months
June 30, Ended June 30,
------------- ---------------
2001 2000 2001 2000
------ ----- ------- ------
Selected Financial Information:
Operating loss:
Telecommunication services.................. $ (539) $(288) $(1,055) $ (451)
Installation and maintenance................ -- (1) 3 (2)
------ ----- ------- ------
Consolidated................................ $ (539) $(289) $(1,052) $ (453)
====== ===== ======= ======
Recurring Adjusted EBITDA:
Telecommunications services................. $ 448 $ 326 $ 863 $ 617
Installation and maintenance................ 24 31 50 52
------ ----- ------- ------
Consolidated................................ $ 472 $ 357 $ 913 $ 669
====== ===== ======= ======
Cash paid for capital expenditures:
Telecommunications services................. $1,014 $ 873 $ 2,267 $1,603
Installation and maintenance................ 19 19 35 50
------ ----- ------- ------
Consolidated................................ $1,033 $ 892 $ 2,302 $1,653
====== ===== ======= ======
June 30, December 31,
2001 2000
-------- ------------
Total assets:
Telecommunication services............................ $25,522 $23,900
Installation and maintenance.......................... 1,267 1,316
Net assets of discontinued operations................. -- 4,969
------- -------
Consolidated.......................................... $26,789 $30,185
======= =======
- --------
(1) Installation and Maintenance revenue includes $14 and $27 in revenue for
the three months ended June 30, 2001 and 2000, respectively, as well as $28
and $45 in revenue for the six months ended June 30, 2001 and 2000,
respectively, related to services performed for the Telecommunications
Services Segment. These revenues and the related intercompany profit are
eliminated upon consolidation.
11
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recurring Adjusted Earning before Interest, Taxes, Depreciation and
Amortization, or Recurring Adjusted EBITDA, is calculated as operating loss,
plus depreciation and amortization, which includes non-cash cost of capacity
sold, stock related expenses, the cash portion of the change in deferred
revenue, merger-related expenses, and certain other non-recurring items. This
definition is consistent with financial covenants contained in the Company's
major financial agreements. The Company's management uses Recurring Adjusted
EBITDA to monitor compliance with its financial covenants and to measure the
performance and liquidity of its reportable segments. This information should
not be considered as an alternative to any measure of performance as
promulgated under GAAP. The Company's calculation of Recurring Adjusted EBITDA
may be different from the calculation used by other companies and, therefore,
comparability may be limited. Consideration received during the three and six
months ended June 30, 2001 of $345 and $720, respectively, which is included in
the $472 and $913 of Recurring Adjusted EBITDA below and in the $1,620 and
$3,233 of cash revenue above, was received from significant carrier customers
who signed contracts to purchase $381 and $881 of capacity during the three and
six months ended June 30, 2001, respectively. In addition, the Company has made
cash commitments to these carrier customers of $358 and $625 for the three
months ended June 30, 2001 and March 31, 2001, respectively, including the cost
of the possible construction of the Caribbean system. (See Note 10 and
"Liquidity and Capital Resources" on page 20).
The calculation of Recurring Adjusted EBITDA is as follows:
Three
Months Six Months
Ended Ended
June 30, June 30,
------------ --------------
2001 2000 2001 2000
----- ----- ------- -----
Operating income (loss)...................... $(539) $(289) $(1,052) $(453)
Depreciation and amortization................ 450 318 863 597
Stock related expense........................ 4 8 9 27
Cash portion of the change in deferred
revenue..................................... 551 308 1,082 474
Merger-related expenses...................... 6 12 11 24
----- ----- ------- -----
Recurring Adjusted EBITDA.................... $ 472 $ 357 $ 913 $ 669
===== ===== ======= =====
12. Subsequent Event
Subsequent to June 30, 2001, the Company's board of directors approved a
plan to effectuate the realignment and integration of the Company's current
regional organizational structure into integrated global functions such as
network operations, customer care, information systems, finance and sales and
marketing. The realignment and integration will result in the elimination of
more than 2,000 positions, primarily in the United States, across a majority of
the Company's business functions and job classes. In addition, as part of the
plan a significant consolidation of offices and other related real estate
facilities will occur. These actions are expected to reduce annual operating
expenses by approximately $160-$170 through the year ended December 31, 2001.
To provide for the one-time costs of implementing these changes, the Company
expects to reflect in its third quarter results of operations a non-recurring
charge of approximately $250 to $325. Of this amount, $50 to $75 relates to
staff reduction costs and $200 to $250 relates to the closing of facilities.
Upon completion of the plan, the Company will employ approximately 11,400
people in 27 countries around the world.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollar amounts presented are in millions, unless otherwise stated.)
Recently Issued Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting. SFAS 142, which will be
adopted by the Company on January 1, 2002, requires that goodwill and certain
intangible assets resulting from business combinations entered into prior to
June 30, 2001 no longer be amortized, but instead be reviewed for impairment.
Any write-down of goodwill would be charged to results of operations in the
periods in which the recorded value of goodwill and certain intangibles is
more than its fair value. The adoption of SFAS 142 will reduce the
amortization of goodwill and intangibles commencing January 1, 2002; however,
impairment reviews may result in periodic write-downs subsequent to the date
of adoption.
Results of Operations for the Three Months Ended June 30, 2001, and June 30,
2000:
Revenues
Revenues for the three months ended June 30, 2001 and 2000 reflect the
following changes by segment:
Three Months Ended
June 30,
----------------------
Increase /
2001 2000 (Decrease)
------ ---- ----------
Commercial............................................... $ 443 $316 $127
Consumer................................................. 38 43 (5)
Carrier:
Service Revenue........................................ 409 316 93
Sales Type Lease Revenue............................... -- 99 (99)
Amortization of prior period IRU's..................... 16 5 11
------ ---- ----
Total Carrier............................................ 425 420 5
------ ---- ----
Telecommunications Services Segment Revenue.............. 906 779 127
Installation and Maintenance Segment Revenue............. 163 119 44
------ ---- ----
Total Revenues......................................... $1,069 $898 $171
====== ==== ====
Revenues for the three months ended June 30, 2001, increased $171 over the
same period in 2000. The increase was due to growth in our existing business
segments, as explained in the pro forma revenue section below, and due to the
merger with IXnet and IPC in June 2000.
The following table provides supplemental pro forma detail of Global
Crossing's revenues for the three months ended June 30, 2001 and 2000. Actual
revenues for 2000 reflect the operations of IXnet and IPC only after June 14,
2000. Management believes that pro forma revenue provides a more meaningful
comparability among periods presented since our historical results only
reflect the operations of IXnet and IPC after the close of the merger. Pro
forma revenue assumes the merger occurred at January 1, 2000. Pro forma
revenue is not necessarily indicative of the results that would have been
achieved had such transactions actually occurred at January 1, 2000, nor are
they necessarily indicative of our future results. In addition, the Company
expects slower growth in commercial and carrier revenue than anticipated at
the beginning of the calendar year due to a lengthening sales cycle resulting
from the financial difficulties being experienced by some of our commercial
and carrier customers as well as the downturn in the industry and a slowing
economy. The industry downturn has also caused a drop in the level of subsea
installation projects occurring around the globe and, as a
13
result, we expect to experience a decline in our installation revenue. However,
neither bad debt expense nor accounts receivable balances have significantly
increased as a result of these factors.
Three Months Ended
June 30,
----------------------
Increase /
2001 2000 (Decrease)
------ ---- ----------
Commercial............................................... $ 443 $397 $46
Consumer................................................. 38 43 (5)
Carrier:
Service Revenue........................................ 409 316 93
Sales Type Lease Revenue............................... -- 99 (99)
Amortization of prior period IRU's..................... 16 5 11
------ ---- ---
Total Carrier............................................ 425 420 5
------ ---- ---
Telecommunications Services Segment Revenue.............. 906 860 46
Installation and Maintenance Segment Revenue............. 163 119 44
------ ---- ---
Total Revenues......................................... $1,069 $979 $90
====== ==== ===
Revenues on a pro forma basis increased $90 compared to the same period in
the prior year. Of this increase, $46 is due to growth from our commercial
services which include data services such as private line, frame relay, ATM,
and IP. Growth in data services was slightly offset by a decline in commercial
voice revenue. The increase in revenue from data services has primarily been
driven by the expansion of our network resulting in an increase in the volume
of data service provided across the network compared to the same period in
2000.
Revenue from carrier services increased $93 on an actual and pro forma basis
compared to the three months ended June 30, 2000. Carrier services include (i)
voice services; (ii) data services such as private line, frame-relay, ATM and
IP and (iii) operations, administration and maintenance ("OA&M") services.
Increased revenue in voice and data services for the carrier segment has been
primarily driven by the expansion of our network over the past year resulting
in an increase in the number of carrier customers serviced by the Company as
well as the volume of traffic carried over the network. This increase in the
number of capacity agreements has also resulted in an increase in the number of
OA&M agreements and therefore, the Company has experienced an increase in OA&M
revenue.
The Company did not record any sales-type lease revenue during the current
quarter. This is directly due to the adoption of FASB Interpretation No. 43,
"Real Estate Sales, an interpretation of FASB Statement No. 66" ("FIN 43"),
which limits the applicability of sales-type lease accounting and requires
revenue from capacity sales to be recorded over the life of the contract when
sales-type lease accounting is not permitted. As a result of this accounting
change and industry practice, the volume of capacity agreements recognized as
sales-type leases has decreased. Results for the three month period ended June
30, 2000, reflect revenue from capacity agreements included in the Company's
backlog at the time FIN 43 was adopted and additional sales under existing
capacity agreements which were eligible for sales-type lease accounting.
Revenue from the amortization of prior period IRU's increased $11 on an
actual and pro forma basis over the same period in the prior year. This
increase is primarily driven by an increase in the number of IRU agreements
entered into by our carrier customers over the past year.
14
Installation and maintenance revenue increased $44 on an actual and pro
forma basis compared to the same period in the prior year primarily due to an
increase in the number and size of installation contracts awarded to us. As a
result, vessels have been redeployed from maintenance to installation projects
to fulfill the increased contractual requirements. The Company's fleet
operations have been expanded since June 2000 to meet the increased
installation demand and increased size of global undersea network capacity
which requires maintenance services.
Operating Expenses
Components of operating expenses for the three months ended June 30, 2001
and 2000 were as follows:
Three Months Ended
June 30,
------------------------
Increase /
2001 2000 (Decrease)
------ ------ ----------
Cost of access and maintenance......................... $ 545 $ 413 $132
Other operating expenses............................... 613 456 157
Depreciation and amortization.......................... 450 318 132
------ ------ ----
Total Operating Expenses............................. $1,608 $1,187 $421
====== ====== ====
Cost of access and maintenance increased $132 compared to the same period
in 2000. The increase is primarily due to the continued growth in domestic and
international voice and data products in North America, the merger with IXnet
in June of 2000, and the expansion of the network into Asia and Latin America.
In addition, several of our systems became ready for service ("RFS") during or
subsequent to June 2000, including Pacific Crossing-1; PAC, which connects the
western United States with Central and South America, as well as the
Caribbean; phases I and II of South American Crossing; and Mid-Atlantic
Crossing. Once a cable is deemed RFS, the Company incurs ongoing maintenance
charges for the cable as well as its associated landing stations. As a result,
the Company recorded third party maintenance costs associated with these
systems during the three months ended June 30, 2001, whereas, no third party
maintenance costs were incurred during the same period in 2000 when these
systems were not yet RFS.
Other operating expenses increased $157 over the same period in 2000
primarily due to the continued expansion of our network and business, as well
as the acquisition of IXnet and IPC in June of 2000. Internal OA&M costs have
increased over the prior period as new systems such as PC-1, PAC, SAC and MAC
have become operational. Selling, general and administrative ("SG&A") costs
have increased due to increased headcount as well as an increase in marketing
and other promotional expenses in order to support our expanded network and
services.
Depreciation and amortization increased $132 compared to the same period in
2000 primarily due to the acquisition of IPC and IXnet. IPC and IXnet were
acquired on June 14, 2000 resulting in additional goodwill of $3,395. Given
the timing of this acquisition only one half month of amortization was
included in our operating results for the quarter ended June 30, 2000. In
addition, the property and equipment acquired from IPC and IXnet was only
amortized for one half month. The remainder of the increase over the prior
year is due to additional property and equipment placed in service resulting
from the continued expansion of our network and finalization of our purchase
accounting for our 1999 mergers and acquisitions.
15
Other significant components of our Statement of Operations for the three
months ended June 30, 2001 and 2000 include the following:
Three Months Ended
June 30,
-----------------------
Increase /
2001 2000 (Decrease)
----- ---- ----------
Minority interest....................................... $ 39 $ 3 $ 36
Interest income......................................... $ 16 $ 33 $(17)
Interest expense........................................ $(140) $(94) $ 46
Benefit for income taxes................................ $ 77 $ 65 $ 12
Discontinued operations, net of tax..................... $ (71) $(61) $ 10
Minority interest represents the portion of net income or loss applicable to
third parties who are minority shareholders in less than wholly-owned
consolidated subsidiaries of the Company. Minority interest of $39 for the
three months ended June 30, 2001, represents the portion of net loss recorded
by our less than wholly-owned consolidated subsidiaries such as Asia Global
Crossing Ltd., Pacific Crossing Ltd., and AGC Taiwan which is applicable to
minority shareholders of those entities. For the three month period ended June
30, 2000, our less than wholly-owned consolidated subsidiaries AGC and PCL
recorded net loss from operations resulting in minority interest of $3.
In 2001, the Company sought to minimize idle cash balances by repaying
short-term debt. As a result, average cash balances were lower compared to the
same period in 2000 resulting in a decrease in interest income of $17.
Interest expense increased $46 during the three months ended June 30, 2001
compared to the same period in 2000. The increase is primarily due to the
issuance of $1 billion in Senior Notes in January 2001 and the issuance by AGC
of $408 in Senior Notes in October 2000. In addition, the Company increased its
Senior Secured Credit Facility from $1 billion to $2.25 billion in August of
2000 and received a $1 billion bridge loan in October 2000 in anticipation of
the sale of its incumbent local exchange carrier ("ILEC") business.
For the three months ended June 30, 2001, the Company recorded an income tax
benefit of $77 on a loss from continuing operations of $(636) compared to an
income tax benefit of $65 on a loss from continuing operations of $(369) for
the three months ended June 30, 2000. The change in the benefit for income tax
in relation to the earnings for the respective years is caused by changes in
the distribution of earnings to jurisdictions at various tax rates.
On June 30, 2001, the Company completed the ILEC sale to Citizens
Communications. As a result, the loss on discontinued operations of $(71) for
the current quarter represents income from discontinued operations of $7, net
of tax of $11, offset by a loss on disposal of the ILEC of $(78), net of tax of
$6. Loss from discontinued operations for the quarter ended June 30, 2000
represents income from the ILEC of $28, net of tax of $24 and a loss from
GlobalCenter operations of $(89), net of a tax benefit of $12.
16
Results of Operations for the Six Months Ended June 30, 2001, and June 30,
2000.
Revenues for the six months ended June 30, 2001 and 2000 reflect the
following changes by segment:
Six Months Ended
June 30,
------------------------
Increase /
2001 2000 (Decrease)
------ ------ ----------
Commercial............................................. $ 865 $ 616 $249
Consumer............................................... 78 88 (10)
Carrier:
Service Revenue...................................... 798 635 163
Sales Type Lease Revenue............................. 18 266 (248)
Amortization of prior period IRU's................... 34 8 26
------ ------ ----
Total Carrier.......................................... 850 909 (59)
------ ------ ----
Telecommunications Services Segment Revenue............ 1,793 1,613 180
Installation and Maintenance Segment Revenue........... 358 192 166
------ ------ ----
Total Revenues....................................... $2,151 $1,805 $346
====== ====== ====
Revenues for the six months ended June 30, 2001, increased $346 over the
same period in 2000. The increase was due to growth in our existing business
segments, as explained in the pro forma revenue section below, and due to the
merger with IXnet and IPC in June 2000.
The following table provides supplemental pro forma detail of Global
Crossing's revenues for the six months ended June 30, 2001 and 2000. Actual
revenues for 2000 reflect the operations of IXnet and IPC only after June 14,
2000. Management believes that pro forma revenue provides a more meaningful
comparability among periods presented since our historical results only reflect
the operations of IXnet and IPC after the close of the merger. Pro forma
revenue assumes the merger occurred at January 1, 2000. Pro forma revenue is
not necessarily indicative of the results that would have been achieved had
such transactions actually occurred at January 1, 2000, nor are they
necessarily indicative of our future results. In addition, the Company expects
slower growth in commercial and carrier revenue than anticipated at the
beginning of the calendar year due to a lengthening sales cycle resulting from
the financial difficulties being experienced by some of our commercial and
carrier customers as well as the downturn in the industry and a slowing
economy. The industry downturn has also caused a drop in the level of subsea
installation projects occurring around the globe and, as a result, we expect to
experience a decline in our installation revenue. However, neither bad debt
expense nor accounts receivable balances have significantly increased as a
result of these factors.
Six Months Ended
June 30,
------------------------
Increase /
2001 2000 (Decrease)
------ ------ ----------
Commercial............................................. $ 865 $ 784 $ 81
Consumer............................................... 78 88 (10)
Carrier:
Service Revenue...................................... 798 635 163
Sales Type Lease Revenue............................. 18 266 (248)
Amortization of prior period IRU's................... 34 8 26
------ ------ ----
Total Carrier.......................................... 850 909 (59)
------ ------ ----
Telecommunications Services Segment Revenue............ 1,793 1,781 12
Installation and Maintenance Segment Revenue........... 358 192 166
------ ------ ----
Total Revenues....................................... $2,151 $1,973 $178
====== ====== ====
17
Revenues on a pro forma basis increased $178 compared to the same period in
the prior year. Of this increase, $81 is due to growth from our commercial
services which include data services such as private line, frame relay, ATM,
and IP. Growth in data services was slightly offset by a decline in commercial
voice revenue. The increase in revenue from data services has primarily been
driven by the expansion of our network resulting in an increase in the volume
of data service provided across the network compared to the same period in
2000.
Revenue from carrier services increased $163 on an actual and pro forma
basis compared to the six months ended June 30, 2000. Carrier services include
(i) voice services; (ii) data services such as private line, frame-relay, ATM
and IP and (iii) OA&M services. Increased revenue in voice and data services
for the carrier segment has been primarily driven by the expansion of our
network over the past year resulting in an increase in the number of carrier
customers serviced by the Company as well as the volume of traffic carried over
the network. This increase in the number of capacity agreements has also
resulted in an increase in the number of OA&M agreements and therefore, the
Company has experienced an increase in OA&M revenue.
Sales-type lease revenue decreased $248 on an actual and pro forma basis
over the same period in 2000. This is directly due to the adoption of FIN 43,
which limits the applicability of sales-type lease accounting and requires
revenue from capacity sales to be recorded over the life of the contract when
sales-type lease accounting is not permitted. As a result of this accounting
change and industry practice, the volume of capacity agreements recognized as
sales-type leases has decreased. Results for the six month period ended June
30, 2000 reflect revenue from capacity agreements included in the Company's
backlog at the time FIN 43 was adopted and additional sales under existing
capacity agreements which were eligible for sales-type lease accounting.
Revenue from the amortization of prior period IRU's increased $26 on an
actual and pro forma basis over the same six month period in the prior year.
This increase is primarily driven by an increase in the number of IRU
agreements being amortized compared to the same period in 2000.
Installation and maintenance revenue increased $166 on an actual and pro
forma basis compared to the same period in the prior year primarily due to an
increase in the number and size of installation contracts awarded to us. As a
result, vessels have been redeployed from maintenance to installation projects
to fulfill the increased contractual requirements. The Company's fleet
operations have been expanded since June 2000 to meet the increased
installation demand and increased size of global undersea network capacity,
which requires maintenance services.
Operating Expenses
Components of operating expenses for the six months ended June 30, 2001 and
2000 were as follows:
Six Months Ended
June 30,
------------------------
Increase /
2001 2000 (Decrease)
------ ------ ----------
Cost of access and maintenance......................... $1,064 $ 829 $235
Other operating expenses............................... 1,276 832 444
Depreciation and amortization.......................... 863 597 266
------ ------ ----
Total Operating Expenses............................. $3,203 $2,258 $945
====== ====== ====
Cost of access and maintenance increased $235 compared to the same period in
2000. The increase is primarily due to the continued growth in domestic and
international voice and data products in North America and Europe, the merger
with IXnet in June of 2000, and the expansion of the network into Asia and
Latin America. In addition, several of our systems became RFS during or
subsequent to June 2000, including Pacific Crossing-1; PAC; phases I and II of
South American Crossing; and Mid-Atlantic Crossing. Once cable is deemed RFS,
the Company incurs ongoing maintenance charges for the cable as well as its
associated landing stations. As a result, the Company recorded third party
maintenance costs associated with these systems during the six months ended
June 30, 2001, whereas, no third party maintenance costs were incurred during
the same period in 2000 when these systems were not yet RFS.
18
Other operating expenses increased $444 over the same period in 2000
primarily due to the continued expansion of our network and business, as well
as the acquisition of IXnet and IPC in June of 2000. Internal OA&M costs have
increased over the prior period as new systems such as PC-1, PAC, SAC and MAC
have become operational. SG&A costs have increased due to increased headcount
as well as an increase in marketing and other promotional expenses in order to
support our expanded network and services.
Depreciation and amortization increased $266 compared to the same period in
2000 primarily due to the acquisition of IPC and IXnet. IPC and IXnet were
acquired on June 14, 2000 resulting in additional goodwill of $3,395. Given the
timing of this acquisition only one half month of amortization was included in
our operating results for the six months ended June 30, 2000. In addition, the
property and equipment acquired from IPC and IXnet was only amortized for one
half month. The remainder of the increase over the prior year is due to
additional property and equipment placed in service resulting from the
continued expansion of our network and finalization of our purchase accounting
for our 1999 mergers and acquisitions.
Other significant components of our Statement of Operations for the six
months ended June 30, 2001, and 2000 include the following:
Six Months Ended
June 30,
------------------------
Increase /
2001 2000 (Decrease)
----- ----- ----------
Minority interest...................................... $ 79 $ (13) $ 92
Interest expense....................................... $(282) $(178) $104
Benefit for income taxes............................... $ 123 $ 72 $ 51
Discontinued operations, net of tax.................... $(125) $(112) $ 13
Minority interest represents the portion of net income or loss applicable to
third parties who are minority shareholders in less than wholly-owned
consolidated subsidiaries of the Company. Minority interest of $79 for the six
months ended June 30, 2001, represents the portion of net loss recorded by our
less than wholly-owned consolidated subsidiaries such as Asia Global Crossing
Ltd, Pacific Crossing Ltd., and AGC Taiwan which is applicable to minority
shareholders of those entities. For the six month period ended June 30, 2000,
our less than wholly-owned consolidated subsidiaries, AGC and PCL recorded net
income from operations resulting in minority interest of $ (13).
Interest expense increased $104 during the six months ended June 30, 2001
compared to the same period in 2000. The increase is primarily due to the
issuance of $1 billion in Senior Notes in January 2001 and the issuance by AGC
of $408 in Senior Notes in October 2000. In addition, the Company increased its
Senior Secured Credit Facility from $1 billion to $2.25 billion in August of
2000 and received a $1 billion bridge loan in October 2000 in anticipation of
the ILEC sale.
For the six months ended June 30, 2001, the Company recorded an income tax
benefit of $123 on a loss from continuing operations of $(1,244) compared to an
income tax benefit of $72 on a loss from continuing operations of $(628) for
the six months ended June 30, 2000. The change in the benefit for income tax in
relation to the earnings for the respective years is caused by changes in the
distribution of earnings to jurisdictions at various tax rates.
On June 30, 2001, the Company completed the sale of its ILEC business to
Citizens Communications. As a result, the loss on discontinued operations for
the six months ended June 30, 2001 represents income from discontinued
operations of $1, net of tax of $20, offset by an after-tax loss on disposal of
the ILEC of $(208). Loss from discontinued operations for the six months ended
June 30, 2000 represents income from the ILEC of $51, net of tax of $45 and a
loss from GlobalCenter operations of $(160), net of a tax benefit of $21.
19
Liquidity and Capital Resources
The Company's principal sources of liquidity for the remainder of 2001 are
expected to be existing cash balances which include proceeds from the sale of
the ILEC business, cash from our operations, the sale of eligible accounts
receivable, and funds available under our corporate credit facility.
At June 30, 2001, we had available cash and cash equivalents of $1,923, as
well as restricted cash and cash equivalents of $167 and unused capacity on our
corporate credit facility of approximately $1,700. As a result, we entered into
the second half of the year with approximately $3,790 in liquid resources.
On June 30, 2001, the Company completed the previously announced sale of its
ILEC business to Citizens, which resulted in the receipt of $3,369. Of the
proceeds, $1,000 has been used to repay a short-term bridge loan due upon the
sale of the ILEC, $1,500 has been used to reduce outstanding borrowings under
our corporate credit facility, and the remainder is being used for general
corporate purposes.
On January 10, 2001, the Company completed the sale of GlobalCenter to
Exodus Communications. Under the terms of the agreement, Global Crossing
received 108.2 million Exodus common shares, valued at $1,918 at the date of
closing and $223 at June 30, 2001. The Company is monitoring the potential
impairment of this security in accordance with SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" and, accordingly, the
unrealized loss in the securities is reflected within the accompanying
Condensed Consolidated Statement of Comprehensive Loss for the three and six
months ended June 30, 2001. Unless there is adequate recovery of the
investment's market value, a revaluation of the investment is expected to be
reflected in the Company's statement of operations for the fiscal third quarter
of 2001.
On June 15, 2001, certain of the Company's indirect, wholly-owned
subsidiaries (the "Subsidiaries") entered into a receivables sale agreement
(the "Sale Agreement"), under which the ("Subsidiaries") agreed to sell a
defined, revolving pool of trade accounts receivable to GC Mart LLC ("GCM"), a
wholly-owned, special purpose subsidiary of the Company. GCM was formed for the
sole purpose of buying and selling receivables generated by the Subsidiaries.
Under the Sale Agreement, the Subsidiaries agreed to irrevocably and without
recourse sell their accounts receivable to GCM. Under a separate receivables
purchase agreement, dated the same date (the "Purchase Agreement"), GCM agreed
to sell, in turn, an undivided percentage ownership interest in these
receivables to an independent issuer of receivables-backed commercial paper.
During the three months ended June 30, 2001, GCM sold an undivided interest in
an aggregate of $183 of accounts receivable, which has been removed from the
accompanying condensed consolidated balance sheet. Proceeds from the sale were
used to reduce outstanding indebtedness of the Company, resulting in a
reduction in our cost of borrowing.
Subsequent to June 30, 2001, the Company's board of directors approved a
plan to effectuate the realignment and integration of the Company's current
regional organizational structure into integrated global functions such as
network operations, customer care, information systems, finance and sales and
marketing. The realignment and integration will result in the elimination of
more than 2,000 positions, primarily in the United States, across a majority of
the Company's business functions and job classes. In addition, as part of the
plan a significant consolidation of offices and other related real estate
facilities will occur. These actions are expected to reduce annual operating
expenses by approximately $160-$170 and to save approximately $70 for the
fiscal year ended December 31, 2001. To provide for the one-time costs of
implementing these changes, the Company expects to reflect in its third quarter
results of operations a non-recurring charge of approximately $250 to $325. Of
this amount, $50 to $75 relates to the staff reduction costs and $200-$250
relates to closing of facilities, including certain non-cash items. Upon
completion of the plan, the Company will employ approximately 11,400 people in
27 countries around the world.
Net cash provided by operating activities was $677 and $330 for the six
months ended June 30, 2001 and 2000, respectively. The increase is primarily
due to an increase in revenue from our commercial and carrier businesses
resulting from the expansion of our network over the past year as well as an
increase in the number
20
of capacity agreements executed by our carrier customers. This increase was
offset by increased operating costs also due to the expansion of our network as
well as the acquisition of IPC and IXnet in June of 2000. Cash provided by
operating activities also increased as a result of the sale of $183 of accounts
receivable by GCM.
Net cash provided by (used in) investing activities was $1,087 and $(1,762)
for the six months ended June 30, 2001, and 2000, respectively. The increase is
primarily due to the receipt of $3,369 in proceeds from the sale of the ILEC,
which closed on June 29, 2001. The increase in cash provided by these proceeds
was offset by an increase in cash used for purchases of property and equipment
as the Company continued to build out and complete its network over the past
year.
During the six months ended June 30, 2001, the Company entered into a multi-
year agreement to provide a carrier customer with $150 of fiber optic undersea
capacity, to be provided for over the existing MAC system as well as over
acquired or constructed new capacity, connecting key Caribbean markets to
Miami. If constructed, the new Caribbean system would have more capacity than
would be required for the customer's contract.
We entered into several agreements with various carrier customers for the
purchase or lease of capacity and co-location space. These transactions were
implemented in order to acquire cost-effective local network expansions; to
provide for cost-effective alternatives to new construction in certain markets
in which the Company anticipates shortages of capacity; and to provide
additional levels of physical diversity in the network as the Company
implements its global mesh architecture. The cash commitments totaled $358 and
$625 for the three months ended June 30, 2001 and March 31, 2001, respectively,
including the cost of the possible construction of the Caribbean system
previously mentioned.
Furthermore, during the quarter we completed our core network which links 27
countries and over 200 major cities in Europe, North America, South America and
Asia. Cash paid for capital expenditures for continuing operations during 2001,
including spending by Asia Global Crossing, is expected to be less than $4,500,
an amount that includes approximately $1,000 of previously announced capital
spending from the 2000 capital program for which payment will be made in 2001.
The expected capital spend for 2001 has been lowered from previous estimates
ranging from $4,900 to $5,100 due to: (i) lower network volume, (ii) increased
network efficiency, (iii) use of existing inventories and (iv) improved vendor
pricing.
Net cash (used in) provided by financing activities was $(1,318) and $2,186
for the six months ended June 30, 2001 and 2000, respectively. The decrease is
primarily due to an increase in cash used for the repayment of outstanding
indebtedness. During the six months ended June 30, 2001, the Company repaid
$2,643 of long-term debt and $1,000 of short-term borrowings of which
approximately $2,500 was provided by proceeds received from the sale of the
ILEC. The increase in the amount repaid compared to the same period in 2000 was
offset by an increase in the amount drawn against existing credit facilities
during the current period. The Company also entered into prepaid variable
forward sales contracts relating to certain strategic investments during the
three months ended June 30, 2001, which allow the Company to borrow up to $61
with an interest rate of LIBOR + 50 basis points, reset quarterly for any
outstanding amount. The balance outstanding at June 30, 2001 was $61 and is
reflected in the accompanying Condensed Consolidated Balance Sheet as short-
term borrowings. In addition, the amount of cash received from the issuance of
common and preferred equity securities decreased compared to the same period in
the prior year.
The Company expects that its cash flows from operations, together with its
committed credit facilities, will be adequate to meet its anticipated cash
requirements for the foreseeable future. The Company's financing agreements
require the maintenance of certain financial ratios and compliance with other
covenants. The Company is in compliance with these covenants and expects to
maintain compliance with its financing agreements in the foreseeable future.
There can be no assurances, however, in this regard, and we may be required to
reduce capital expenditures, restructure all or a portion of our existing debt
or obtain additional financing in the event we are unable to generate
sufficient cash flow.
21
Euro Conversion
On January 1, 1999, a single currency called the Euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union agreed to
adopt the Euro as their common legal currency on that date. Fixed conversion
rates between these countries' existing currencies (legacy currencies) and the
Euro were established as of that date. The legacy currencies are scheduled to
remain legal tender in these participating countries between January 1, 1999
and January 1, 2002 (not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or a
participating country's legacy currency.
As most of our sales and expenditures are denominated in United States
dollars, management does not believe that the Euro conversion will have a
material adverse impact on our business or financial condition. We do not
expect the cost of system modifications to be material and we will continue to
evaluate the impact of the Euro conversion.
Inflation
We do not believe that our business is impacted by inflation to a
significantly different extent than the general economy.
Information Regarding Forward-Looking Statements
The Company has included "forward-looking statements" throughout this
Quarterly Report on Form 10-Q. These forward-looking statements describe
management's intentions, beliefs, expectations or predictions for the future.
The Company uses the words "believe," "anticipate," "expect," "intend" and
similar expressions to identify forward-looking statements. Such forward-
looking statements are subject to a number of risks, assumptions and
uncertainties that could cause the Company's actual results to differ
materially from those projected in such forward-looking statements. These
risks, assumptions and uncertainties include:
. the ability to upgrade systems within the currently estimated time frames
and budgets;
. the ability to compete effectively in a rapidly evolving and price
competitive marketplace;
. changes in business strategy;
. changes in the nature of telecommunications regulation in the United
States and other countries;
. the successful integration of newly-acquired businesses; and
. the impact of technological change.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the Company's forward-looking statements. The
Company undertakes no obligation to update any forward-looking statements made
by it.
22
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market
risk exposure is changing interest rates. Our policy is to manage interest
rates through use of a combination of fixed and floating rate debt. Interest
rate swaps may be used to adjust interest rate exposures when appropriate,
based upon market conditions, and the Company does not engage in such
transactions for speculative purposes.
Fair Value
June 30,
Expected maturity dates 2001 2002 2003 2004 2005 Thereafter Total 2001
----------------------- ---- ---- ---- ---- ---- ---------- ------ ----------
(In millions)
8.70% Senior Notes due
2007................... -- -- -- -- -- $1,000 $1,000 $762
Average interest
rates--fixed.......... 8.7%
9 1/2% Senior Notes due
2009................... -- -- -- -- -- 1,100 1,100 848
Average interest
rates--fixed.......... 9.5%
9 1/8% Senior Notes due
2006................... -- -- -- -- -- 900 900 707
Average interest
rates--fixed.......... 9.1%
9 5/8% Senior Notes due
2008................... -- -- -- -- -- 800 800 624
Average interest
rates--fixed.......... 9.6%
Asia Global Crossing 13
3/8% Senior Notes Due
2010................... -- -- -- -- -- 408 408 323
Average interest
rates--fixed.......... 13.4%
Senior Secured Credit
Facility--Term Loan B.. 2 4 4 4 269 267 550 550
Average interest
rates--variable....... (a)
Medium-Term Notes, 9.0%-
9.3%, due
2001 to 2021........... 20 -- -- 20 -- 100 140 94
Average interest
rates--fixed.......... 9.0% 9.3% 9.0%
7 1/4% Senior Notes due
2004................... -- -- -- 300 -- -- 300 239
Average interest
rates--fixed.......... 7.3%
6% Dealer Remarketed
Securities ("Drs")
Due 2013............... -- -- -- -- -- 200 200 172
Average interest
rates--variable....... -- -- -- -- -- -- (b) --
Prepaid Variable Forward
Transaction............ 61 -- -- -- -- -- 61 61
Average interest
rates--variable....... -- -- -- -- -- -- (c) --
Pacific Crossing Term
Loan A................. 43 85 100 112 112 -- 452 452
Average interest
rates--variable....... (d)
Pacific Crossing Term
Loan B................. 21 3 3 3 3 275 308 308
Average interest
rates--variable....... (e)
Other................... 1 7 -- -- -- -- 8 8
Average interest
rates--variable....... (f)
DERIVATIVE INSTRUMENTS
Interest rate swap
floating for fixed--
Contract notional
amount................ -- -- -- -- 500 -- 500 (2)
Fixed rate paid by
counterparty.......... 5.0%
Floating rate paid by
GCL................... (g)
- --------
(a) The interest rate is US dollar LIBOR + 2.75% or the Prime Rate + 1.75%. The
effective interest rate was 7.1% as of June 30, 2001.
(b) The interest rate is fixed at 6.0% until October 2003. At that time, the
remarketing dealer (J.P. Morgan) has the option to remarket the notes at
prevailing interest rates or tender the notes for redemption.
(c) The interest rate is 3 month US dollar LIBOR + 0.50%. The effective
interest rate was 4.5% as of June 30, 2001.
(d) The interest rate is 1 month US dollar LIBOR +2.00%, which was 5.8% as of
June 30, 2001.
(e) The interest rate is 1 month US dollar LIBOR + 2.25%, which was 6.0% as of
June 30, 2001.
(f) Various fixed and floating-rate obligations with effective interest rates
from 0% to 9.0%.
(g) The interest rate received on the interest rate swap is 1 month US dollar
LIBOR, which was 3.8% as of June 30, 2001.
23
Foreign Currency Risk
For those subsidiaries using the U.S. dollar as their functional currency,
translation adjustments are recorded in the accompanying condensed consolidated
statements of operations. None of our translation adjustments were material as
of and for the six months ended June 30, 2001 and 2000.
For those subsidiaries not using the U.S. dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts at average exchange
rates during the period. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity. For the six months
ended June 30, 2001 and 2000, we incurred foreign currency translation losses
of $205 and $92, respectively.
We use foreign currency forward transactions to hedge exposure to foreign
currency exchange rate fluctuations. The Euro was the principal currency hedged
by us. Changes in the value of forward foreign exchange contracts, which are
designated as hedges of foreign currency denominated assets and liabilities,
are classified in the same manner as changes in the underlying assets and
liabilities.
24
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On July 16, 1999, Frontier Communications Corporation ("Frontier") was
served with a summons and complaint in a lawsuit commenced in New York State
Supreme Court, New York County, by a Frontier shareholder alleging that
Frontier and its board breached their fiduciary duties by failing to obtain the
highest possible acquisition price for Frontier in the definitive merger
agreement with the Company. The action has been framed as a purported class
action and seeks compensatory damages and injunctive relief. The claims against
Frontier were asserted in the same action as similar but separate claims
against US West, Inc. However, the claims against Frontier have been severed
from the US West claims. In February 2000, the court granted the Company's
motion to transfer the action to Monroe County. On February 11, 2001, the
Company moved to dismiss all claims against it. Oral argument on this motion
was heard on May 4, 2001. We believe the asserted claims are without merit and
are defending ourselves vigorously.
On May 22, 2000, GCL and its subsidiary, South American Crossing (Subsea)
Ltd., filed a lawsuit against Tyco Submarine Systems Ltd. in the United States
District Court for the Southern District of New York. Our complaint alleges
fraud, theft of trade secrets, breach of contract, and defamation related to
Tyco's agreements to install the South American Crossing fiber-optic cable
system. We seek damages, including punitive damages, in excess of $1 billion
and attorneys' fees and costs, as well as a declaration that the construction
and development agreement with Tyco is void due to Tyco's alleged fraud and
injunctive relief barring Tyco from further misappropriation of trade secrets
and confidential information. On June 13, 2000, Tyco answered the complaint,
denying the material allegations and asserting a variety of defenses to such
claims. Additionally, Tyco asserted counterclaims that South American Crossing
(Subsea) Ltd. breached its construction and development agreement with Tyco.
Tyco seeks damages of not less than $150 million, attorneys' fees and costs and
a declaration that, among other things, the construction and development
agreement is a valid, enforceable contract and that South American Crossing
(Subsea) Ltd. breached the contract or, in the alternative, terminated the
contract for convenience. On July 5, 2000, we answered Tyco's counterclaims,
denying the material allegations. On August 7, 2000, Tyco moved to dismiss
several of our claims. The court has not yet ruled on that motion, which has
been fully briefed. Discovery is ongoing.
In addition, on May 22, 2000, our subsidiary, Atlantic Crossing Ltd.,
together with certain of its affiliates, filed arbitration claims against Tyco
for breaches of its obligations in connection with various contracts for the
development of the Atlantic Crossing-1 fiber-optic cable system. We seek
unspecified monetary damages, a declaration that certain of our obligations
under the various contracts relating to Atlantic Crossing-1 are terminated and
a return of misappropriated intellectual property. On June 22, 2000, Tyco
responded to such claims, denying the material allegations. Tyco additionally
asserted counterclaims that we and our subsidiaries breached our various
obligations under the various contracts relating to Atlantic Crossing-1. Tyco
seeks, among other things, the denial of all relief sought by us and awards
aggregating not less than $185 million and unspecified damages for breach of
the agreements. In a settlement agreement dated as of August 30, 2000, Atlantic
Crossing and Tyco agreed to the early termination of one of the contracts
relating to Atlantic Crossing-1, the Operations, Administration and Maintenance
("OA&M") Agreement, in return for the payment of $19 million to Tyco. In
addition, Atlantic Crossing and Tyco agreed to drop their respective claims
under the OA&M Agreement in the arbitration. The other claims asserted in
arbitration remain pending. The hearing of this matter commenced on December
18, 2000 and is ongoing.
We do not believe that these actions with Tyco will have an impact on our
network and/or the timely completion of any of our systems. We intend to pursue
our claims against Tyco vigorously and to defend ourselves vigorously against
Tyco's counterclaims, which counterclaims we believe to be without merit.
In May 2001, a purported class action was commenced against three of the
Company's subsidiaries in the United States District Court for the Southern
District of Illinois. The complaint alleges that the Company had
25
no right to install a fiber optic cable in rights-of-way granted by the
plaintiffs to certain railroads. Pursuant to an agreement with Qwest
Communications Corporation, the Company has an indefeasible right to use
certain fiber optical cables in a fiber optic communications system constructed
by Qwest within the rights-of way. The complaint alleges that the railroads had
only limited rights-of-way granted to them which did not include permission to
install fiber optic cable for use by Qwest or any other entities. The action
purports to be brought on behalf of a national class of landowners whose
property underlies or is adjacent to a railroad right-of-way within which the
fiber optic cables have been installed. The case has not been certified by the
court as a class action. The action seeks actual damages in an unstated amount
and alleges that the wrongs done by the Company involve fraud, malice,
intentional wrongdoing, willful or wanton conduct and/or reckless disregard for
the rights of the plaintiff landowners. As a result, plaintiffs also request an
award of punitive damages. The Company has made a demand of Qwest to defend and
indemnify the Company in the lawsuit. In response, Qwest has appointed defense
counsel to protect the Company's interests. In July 2001, the Company moved to
dismiss the claim against two of the defendants and filed an answer to the
complaint on behalf of the third. The Company believes the action to be without
merit and will continue to defend itself aggressively.
On June 28, 2001, 360networks Inc. and several of its operating subsidiaries
filed for protection under the Companies' Creditors Arrangement Act (CCAA) in
the Supreme Court of British Columbia, Canada. 360networks' principal U.S.
subsidiary, 360networks (USA) Inc., and 22 of its affiliates concurrently filed
for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Southern District of New York. Subsidiaries of
360networks have also instituted insolvency proceedings in Europe. 360networks
has been both a network customer of Global Crossing as well as a network
supplier to Global Crossing. Global Crossing has contracted with some
subsidiaries of 360networks Inc. that are subject to these insolvency
proceedings. Global Crossing is actively monitoring the various bankruptcy and
insolvency proceeds relating to 360networks.
Commencing in late July 2001, purported class action lawsuits were filed in
the United States District Court for the Southern District of New York against
GCL, certain of its present and former directors and executive officers, and
certain of the investment banks that underwrote GCL's initial public offering
("IPO") in August 1998 (the "Underwriters"). The complaints allege that the
Underwriters improperly (1) solicited and received additional, excessive and
undisclosed commissions in exchange for allocations of shares of GCL common
stock in the IPO and (2) tied allocations of IPO stock to purchases of
additional GCL shares in the after-market. The complaints further allege that
the registration statement and prospectus for the IPO should have disclosed the
allegedly improper actions taken by the Underwriters and that the named
defendants are responsible for those omissions. Global Crossing intends to
vigorously defend itself against the lawsuits and will be seeking
indemnification from the Underwriters.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
26
Item 4. Submission of Matters to a Vote of Security Holders
The Annual General Meeting of Shareholders of the Company was held on June
13, 2001. All of the Director nominees were elected at the Annual General
Meeting pursuant to Proposal No. 1. The names of the nominees and the results
of the voting were as follows:
Shares
Nominee Shares For Withheld
- ------- ----------- ----------
Lodwrick M. Cook......................................... 717,562,794 15,402,425
Eric Hippeau............................................. 717,885,873 15,079,346
Geoffrey J.W. Kent....................................... 702,668,369 30,296,850
Each of the other Proposals submitted for Shareholder approval at the Annual
General Meeting was approved. The results of the voting were as follows:
Broker
Shares Non-
Proposal Number and Description Shares For Against Abstentions Votes
- ------------------------------- ----------- ---------- ----------- ------
2. Proposal to appoint Arthur
Andersen as independent auditors
for 2001 and approve the
authority of the Board of
Directors to determine their
renumeration..................... 722,909,438 6,280,691 3,775,090 N/A
3. Proposal to amend the 1998 Global
Crossing Ltd. Stock Incentive
Plan............................. 674,101,582 52,549,736 6,313,901 N/A
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 1998 Global Crossing Ltd. Stock Incentive Plan as amended and
restated as of April 11, 2001 (incorporated by reference to
Appendix 1 to the Registrant's definitive proxy statement on
Schedule 14A filed on April 27, 2001).
(b) Reports on Form 8-K.
During the quarter ended June 30, 2001, Global Crossing Ltd. filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated April 26, 2001 (date of earliest
even reported), filed on April 27, 2001, for the purpose of reporting,
under item 5 and 7, the agreed upon amendment to the Stock Purchase
Agreement in connection with the sale of the Company's incumbent local
exchange carrier business entered into between the Company and Citizens
Communications Company.
27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Global Crossing Ltd.,
a Bermuda Corporation
Dated: August 14, 2001
/s/ Dan J. Cohrs
By:_________________________________
Dan J. Cohrs
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)