XO Communications Reports Financial Results For Fourth Quarter and Year End 2004.RESTON, Va., March 18 /PRNewswire-FirstCall/ -- XO Communications XO Communications is a United States telecommunications firm and one of the largest Competitive Local Exchange Carrier (CLEC) in the country. It is owned by XO Holdings, Inc OTCBB: XOHO. , Inc. (BULLETIN BOARD: XOCM XOCM XO Communications Inc (stock symbol) ) today reported its fourth quarter and full year 2004 financial and operational results.
Revenue for the fourth quarter ended December 31, 2004 was $369.4 million, an increase of 42 percent compared to the same period in the prior year. Annual revenue for year ended December 31, 2004 was $1.3 billion, an increase of 17 percent versus the prior year. Revenue for the fourth quarter of 2004 includes a full quarter of revenue from the acquired telecommunications services assets of Allegiance Telecom. Revenue for the full year 2004 includes $217.2 million derived from the acquired telecommunications services assets of Allegiance Telecom.
Consolidated net loss for the fourth quarter of 2004 was $271.4 million compared to a net loss of $21.4 million in the same period in the prior year. Reported net loss for the full year 2004 was $405.6 million compared with a net loss of $102.6 million for the full year ended December 31, 2003. The 2004 results include a non-cash goodwill impairment Impairment
1. A reduction in a company's stated capital.
2. The total capital that is less than the par value of the company's capital stock.
1. This is usually reduced because of poorly estimated losses or gains.
2. charge of $212.5 million. On an adjusted basis, excluding the non-cash goodwill impairment charge, net loss for the fourth quarter of 2004 was $59 million and net loss for the full year 2004 was $198 million. The goodwill impairment adjustment was necessary under accounting standards as the Company's equity market capitalization Equity Market Capitalization
A measure of the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole. during the fourth quarter of 2004 was less than the fair value of the Company's net assets Net assets
The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand.
See owners' equity. .
Consolidated adjusted earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
"In 2004, we closed our acquisition of the Allegiance Telecom assets and made progress integrating the acquired assets, which include achieving the majority of the administrative, network and operating synergies in just the first eight months after we began managing the assets," said Carl Grivner, XO Communications chief executive officer.
Revenue from voice services -- consisting of local, long distance and other voices services -- was $186.1 million in the fourth quarter of 2004 compared with $131.6 million for the same period in the prior year. Revenue from data services -- consisting of Internet access See how to access the Internet. , network access and web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. -- was $116.2 million in the fourth quarter of 2004 compared with $92.4 million for the same period in the prior year. Revenue from integrated services In computer networking, IntServ or integrated services is an architecture that specifies the elements to guarantee quality of service (QoS) on networks. IntServ can for example be used to allow video and sound to reach the receiver without interruption. -- consisting of integrated data and voice services -- was $67.2 million in the fourth quarter of 2004 compared with $37.0 million for the same period in the prior year. For the full year 2004, revenue from voice services was $673.3 million compared to $572.8 million in the prior year, revenue from data services was $414.8 million compared to $392.7 million in the prior year, and revenue from integrated services was $212.3 million compared to $145.0 million in the prior year.
Gross margin for the fourth quarter of 2004 was $207.4 million compared to $158.2 million in the same period in the prior year. Gross margin for the full year 2004 was $747.7 million compared to $688.4 million in the prior year. As a percentage of revenue, gross margin for the fourth quarter of 2004 was 56 percent compared to 61 percent in the same period in the prior year. Gross margin as a percentage of revenue for the full year 2004 was 57 percent compared to 62 percent in the prior year. The decline in annual gross margins is largely attributable to FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. mandated access rate reductions, competitive pricing pressures and a shift in product mix.
Selling, operating and general (SOG) expenses as a percentage of revenue for the fourth quarter of 2004 were 50 percent compared to 64 percent in the same period in the prior year. SOG expenses as a percentage of revenue for the full year 2004 were 56 percent compared to 61 percent in the prior year. The improvements in SOG as a percentage of revenue were primarily due to the Company's ongoing cost reduction initiatives and greater efficiencies resulting from the integration of the acquired Allegiance Telecom operations.
Cash and cash equivalents were $251.3 million at December 31, 2004, a decrease of $269.3 million from the prior year. The decrease in cash was due to the Company's $106 million of capital spending capital spending
Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and the acquisition of the assets from Allegiance Telecom, which included a cash payment of $325.2 million. The Company also raised $199.4 million in proceeds from the August 2004 private placement of 6% Class A Convertible Preferred Stock Convertible Preferred Stock
Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". .
XO Communications recently detailed plans for its new suite of XOIP services, a series of next generation IP services that will leverage the company's national IP network and softswitch technology to provide commercial and wholesale customers with advanced IP-based voice and data services.
Last month, XO launched XO VoIP Termination, the first of its new XOIP service offerings. XO VoIP Termination is an advanced voice termination service for broadband telephony providers that offer voice over Internet Protocol See Internet and TCP/IP.
(networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. (VoIP) services to businesses. The new service allows service providers to hand over their VoIP traffic directly to XO for terminating voice calls to domestic locations in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. using softswitch technology deployed across the XO national IP network.
XO also recently announced that in the second quarter 2005, it will launch its second XOIP service offering, XOptions Flex, the company's new VoIP enabled services bundle for businesses. Available nationwide in April 2005, XOptions Flex is the industry's first VoIP services bundle that combines unlimited local and long distance calling, dedicated Internet access and web hosting services at flat monthly price. The service will provide businesses with a single source solution with enhanced capabilities such as unlimited voice calls, dynamic bandwidth allocation Bandwidth allocation refers to various methods used in the communications industry to design and assign frequency channels to different wireless applications. Also on programs such as Bittorent or Limewire. , and voice virtual private networking all over a single broadband connection on the XO IP network.
XO has also announced a program to assist telecommunications companies and other service providers that will be negatively affected by the new rules adopted by the Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. (FCC) regarding the local network unbundling A regulatory requirement that enables a competing service provider to purchase parts of the incumbent local exchange carrier's network in order to provide service to its customers. See ILEC. obligations of the regional Bell operating companies (RBOC (Regional Bell Operating Company) The Bell telephone companies that were spun off of AT&T by court order in 1984 (the Divestiture). Also known as the "Baby Bells," the initial seven RBOCs were Nynex, Bell Atlantic, BellSouth, Southwestern Bell, US West, ). As one of the largest facilities-based National Local Exchange Carriers, XO is offering carriers a wide range of cost-effective transport and local voice service alternatives that will enable them to transition off the RBOC unbundled network elements, including the UNE platform, and onto XO's network facilities and fiber.
About XO Communications
XO Communications is a leading provider of national and local telecommunications services to businesses, large enterprises and telecommunications companies. XO offers a complete portfolio of services, including local and long distance voice, dedicated Internet access, private networking, data transport, and Web hosting services as well as bundled voice and Internet solutions. XO provides these services over an advanced, national facilities-based IP network and serves more than 70 metropolitan markets across the United States. For more information, visit http://www.xo.com/ .
The statements contained in this release that are not historical facts are "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995). These statements include those describing XO's expected future business and network operations and results of operations, XO's ability to continue to achieve projected synergies and revenue from the acquisition of allegiance's assets, XO's ability to increase sales, XO's ability to continue to implement effective cost containment cost containment,
n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. measures, and xo's ability to mitigate the effects of regulations recently adopted by the federal communications commission. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS BUT ARE SUBJECT TO A NUMBER OF BOTH KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE, AND/OR ACHIEVEMENTS OF XO TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE, AND/OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. Management cautions the reader that these forward-looking statements are only predictions and are subject to risks and uncertainties and actual results may differ materially from those indicated in the forward-looking statements as a result of a number of factors. These factors include, without limitation, those risks and uncertainties described from time to time in the reports filed by XO Communications, Inc. with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2004 and its quarterly reports on Form 10-Q. XO UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS.
XO, XOptions, XOIP, XOptions Flex, National Local Exchange Carrier, Allegiance, and all related marks are either registered trademarks or trademarks of XO Communications, Inc. in the United States and/or other countries.
XO COMMUNICATIONS, INC. Condensed Consolidated Statements of Operations (Dollars in thousands, except for share and per share data) Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004(2) 2003 2004(2) 2003 (Unaudited) (Unaudited) Revenue $369,407 $261,040 $1,300,420 $1,110,483 Costs and expenses: Cost of service 162,006 102,790 552,735 422,129 Selling, operating, and general 185,537 168,022 727,666 679,286 Depreciation and amortization 65,280 27,315 177,781 109,308 Goodwill impairment charge(1) 212,530 - 212,530 - Restructuring and asset write-downs - 11,618 - 11,618 Loss from operations (255,946) (48,705) (370,292) (111,858) Investment income (loss), net(2) (8,334) 36,851 (9,037) 46,152 Interest expense, net (7,170) (9,589) (26,214) (36,848) Net loss (271,450) (21,443) (405,543) (102,554) Preferred stock accretion (3,070) - (4,910) - Net loss applicable to common shares $(274,520) $(21,443) $(410,453) $(102,554) Net loss per common share, basic and diluted $(1.51) $(0.22) $(2.57) $(1.07) Weighted average shares, basic and diluted 181,933,035 96,247,325 159,883,403 95,632,859 XO COMMUNICATIONS, INC. Reconciliation of Net Loss to Adjusted EBITDA (Dollars in thousands) Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004(2) 2003 2004(2) 2003 (Unaudited)(Unaudited)(Unaudited)(Unaudited) Net loss $(271,450) $(21,443) $(405,543) $(102,554) Goodwill impairment charge(1) 212,530 - 212,530 - Restructuring and asset write-downs - 11,618 - 11,618 Depreciation and amortization 65,281 27,315 177,781 109,308 Investment (income) loss, net(3) 8,334 (36,851) 9,037 (46,152) Interest expense, net 7,170 9,589 26,214 36,848 Adjusted EBITDA $21,865 $(9,772) $20,019 $9,068 XO COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets (Dollars in thousands) As of As of December 31, December 31, 2004(2) 2003 Cash, marketable securities and other investments $251,289 $520,612 Accounts receivable, net 150,101 93,958 Other current assets 50,864 12,421 Property and equipment, net 820,536 485,984 Broadband wireless licenses and other intangibles, net 139,866 109,515 Other assets, net 46,729 42,675 Total assets $1,459,385 $1,265,165 Accounts payable and accrued expenses $329,542 $271,417 Long-term debt (4) 366,247 536,791 Other long-term liabilities 73,691 76,532 6% Class A convertible preferred stock 204,353 - Total stockholders' equity 485,552 380,425 Total liabilities, convertible preferred stock and stockholders' equity $1,459,385 $1,265,165 Footnotes to Condensed Consolidated Financial Statements (1) XO recorded a $212.5 million non-cash impairment charge in the fourth quarter of 2004. XO retained independent appraisers to perform a valuation of its assets and liabilities as of December 31, 2004. The goodwill impairment adjustment was necessary as XO's fair value as determined by its stock price, was less than the fair value of the company's net assets. (2) XO's 2004 amounts include the results of operations of the acquired Allegiance telecommunication services assets from June 23, 2004 through December 31, 2004 (3) Investment income, net includes interest income, and any realized gains or losses on investments. (4) Long-term debt represents the outstanding principal amount of loan and accrued interest under XO's credit agreement. During January 2004, XO raised net proceeds of $197.6 million upon the consummation of our Rights Offering, and applied these proceeds to
CONTACT: Media: Chad Chad (chăd, chäd), Fr. Tchad, officially Republic of Chad, republic (2005 est. pop. 9,826,000), 495,752 sq mi (1,284,000 sq km), N central Africa. Couser of XO Communications, +1-703-547-2746, or email@example.com; or Investor: Augustine Okwu Jr., +1-203-682-8244, or firstname.lastname@example.org, or Andrew Greenebaum, +1-310-395-2215, or email@example.com, both of Integrated Corporate Relations, Inc.
Web site: http://www.xo.com/