XO Communications Reports Financial Results for First Quarter 2005
* Revenue of $361.5 Million, 39% Increase over Q1 2004 * Reduced
Net Loss to $42.9 Million from $48.5 Million in Q1 2004 * EBITDA of
$21.6 Million Compared to $17.9 Million EBITDA Loss in Q1 2004 *
Initiated National Rollout of VoIP Services Bundle to Businesses
RESTON, Va., May 9 /PRNewswire-FirstCall/ -- XO Communications,
Inc. (OTC:XOCM.OB) (BULLETIN BOARD: XOCM.OB) today reported its
first quarter 2005 financial and operational results. Revenue for
the first quarter ended March 31, 2005 was $361.5 million, an
increase of 39 percent compared with $260.9 million in the same
period in the prior year. Revenue for the first quarter of 2005
includes a full quarter of revenue from the acquired
telecommunications services assets of Allegiance Telecom.
Consolidated net loss for the first quarter of 2005 was $42.9
million, an improvement of $5.6 million compared to a net loss of
$48.5 million in the same period in the prior year. Consolidated
EBITDA for the first quarter of 2005 was $21.6 million, an
improvement of $39.5 million compared to a $17.9 million EBITDA
loss in the same period in the prior year. A portion of the EBITDA
increase related to $10 million of favorable settlements with other
carriers contributing to a reduction in the cost of service. "We're
off to a solid start in 2005, demonstrated by our financial results
and the reception by customers to our new IP-based services," said
Carl Grivner, XO Communications CEO. "Our first quarter results
show that we continue to execute on our strategic plan. We achieved
positive EBITDA for the third consecutive quarter and were able to
maintain our cash position with a slight improvement over the
previous quarter. We are also seeing strong demand for our recently
launched VoIP services bundle, XOptions Flex, for which we've
already received more than 230 customer orders." Revenue from voice
services -- consisting of local, long distance and other voice
services -- was $186.3 million in the first quarter of 2005
compared with $130.9 million for the same period in the prior year.
Revenue from data services -- consisting of Internet access,
network access and web hosting -- was $108.4 million in the first
quarter of 2005 compared with $92.9 million for the same period in
the prior year. Revenue from integrated services -- consisting of
integrated data and voice services -- was $66.8 million in the
first quarter of 2005 compared with $37.1 million for the same
period in the prior year. Selling, operating and general (SOG)
expenses as a percentage of revenue for the first quarter of 2005
were 53 percent compared to 65 percent in the same period 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, cash equivalents and
marketable securities were $267.3 million at March 31, 2005, an
increase of $16.0 million from the previous quarter. In May of
2005, XO obtained a waiver of compliance with certain financial
covenants contained in its senior secured credit facility through
December 31, 2006. The waiver was obtained from the affiliate of
Mr. Icahn which holds a majority of the loans outstanding under
that agreement. In connection with the waiver, XO agreed that in
the event of a sale of the Company and in the event of certain
other significant sale or divestiture transactions, it will prepay
all amounts outstanding under the credit facility in cash and offer
to repurchase outstanding shares of XO's outstanding preferred
stock at their liquidation value accrued through the date of
redemption for cash or, in certain events, securities. The
affiliate of Mr. Icahn which holds a majority of such Preferred
Stock has agreed to accept this offer, to the extent it consists of
cash. In March 2005, XO retained Jefferies & Company, Inc.
("Jefferies") to present strategic alternatives based on, among
other things, the competitive environment of the telecommunications
industry, the current regulatory environment, and the recent and
pending mergers and acquisitions in the industry. XO has received
the Jefferies report, which addressed potential operational
improvements and disposition possibilities, and is considering all
of its strategic alternatives. Quarter Highlights and Recent
Announcements XO has begun offering fixed broadband wireless
backhaul services to mobile wireless telecommunications carriers.
In April 2005, XO reached an agreement to provide fixed broadband
wireless services on a limited basis to one of the national mobile
wireless carriers. The Company will continue to pursue
opportunities to market and sell its fixed wireless solution to
mobile wireless carriers both for primary network connectivity and
redundancy. Following initial market rollouts in Baltimore, Boston,
New York and Washington, D.C. in the first quarter of 2005, XO last
month announced the national availability of XOptions Flex, its new
industry-leading Voice over Internet Protocol (VoIP) services
bundle for businesses. Now available in forty-five markets, which
include more than 1,000 cities nationwide, XOptions Flex is the
industry's first VoIP services bundle for businesses that combines
unlimited local and long distance calling, dedicated Internet
access and web hosting services at a flat monthly price. The
service leverages the latest in VoIP technology to provide
customers with next generation communications capabilities, such as
unlimited voice calling, dynamic bandwidth allocation, voice
virtual private networking (VPN), and a simple Administrative Web
Portal. In March 2005, XO announced a major contract with The
Detroit Public Schools, the nation's eleventh largest school
district. Under the three-year, $8 million contract, XO will
provide the 140,000 student Detroit Public School system with local
voice services as well as high-speed Internet access to over 235
schools and administrative locations around the City of Detroit.
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 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 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 March 31, March 31, 2005 2004 (Unaudited)
(Unaudited) Revenue $361,504 $260,945 Costs and expenses: Cost of
service (exclusive of depreciation and amortization) 147,922
109,961 Selling, operating, and general 191,694 168,553
Depreciation and amortization 58,365 25,697 Loss from operations
(36,477) (43,266) Interest income 1,893 1,705 Investment loss, net
(1) (271) (329) Interest expense, net (8,004) (6,604) Net loss
(42,859) (48,494) Preferred stock accretion (3,097) - Net loss
applicable to common shares $(45,956) $(48,494) Net loss per common
share, basic and diluted $(0.25) $(0.37) Weighted average shares,
basic and diluted 181,933,035 129,406,599 XO COMMUNICATIONS, INC.
Reconciliation of Net Loss to EBITDA (Dollars in thousands) Three
Months Ended March 31, March 31, 2005 2004 (Unaudited) (Unaudited)
Net loss $(42,859) $(48,494) Depreciation and amortization 58,365
25,697 Interest income (1,893) (1,705) Interest expense, net 8,004
6,604 EBITDA (2) $21,617 $(17,898) XO COMMUNICATIONS, INC.
Condensed Consolidated Balance Sheets (Dollars in thousands) As of
As of March 31, December 31, 2005 2004 (Unaudited) Cash, marketable
and other securities $267,292 $251,289 Accounts receivable, net
133,980 150,101 Other current assets 30,688 50,864 Property and
equipment, net 791,892 820,536 Broadband wireless licenses and
other intangibles, net 127,773 139,866 Other assets, net 46,375
46,729 Total assets $1,398,000 $1,459,385 Accounts payable and
accrued expenses $307,510 $329,542 Long-term debt 374,195 366,247
Other long-term liabilities 71,272 73,691 6% Class A convertible
preferred stock, 4,000,000 shares authorized, issued and
outstanding 207,451 204,353 Total stockholders' equity 437,572
485,552 Total liabilities, convertible preferred stock and
stockholders' equity $1,398,000 $1,459,385 Footnotes to Condensed
Consolidated Financial Statements (1) Investment loss, net includes
any realized gains or losses on sale of investments. (2) EBITDA is
defined as net income or loss before depreciation, amortization,
interest expense, and interest income. EBITDA is not intended to
replace operating income (loss), net income (loss), cash flow and
other measures of financial performance reported in accordance with
generally accepted accounting principles in the United States.
Rather, EBITDA is an important measure used by management to assess
operating performance of the company. EBITDA as used in this
document may not be comparable to similarly titled measures
reported by other companies due to differences in accounting
policies. Additionally, EBITDA as defined here does not have the
same meaning as EBITDA as defined in our secured credit facility
agreement. DATASOURCE: XO Communications, Inc. CONTACT: Media: Chad
Couser of XO Communications, +1-703-547-2746, ; or Investors:
Augustine Okwu Jr., +1-203-682-8244, , or Andrew Greenebaum,
+1-310-395-2215, , both of Integrated Corporate Relations, Inc. for
XO Communications, Inc. Web site: http://www.xo.com/
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