XO Communications Reports Improved Third Quarter 2004 Results *
Increased revenues to $391.9 million reflecting a 40.2% improvement
from third quarter of 2003 RESTON, Va., Nov. 9
/PRNewswire-FirstCall/ -- XO Communications, Inc. (OTC:XOCM.OB)
(BULLETIN BOARD: XOCM.OB) today reported financial results for the
quarter ending September 30, 2004. Total revenue for the third
quarter of 2004 was $391.9 million -- reflecting a full quarter of
revenues from the acquired assets of Allegiance Telecom -- compared
with $278.2 million in the second quarter of 2004 and $279.4
million in the third quarter of 2003. Total revenues for the nine-
month period ending September 30, 2004 was $931.0 million compared
with $849.4 million for the corresponding period in 2003. Reported
net loss for the quarter was $43.6 million, which includes $1.8
million of preferred stock accretion, or a loss per common share of
$0.24. Consolidated EBITDA for the third quarter was positive $20.5
million compared to a $4.8 million EBITDA loss in the second
quarter of 2004. Third quarter results include settlements of
disputes with other carriers as well as certain one-time
adjustments. In total, these settlements and adjustments increased
the Company's revenues by approximately $10 million and improved
net loss and EBITDA by approximately $15 million. "We are extremely
pleased with the results from our ongoing operations as well as the
benefits and efficiencies realized through the continued
integration of Allegiance Telecom," said Carl Grivner, XO
Communications' CEO. "The Company's financial performance in the
third quarter of 2004 continued to meet our expectations,
highlighted by the achievement of positive EBITDA." Revenue from
voice services -- consisting of local, long distance and other
voice services -- was $214.7 million in the third quarter of 2004
compared with $140.4 million for the corresponding period in 2003.
Revenue from data services -- consisting of Internet access,
network access and web hosting services -- was $110.0 million in
the third quarter of 2004 compared with $101.0 million in the
corresponding period in 2003. Revenue from integrated services --
consisting of integrated data and voice services -- was $67.2
million in the third quarter of 2004 compared with $38.0 million in
the corresponding period in 2003. Gross margin for the third
quarter of 2004 was $229.9 million compared to $159.4 million in
the second quarter of 2004 and $172.5 million in the third quarter
of 2003. On a percentage of revenues basis, cost of service for the
third quarter of 2004 was 41.3%, compared to 42.7% in the second
quarter of 2004 and 38.3% in the third quarter of 2003. The gross
margin improvement in the third quarter of 2004 relative to the
second quarter of 2004 was due to significant settlements during
the third quarter of disputes with incumbent local exchange
carriers. Selling, operating and general (SOG) expenses were $209.4
million reflecting the inclusion of a full quarter of Allegiance
Telecom results. SOG as a percentage of revenue for the third
quarter was 53.4% compared to 59% reported in the second quarter of
2004 and 64.4% in the third quarter of 2003. The improvement in
third quarter 2004 SOG as a percentage of revenue was primarily due
to the Company's ongoing cost reduction initiatives and greater
efficiencies resulting from the integration of Allegiance Telecom's
operations. Net loss for the third quarter of 2004 was $43.6
million compared to a net loss of $43.8 million in the second
quarter of 2004, and a net loss of $40.8 million in the third
quarter of 2003. The third quarter 2004 results include $1.8
million of accretion on the August 2004 preferred stock offering
that provided net proceeds of $199.4 million. Capital expenditures
for the third quarter of 2004 were $23.6 million compared to $23.7
million for the second quarter of 2004. "We continue to review
business opportunities including voice over IP and broadband
wireless offerings as well as potential acquisitions. On the
regulatory front, we remain committed to maintaining a competitive
environment and look for the FCC to quickly reaffirm its public
support for the retention of cost-based wholesale rates for
unbundled DS-1 circuits," added Mr. Grivner. 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 achieve projected synergies and revenue from the
acquisition of allegiance's assets in a timely manner or at all,
XO's ability to increase sales, and XO's ability to continue to
implement effective cost containment measures. 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, but are not limited to, 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, 2003 and its quarterly reports on Form 10-Q. XO
COMMUNICATIONS, INC. Condensed Consolidated Statements of
Operations (Dollars in thousands, except for share and per share
data) Three Months Ended Nine Months Ended Sept. 30, Sept. 30,
Sept. 30, Sept. 30, 2004 2003 2004 2003 (Unaudited) (Unaudited)
(Unaudited) (Unaudited) Revenue $391,885 $279,433 $931,013 $849,443
Costs and expenses: Cost of service 161,946 106,935 390,729 319,339
Selling, operating, and general 209,427 179,988 542,129 511,264
Depreciation and amortization 56,739 28,388 112,501 81,993 Loss
from operations (36,227) (35,878) (114,346) (63,153) Investment
income (loss), net 1,041 980 (704) 9,301 Interest expense, net
(6,593) (5,889) (19,044) (27,259) Net loss (41,779) (40,787)
(134,094) (81,111) Preferred stock accretion (1,839) - (1,839) -
Net loss applicable to common shares $(43,618) $(40,787) $(135,933)
$(81,111) Net loss per common share, basic and diluted $(0.24)
$(0.42) $(0.89) $(0.85) Weighted average shares, basic and diluted
181,933,035 96,019,526 152,479,324 95,411,819 XO COMMUNICATIONS,
INC. Reconciliation of Net Loss to EBITDA (Dollars in thousands)
Three Months Ended September 30, June 30, 2004 2004 (Unaudited)
(Unaudited) Net loss $(41,779) $(43,820) Depreciation and
amortization 56,739 30,065 Investment (income) loss, net (1,041)
3,121 Interest expense, net 6,593 5,846 EBITDA $20,512 $(4,788) XO
COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets (Dollars
in thousands) As of As of September 30, June 30, 2004 2004
(Unaudited) (Unaudited) Cash, marketable and other securities (3)
$254,233 $54,597 Accounts receivable, net 168,041 117,073
Investment in acquired businesses (1) - 680,936 Property and
equipment, net 848,897 498,607 Broadband wireless licenses and
other intangibles, net 152,342 96,433 Goodwill (1) 213,891 - Other
assets, net 114,969 60,293 Total assets $1,752,373 $1,507,939
Accounts payable and accrued expenses $347,450 $281,070 Long-term
debt (2) 358,925 352,064 Other long-term liabilities 86,472 71,454
6% Class A convertible preferred stock, 4,000,000 shares
authorized, issued and outstanding (3) 201,266 - Total
stockholders' equity 758,260 803,351 Total liabilities, convertible
preferred stock and stockholders' equity $1,752,373 $1,507,939
Footnotes to Condensed Consolidated Financial Statements (1)
Investment in acquired businesses as of June 30, 2004, includes the
purchase price for the competitive local exchange businesses of
Allegiance which XO acquired as of June 23, 2004. As of September
30, 2004, the purchase price was allocated to the estimated fair
value of the assets acquired and the liabilities assumed with the
excess being recorded as goodwill. (2) 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 the outstanding balance on the credit
facility. (3) On August 6, 2004, XO completed a private placement
of 4.0 million shares of its 6% Class A Convertible Preferred Stock
for net proceeds of $199.4 million. 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. Web site: http://www.xo.com/
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