Global Crossing Lost $10 Billion in 2001
Bankrupt telecom giant Global Crossing Ltd. (NYSE: GX) will report a net loss of at least $10.9 billion for 2001, according to earnings estimates released by the company yesterday. Revenues for the year are expected to be about $3.2 billion (see GlobalX Shares Its Pain).
As part of the net loss, the company says it expects about an $8 billion writeoff of its remaining goodwill and other intangible assets; a multibillion-dollar writedown of its tangible assets; a $2.1 billion writedown of the company’s equity investment portfolio, including its investment in Exodus Communications Inc. (see Global Xing Comments on Exodus); $545 million related to the impairment of goodwill associated with its Global Marine unit; plus $294 million in restructuring charges. The losses are applicable to common shareholders.
The company filed for chapter 11 on January 28 (see Global Crossing Falls Overboard) and was supposed to have announced both its fourth quarter and full year 2001 earnings yesterday. However, due to the fact that its auditor, Arthur Andersen LLP, is still reviewing its financial statements, the company only released unaudited revenue estimates. It said it would release its complete financial results when it files its annual report with the Securities and Exchange Commission (SEC). A date for the filing has not yet been set, according to Tisha Kresler, a spokeswoman for the company.
The company expects to report about $804 million in revenues for its fourth quarter of 2001, most of which is accounted for by $764 million in service revenue. Of the approximately $3.2 billion the company expects to report in full-year revenue, about $3.1 billion is service revenue.
Global Crossing had $2.2 billion in cash and cash equivalents at the end of the third quarter of 2001, but held only about $700 million in accessible cash as of February 25, according to the announcement yesterday. In addition, the company has nearly $820 million in restricted bank accounts and Asia Global Crossing Ltd. (NYSE: AX) bank accounts. The amount of cash the company has is important to creditors, since it determines how much money will be available for the reorganization. Global Crossing would not reveal what its cash burn has been since the company filed for bankruptcy a month ago, but the Los Angeles Times reported today that the company had spent about $200 million since the filing.
"We feel comfortable with our cash position throughout the restructuring process," Kresler says.
Global Crossing is currently being investigated by both the SEC and the FBI for alleged accounting irregularities, such as reporting IRU swaps as revenue (see Qwest Called on Global Crossing , Global Crossing: More Questions, and 360networks Subpoenaed).
Asia Global Crossing, a subsidiary of Global Crossing, also reported preliminary revenues yesterday. The company is not part of the bankruptcy filing but warned that it would report a “material” loss due to several charges and that its auditors were questioning whether or not it could stay in business: "It is likely that in their report on the company’s audited financial statements, the company’s auditors will express substantial doubt about the company’s ability to continue as a going concern."
Asia Global Crossing also announced that its revenues for 2001, excluding IRUs, had risen 328 percent to $121.5 million.
Shares in Asia Global Crossing, 59 percent of which belong to the parent company, were halted for an imbalance today. The shares are expected to open between 15 cents and 25 cents, well below their closing at 36 cents on the New York Stock Exchange yesterday. The company’s stock has lost about 94 percent of its value over the past year.
In addition to the preliminary financial information, Global Crossing announced yesterday that it had appointed Carl Grivner as chief operating officer and Anthony Christie as senior vice president of product management. The company also reported that Mark Attanasio had resigned as a member of the board and that it is recruiting new board members (see GlobalX Names COO).
— Eugénie Larson, Reporter, Light Reading