Teleglobe (NASDAQ:TLGB)
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Teleglobe International Holdings Ltd (NASDAQ:TLGB), a
leading provider of international telecommunications services to
Internet service providers and to fixed and mobile network operators,
announced today unaudited third quarter 2005 results for the period
ended September 30, 2005.
Third quarter 2005 revenue was $243.8 million versus $239.2
million in the second quarter of 2005 and $276.8 million in the third
quarter of 2004. Net loss for third quarter 2005 was $7.9 million, or
$(0.20) per share, versus $0.4 million, or $(0.01) per share, in the
second quarter of 2005 and $11 million, or $(0.28) per share in the
third quarter of 2004.
Third quarter 2005 earnings before interest, taxes, depreciation
and amortization (EBITDA) were $3.1 million including a $77,000 loss
from foreign exchange translations versus $9.8 million including a
$1.6 million loss from foreign exchange translations in the second
quarter of 2005. Third quarter results include non-recurring special
charges incurred in SG&A in connection with the Plan of Amalgamation
with VSNL totaling $6.8 million. Second quarter 2005 results include a
$2.2 million pretax gain on the disposal of a Vancouver facility
associated with the company's plan to reduce operating expenses. The
second quarter also includes the impact of major favorable settlements
with carriers.
Liam Strong, president and CEO of Teleglobe, stated, "Excluding
the non-recurring special charges of $6.8 million incurred in
connection with the Plan of Amalgamation with VSNL, Teleglobe's third
quarter results were consistent overall with our performance
year-to-date as we made progress in evolving our revenue mix toward
higher-margin products. Increases in voice and data volumes were
offset by sustained pricing pressure, while our value-added services
business continued to perform above expectations. During Q3, we
continued to expand our services and won new customers to our
value-added services offering, further differentiating Teleglobe as a
comprehensive wholesale telecommunications services provider."
Non-GAAP Results
EBITDA (Earnings before interest, taxes, depreciation, and
amortization) for third quarter 2005 was $3.1 million versus $9.8
million in the second quarter of 2005 and $5.0 million in the third
quarter of 2004. EBITDA is a non-GAAP concept, differing from GAAP
measures in that it excludes net interest expense, taxes, depreciation
and amortization. A more detailed reconciliation of the differences
between GAAP and non-GAAP results is included in the financial tables
in this press release.
Non-GAAP Financial Data
We are presenting EBITDA (Earnings before interest, taxes,
depreciation and amortization) and Gross Margin because management
considers them to be important supplemental measures of our
performance and believes that they are frequently used by interested
parties in the evaluation of companies in our industry. However,
EBITDA and Gross Margin have limitations as analytical tools, and you
should not consider them in isolation, or as a substitute for analysis
of our results as reported under GAAP. Some of these limitations
include the following:
-- EBITDA does not reflect cash expenditures, future requirements
for capital expenditures, or contractual commitments;
-- EBITDA does not reflect changes in, or cash requirements for,
working capital needs;
-- EBITDA does not reflect the significant interest expense, or
the cash requirements necessary to service interest or
principal payments, on debt;
-- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to
be replaced in the future, and EBITDA does not reflect any
cash requirements for such replacements;
-- EBITDA reflects the impact on earnings of charges resulting
from matters we consider not to be indicative of our ongoing
operations; and
-- Other companies in our industry may calculate EBITDA and Gross
Margin differently than we do, limiting their usefulness as a
comparative measure.
-- The Gross Margin calculation excludes any depreciation or
amortization relating to property, equipment and intangible
assets required to generate revenues.
Because of these limitations, we rely primarily on the GAAP
results and use EBITDA and Gross Margin only as supplemental measures
of our performance.
Adjusted EBITDA is a further supplemental measure of our
performance. We compute Adjusted EBITDA by adjusting EBITDA to
eliminate the impact of a number of items that management does not
consider indicative of our ongoing operating performance. You are
encouraged to evaluate each adjustment and the reasons we consider it
appropriate for supplemental analysis. In addition, in evaluating
Adjusted EBITDA, you should be aware that in the future we may incur
expenses similar to the adjustments in this presentation. The
presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
nonrecurring items.
Acquisition of Teleglobe by VSNL
On October 25, 2005, Teleglobe held a Special General Meeting of
shareholders to vote on the Plan of Amalgamation with VSNL. At the
meeting, Teleglobe shareholders approved the acquisition, with over
99% of votes cast, representing over 78% of Teleglobe's shares
outstanding, voted in favor. A majority was required to approve the
transaction. Pending regulatory approvals and notices and other
customary closing conditions, the transaction is expected to close in
the first quarter of 2006. Pursuant to the amalgamation, Teleglobe
shareholders will receive consideration of $4.50 per common share in
cash. More details are available on the Agreement and Plan of
Amalgamation in Teleglobe's Definitive Proxy Statement that was filed
with the SEC on September 26, 2005.
About Teleglobe:
Teleglobe (NASDAQ: TLGB) is a leading provider of international
voice, data, Internet and mobile roaming services with over 50 years
of industry expertise in international telecommunications.
Teleglobe owns and operates one of the world's most extensive
telecommunications networks, reaching over 240 countries and
territories with advanced voice, mobile, and data services. Teleglobe
is the carrier of choice to more than 1,400 wholesale customers
representing the world's leading telecommunications, mobile operators
and Internet service providers.
With an annual run-rate of over 13 billion minutes, and a
significant portion of the world's Internet traffic, Teleglobe's
network is consistently ranked among the most robust and reliable,
performing at the high end of industry standards. Detailed information
about Teleglobe is available on the company's web site at
www.Teleglobe.com.
Forward-looking Statements
Teleglobe has included in this press release forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including all statements concerning future or
expected events or results.
Actual results could differ materially from those projected in the
companies' forward-looking statements due to numerous known and
unknown risks and uncertainties, including, among other things, the
risks and uncertainties described in the Form 10-Q that was filed by
Teleglobe on November 9, 2005, as well as other Teleglobe periodic
filings with the Securities and Exchange Commission.
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Teleglobe International Holdings Ltd - Selected Financial
Highlights for the periods indicated (USD$, 000's) (Unaudited):
Consolidated Statement of Operations -
Selected Information Q3-2005 Q2-2005 Q3-2004
----------------------------------------------------------------------
Revenues $243,778 $239,173 $276,789
Telecommunication expenses 177,656 169,596 208,322
Network expenses, exclusive of
amortization and Depreciation 22,199 22,729 23,379
----------------------------
Total telecommunication and network
expenses $199,855 $192,325 $231,701
Selling, general & administrative, bad debt
expenses, stock based compensation,
restructuring charges, foreign exchange
loss (gain) and other income $ 40,821 $ 37,037 $ 40,085
----------------------------
Net loss $ (7,868) $ (401) $(11,031)
----------------------------
Teleglobe International Holdings Ltd - Selected Financial
Highlights for the periods indicated (USD$, 000's) (Unaudited):
Consolidated Balance Sheet - September December
Selected Information 30, 2005 31, 2004
----------------------------------------------------------------------
Cash, Marketable Securities and Restricted Cash $ 34,285 $ 34,060
Accounts Receivable 192,974 210,588
Other Current Assets 11,560 10,189
-----------------
Total Current Assets 238,819 254,837
Property and Equipment 132,222 134,083
Intangible Assets 144,851 143,231
Other Non-Current Assets 20,589 21,638
-----------------
Total Assets $536,481 $553,789
-----------------
Accounts Payable and Accrued Liabilities $273,211 $275,645
Other Current Liabilities 6,557 6,065
Current Portion of Senior Notes Payable 25,000 --
-----------------
Total Current Liabilities 304,768 281,710
Other Non-Current Liabilities 15,053 13,929
Senior Notes Payable 75,000 100,000
Total Shareholders' Equity 141,660 158,150
-----------------
Total Liabilities and Shareholders' Equity $536,481 $553,789
-----------------
Teleglobe International Holdings Ltd - Selected Financial
Highlights for the periods indicated (USD$, 000's) (Unaudited):
*Reconciliation of EBITDA to GAAP Measure
for the periods indicated Q3-2005 Q2-2005 Q3-2004
----------------------------------------------------------------------
Net loss $(7,868) $ (401) $(11,031)
Add:
Interest expense, net 2,369 2,101 6,271
Income tax expense (recovery) 133 (299) (165)
Depreciation 5,559 5,762 7,059
Amortization of intangible assets 2,909 2,648 2,869
--------------------------
EBITDA $ 3,102 $ 9,811 $ 5,003
Add:
Non-recurring special charges in
connection with the Plan of Amalgamation
with VSNL 6,785 1,099 --
ITXC Integration costs -- -- 3,200
Professional fees incurred in connection
with Foreign Corrupt Practices Act
investigation -- -- 1,360
--------------------------
Adjusted EBITDA $ 9,887 $10,910 $ 9,563
--------------------------
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The EBITDA for the three months ended September 30, 2005 includes
the favorable impact of $1.8 million in telecommunication expense due
to the revision of estimates on disputed accounts payables and accrued
liabilities with certain carriers and the benefit associated with
negotiated retroactive rate adjustments totaling $1.6 million on
certain contracts.
The EBITDA for the three months ended June 30, 2005 includes a
non-recurring gain of $2.2 million relating to the disposal of the
Burnaby Vancouver Station, $3.0 million of revenue due to favorable
settlement agreements with certain carriers and $0.9 million of
similar favorable agreements in network expenses. Additionally, for
the three months ended June 30, 2005, the Company's telecommunication
expenses were reduced by major favorable settlements with certain
carriers for approximately $2.7 million compared to $3.0 million in
the first quarter of 2005.
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*Reconciliation of Gross Margin to GAAP
Measure for the periods indicated Q3-2005 Q2-2005 Q3-2004
----------------------------------------------------------------------
Loss before income taxes $(7,735) $ (700) $(11,196)
Add:
Interest expense, net and other income 2,022 (122) 5,962
Foreign exchange loss (gain) 77 1,594 (233)
Depreciation 5,559 5,762 7,059
Amortization of intangible assets 2,909 2,648 2,869
Bad debt expense 1,180 221 620
SG&A and stock based compensation 39,911 37,445 40,007
--------------------------
Gross Margin $43,923 $46,848 $ 45,088
--------------------------
Gross Margin as a Percentage of Revenue 18.0% 19.6% 16.3%
--------------------------
Revenue Information
The following table presents relevant revenue-related information
for the periods indicated for Teleglobe International Holdings Ltd
(Unaudited)
Three Months Three Months Three Months
Ended Ended Ended
September 30, June 30, September 30,
2005 2005 2004
----------------------------------------------------------------------
Revenues per line of business
(in millions of U.S. dollars)
Voice - transport $ 191 $ 190 $ 226
Data - transport 25 25 26
Value - added services 28 24 25
---------------------------------
Total $ 244 $ 239 $ 277
---------------------------------
Total revenues excluding Bell
Canada (1) revenues $ 222 $ 215 $ 251
Percentage of revenues from
Bell Canada (1) 8.8% 10.1% 9.3%
Minutes of traffic (in millions)
Voice - transport 3,470 3,328 3,297
Other 78 70 61
---------------------------------
Total 3,548 3,398 3,358
---------------------------------
Average voice revenue per minute $ 0.055 $ 0.057 $ 0.069
Geographic distribution of revenues
Asia 7% 7% 8%
Canada 14% 15% 13%
Europe 34% 32% 29%
USA 31% 31% 33%
Latin America 4% 4% 4%
Other 11% 11% 13%
---------------------------------
Total 100% 100% 100%
---------------------------------
1 Bell Canada is Canada's largest telecommunications company.
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