XO Communications Reports Financial Results For Fourth Quarter and
Year End 2004 RESTON, Va., March 18 /PRNewswire-FirstCall/ -- XO
Communications, Inc. (OTC:XOCM) (BULLETIN BOARD: XOCM) 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 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 during the fourth
quarter of 2004 was less than the fair value of the Company's net
assets. Consolidated adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA), excluding the goodwill
impairment charge, for the fourth quarter of 2004 was $21.9 million
compared to a $9.8 million adjusted EBITDA loss in the same period
in the prior year. Consolidated adjusted EBITDA for the full year
ended December 31, 2004 was $20.0 million compared to $9.1 million
in adjusted EBITDA in the prior year. The fourth quarter of 2004
results include a benefit of approximately $11.9 million of
selling, operating and general (SOG) expense settlements. "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, network access and web hosting -- 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 -- 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 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 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. Recent Announcements 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 (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 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, 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 (FCC) regarding the local network
unbundling obligations of the regional Bell operating companies
(RBOC). 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 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
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 DATASOURCE: XO Communications, Inc.
CONTACT: Media: Chad Couser of XO Communications, +1-703-547-2746,
or ; or Investor: Augustine Okwu Jr., +1-203-682-8244, or , or
Andrew Greenebaum, +1-310-395-2215, or , both of Integrated
Corporate Relations, Inc. Web site: http://www.xo.com/
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