RESTON, Va., Nov. 9 /PRNewswire-FirstCall/ -- XO Communications,
Inc. (OTC:XOCM.OB) (BULLETIN BOARD: XOCM.OB) today reported its
third quarter 2005 financial and operational results. Revenue for
the third quarter ended September 30, 2005 was $358.7 million
compared with $362.2 million in the second quarter of 2005 and
$391.9 million reported in the third quarter of 2004. Consolidated
net loss for the third quarter of 2005 was $30.6 million, compared
with a consolidated net loss of $29.5 million in the second quarter
of 2005 and a consolidated net loss of $41.8 million in the third
quarter of 2004. Consolidated adjusted EBITDA(1) for the third
quarter of 2005 was $34.0 million compared with consolidated
adjusted EBITDA of $36.4 million in the second quarter of 2005 and
a $20.5 million consolidated adjusted EBITDA loss in the third
quarter of 2004. Consolidated adjusted EBITDA for the third quarter
of 2005 included favorable carrier settlements of $8.5 million,
compared with $10.5 million for the second quarter of 2005 and $9.4
million for the third quarter of 2004. "We continued to make
progress against our financial goals by narrowing our net loss year
over year, delivering positive EBITDA for the fifth consecutive
quarter, and generating positive cash-flow for the second
consecutive quarter," said Carl Grivner, CEO of XO Communications.
"Our new IP-based commercial and wholesale product offerings have
been well-received by the market, demonstrated by the fact that we
have signed nearly 2,000 new customers of XOptions Flex, our new
VoIP services bundle for businesses, since its launch earlier this
year." "The recently announced sale of XO's wireline
telecommunications business will mark a new chapter for XO," added
Grivner. "The transaction will create a new wireless business that
will be debt free and have more than $300 million in cash. With its
financial position and national spectrum coverage, the new wireless
business will be uniquely positioned as one of the nation's leading
pure-play broadband wireless companies. The privately held XO
national wireline business will have a restructured balance sheet
and will be in a stronger position to move forward as the nation's
largest competitive provider of telecommunications services to
businesses." Revenue from voice services -- consisting of local,
long distance and other voice services -- was $182.0 million in the
third quarter of 2005 compared with $188.5 million in the second
quarter of 2005 and $214.7 million for the third quarter of 2004.
Revenue from data services -- consisting of Internet access,
network access and web hosting -- was $108.8 million in the third
quarter of 2005 compared with $107.8 million in the second quarter
of 2005 and $110.0 million for the third quarter of 2004. Revenue
from integrated services -- consisting of integrated data and voice
services -- was $67.9 million in the third quarter of 2005 compared
with $65.9 million in the second quarter of 2005 and $67.2 million
for the third quarter of 2004. Gross margin(2) for the third
quarter of 2005 was $211.7 million compared to $224.1 million in
the second quarter of 2005 and $229.9 million in the third quarter
of 2004. Selling, operating and general (SOG) expenses for the
third quarter of 2005 were $177.7 million compared to $187.8
million in the second quarter of 2005 and $209.4 million in the
third quarter of 2004. As a percentage of revenue, SOG expenses for
the third quarter of 2005 were 50 percent compared to 52 percent
for the second quarter of 2005 and 53 percent in the third quarter
of 2004. The improvements in SOG expenses year-over-year as a
percentage of revenue were primarily due to greater efficiencies
resulting from the integration of the acquired Allegiance Telecom
operations and XO's ongoing cost reduction initiatives. Cash, cash
equivalents and marketable securities increased by $0.6 million to
$280.2 million in the third quarter of 2005 compared to $279.6
million at the end of the second quarter of 2005. Quarter
Highlights and Recent Announcements Last week, XO announced an
agreement that will create a leading provider of fixed broadband
wireless services to businesses and service providers. In order to
create and finance the fixed wireless business, XO will sell its
national wireline telecommunications business for $700 million in
cash to Elk Associates LLC, an entity owned by XO's controlling
stockholder, Carl Icahn. Following the sale, the Company will
retain its fixed broadband wireless spectrum assets and be uniquely
positioned to be a leading provider of fixed broadband wireless
services nationally as one of the largest holders of fixed wireless
licenses in the 28 GHz-31 GHz spectrum range covering more than 70
U.S. major metropolitan markets. The proceeds from the sale of the
wireline business will be used to repay XO's outstanding long-term
debt, to offer to redeem, at the closing of the sale, XO's
outstanding preferred stock and to fund growth and development of
the wireless business. Once the sale is completed, the wireless
business will be debt-free and is currently expected to have in
excess of $300 million in cash to fund its operations and for other
corporate purposes. The transaction is anticipated to close in late
2005 or early 2006. The "XO Communications" brand name will be
transferred to the private company and thereby will remain with the
national wireline telecommunications business. XO anticipates
operating its fixed wireless business under a new name. On
September 20, 2005, XO announced that it signed its 1,500th
XOptions Flex customer just five months after launching the service
nationwide. XOptions Flex is the industry's first voice over IP
(VoIP) services bundle for businesses that combines unlimited local
and long distance calling, dedicated Internet access and web
hosting services for a flat monthly price. XOptions Flex also
received INTERNET TELEPHONY magazine's Excellence Award for 2005,
which singled out XOptions Flex for delivering solutions that
improve VoIP and IP telephony. XO announced that it is broadening
its nationwide Wholesale Local Voice services platform to support
competitive local exchange carriers (CLECs) that offer local and
long distance services to residential customers in competition with
the regional Bell operating companies (RBOCs). XO can now help
CLECs focused on residential customers transition off of the RBOCs'
unbundled network element platform (UNE-P) and utilize central
office and transport services from XO in order to continue to
cost-effectively deliver telephone services to their customers. XO
announced that it carried more than 1.8 billion minutes of VoIP
traffic across the XO IP network during the third quarter of 2005.
VoIP traffic grew by 17 percent during the quarter due to an
increased usage of XO's commercial and wholesale VoIP solutions. XO
also announced a number of customer wins during the third quarter.
These included Pandora Networks, the Sacramento Kings, SunRocket,
and a $7 million, five-year contract to provide data and voice
services to MinolConnect that will enable MinolConnect to provide
local and long distance telephone and high-speed Internet services
to 6,300 apartment units owned and operated by Olen Residential in
the Las Vegas metropolitan area. 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/. Forward Looking Statement Note 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) that involve
risks and uncertainties. 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 Telecom's assets,
XO's ability to increase sales, XO's ability to continue to
implement effective cost containment measures, XO's ability to
service the growing demand for high-bandwidth broadband wireless
services, and XO's ability to increase sales once it begins
operating under a new name. Management cautions the reader that
these forward-looking statements are only predictions and are
subject to a number of both known and unknown risks and
uncertainties and actual results, performance, and/or achievements
of XO to differ materially from the future results, performance,
and/or achievements expressed or implied by 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 Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue $358,672
$391,885 $1,082,341 $931,013 Costs and expenses: Cost of service
(exclusive of depreciation and amortization) 147,009 161,946
432,955 390,729 Selling, operating, and general 177,712 209,427
557,179 542,129 Depreciation and amortization 57,269 56,739 176,731
112,501 Loss from operations $(23,318) $(36,227) $(84,524)
$(114,346) Interest income 2,488 554 6,308 2,147 Investment gain
(loss), net (676) 487 936 (2,851) Interest expense, net (9,128)
(6,593) (25,720) (19,044) Net loss $(30,634) $(41,779) $(103,000)
$(134,094) Preferred stock accretion (3,221) (1,839) (9,464)
(1,839) Net loss applicable to common shares $(33,855) $(43,618)
$(112,464) $(135,933) Net loss per common share, basic and diluted
$(0.19) $(0.24) $(0.62) $(0.89) Weighted average shares, basic and
diluted 181,933,035 181,933,035 181,933,035 152,479,324 XO
COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets (Dollars
in thousands) As of As of September 30, June 30, 2005 2005
(Unaudited) (Unaudited) Cash, cash equivalents, and marketable
securities $280,202 $279,598 Accounts receivable, net 138,732
137,683 Other current assets 29,542 33,121 Property and equipment,
net 742,447 764,729 Broadband wireless licenses and other
intangibles, net 103,138 115,567 Other assets, net 44,614 44,917
Total assets $1,338,675 $1,375,615 Accounts payable and other
current liabilities $295,660 $311,128 Long-term debt and accrued
interest payable 391,887 382,646 Other long-term liabilities 67,623
67,502 Class A convertible preferred stock 213,817 210,596 Total
stockholders' equity 369,688 403,743 Total liabilities, convertible
preferred stock and stockholders' equity $1,338,675 $1,375,615 (1)
Adjusted EBITDA is defined as net income or loss before
depreciation, amortization, interest expense, interest income,
investment gain (loss), impairment charges, restructuring charges,
and asset writedowns. Adjusted 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, Adjusted EBITDA is an important measure used by management
to assess operating performance of the company. Adjusted EBITDA as
defined here may not be comparable to similarly titled measures
reported by other companies due to differences in accounting
policies. Additionally, Adjusted EBITDA as defined here does not
have the same meaning as EBITDA as defined in our secured credit
facility agreement, or as EBITDA as defined in our SEC filings. A
reconciliation of Adjusted EBITDA to net loss is included below: XO
COMMUNICATIONS, INC. Reconciliation of Net Loss to Adjusted EBITDA
(Dollars in thousands) Three Months Ended Nine Months Ended Sept.
30, June 30, Sept. 30, Sept. 30, Sept. 30, 2005 2005 2004 2005 2004
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited) Net loss
$(30,634) $(29,507) $(41,779) $(103,000) $(134,094) Depreciation
and amortization 57,269 61,097 56,739 176,731 112,501 Interest
income (2,488) (1,919) (554) (6,308) (2,147) Investment (gain)
loss, net 676 (1,891) (487) (936) 2,851 Interest expense, net 9,128
8,588 6,593 25,720 19,044 Adjusted EBITDA $33,951 $36,368 $20,512
$92,207 $(1,845) (2) Gross margin is defined as revenue less cost
of service, and excludes depreciation and amortization. Gross
margin 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, gross margin is
an important measure used by management to assess operating
performance of the company. Additionally, we believe that gross
margin is a standard measure of operating performance that is
commonly reported and widely used by analysts, investors, and other
interested parties in the telecommunications industry. Gross margin
as defined here may not be comparable to similarly titled measures
reported by other companies due to differences in accounting
policies. A reconciliation of Gross Margin to net loss is included
below: XO COMMUNICATIONS, INC. Reconciliation of Net Loss to Gross
Margin (Dollars in thousands) Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2005 2005 2004
2005 2004 (Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Net loss $(30,634) $(29,507) $(41,779) $(103,000) $(134,094)
Selling, operating and general 177,712 187,772 209,427 557,179
542,129 Depreciation and amortization 57,269 61,097 56,739 176,731
112,501 Interest income (2,488) (1,919) (554) (6,308) (2,147)
Investment (gain) loss, net 676 (1,891) (487) (936) 2,851 Interest
expense, net 9,128 8,588 6,593 25,720 19,044 Gross margin $211,663
$224,140 $229,939 $649,386 $540,284 DATASOURCE: XO Communications,
Inc. CONTACT: Chad Couser of XO Communications, +1-703-547-2746,
Web site: http://www.xo.com/
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