Teleglobe Announces Fourth Quarter 1999 and Full-Year Results - Company Financial Information

Cambridge Telcom Report, Feb 21, 2000

1999 YEAR-END REPORT - US GAAP For the twelve-month period ended Dec. 31, 1999

All figures are in U.S. dollars and derived from U.S. GAAP financial statements

Teleglobe Announces Fourth Quarter 1999 and Full-Year Results -- Internet revenues increase 89% in fourth quarter and 102% in 1999 -- GlobeSystem deployment on schedule

Teleglobe Inc. Wednesday announced fourth quarter and full year financial results for 1999. All amounts are in U.S. dollars and reflect U.S. generally accepted accounting principles including new accounting rules for certain sales of capacity made after June 30, 1999 which are no longer recognized as one-time sales.

Consolidated results -- full year For the full year 1999, consolidated revenues totaled $2,867.9 million compared to $3,388.9 million in 1998, a decrease of 15%. Gross margin was $1,221.0 million compared to $1,352.0 million before non-recurring charges in 1998 due to lower traffic at Excel Communications Inc. (Excel) and higher fixed network costs generated by GlobeSystem at Teleglobe Communications Corporation (TCC). Net income was $20.3 million, or $0.06 per share on a fully diluted basis, in 1999, compared to $14.9 million, or $0.04 per share, in 1998. On a fully-diluted basis, earnings per share from core operations were $0.28 in 1999 compared to $0.99 before non-recurring items in 1998.

Reported earnings per share were $0.06 including a $0.22 loss from non-core operations ORBCOMM and Look Communications, compared to $0.04, including a $0.07 loss per share from non-core operations, in 1998. Both companies continued their planned expansion in 1999, leading to the increased loss per share.

EBITDA (earnings before interest, taxes, depreciation and amortization) for 1999 was $323.8 million compared to $584.5 million in 1998, before non-recurring items. The 1999 results were impacted by non-cash provisions for bad debt due to, among other things, implementation of the new billing systems.

TCC revenues were $1,467.4 million in 1999 compared to $1,611.2 million in 1998. Excluding sales of capacity, revenues decreased by 6% as prices declined 27% year over year. Internet revenues increased 102% to $129.0 million compared to $63.9 million in 1998. Overall, data and transmission revenues, including Internet revenues, increased by 19% from $200.4 million to $239.3 million. Excluding revenues from sales of capacity, data and transmission revenues increased by 59% from $144.7 million to $229.4 million. Total international traffic carried by TCC rose to 5.1 billion minutes, up 41% from 3.6 billion minutes in 1998.

Excel recorded revenues of $1,257.3 million, a decrease of 22% compared to $1,601.8 million in 1998. Minutes of traffic were 7.3 billion compared to 8.6 billion in 1998. These reductions stem from customer care problems at the end of 1998 which translated in a lower number of representatives and customers in 1999. Since then, the systems were stabilized and the traffic volume has resumed its growth in the second half of 1999.

Teleglobe Business Solutions (TBS) revenues rose to $176.2 million in 1999, up 7% from $165.1 million in 1998. Minutes of traffic increased by 31% to reach 2.0 billion in 1999. Consolidated results - fourth quarter For the fourth quarter of 1999, consolidated revenues totaled $700.9 million, compared to $809.6 million in the corresponding period of 1998 and to $709.9 million in the third quarter of 1999. Gross margin was $303.4 million compared to $339.3 million in 1998. Excluding sales of capacity, the decrease was 1%. Net loss in the fourth quarter of 1999 was $23.3 million, or $0.10 per share on a fully diluted basis, compared to a net loss of $184.4 million, or $0.74 per share, in the 1998 period.

Loss per share from core operations in the fourth quarter of 1999 was $0.02 per share on a fully diluted basis, compared to earnings per share of $0.33 before non-recurring charges in the 1998 period.

On a fully diluted basis, the reported loss per share was $0.10, including a loss of $0.08 per share from non-core operations ORBCOMM and Look, compared to a loss of $0.74 in the fourth quarter of 1998. In January 2000, Teleglobe increased its ownership interest in ORBCOMM to nearly 65% from 50% during 1999. The new ownership structure reflects the continuing investments by Teleglobe and the consequent dilution of Orbital Sciences' participation, and significantly increases the value of Teleglobe's investment in ORBCOMM.

TCC revenues were $366.5 million compared to $409.2 in the fourth quarter of 1998. Excluding sales of capacity, revenues decreased by 3% while gross margin increased by 3%. Internet revenues increased 89% to $38.3 million from $20.2 million in the fourth quarter of 1998. The value of capacity sales contracts signed in the fourth quarter amounted to $97.5 million of which $60.9 million was received. These sales will be recognized in TCC's revenues over 15 years. Total international traffic rose to 1.5 billion minutes compared to 1.0 billion minutes in the 1998 quarter, an increase of 47%.