5/15/03
XO Communications Reports First Quarter 2003 Results
Reston, VA - XO Communications, Inc. today announced financial results for the three month period ending March 31, 2003. Total revenue was $286.1 million in the first quarter of 2003 versus $299.4 million for the fourth quarter of 2002. Total revenue for the first quarter of 2002 was $333.4 million. While the first quarter revenue drop was consistent with expectations due to recent trends in reduced demand from other telecommunications customers and customer bankruptcies, these trends were also positively impacted by increased customer installations and usage from larger customers.
"In the first quarter of 2003, XO experienced an up tick in sales activity from the levels seen in the previous few quarters," said Nate Davis, XO COO. "We believe that we are poised to continue to attract new customers in this challenging market environment with our state-of-the-art broadband network, our vast product portfolio, and our dedicated 24 x 7 customer care service." Of the total revenue reported in the first quarter of 2003, $150.7 million was derived from voice services, which includes revenue from local, long distance and other enhanced voice services, and $102.0 million was attributable to data services, which includes Internet access, network access, and web hosting. Revenue from integrated voice and data services totaled $33.4 million in the first quarter of 2003.
XO reported an improvement in its loss from operations, which was $14.0 million for the first quarter of 2003, versus $176.5 million in the fourth quarter of 2002, and $182.7 million in the first quarter of 2002. This improvement in operating results was attributed to a combination of factors. The primary cause was a significant decrease in depreciation and amortization expense resulting from recording XO's property and equipment and intangible assets at fair value as part of the application of fresh start accounting in connection with the completion of XO's Chapter 11 proceeding. In addition, cost of service of $107.5 million declined in the first quarter of 2003 versus $122.0 million in the fourth quarter of 2002 and $140.4 million in the first quarter of 2002, primarily due to cost optimization programs that reduced expenses by transferring traffic from leased facilities onto XO's owned or controlled facilities, cost reductions due to customer disconnects and approximately $6.4 million of net benefits associated with favorable resolution of disputed third party costs. XO anticipates that cost of service will increase to historical levels as a percentage of revenue in future periods, based on its expectation that the reduction in expenses resulting from favorable dispute resolutions will be less than it experienced in the first quarter of 2003.
Selling, operating and general expenses in the first quarter of 2003 also declined from prior periods to $166.2 million, from $168.4 million in the fourth quarter of 2002 and $205.3 million in the first quarter of 2002. The centralization of many functions and other cost reduction and restructuring initiatives as well as the effects of recording certain long term real estate contracts at their fair value, as required by fresh start accounting, all contributed to the reduction in these expenses. XO expects selling, operating and general expense to increase in absolute dollars for the remainder of 2003 due primarily to new sales incentive programs and increased compensation costs. "I am delighted to join such a dynamic company and expect 2003 to be a critical year for XO," said Carl Grivner, CEO of XO Communications. "Our success in the marketplace will be driven by our unique combination of network assets and current and future service offerings that give us the opportunity to provide our customers with the state of the art telecommunications services they demand and the customer service they deserve."
XO's liquidity position as of March 31, 2003 remained strong as a result of the company's continued focus on cash conservation and expense management. XO reported $538.4 million of cash and marketable securities as of March 31, 2003 compared to cash and marketable securities of $561.0 million at December 31, 2002. This decrease resulted principally from a transfer of funds to an escrow deposit in conjunction with the consummation of our Plan of Reorganization. The Company expects that its cash and marketable securities on hand will be sufficient to fund its operations until cash flows generated by operations are sufficient to fund capital expenditure and debt service requirements.
"XO's strong balance sheet, product portfolio, management team and customer base position the company well for future growth and success." said Carl Icahn, Chairman of the Board.
About XO Communications
XO Communications is a leading broadband communications service provider offering a complete set of communications services, including: local and long distance voice, Internet access, Virtual Private Networking (VPN), Ethernet, Wavelength, Web Hosting and Integrated voice and data services.
XO has assembled an unrivaled set of facilities-based broadband networks and Tier One Internet peering relationships in the United States. XO currently offers facilities-based broadband communications services in more than 60 markets throughout the United States.
For more information contact:
Dawnyielle Downes/ XO Communications
Media and Industry Analysts
703-547-2682 or 703-675-3450
XO Communications Investor Relations Department
Financial Analysts
877-444-2068
