RESTON, Va.--(BUSINESS WIRE)--March 15, 2004--XO Communications, Inc. (OTCBB:XOCM.OB) today reported financial results for the fourth quarter and year ended December 31, 2003. XO reported fourth-quarter 2003 revenue of $261.0 million versus revenue of $299.4 million for the fourth-quarter of 2002. For the fiscal year ended December 31, 2003, XO reported revenue of $1,110.5 million versus revenue of $1,259.9 million for the fiscal year ended December 31, 2002.
The majority of the decline in revenue was caused by downsizings from carrier customers. The commercial offerings to middle market businesses, however, remained relatively stable as revenue acquisition kept pace with attrition. The company estimates that total 2004 revenue will increase as compared to annualized fourth quarter 2003 results.
Of the total fourth quarter revenues, revenue from voice services, which includes local, long distance and other voice services, was $131.6 million, revenue from data services, which includes Internet access, network access and web hosting services, totaled $92.4 million, and fourth quarter revenue from integrated data and voice services was $37.0 million. Of total revenues for the fiscal year ended December 31, 2003, revenue from voice services was $572.8 million, revenue from data services was $392.7 million, and revenue from integrated data and voice services was $145.0 million.
Loss from operations for the fourth quarter of 2003 was $48.7 million versus $176.5 million for the fourth quarter 2002. Loss from operations for the fiscal year ended December 31, 2003 was $111.9 million versus $1,208.9 million for the fiscal year ended December 31, 2002.
"XO's fourth-quarter and full year results reflect the continued competitive pressures faced by companies in the telecommunications industry," said XO Communications' Chief Executive Officer, Carl Grivner. "Despite these challenges, we were able to execute more than 10,000 new customer orders in the fourth quarter. Furthermore, we took action to improve our operational effectiveness by focusing on improving margins and reducing our cash consumption. As a result of these efforts, we were able to generate net cash from operations of $6.3 million during 2003."
Cost of service for the fourth quarter of 2003 was $102.8 million versus $122.0 million for the fourth quarter of 2002. Cost of service as a percentage of revenue for the fiscal year ended December 31, 2003 declined to 38.0 percent or $422.1 million versus 41.5 percent or $522.9 million for the fiscal year ended December 31, 2002. Selling, operating and general expenses were $679.3 million for the fiscal year ended December 31, 2003 versus $765.9 million for the fiscal year ended December 31, 2002. Capital expenditures for the fiscal year ended December 31, 2003 were $82.3 million versus $208.7 million for the fiscal year ended December 31, 2002.
As of December 31, 2003, the company's balance of cash and marketable securities decreased to $520.6 million from $561.0 million as of December 31, 2002. For the previous fiscal year, the company's balance of cash and marketable securities decreased to $561.0 million as of December 31, 2002 from $755.2 as of December 31, 2001.
In January 2004, XO closed a rights offering that resulted in the sale of 39.7 million shares of the company's new common stock. XO raised net proceeds of approximately $197.6 million from the rights offering and applied those proceeds to reduce its outstanding debt and accrued interest from approximately $536.8 million to approximately $339.2 million. XO has no current debt service requirements since cash interest payments as well as automatic and permanent quarterly reductions of the principal amount outstanding under the company's credit facility do not commence until 2009 except under certain circumstances relating to financial results and ratios.
"While this has been a difficult year for the telecommunications industry, XO was able to make progress by improving our gross margins, reducing total overhead costs, and using our assets more efficiently, thereby lowering our capital expenditures year over year," said XO Communications' Chief Financial Officer Wayne Rehberger.
On February 13, 2004, XO Communications announced that it had been selected as the winning bidder to acquire substantially all of the assets of Allegiance Telecom, Inc. On February 19, 2004, XO's purchase of substantially all of the Allegiance Telecom assets was approved by the U.S. Bankruptcy Court for the Southern District of New York. The transaction remains subject to certain federal and state governmental approvals. The financial information in this press release does not include the financial results of Allegiance Telecom, Inc. and relates only to XO's fourth-quarter and annual results for the period ending December 31, 2003.
"The acquisition of Allegiance Telecom's network assets will make XO one of the nation's largest national local telecommunications services providers. The combination of XO and Allegiance is good for both the industry and businesses as it will contribute to increased competition for regional Bell operating companies and give businesses more choices for their end-to-end telecommunications needs," said Grivner. "In addition, the acquisition increases the density of our PoPs (Points of Presence) in local markets, which uniquely positions XO to sell last mile and metro services to all the large long distance companies."
"We have identified approximately $60 million in network cost savings and $100 million in general and administrative costs that could be realized over time as a result of this acquisition," added Grivner.
XO Communications plans to hold a conference call during the second quarter to discuss its pending acquisition of Allegiance Telecom, company strategy, and financial results. Details about the conference call will be publicly announced in the near future.
About XO Communications
XO Communications is a leading broadband telecommunications services provider offering a complete portfolio of telecommunications 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 telecommunications services within and between more than 70 markets throughout the United States.
