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Nochmal ein Beitrag von dem gleichen Autor wie oben.

GX Fans
I decided to look at the GX financials from a different viewpoint to hopefully deny or confirm Smartguy`s
comments about their impending filing for bankruptcy. He chose not to support his thesis of reduced
revenues and likely further reductions in revenue guidance will lead to an impending bankruptcy filing. I
decided to try to look at that exact scenario and see what we can come up with.
For the six months ended June 01, GX has reported "adjusted recurring EBITDA" of $913 million. (This is
the key financial metric and explained why a little later.) They submitted a forecast of adjusted recurring
EBITDA of $1.6 billion to $2.0 billion during the 2Q conference call, and then recently affirmed those
numbers in the recent press release. Thus, it seems as though GX is pretty confident that they will be in that
range. Since they have already recognized $913 million for the first six months, they only need about $700
million for the last six months to hit the minimum of $1.6 billion, and they need $1.1 billion to hit the high
end of the target. Since they cleared $472 million in the 2Q alone, I don`t think it is much of a stretch to think
they will hit $1.8 billion for the year, or the mid point of their estimate. At the halfway point, they are on
track for $1.85 billion.
So, my first assumption is that GX will hit $1.8 billion for 2001. GX management has already indicated that
they will end the year with cash and liquidity of $1.7 billion to $2.1 billion. So, my second assumption is
that they will end 2001 with $1.9 billion in cash and liquidity.
Now, given those two assumptions, which seem reasonable and fairly conservative as we are using the mid
points of the ranges given, and GX hasn`t missed a range yet on their SHORT TERM predictions, let`s pick a
downside scenario for 2002. Not a worst case scenario, as I don`t want to get that negative and nor do I think
GX will hit a worse case scenario. But let`s pick a downside scenario for 2002 adjusted recurring EBITDA,
and see if that downside scenario could lead to a bankruptcy filing.
I think a down side scenario of adjusted recurring EBITDA is $1.5 billion. That would represent a $300
million drop, or nearly 20%, from projected 2001 actual. I think that is fairly significant given that GX has
demonstrated growth EVERY YEAR and their most recent news release indicated that they are experiencing
"...continued growing demand...". I would think it is close to a layup that GX will at least show 2002 results
similar to 2001 (I actually expect a higher number but we are trying to show a downside scenario here.) GX
hasn`t yet given guidance to this number and it will be very telling when they do. But I think a projection of
nearly a 20% drop from 2001 to 2002 is pretty aggressive for a downside scenario.
Adjusted recurring EBITDA is the key financial metric here because this metric basically tells you how much
cash GX has generated from operations PRIOR to having to have to pay down principal, interest, preferred
dividends and CAPEX. (If GX can`t meet these obligations, this is how they get forced into bankruptcy.) I
believe that 2002 principal is only $92 million per the 10-K filing. I am estimating preferred dividend
payments in 2002 at $250 million, and I am estimating 2002 interest at $600 million. Those numbers may be
off by a little, but they should be pretty close. Thus, the sum of those three represents about $1 billion
(rounded up a little).
Thus, if they generate $1.5 billion in recurring adjusted EBITDA, and they have to pay out about a $1 billion
for debt service, that only leaves $500 million for CAPEX. That of course isn`t much. However, we have the
remaining $1.9 billion in cash and liquidity (borrowing capacity) still available. So, I think even in a pretty
downside scenario, they can make it for 2002 without too much difficulty. Now, if 2003 doesn`t pick up
nicely, and they have two back to back poor years, then things get much dicier in late 2003/early 2004. They
have a large principal payment due in 2004, and they will need to be generating pretty significant recurring
adjusted EBITDA by then to meet this obligation.
So, my conclusion? Yes, GX could see some trouble in the next couple years if they have back to back
downside years in 2002 and 2003. However, I think the chances of that are fairly remote, and I like making
investments in companies where upside looks to be tremendous and downside seems "remote".
My opinion. Would love to hear some critiques.
Bob aka TheCPACommish
aus der Diskussion: meinungen zu global crossing (gblx)
Autor (Datum des Eintrages): Gruno  (09.09.01 01:20:03)
Beitrag: 5 von 29 (ID:4384231)
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