XO reports solid results, but capital a concern

XO Communications reported solid results for the quarter, but the company’s current capital structure has become a concern for some analysts.

For the quarter ending June 30, XO posted revenue of $306.8 million, up from the $246.5 million it posted in the first quarter. Net loss for the quarter was $461.1 million. The company posted an earnings-per-share loss of $1.32, just off the analyst consensus loss of $1.31, but well within the predicted range of $1.16 and $1.43. XO’s EBITDA loss was $70.7 million, largely in line with analyst expectations.

Along services lines, $147.8 million of the company’s total revenue was derived from voice, while $149 million was attributable to data services. Integrated voice and data services totaled $8.5 million.

Despite the solid results, the company’s balance sheet has become a concern for some Wall Street analysts. XO currently has about $1.37 billion in cash and marketable securities and $5.26 billion in long-term debt, leaving some analysts to predict that XO is funded only through the first quarter of 2003.

XO, therefore, is considering ways to shore up its balance sheet, though company leadership declined to elaborate. “We do not have a completely thought-through plan that we’re capable of discussing,” said XO’s CEO Dan Akerson.

One solution that is apparently being considered is a debt buy-back program by XO, which would help lower the company’s interest payments.

At least one analyst, Glen Waldorf of UBS Warburg, is skeptical of that plan, however.

“XO’s business, with its growing proof of concept, is its most valuable asset. While we recognize that lower debt would give the company greater financial flexibility and praise from Wall Street analysts, we believe it is more important for the company to conserve cash or use it to fund core operations,” he said.