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Global Crossing Ltd – ‘10-K/A’ for 12/31/99

On: Wednesday, 9/20/00, at 8:13pm ET · As of: 9/21/00 · For: 12/31/99 · Accession #: 950130-0-5135 · File #: 0-24565

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/21/00  Global Crossing Ltd               10-K/A     12/31/99    4:345K                                   Donnelley R R & S… 02/FA

Amendment to Annual Report — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment #1 to Form 10-K                            100    597K 
 2: EX-12.1     Computation of Ratio of Earnings                       2±     9K 
 3: EX-23.1     Consent of Arthur Andersen                             1      7K 
 4: EX-27.1     Financial Data Schedule                                2      9K

10-K/A — Amendment #1 to Form 10-K
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) AC-1 Credit Facility Acquisitions Business Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Consolidated Balance Sheets as of December 31, 1999 and 1998 Exhibits, Financial Statements Schedules, and Reports on Form 10-K Financial Statements and Supplementary Data Income from discontinued operations Legal Proceedings MAC Credit Facility Management's Discussion and Analysis of Financial Condition and Results of Operations Market for the Registrant's Common Stock and Related Shareholder Matters Notes to Consolidated Financial Statements Operating income Properties Provision for income taxes Quantitative and Qualitative Disclosures about Market Risk Racal Telecom Term Loan A Report of Independent Public Accountants Revenue Schedule II Schedule II -- Valuation and Qualifying Accounts Selected Financial Data Senior Secured Revolving Credit Facility Signatures Submission of Matters to a Vote of Security Holders Valuation and Qualifying Accounts
1	1st Page - Filing Submission
3	Item 1. Business
26	Item 2. Properties
"	Item 3. Legal Proceedings
27	Item 4. Submission of Matters to a Vote of Security Holders
28	Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
29	Item 6. Selected Financial Data
33	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
34	Acquisitions
"	Revenue
36	Provision for income taxes
"	Income from discontinued operations
42	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
43	Item 8. Financial Statements and Supplementary Data
"	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
44	Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 10-K
"	Consolidated Balance Sheets as of December 31, 1999 and 1998
"	Notes to Consolidated Financial Statements
"	Schedule II -- Valuation and Qualifying Accounts
51	Report of Independent Public Accountants
70	Senior Secured Revolving Credit Facility
"	AC-1 Credit Facility
"	MAC Credit Facility
71	Racal Telecom Term Loan A
86	Operating income
98	Schedule II
"	Valuation and Qualifying Accounts
99	Signatures

10-K/A 1st Page of 100 TOC ↑Top Previous Next ↓Bottom Just 1st
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1 ON FORM 10-K/A
TO
FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1999

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number: 000-24565

GLOBAL CROSSING LTD.

BERMUDA 98-0189783
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(Address Of Principal Executive Offices)

(441) 296-8600
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class Names of Each Exchange on Which
Common Stock, par value $.01 per share Registered
Nasdaq National Market

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the common stock of the Registrant held by
non-affiliates of the Registrant on September 1, 2000, based on the closing
price of the common stock reported on the Nasdaq National Market on such date
of $35 1/8 per share, was $27,240,662,625.

The number of shares of the Registrant's common stock, par value $0.01 per
share, outstanding as of September 1, 2000, was 903,965,490, including
22,033,758 treasury shares.

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10-K/A 2nd Page of 100 TOC 1st Previous Next ↓Bottom Just 2nd
This Amendment No. 1 on Form 10-K/A amends and restates certain disclosure
contained in the Company's Annual Report on Form 10-K, which was filed with
the Securities and Exchange Commission on March 17, 2000. Specifically, this
filing amends and restates Parts I, II and IV of the Annual Report on Form 10-
K.

On July 11, 2000, the Company entered into an agreement to sell its
incumbent local exchange carrier business, acquired as part of the Company's
acquisition of Frontier Corporation, to Citizens Communications for $3.65
billion in cash, subject to certain adjustments concerning closing date
liabilities and working capital balances. This Amendment No. 1 on Form 10-K/A
reflects the financial position and results of operations of the incumbent
local exchange carrier business as discontinued operations for all periods
since the date of the Frontier acquisition.

In addition, pursuant to a limited review by and subsequent discussions with
the accounting staff of the Securities and Exchange Commission, this Amendment
No. 1 on Form 10-K/A adjusts the Company's consolidated financial statements
for the year ended December 31, 1999 to revise the estimated useful life of
the $1.5 billion goodwill related to GlobalCenter from 10 to 5 years.
GlobalCenter was acquired in September 1999 as part of the Company's
acquisition of Frontier Corporation. As a result, loss applicable to common
shareholders increased by $41 million for the year ended December 31, 1999.
This adjustment has no impact on the Company's cash flow or its compliance
with debt agreements.

This Form 10-K/A also updates various disclosures primarily related to the
above.

GLOBAL CROSSING LTD. AND SUBSIDIARIES

For The Year Ended December 31, 1999

INDEX

[Download Table]

Page
----

Part I.
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 24
Item 3. Legal Proceedings.............................................. 24
Item 4. Submission of Matters to a Vote of Security Holders............ 25
Part II.
Item 5. Market for the Registrant's Common Stock and Related 26
Shareholder Matters............................................
Item 6. Selected Financial Data........................................ 27
Item 7. Management's Discussion and Analysis of Financial Condition and 31
Results of Operations..........................................
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 40
Item 8. Financial Statements and Supplementary Data.................... 41
Item 9. Changes in and Disagreements With Accountants on Accounting and 41
Financial Disclosure...........................................
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 42
10-K...........................................................
Consolidated Financial Statements........................................ F-1
Signatures............................................................... S-1

10-K/A 3rd Page of 100 TOC 1st Previous Next ↓Bottom Just 3rd
PART I

In this Annual Report on Form 10-K/A, "GCL" refers to Global Crossing Ltd.
and the "Company," "Global Crossing," "we," "our" and "us" refer to GCL and
its consolidated subsidiaries (unless the context otherwise requires).

Throughout this Annual Report on Form 10-K/A, references to "dollars" and
"$" are to United States dollars.

ITEM 1. BUSINESS

Introduction

We are building and offering services over the world's first integrated
global fiber optic network, consisting of 101,000 announced route miles and
serving five continents, 27 countries and more than 200 major cities. Upon
completion of our currently announced systems, our network and its
telecommunications and Internet product offerings will be available in markets
constituting over 80% of the world's international communications traffic.

We are included in both the S&P 500 index and the Nasdaq 100 index. Our
operations are headquartered in Hamilton, Bermuda, with executive offices in
Los Angeles, California; Morristown, New Jersey; and Rochester, New York.

We are incorporated in Bermuda, and the address of our principal executive
offices is Wessex House, 45 Reid Street, Hamilton HM12, Bermuda. Our telephone
number is 441-296-8600. You may visit us at our website located at
www.globalcrossing.com.

Business Strategy

Global Crossing's strategy is to be the premier provider of global Internet
Protocol ("IP") and data services for both wholesale and retail customers. We
are building a state-of-the-art fiber optic network that we believe to be of
unprecedented global scope and scale to serve as the backbone for this
strategy. We believe that our network will enable us to be the low cost
service provider in most of our addressable markets.

Global Crossing offers a variety of voice, data and Internet services
throughout most of North America and Europe. During 2000, we intend to
aggressively roll out similar services in Asia, Mexico, Central America and
South America.

In Asia, these services will be offered through our Asia Global Crossing
joint venture with Softbank Corp. and Microsoft Corporation. Asia Global
Crossing aims to become the first truly pan-Asian carrier to offer worldwide
bandwidth and data communications. As such, we believe that Asia Global
Crossing will be uniquely positioned to take advantage of the anticipated
explosive growth and increasingly favorable regulatory environment in the
Asian telecommunications markets.

In each of our businesses, we intend to expand significantly our current
product offerings, with an increasing focus on value-added services. In
particular, our GlobalCenter subsidiary will expand its product set to become
a single-source e-commerce service solution that will provide web-centric
businesses with the high availability, flexibility and scalability necessary
to compete in the rapidly expanding digital economy.

Business Combinations

The Asia Global Crossing joint venture was established on November 24, 1999.
We contributed to the joint venture our development rights in East Asia
Crossing, an approximately 11,000 mile undersea network that will link several
countries in eastern Asia, and our 58% interest in Pacific Crossing, an
undersea system connecting

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the United States and Japan. Softbank Corp. and Microsoft Corporation each
contributed $175 million in cash to Asia Global Crossing. In addition,
Softbank and Microsoft committed to make a total of at least $200 million in
capacity purchases on our network over a three-year period, expected to be
utilized primarily on PC-1 and EAC. Softbank and Microsoft have also agreed to
use Asia Global Crossing's network in the region, subject to specified
conditions.

Also on November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for approximately
$1.6 billion in cash. Racal Telecom owns one of the most extensive fiber
telecommunications networks in the United Kingdom, consisting of approximately
4,650 route miles of fiber and reaching more than 2,000 cities and towns.

On September 28, 1999, we completed the acquisition of Frontier Corporation
in a merger transaction valued at over $10 billion, with Frontier shareholders
receiving 2.05 shares of our common stock for each share of Frontier common
stock held. Frontier is one of the largest long distance telecommunications
companies in the United States and one of the leading providers of facilities-
based integrated communications and Internet services.

On July 2, 1999, we completed our acquisition of the Global Marine Systems
division of Cable & Wireless Plc for approximately $908 million in cash and
assumed liabilities. Global Marine Systems owns the largest fleet of cable
laying and maintenance vessels in the world and currently services more than a
third of the world's undersea cable miles.

Recent Developments

On July 11, 2000, we entered into an agreement to sell our incumbent local
exchange carrier ("ILEC") business, acquired as part of our acquisition of
Frontier Corporation, to Citizens Communications for $3.65 billion in cash,
subject to adjustments concerning closing date liabilities and working capital
balances. We and Citizens Communications also entered into a strategic
agreement under which we will provide long distance services to the incumbent
local exchange carrier business. The transaction is subject to both federal
and state regulatory approvals, which are expected to take approximately nine
months to obtain. As a result of this transaction we have restated our
financial statements to reflect the financial position and results of
operations of the ILEC business as discontinued operations for all periods
presented since the date of the Frontier Corporation acquisition.

On June 14, 2000, we completed our acquisition of IXnet, Inc. and its parent
company, IPC Communications, Inc, resulting in IXnet and IPC becoming wholly
owned subsidiaries of us. IXnet shareholders received 1.184 shares of Global
Crossing common stock for each outstanding share of common stock of IXnet and
5.417 shares of Global Crossing common stock for each outstanding share of
common stock of IPC, for a total of 58.2 million shares of Global Crossing
common stock. The purchase price of $3.8 billion reflects a Global Crossing
stock price of $49.77 per share, the average price before and after the
definitive merger agreement was entered into (February 22, 2000), and includes
long-term debt assumed and the fair market value of options issued by Global
Crossing. The excess of the purchase price over net liabilities assumed of
$3.4 billion was allocated to goodwill and other intangible assets, which are
being amortized on the straight-line method over 10 years.

In April 2000, Global Crossing Ltd. issued 21,673,706 shares of its common
stock for net proceeds of approximately $694 million and 4,000,000 shares of 6
3/4% cumulative convertible preferred stock at a liquidation preference of
$250 for net proceeds of approximately $970 million. In May 2000, pursuant to
an over-allotment option held by the underwriters of the preferred stock,
Global Crossing Ltd. issued an additional 600,000 shares of 6 3/4% cumulative
convertible preferred stock for net proceeds of approximately $146 million. We
are using the proceeds of these offerings for general corporate purposes,
principally capital for the expansion of our business.

On March 24, 2000, we announced that we had increased our interest in the
PC-1 cable system from 57.75% to 64.50% for approximately $21 million by
acquiring the remaining ownership of another partner in PC-1. In

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connection with this transaction, the PC-1 shareholder agreement was amended,
which enabled us to exercise effective control over PC-1.

On March 2, 2000, we announced that Leo Hindery had succeeded Robert
Annunziata as Global Crossing's Chief Executive Officer. Mr. Hindery will also
continue to serve as Chief Executive Officer of GlobalCenter Inc., our
subsidiary that provides complex web hosting and Internet infrastructure
services. Mr. Annunziata will continue as a director of Global Crossing. In
addition, on March 2, 2000, we also announced our intentions to create a
tracking stock for GlobalCenter, which will continue to complement our
worldwide operations.

On February 29, 2000, we announced that we had concluded an agreement to
provide substantial additional capacity to Deutsche Telekom AG. Total capacity
sold to Deutsche Telekom is now 35 gigabits per second ("Gbps") on AC-1, the
fiber-optic system that provides a link between North America and Germany.

On January 26, 2000, our Asia Global Crossing joint venture announced an
agreement to create GlobalCenter Japan, a joint venture with Japan's Internet
Research Institute, Inc. ("IRI"). GlobalCenter Japan will design, develop and
construct a media distribution center in Japan providing connectivity
worldwide through the Global Crossing Network. The joint venture will also
develop and provide complex web hosting services, e-commerce support and
applications hosting solutions. Asia Global Crossing will own 89 percent of
GlobalCenter Japan, with IRI owning the remaining 11 percent.

On January 12, 2000, we established a joint venture, called Hutchison Global
Crossing, with Hutchison Whampoa Limited to pursue fixed-line
telecommunications and Internet opportunities in Hong Kong. For its 50% share,
Hutchison Whampoa contributed to the joint venture its building-to-building
fixed-line telecommunications network in Hong Kong and a number of Internet-
related assets. In addition, Hutchison Whampoa has agreed that any fixed-line
telecommunications activities it pursues in China will be carried out by the
joint venture. For our 50% share, we provided to Hutchison Whampoa $400
million in Global Crossing convertible preferred stock (convertible into
shares of Global Crossing common stock at a rate of $45 per share) and
committed to contribute to the joint venture international telecommunications
capacity rights on our network and certain media distribution center
capabilities which together are valued at $350 million, as well as $50 million
in cash. We intend to integrate our interest in Hutchison Global Crossing into
Asia Global Crossing.

Services

General

We provide services in two principal segments. Our telecommunications
services segment offers a variety of integrated telecommunications products
and services to customers through our global fiber optic network. Our
installation and maintenance services segment, consisting of our Global Marine
Systems subsidiary, installs and maintains undersea fiber optic cable systems
to carrier customers worldwide.

Our discontinued operations, consisting of our incumbent local exchange
carrier ("ILEC") services segment, provides local communications services
through local exchange service providers in 13 states, serving over one
million access lines.

Telecommunications Services

Global Crossing provides a variety of integrated telecommunications and
Internet-based products designed to meet the customer's total communications
needs. Global Crossing provides domestic and international voice services,
data products, Internet-based services, structured bandwidth services and
other communications products to primarily small to mid-size business
customers, web-centric businesses and other telecommunication carriers.
Beginning in 2000, we will begin marketing products more intensely to large
multinational customers who have bandwidth-intensive applications and
international requirements. Such customers demand global end-to-end solutions.
We are well positioned to address this market due to the international scope
and broadband capacity of our network along with the flexibility of product
pricing to maintain competitiveness.

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Global Crossing offers the following products and services to its customers:

. Voice: Switched and dedicated outbound voice services for local,
domestic, and international traffic.

. Data Transport: Point-to-point data services in a number of products
(including private line, ATM, frame relay, X.25 and Internet access) and
varying bandwidth sizes (from fractional T-1 to OC-192).

. Virtual Private Network ("VPN"): Customizable network solutions where
our customers create a private network by using the Global Crossing
Network without purchasing dedicated facilities. In addition, customers
have flexibility to change capacity requirements between points over
time and reconfigure their VPNs to meet changing requirements.

. International Private Line ("IPL"): Expanded services providing retail
customers greater flexibility at reduced cost. We currently provide
access to New York, London, Amsterdam, Frankfurt, Paris and Tokyo, with
access expected to be available to 18 additional cities within the next
six months.

. Web Hosting Services: A combination of digital distribution services,
server co-location, equipment sales, consulting services and
professional expertise aimed at supporting customers' mission critical
Internet operations. This product is easily scalable to meet customer
needs and is marketed primarily by our GlobalCenter subsidiary.

. Advanced Voice and Data Services: These services combine traditional
voice or data products with additional features. Products include
calling card, 800/888 toll free services, voice mail, audio
conferencing, video conferencing and broadcast fax.

. Advanced Internet Services: Products include basic dial-up and dedicated
Internet access along with web-based applications such as e-mail
hosting, unified messaging, off-site data storage and backup.

. Structured Bandwidth Services: Historically, we have sold capacity on
our systems on an Indefeasible Right of Use ("IRU") basis, whereby the
customer purchased a unit of point to point capacity for the expected
economic life of the system, typically in increments of 155 megabits per
second ("Mbps"), a unit known as an STM-1. However, with the
consummation of our acquisition of Frontier in September 1999, we have
begun to derive a significant source of revenue from service offerings
involving leases of capacity on our systems in smaller increments and
for periods significantly shorter than the expected useful life of the
system. From time to time, we also engage in sales of "dark" fiber
(i.e., fiber that has not been equipped with the electronic components
necessary for telecommunications transmission).

Payment for long-term leases of capacity or dark fiber is typically made
in advance of activation, although in some cases a customer's payments
are made in installments over two to four years. For short-term
bandwidth services, customers are typically billed on a monthly basis.

Due to the breadth of the Global Crossing Network, we are uniquely
positioned to offer worldwide capacity to our customers. Many customers
acknowledge that their need for large bandwidth is increasing, but they
are often uncertain with regard to the precise routes where their
particular growth will take place. In order to stimulate customer
loyalty and leverage this uncertainty, we have developed the Global
Crossing Network Offer, which allows customers who can make a multi-year
commitment the flexibility to activate capacity where needed, in a
"just-in-time" manner, in return for volume discounted pricing. As our
network continues to expand, we are exploring other marketing programs
that will provide further benefits to our customers and position Global
Crossing as the broadband infrastructure provider of choice.

Moreover, because our centralized Global Crossing Network Center
("GCNC"), located in The Docklands, London, England, enables us to
monitor and direct transmission on our cable systems worldwide, we
believe that we have a strategic advantage in being able to more quickly
activate capacity for a customer on any of our systems.

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. Switched Services: We provide originating and switched terminating
services to long distance carriers over our switched services network.
Such services are generally offered on a month-to-month basis, and the
service is billed on a minutes-of-use basis.

. Internet Protocol Services: We offer IP Services to carriers, Internet
Service Providers ("ISPs") and other business customers over our global
IP network. Such services are offered on a month-to-month basis and
generally billed on a megabit per second (Mbps) basis.

Installation and Maintenance Services

We offer both installation and maintenance services for undersea cable
systems through our Global Marine Systems subsidiary. Global Marine Systems
has the largest fleet of cable ships in the world, comprised of both
maintenance vessels and installation vessels. These vessels operate throughout
the world. Since the acquisition, Global Marine Systems added three ships,
with five additional ships to enter service early in 2000. Global Marine
Systems also announced an agreement with Maersk to charter ships as needed.

Global Marine Systems' business consists of two components: installation and
maintenance.

. Maintenance: Global Marine Systems is the world's market leader for
submarine cable maintenance with 31% of the world market by value in
1999.

Global Marine Systems' maintenance business is centered around cable
system security. Despite optimum route planning and installation, cables
are sometimes damaged on the seabed. The maintenance cable ship must be
able to retrieve a partially buried cable down to two thousand meters as
well as retrieve and repair a cable from the furthest ocean depths. With
cable in water depths of up to nine thousand meters, the cable ship is a
specialized vessel designed to operate continuously in the extreme
weather conditions found in the major cable routes around the world.

. Installation: Global Marine Systems' installation business has a market
share in excess of 25%, making it a leading competitor in the undersea
telecommunications installation industry.

Revenue from installation is linked to the number of submarine
telecommunication cable systems annually installed worldwide. Such
systems traverse many types of seabed, including active continental
shelves, flat deep-water abyssal plains and mountainous oceanic ridges.
The objective when installing cable is to deploy it in such a way as to
minimize the risk of damage to the cable either from external threats or
from natural wear effects caused by ocean currents and tides. The cable
can either be buried into the seabed if protection is required from
threats such as fishing and anchoring or it can simply be laid across
the surface of the seabed.

Discontinued Operations--ILEC Services

Global Crossing's discontinued operations, consisting of its ILEC services
segment, comprises one of the largest local exchange service providers in the
United States. This segment consists of 34 regulated telephone operating
subsidiaries in 13 states, serving in excess of one million access lines. Such
services are marketed under the name Frontier Telephone, a Frontier
Communications Company. The local exchange carriers provide local, toll,
access and resale services, sell, install and maintain customer premises
equipment and provide directory services. Our ILEC services segment excludes
local services provided by our subsidiaries authorized as competitive local
exchange carriers ("CLECs"), which services are included in our
telecommunications services segment. Generally speaking, ILECs tend to be the
original provider of local exchange service in a given area and, accordingly,
receive a greater degree of regulation than do CLECs and other carriers
without market power.

We have installed advanced digital switching platforms throughout all of our
switching network, making it one of the first in the industry to be served by
an entirely digital network for our local exchange companies. We have achieved
substantial cost reductions through the elimination of duplicative services
and procedures and the

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consolidation of administrative functions. We believe that additional cost
reductions may be obtainable from advanced switching platforms and outside
plant delivery systems. We intend to pursue additional gains in productivity
by investing in these technologies where feasible and by reengineering
customer service processes.

Of the approximately 1,072,000 access lines in service on December 31, 1999,
737,000 were residential lines and 335,000 were business lines. Long distance
network service to and from points outside of the telephone companies'
operating territories is provided by interconnection with the facilities of
interexchange carriers.

We are pursuing several alternatives to provide expanded broadband
capabilities to our customers. To date, we have installed over 31,000 fiber
miles of fiber based network facilities, totaling more than 930 route miles,
in the Rochester, New York area to provide our customers with enhanced
capacity and to enable us to offer new products. We provide expanded broadband
services to select customers, including video-distance learning arrangements
for educational institutions and access to SONET based fiber rings for major
business customers. In addition to these offerings, we plan to aggressively
begin marketing Digital Subscriber Line ("DSL") services in 2000.

In connection with our integration strategy, we have developed a program
known as "Frontier Long Distance," whereby our local exchange companies resell
our integrated services. We believe that many customers prefer the convenience
of obtaining their long distance service through their local telephone company
and receiving a single bill. Frontier Long Distance is currently offered in
the product lines of most of Global Crossing's local telephone exchange
companies.

The Global Crossing Network

The fiber optic cable systems that we have completed or that are under
development will form a state-of-the-art interconnected worldwide high
capacity fiber optic network. The following systems are currently in service:

. Atlantic Crossing-1, referred to as "AC-1", an undersea system
connecting the United States and Europe;

. North American Crossing, referred to as "NAC", formerly part of
Frontier, a terrestrial system connecting major cities in the United
States;

. Pan European Crossing, referred to as "PEC", a primarily terrestrial
system connecting major European cities to AC-1;

. Racal Telecom Network, a terrestrial network in the United Kingdom to be
operated in conjunction with PEC;

. Pacific Crossing, referred to as "PC-1", an undersea system connecting
the United States and Japan;

. Global Access Ltd., referred to as "GAL", a terrestrial system
connecting a number of major cities in Japan to PC-1;

. Hutchison Global Crossing, referred to as "HGC", a terrestrial network
in Hong Kong, connecting to EAC; and

. Mid-Atlantic Crossing, referred to as "MAC", an undersea system
connecting the eastern United States and the Caribbean.

The following systems are in varying stages of development:

. Atlantic Crossing-2 ("AC-2", and together with AC-1, referred to as
"AC"), an undersea system that will connect the United States and
Europe;

. East Asia Crossing, referred to as "EAC", an undersea system that will
connect several countries in Asia to PC-1;

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. Pan American Crossing, referred to as "PAC", a primarily undersea system
that will connect the western United States, Mexico, Panama, Venezuela
and the Caribbean; and

. South American Crossing, referred to as "SAC", an undersea and
terrestrial system that will connect the major cities of South America
to MAC, PAC and the rest of our network.

Although many of these fiber optic cable systems are wholly-owned, some are
being developed through joint ventures with one or more partners. EAC and our
58% economic interest in PC-1 are being developed through our Asia Global
Crossing joint venture, for which we are responsible for management and
operation. In addition, we expect to construct parts of the terrestrial
portion of SAC through joint venture arrangements, and terrestrial
connectivity to PAC in Mexico will similarly be developed through a joint
venture. We will be responsible for management and operation of these
entities. Finally, we own a 50% interest in Hutchison Global Crossing and a
49% interest in Global Access Ltd., which is constructing GAL. Management and
operation of these two entities will be performed by or with our joint venture
partners.

All of our undersea systems are equipped with state-of-the-art dense wave
division multiplexing ("DWDM") technology, a method of increasing the amount
of a cable's transmission capacity through installation of electronic
equipment at cable landing stations and without requiring the undersea cable
to be physically handled.

The twin operations and management centers for the Global Crossing Network
are the Customer Care Center, located in Bermuda, and the GCNC, located in The
Docklands, London, England. These two facilities provide complete customer
support--from provisioning and assistance to billing. From the GCNC, Global
Crossing technicians and network managers monitor and control all undersea
cable systems, shore station equipment and terrestrial facilities worldwide.
The GCNC began operations in the fourth quarter of 1999.

Network Systems

Atlantic Crossing

AC-1, our first undersea fiber optic cable in the Atlantic region, is an
approximately 9,000 mile, four fiber pair self-healing ring that connects the
United States and Europe with landing stations in the United States, the
United Kingdom, the Netherlands and Germany. The full ring currently offers 80
Gbps of service capacity and is being upgraded to offer 140 Gbps. AC-1 started
service on its United States to United Kingdom segment during May 1998, and
the full system was completed during February 1999.

On February 17, 2000, we announced that we had entered into an agreement
with Level 3 Communications, Inc. to co-build an additional high-capacity,
fiber optic transatlantic cable. Our two fiber pairs in the cable, to be
called AC-2, will provide us with an additional 560 Gbps of capacity along
this route. AC-2 will be integrated with the two cables of AC-1, providing AC-
2 with self-healing capabilities. The new cable is expected to be in service
in September 2000. In addition, Level 3 Communications, Inc. agreed to acquire
capacity on AC-1 to provide Level 3 Communications, Inc. with self-healing
ring circuitry.

North American Crossing

We acquired NAC, formerly the Frontier Optronics Network, as a result of our
September 1999 merger with Frontier Corporation. The network, consisting of
approximately 20,000 route miles of optical fiber capacity, is fully in
service.

Pan European Crossing

Upon completion, PEC will consist of eight self-healing rings offering
connectivity between AC and 41 major European metropolitan centers. Phase I of
this system, connecting 13 cities, was completed in December

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1999. The complete system, expected to consist of approximately 13,400 miles
with 24 to 72 fiber pairs as well as spare conduits, is anticipated to be
completed by early 2001.

We intend to operate the Racal Telecom Network in conjunction with PEC.
Acquired in November 1999, the Racal Telecom Network is one of the most
extensive fiber telecommunications networks in the United Kingdom, consisting
of approximately 4,500 route miles of fiber and reaching more than 2,000
cities and towns.

Pacific Crossing

PC-1, our first undersea fiber optic cable in the Pacific region, is being
developed as an approximately 13,100 mile, four fiber pair self-healing ring
connecting California and Washington in the western United States with two
landing sites in Japan. The PC-1 self-healing ring is designed to operate
initially at 80 Gbps of service capacity, upgradable to a minimum of 160 Gbps.
The first segment of PC-1 commenced service in December 1999 and the full
system is anticipated to be completed in the fourth quarter of 2000.

Global Access Ltd.

GAL is an approximately 1,000 mile fiber optic terrestrial system in Japan
that, among other things, will connect the PC-1 cable stations with Tokyo,
Osaka and Nagoya, Japan. The first phase of GAL's development was completed in
December 1999, with the full system scheduled for service in the second
quarter of 2001.

Hutchison Global Crossing

Hutchison Global Crossing owns and operates a building-to-building fixed-
line telecommunications network in Hong Kong and a number of Internet-related
assets. The fiber optic network as of December 1999 extended over 400 miles
and is expected to be expanded during 2000. In addition, any fixed-line
telecommunications activities that Hutchison Whampoa pursues in China will be
carried out by the joint venture.

Mid-Atlantic Crossing

MAC is an approximately 4,700 mile two fiber pair self-healing ring
connecting New York, the Caribbean and Florida. MAC connects to AC via its
cable station in Brookhaven, New York, to NAC via its cable stations in
Brookhaven and in Hollywood, Florida and to SAC and PAC via its cable station
in St. Croix, United States Virgin Islands. This system is being designed to
operate initially at 20 Gbps of service capacity, upgradable to a minimum of
40 Gbps. MAC commenced service in January 2000, with the full system
anticipated to be completed during the third quarter of 2000.

East Asia Crossing

EAC will be an approximately 11,000 mile terrestrial and undersea cable
system, Phase I of which will link Japan, Taiwan, South Korea and Hong Kong,
and Phase II of which is expected to further link Singapore, Malaysia and the
Philippines. EAC is being designated to operate initially at 80 Gbps of
service capacity, upgradable to a minimum of 1,200 Gbps. The first segment of
EAC's development, linking Japan and Hong Kong, is expected to be completed by
December 2000, with the full Phase I system anticipated to be completed by
June 2001.

Pan American Crossing

PAC will be an approximately 6,000 mile two fiber pair cable system
connecting California, Mexico, Panama, Venezuela and the Caribbean. PAC will
interconnect with PC- 1 and NAC through our landing station in Grover Beach,
California, with MAC through our landing station in St. Croix, United States
Virgin Islands and with SAC through our landing station in Fort Amador,
Panama. PAC is being designed to operate initially at

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20 Gbps of service capacity, upgradable to a minimum of 40 Gbps. PAC is
anticipated to commence service during 2000.

In connection with PAC, we own a 49% interest in Global Crossing Landing
Mexicana, S. de R.L. de C.V., a joint venture company jointly owned with an
affiliate of Bestel, S.A. de C.V., that will provide approximately 2,200 miles
of terrestrial connectivity in Mexico, known as Mexican Crossing, connecting
to the PAC system.

South American Crossing

SAC will be an approximately 9,900 mile undersea and 1,500 mile terrestrial
fiber optic network directly linking the major cities of South America through
MAC and PAC to the United States, Mexico, Central America, the Caribbean, Asia
and Europe. We plan to build SAC in three phases. The first two phases,
providing Argentina and Brazil with connectivity to the Global Crossing
Network, are scheduled to commence service in the fourth quarter of 2000. The
final phase, completing the loop around the continent, is scheduled for
completion in the first quarter of 2001. Initially, SAC is expected to have a
capacity of 40 Gbps and to be upgradable to a minimum of 80 Gbps.

The undersea portion of SAC will constitute a state-of-the-art four-fiber
pair, self-healing ring, expected to connect to landing sites at St. Croix;
Fortaleza, Rio de Janeiro and Santos, Brazil; Las Toninas, Argentina;
Valparaiso, Chile; Lurin, Peru; Buenaventura, Colombia; and Fort Amador,
Panama. Terrestrial segments are expected to connect to most major South
American cities, including Rio de Janeiro, Sao Paulo, Buenos Aires, Santiago,
Lima, Cali and Bogota. The SAC ring is expected to be completed on its
southern-most end by a terrestrial link across the Andes between Las Toninas
and Valparaiso. The PAC system from Panama to St. Croix is expected to
complete the ring.

Additional Business Opportunities

In addition to the core components of the Global Crossing Network, we also
intend from time to time to make strategic investments and other contractual
arrangements to better enable us to expand our offerings of products and
services. Some of these opportunities include:

NextWave. We have agreed to make an equity investment in NextWave Telecom
Inc. as part of NextWave's plan of bankruptcy reorganization, subject to
certain conditions relating to NextWave's retaining communications licenses
from the Federal Communications Commission. In addition, we have entered into
a strategic services agreement with NextWave making us the preferred provider
of backhaul, long distance backbone, web-hosting and other communications
services to NextWave. NextWave plans to deploy a wireless telecommunications
network specifically designed to provide next generation wireless services,
including Internet access.

Telergy. We have entered into an agreement with Telergy, Inc., under which
we have acquired 96 strands of fiber throughout the New York area on Telergy's
100-mile New York City network. In addition, the agreement provides us with an
ownership position in Telergy and representation on its board of directors.
Global Crossing and Telergy have also agreed to explore co-build opportunities
in the northeastern United States and to seek to utilize the Telergy network
as needed for redundancy and termination of Global Crossing traffic in certain
areas.

Africa ONE. We have been selected to provide marine operations and to act as
project manager of Africa ONE, an estimated $1.6 billion cable system
consisting of a self-healing ring around the continent of Africa. We do not
intend to make an equity investment in this system.

Principal Customers

Although we have greatly expanded the number of products and services that
we offer to our customers, our principal customers to date have been licensed
telecommunications providers, including post, telephone and

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telegraph companies, Internet service providers and established and emerging
telecommunications companies, that have purchased significant amounts of
capacity on our systems worldwide. Significant customers in our
telecommunications services segment include Deutsche Telekom, MCI Worldcom,
Level 3 Communications, KPN Qwest, Teleglobe, Telia, British Telecom, Viatel
and AT&T. In addition, the largest of our web hosting customers include
Yahoo!, NBCi, Novell, Viacom and ZDNet.

Principal Suppliers

Our principal suppliers are the companies that are constructing the various
cable systems that comprise the Global Crossing Network. Tyco Submarine
Systems Ltd. ("TSSL") completed construction of AC-1; is responsible for the
design and installation of PAC; together with Alcatel, is responsible for
design and installation of MAC; and, together with Kokusai Denshin Denwa-
Submarine Cable Systems ("KDD-SCS") (as a subcontractor), is responsible for
design and installation of PC-1. Alcatel is responsible for the design and
construction of SAC, while KDD-SCS is responsible for the design and
construction of the first phase of EAC. We utilize multiple suppliers for
terrestrial systems.

Competition

Telecommunications Services

The telecommunications industry is highly competitive. Many of our existing
and potential competitors, particularly in our telecommunications services
markets, compete with significantly greater financial, personnel, marketing
and other resources, and have other competitive advantages.

The telecommunications industry is in a period of rapid technological
evolution, marked by increasing fiber and satellite transmission capacity, new
technologies and the introduction of new products and services. For instance,
recent technological advances enable substantial increases in transmission
capacity of both new and existing fiber, which could affect capacity supply
and demand. Also, the introduction of new products or emergence of new
technologies may reduce the cost or increase the supply of certain services
similar to those we provide.

High initial network cost and low marginal costs of carrying long distance
traffic have led to a trend among non-facilities-based carriers to consolidate
in order to achieve economies of scale. Such consolidation could result in
larger, better-capitalized competitors. However, we believe that owning our
own network will offer an advantage over carriers that lease network capacity.

Increased consolidation and strategic alliances in the industry resulting
from the Telecommunications Act of 1996 (the "Telecom Act") have allowed
significant new competitors to enter the industry, including local exchange
carriers, previously prohibited from the inter-state market.

In recent years, competition has increased dramatically in all areas of our
communications services market. Our primary competitors include Qwest, AT&T,
Sprint and MCI WorldCom and foreign PTTs, all of whom have extensive
experience in the long distance market. The impact of continuing consolidation
in the industry is uncertain. In addition, pursuant to the Telecom Act, local
exchange carriers, including Verizon Communications, have begun to enter the
long distance market in their home service areas.

As we expand our business into Internet protocol services, we are also
competing with a wide range of companies that provide web hosting, Internet
access and other Internet protocol products and services. Significant
competitors include IBM, Verizon Communications, UUNet (a subsidiary of MCI
WorldCom), Digex and Exodus. In addition, many smaller companies have entered
the market for web-based services.

The routes addressed by our systems are currently served by several cable
systems as well as satellites. Primary future sources of transatlantic
competition for us may result from, among others, (1) TAT-14, a

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transatlantic cable system which is being developed by its consortium members,
including British Telecom, AT&T, France Telecom and Deutsche Telekom, (2) Flag
Atlantic-1, a transatlantic system which is being developed by Flag Telecom
and Global Telesystems Group Inc., (3) a transatlantic cable system being
developed by Level 3 (the other half of the cable we are co-building as AC-2);
and (4) Hibernia, a transatlantic cable system being developed by Worldwide
Fiber Inc.

Similarly, we expect to face competition in the transpacific market from,
among others, (1) the China-U.S. Cable Network, a transpacific system being
developed as a "private cable system" by fourteen large carriers, including
SBC Communications Inc., MCI WorldCom Inc., AT&T and Sprint, most of which
have traditionally sponsored consortium cables and (2) the Japan-U.S. Cable
Network, a transpacific system being developed by a consortium of major
telecommunications carriers, including MCI WorldCom Inc., AT&T, Kokusai
Denshin Denwa Co. Ltd., Nippon Telegraph and Telephone Corp., Cable & Wireless
and Verizon Communications.

In addition, we will face competition on PEC, our trans-European network.
There are several carriers, including Viatel, KPN-Qwest, MCI WorldCom, Inc., a
joint venture between Deutsche Telekom and France Telecom, British Telecom,
Global Telesystems Group and a joint venture between Level 3 and COLT Telecom
Group plc, which are currently planning or building trans-European network
assets.

We also face competition for our SAC network in South America. At least six
other systems are planned to be completed in the region by the third quarter
of 2001, including two consortium cables (Americas-2 and Atlantis-2);
Atlantica-1, a ring network being constructed by GlobeNet connecting
Venezuela, Brazil, and (through terrestrial cables) Argentina to North
America; and SAm-1, a ring system being constructed by Telefonica S.A. and
TSSL connecting Brazil, Argentina, Chile, Peru and Colombia to the United
States. In addition, we may face competition from existing and planned
regional systems and satellites on our MAC and PAC routes, where entrants are
vying for purchases from a small but rapidly growing customer base.

In addition to the systems mentioned above, several other regional and
global systems are being developed, most notably by TSSL, which has recently
announced its plans to build a worldwide cable network, and Project Oxygen, a
global system being evaluated by the CTR Group, Ltd.

In the United States, there are several facilities-based long distance fiber
optic networks competing with our NAC cable system, including those of AT&T,
Sprint, MCI WorldCom, Qwest, Verizon Communications, Broadwing Communications,
Level 3 Communications and Williams Communications.

Installation and Maintenance Services

Although Global Marine Systems is the world's largest undersea cable
installation and maintenance company, with approximately 25% of the industry's
total vessels, it faces potential competition not only from existing market
participants but also from potential new entrants. There are currently three
other major supply companies in the undersea cable industry: TSSL, Alcatel and
KDD-SCS. Pirelli also has a presence in the industry, and there are a number
of smaller suppliers which have focused primarily on regional routes or non-
repeatered systems. It is unclear whether TSSL will continue to provide
significant installation and maintenance services to others following its
announcement that it is constructing its own worldwide cable network.

Discontinued Operations--ILEC Services

We face many competitors in the provision of equipment and facilities used
in connection with our local exchange networks, as this market has become
increasingly competitive in recent years. The market for the provision of
local services itself is now competitive in Rochester, New York, as a result
of the Open Market Plan, and the Telecom Act is likely to result in
significantly greater competition in other markets. The Company's telephone
properties outside the Rochester, New York, area are experiencing competition
in limited areas.

Long distance companies largely access their end user customers through
interconnection with local exchange companies. These long distance companies
pay access fees to the local exchange companies for these

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services. The provision of access services in Rochester and elsewhere by our
ILEC services segment is considered to be competitive.

Regulation

Our submarine and terrestrial fiber optic cable systems and
telecommunications services are subject to regulation at the federal, state,
and local levels in the United States, as well as regulation by regulatory
agencies in the various foreign countries in which we have facilities or
operations.

REGULATION IN THE UNITED STATES

To the extent that the following discussion of regulation of our businesses
in the United States relates to our ILEC services segment, we note that this
segment has been reclassified as discontinued operations pending completion of
the anticipated sale of this segment to Citizens Communications.

Federal Regulation

The Federal Communications Commission ("FCC") regulates the interstate and
international telecommunications facilities and services of telecommunications
common carriers. Specifically, common carriers must comply with the
requirements of the Communications Act of 1934, as amended by the Telecom Act.
Implementation of the Telecom Act is subject to various federal and state
rulemaking and judicial procedures; therefore, the effects of the Telecom Act
on us cannot be accurately predicted.

We have obtained authority from the FCC to provide international
telecommunications services as a non-dominant carrier on a facilities-based
and resale basis. We also have obtained cable landing licenses that permit us
to land and operate submarine cable systems in U.S. territory. Domestically,
our subsidiaries provide local services as authorized CLECs in 34 states
(including Washington D.C.). Other subsidiaries are certificated as ILECs in
13 states.

The scope of our activities in the United States makes us subject to
varying, and sometimes conflicting, regulation. We are treated as non-dominant
for our interstate and international operations. For local exchange services,
some of our subsidiaries are treated as ILECs and others as CLECs. Generally
speaking, the FCC imposes a greater degree of regulation on ILECs and other
dominant providers and less regulation on CLECs and other carriers without
market power. The issues discussed below may have positive effects on certain
of our subsidiaries and negative effects on other subsidiaries, and, thus, the
net effect on us cannot be accurately predicted.

The intent of the Telecom Act is to increase competition in the U.S.
telecommunications market. To achieve this goal, the Telecom Act seeks to open
local access markets to competition by requiring ILECs to permit
interconnection to their networks and imposing various other obligations on
them.

Interconnection. In August 1996, the FCC released its First Report and Order
on interconnection, which established rules for the implementation of the
Telecom Act's obligations. In July 1997, the U.S. Circuit Court of Appeals for
the Eighth Circuit vacated portions of the FCC's decision. On January 25,
1999, the United States Supreme Court reversed, and affirmed the FCC's
authority to promulgate rules governing pricing, found that the FCC had
authority to promulgate a "pick and choose" rule for interconnection, and
upheld most of the FCC's rules governing access to unbundled network elements.
The Court remanded to the FCC the issue of which network elements must be
unbundled by ILECs. On remand, the FCC retained most of its original list of
network elements to be unbundled, but eliminated the requirements that ILECs
provide unbundled access to (i) local switching for customers with four or
more lines in the most densely populated parts of the top 50 Metropolitan
Statistical Areas, (ii) operator services, and (iii) directory assistance. The
rules governing the pricing, terms, and conditions of interconnection
agreements remain unsettled, and the scope of our interconnection rights and
obligations, both as an ILEC and a CLEC, may change in ways that are not
foreseeable.

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Unbundling and Collocation. In March 1999, the FCC required ILECs to offer
unbundled loops and collocation on more favorable terms than were available
previously. The FCC order permitted collocation of equipment that can be used
to provide advanced data services, such as Digital Subscriber Line services,
and requires ILECs to permit "cageless" collocation by CLECs. The FCC order
was vacated in part by the D.C. Circuit in March 2000, and the FCC is
currently re-examining what equipment ILECs must allow CLECs to collocate in
ILEC central offices.

Universal Service. The Telecom Act required the FCC to restructure the
manner in which universal service fund payments are established and
distributed, and the FCC has significantly expanded the federal universal
service subsidy regime to include low-income consumers. We are required to
contribute to these programs based on our interstate and international revenue
from end-user telecommunications services. Contribution rates change
quarterly. Currently, the contribution rate is 5.877% of interstate and
international end-user telecommunications revenue. We are unable to specify
the amount of any universal service contributions that we will be required to
make in future years.

Reciprocal Compensation. Under the Telecom Act, a local exchange carrier
that terminates calls to customers on its network is entitled to be
compensated by the local exchange carrier of the originating customer. Some
ILECs have taken the position that compensation is not owed for inbound calls
to Internet Service Providers ("ISPs") on the grounds that this type of
traffic is not local and, thus, not covered by the terms of existing
interconnection agreements. As a result, some ILECs have threatened to
withhold, and in some cases have withheld, compensation to CLECs for such
calls. The FCC has requested comments on the rules that it should adopt to
govern compensation for ISP-bound traffic. Comments have been filed by
interested parties and a decision is expected in late 2000. We cannot
accurately predict how the FCC will rule or what impact that rule may have on
future interconnection negotiations.

As an ILEC in New York, we currently are required to pay significant
reciprocal compensation payments for inbound calls to ISPs. The state public
utility commissions ("PUCs") of Alabama, Florida, Georgia, Indiana, Ohio,
Pennsylvania, Illinois, Michigan, Minnesota and Wisconsin, states in which we
also operate ILECs, also have concluded that reciprocal compensation is owed
for ISP-bound calls. Any reciprocal compensation payments in those states are
not material to our operations. In addition, legislation has been introduced
in the U.S. Congress that would ban reciprocal compensation for calls to ISPs.
We cannot predict whether this legislation will pass as currently proposed or
the effect of its passage on our payment or receipt of reciprocal compensation
payments.

Access Charges. Our costs to provide long distance services and our revenue
from providing local services are affected by ongoing substantial changes in
the "access charge" rates imposed by ILECs on long distance carriers for
origination and termination of long distance calls over local facilities.

The increased pricing flexibility of "price cap ILECs" (i.e. ILECs subject
to the FCC's access charge price cap rules), such as our Frontier ILEC
subsidiaries, may have an adverse impact on our interstate access costs if not
properly implemented by ILECs and enforced by the FCC, but could also make it
easier for price cap ILECs to offer reduced access charge rates in markets
subject to competition. The FCC is continuing to examine further access charge
changes, including granting further pricing flexibility to price cap ILECs.

Tariffing and Filing Requirements. Non-dominant carriers currently are
required to file tariffs with the FCC stating the rates, terms, and conditions
of their interstate and international services. Effective January 1, 2001, the
FCC will no longer permit the filing of tariffs for interstate services. This
action will require us to enter into individual contracts with our customers
or determine another manner to advise them of the prices, terms and conditions
of our interstate services. Tariffs will continue to be required for our
international services. The FCC also imposes reporting and filing requirements
on non-dominant carriers. We must file periodic reports regarding our
interstate and international circuits and the deployment of network
facilities. Traffic and revenue reports and universal service contribution
worksheets also must be filed. Carriers also must obtain prior approval from
or give notice to the FCC of certain transfers of control and assignments of
operating authorizations, as

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well as certain affiliations with foreign carriers. In addition, certain
operating and services agreements with dominant foreign carriers must be filed
with the FCC.

Submarine Cables. In connection with the construction and operation of our
submarine cable systems, we have obtained cable landing licenses for the AC-1,
PC-1, MAC, PAC and SAC systems. These licenses give us authority to construct
and land our submarine cables in the United States. In each case, the license
permits the operation of the cable on a non-common carrier basis. Each of our
cable landing licenses is valid for a period of 25 years from its grant. We
are subject to various FCC reporting and filing requirements as the result of
our holding of these cable landing licenses.

State Regulation

In addition to regulation by the FCC, the intrastate services of each of our
local telephone service companies are regulated by the PUCs of the respective
states in which each subsidiary operates with respect to such issues as
prices, service quality, the issuance of securities, and the construction of
facilities. To provide intrastate services, we generally must obtain a
certificate of public convenience and necessity from the appropriate PUC and
comply with state requirements for telecommunications utilities. The level of
regulation imposed by state PUCs varies. Generally, however, ILECs are
regulated more heavily than competitive providers. Our subsidiaries are
certificated as ILECs in 13 states: New York, Alabama, Florida, Georgia,
Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Ohio, Pennsylvania,
and Wisconsin. Other subsidiaries provide competitive local services in 34
states (including Washington D.C.).

A number of states in which we have local or long distance operations are
conducting proceedings related to the rules under which carriers may operate
in an increasingly competitive environment. The issues that the PUCs are
examining include unbundling of local network elements, local interconnection
obligations, dialing parity for intra-LATA (or short-haul) toll traffic, local
number portability, resale of local exchange service and universal service. We
cannot predict how these proceedings will ultimately be resolved, nor when
decisions will be issued.

Open Market Plan. Our Frontier subsidiary in Rochester, New York began its
sixth year of operations under the Open Market Plan in January 2000. The Open
Market Plan promotes telecommunications competition in the Rochester, New York
marketplace by providing for (i) interconnection of competing local networks
including reciprocal compensation for terminating traffic, (ii) equal access
to network databases, (iii) access to local telephone numbers, (iv) service
provider telephone number portability, and (v) certain wholesale discounts to
resellers of local services.

During the operation of the Open Market Plan, we are regulated under pure
price cap regulation rather than rate-of-return regulation. Planned rate
reductions of $21.0 million (the "Rate Stabilization Plan") are being
implemented for Rochester area consumers, including $18.0 million of
reductions that occurred through 1999, and an additional $1.5 million which
commenced in January 2000. Rates charged for basic residential and business
telephone service may not be increased during the seven-year period of the
Plan. We are allowed to raise prices on certain enhanced products such as
Caller ID and call forwarding.

On August 25, 1999, the New York State Public Service Commission ("NYSPSC")
solicited comments regarding our Rochester local exchange subsidiary's
financial condition, earnings and service quality, competition in the
Rochester market, and the terms and conditions of the Open Market Plan.
Settlement discussions in this NYSPSC proceeding have resulted in a Joint
Proposal for Open Market Plan Continuation and Modification (the "Joint
Proposal"), which is subject to NYSPSC review and approval. The Joint Proposal
was approved by the NYSPSC on March 30, 2000 with certain modifications, which
we accepted. As a result, our Frontier ILEC subsidiary in New York will (i)
remain under "price cap" regulation through 2002 (and possibly for an
additional two years); (ii) be required to improve specified elements of
service quality and to offer certain additional services; (iii) be subject to
increased potential penalties related to service targets; and (iv) be required
to lower certain residential and commercial service rates. The impact of the
Joint Proposal, if

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adopted, will not have a material adverse effect on Global Crossing as a
whole. The NYSPSC also has issued orders on other regulatory issues that
affect our New York Frontier subsidiaries, related to service quality, staff
allocations, provisions, and relations with other carriers.

Dividend Policy. The Open Market Plan prohibits the payment of dividends by
Frontier Telephone of Rochester, Inc. ("FTR"), to Frontier Corporation ("FRO")
if (i) FTR's senior debt is downgraded to "BBB" by Standard & Poor's ("S&P"),
or the equivalent rating by other rating agencies, or is placed on credit
watch for such a downgrade, or (ii) a service quality penalty is imposed under
the Open Market Plan. Dividend payments to FRO also require FTR's directors to
certify that such dividends will not impair FTR's service quality or its
ability to finance its short and long-term capital needs on reasonable terms
while maintaining an S&P debt rating target of "A".

In 1999, FTR achieved the required service levels, but a previously imposed
temporary restriction on dividend payments from FTR to FRO will remain in
place until the NYSPSC is satisfied that FTR's service levels demonstrate that
FTR has rectified the service deficiency. In addition, on June 2, 1999,
Moody's and S&P downgraded FTR's senior debt ratings from A1/AA- to Baa2/BBB,
respectively. These ratings actions were a result of the announced merger
between FRO and Global Crossing Ltd., and did not reflect any change in the
financial condition or creditworthiness of FTR. These actions triggered an
additional dividend restriction for FTR, which will be in effect until either
the NYSPSC approves the payment of dividends or FTR's senior debt rating rises
above BBB (for S&P) or the equivalent for other rating agencies. On December
22, 1999, S&P downgraded FTR's senior debt rating to BB+ and, on January 18,
2000, Duff & Phelps downgraded FTR's senior debt rating to A. Both rating
agencies stated that their actions reflected their views that a large
separation in ratings could not be maintained between an operating subsidiary
and its parent. Accordingly, it remains uncertain when the restriction on
payment of dividends from FTR to FRO will be lifted.

Local Regulation

Our activities also are subject to local regulation, including compliance
with franchise obligations, building codes, and local licensing requirements.
Such regulations vary widely by jurisdiction. To construct and install
transmission facilities, we may need to obtain rights-of-way over public and
privately owned land.

INTERNATIONAL REGULATION

Our construction and operation of telecommunications networks and our
provision of telecommunications services in foreign countries require us to
obtain a variety of permits, licenses, and authorizations in the ordinary
course of business. In addition to telecommunications licenses and
authorizations, we may be required to obtain environmental, construction,
zoning and other permits, licenses, and authorizations. The construction and
operation of our facilities and our provision of telecommunications services
may subject us to regulation in other countries at the national, state,
provincial, and local levels.

Europe

In connection with the construction and operation of the PEC network, we
have obtained telecommunications licenses and authorizations in Belgium,
France, Germany, Ireland, Italy, the Netherlands, Norway, Spain, Sweden,
Switzerland and the United Kingdom. No telecommunications authorization is
required for us to construct and operate facilities or provide services in
Denmark. We expect to obtain additional telecommunications licenses and
authorizations in Europe in the ordinary course of business.

Our activities in Europe are subject to regulation by the European Union and
national regulatory authorities. The level of regulation and the regulatory
obligations and rights that attach to us as a licensee in each country vary.
In all countries, we, as a competitive entrant, are currently considered to
lack significant market power ("SMP"), which generally subjects us to less
regulation than providers that are deemed to possess SMP. As we complete
construction of the PEC network and begin providing services in Europe, we
anticipate that the regulatory obligations imposed on us will increase. In
addition, we may be required to address many of the

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"local competition" issues that we face as a competitive provider in the
United States, such as interconnection, collocation, unbundling, reciprocal
compensation, and resale. The laws and regulations of the Member States of the
EU on these issues vary. The European Commission and various of the Member
States have opened or concluded public consultations relating to these and
other "local competition" issues. We cannot predict what decisions will be
made by the EU and the Member States in these ongoing proceedings or the
effects of any those decisions on our operations.

Asia

We are increasing the scope of our activities in Asia. In connection with
the construction and operation of our network in Japan, we have received
various telecommunications licenses, including Type 1 telecommunications
licenses held by GAL and Asia Global Crossing Japan Corporation, a Special
Type II telecommunications license; held by Global Crossing Japan K.K. and a
General Type II telecommunications license held by GlobalCenter Japan
Corporation. As a Japanese telecommunications licensee, we are subject to a
range of regulatory requirements. The Japanese Ministry of Post and
Communications (the "MPT") has recently taken steps to simplify the
telecommunications regulatory process. We cannot accurately predict whether
the MPT will simplify the regulatory regime further or the potential effects
of such an action.

On February 1, 2000, Asia Global Crossing Hong Kong Ltd. ("AGC-HK") was
advised by a Letter of Intent from the Hong Kong telecommunications regulator
that, upon the satisfaction of certain conditions, AGC-HK will be issued an
External Fixed Telecommunications Network Services ("EFTNS") license to land
the EAC cable and to provide international telecommunications facilities and
services in Hong Kong. Our Hutchison Global Crossing ("HGC") joint venture is
authorized to construct and operate local and international fixed-line
telecommunications networks and to provide domestic and international
telecommunications services in Hong Kong. As a result of the HGC venture and
our EFTNS license, we are subject to regulatory oversight and supervision in
Hong Kong. We also expect to apply for telecommunications licenses in
additional countries in Asia.

The status of liberalization of the telecommunications regulatory regimes of
the Asian countries in which we intend to operate varies. Some countries allow
full competition in the telecommunications sector, while others limit
competition for most services. Most of the countries in the region have
committed to liberalizing their telecommunications regimes and opening their
telecommunications markets to foreign investment as part of the World Trade
Organization ("WTO") Agreement on Telecommunications. China also has committed
to liberalizing its telecommunications markets and reducing foreign ownership
limitations if it is admitted to the WTO. We cannot be certain whether this
liberalizing trend will continue or accurately predict the pace and scope of
liberalization. It is possible that one or more of the countries in which we
operate will slow or halt the liberalization of its telecommunications
markets. The effect of such an action on us cannot be accurately predicted.

Latin America

In Latin America, we currently are constructing the MAC, PAC and SAC
systems. In connection with the construction of these cable systems, we have
obtained cable landing licenses and/or telecommunications licenses in
Argentina, Brazil, Chile, Mexico, Panama, and the United States. An
application has been filed in Venezuela and we expect to file applications in
additional Latin American countries in the ordinary course of business.

As in Asia, the status of liberalization of the telecommunications markets
of Latin America varies. All of the countries in which we currently plan to
have operations are members of the WTO and have committed to liberalizing
their telecommunications markets and lifting foreign ownership restrictions.
Some countries now permit competition for all telecommunications facilities
and services, while others allow competition for some facilities and services,
but restrict competition for other services. Some countries in which we
operate or intend to operate currently impose limits on foreign ownership of
telecommunications carriers. We anticipate that we will be granted authority
to land and operate our submarine cable systems in each of the countries in
which they currently are expected to land. It is possible, however, that one
or more of these countries will not grant authority

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to land a submarine cable or will impose conditions that make landing and
operating the cable commercially unfeasible.

The telecommunications regulatory regimes of many Latin American countries
are in the process of development. Many issues, such as regulation of
incumbent providers, interconnection, unbundling of local loops, resale of
telecommunications services, and pricing have not been addressed fully or at
all. We cannot accurately predict whether or how these issues will be resolved
and their impact on our operations in Latin America.

Employees

As of December 31, 1999, we had approximately 12,400 employees. We consider
our relations with our employees to be good.

Forward Looking Statements and Risk Factors

We have included in this Annual Report on Form 10-K/A forward-looking
statements that state our own or our management's intentions, beliefs,
expectations or predictions for the future. Forward-looking statements are
subject to a number of risks, assumptions and uncertainties which could cause
our actual results to differ materially from those projected in the forward-
looking statements. The discussions set forth below constitute cautionary
statements identifying important factors with respect to such forward-looking
statements, including risks and uncertainties, that could cause actual results
to differ materially from results referred to in the forward-looking
statements. There can be no assurance that our expectations regarding any of
these matters will be fulfilled.

We cannot assure you of the successful integration of newly acquired
businesses. If the expected benefits of these acquisitions are not
achieved, our operations will be negatively affected.

Part of our growth strategy is to make selective strategic acquisitions of
businesses operated by others. Achieving the benefits of these acquisitions
will depend in part on the integration of those businesses with our business
in an efficient manner. We cannot assure you that this will happen or that it
will happen in a timely manner. The consolidation of operations following
these acquisitions will often require substantial attention from our
management. The diversion of management attention and any difficulties
encountered in the transition and integration process could have a material
adverse effect on the revenue, levels of expenses and operating results of the
combined company. We cannot assure you that we will realize any of the
anticipated benefits of any acquisition. If we do not realize these benefits,
our operating performance could suffer.

Because we have a limited operating history and have grown rapidly through
successive acquisitions, potential investors may have difficulty evaluating
the performance of our operations.

We were organized in March 1997 and, with the exception of our Frontier,
Global Marine Systems and Racal Telecom subsidiaries, have a limited operating
history. Because of this limited history and our rapid growth though
successive acquisitions, it may be difficult for potential investors to
evaluate the performance of our operations. In particular, comparisons of our
results of operations from one period to another may not be fully indicative
of our current ability to conduct our business.

If we encounter difficulties in completing our cable systems currently under
development, we may face delays in recognizing revenues from the affected
systems.

Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our cable systems
currently under development, as well as on achieving substantial capacity
sales on these systems once they become operational and on our other
operational systems. The construction of these systems will be affected by a
variety of factors, uncertainties and contingencies, many of which are beyond
our control, including:

. our ability to manage their construction effectively,

. our ability to obtain all construction and operating permits and
licenses;

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. third-party contractors performing their obligations on schedule; and

. our ability to enter into favorable construction contracts with a
limited number of suppliers.

As a result, we cannot assure you that each of these systems will be
completed at the cost and in the time frame currently estimated by us, or even
at all. Although we award contracts for construction of our systems to
suppliers who in most cases are expected to be bound by a fixed-price
construction cost schedule and to provide guarantees in respect of completion
dates and system design specifications, we cannot assure you that the actual
construction costs or the time required to complete these systems will not
exceed our current estimates.

Any of these factors could significantly delay or prevent completion of one
or more of our systems currently under development, leading to a corresponding
delay in our recognizing revenues from the affected systems.

If we fail to expand our services and products as we intend, our revenue
growth will be impaired.

We intend to grow revenue and profits by:

. introducing new services and products;

. developing or acquiring additional cable systems; and

. upgrading capacity on our planned systems.

Our inability to effect these expansions of our products and services could
have a material adverse effect on our intended revenue growth.

We face competition to our provision of telecommunications products and
services, which may reduce demand for our products and services.

The international telecommunications industry is highly competitive. In
connection with sales of capacity and the provision of telecommunications
services on our global fiber optic cable network, we face competition
primarily on the basis of price, availability, service quality and
reliability, customer service and location. The ability of our competitors to
provide comparable telecommunications products and services to customers at
similar prices could have a material adverse effect on demand for our products
and services. In addition, much of our planned growth is predicated upon the
growth in demand for international telecommunications capacity and services.
If this anticipated demand growth does not occur, competition for customers
will intensify, and demand for our international telecommunications product
offerings may be adversely impacted.

We are growing rapidly in a changing industry. If we fail to adapt to the
changes in the telecommunications industry as a result of our rapid growth,
our results of operations could be impaired.

Our strategy is to be the premier provider of global broadband
telecommunication services for both wholesale and retail customers. As a
result of this aggressive strategy, we are experiencing rapid expansion and
expect it to continue for the foreseeable future. This growth has increased
our operating complexity. At the same time, the international
telecommunications industry is changing rapidly due to, among other things:

. the easing of regulatory constraints;

. the privatization of established carriers;

. the expansion of telecommunications infrastructure;

. the growth in demand for bandwidth caused by expansion of Internet and
data transmissions;

. the globalization of the world's economies; and

. the changing technology for wired, wireless and satellite communication.

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We cannot assure you that we will succeed in adapting to the changes in the
international telecommunications industry, particularly given our rapid growth
strategy. If we do not succeed, our future results of operations could be
impaired.

We may have difficulty in obtaining the additional financing required to
develop our business. Failure to obtain necessary financing may delay our
planned capital expenditures and have a negative impact on our future
revenue growth.

In order to further implement our aggressive growth strategy, we anticipate
that we will require substantial additional equity and debt financing. Under
our business plan, we and our affiliates expect to require significant
financing by the end of 2000 to build out the Global Crossing Network and
provide additional services to our customers. Obtaining additional financing
will be subject to a number of factors, including, without limitation, the
following:

. the state of operations of our company;

. our actual or anticipated results of operations, financial condition and
cash flows;

. investor sentiment towards companies with substantial international
operations; and

. generally prevailing market conditions.

If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If additional funds are raised
through the issuance of debt securities, these securities would have some
rights, preferences and privileges senior to those of the holders of our
common stock, and the terms of this debt could impose restrictions on our
operations and result in significant interest expense to us. In the event that
we are unable to raise sufficient financing on satisfactory terms and
conditions in the future, our company would be adversely affected.

We face price declines that could adversely affect our operating margins.

Advances in fiber optic technology have resulted in significant per circuit
price declines in the fiber optic cable transmission industry. Recent changes
in technology caused prices for telecommunications capacity and services to go
down even further. If there is less demand than we project or a bigger drop in
prices than we project, it could adversely affect our operating margins and,
accordingly, our results of operations. We cannot assure you, even if our
projections with respect to those factors are realized, that we will be able
to implement our strategy or that our strategy will be successful in the
rapidly evolving telecommunications market.

The operation, administration, maintenance and repair of our cable systems
are subject to risks that could lead to the failure of those systems to
operate as intended for their full design life.

Each of our systems is and will be subject to the risks inherent in a large-
scale, complex fiber optic telecommunications system. The operation,
administration, maintenance and repair of our systems requires the
coordination and integration of sophisticated and highly specialized hardware
and software technologies and equipment located throughout the world. We
cannot assure you that our systems will continue to function as expected in a
cost-effective manner. The failure of the hardware or software to function as
required could render a cable system unable to perform at design
specifications.

Each of our undersea systems either has or is expected to have a design life
of generally 25 years, while each of our terrestrial systems either has or is
expected to have a design life of at least 20 years. The economic lives of
these systems, however, are expected to be shorter than their design lives,
and we cannot assure you of the actual useful life of any of these systems. A
number of factors will ultimately affect the useful life of each of our
systems, including, among other things:

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. quality of construction;

. unexpected damage or deterioration; and

. technological or economic obsolescence.

Failure of any of our systems to operate for its full design life could
result in a loss of customers and a reduction in future revenues and adversely
affect our future operating results.

Because we face significant competition, we may not be able to hire,
integrate and retain key managerial, technical and sales personnel.

Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. In particular, our senior
management has significant experience in the telecommunications and Internet
industries, and the loss of any of them could negatively affect our ability to
execute our business strategy. In addition, we cannot assure you that we will
be able to integrate new management into our existing operations. Competition
for bandwith sales employees and fiber optic engineers is particularly
intense, and we may not be able to attract, motivate and retain highly skilled
and qualified personnel in these areas. Some of our key employees currently do
not have employment agreements that would limit their ability to leave our
employment or compete with us following their departure. In addition, we do
not have "key person" life insurance policies covering any of our employees.

We have substantial international operations and face political, legal and
other risks from our operations in these foreign jurisdictions.

We will derive substantial revenue from international operations and intend
to have substantial physical assets in several jurisdictions along our routes,
including countries in Asia, Central America, South America and Europe. As a
result our business is subject to particular risks from operating in these
areas, including:

. uncertain and rapidly changing political and economic conditions,
including the possibility of civil unrest, errorism or armed conflict;

. unexpected changes in regulatory environments and trade barriers;

. exposure to different legal and regulatory standards; and

. difficulties in staffing and managing operations consistently through
our several operating areas.

Although we have not experienced any material adverse effects with respect
to our foreign operations arising from these factors, problems associated with
these risks could arise in the future. Finally, managing operations in
multiple jurisdictions may place further strain on our ability to manage our
overall growth.

Because many of our customers deal predominantly in foreign currencies, we
may be exposed to exchange rate risks and our net income may suffer due to
currency translations.

We primarily invoice for our services in U.S. dollars; however, most of our
customers and many of our prospective customers derive their revenue in
currencies other than U.S. dollars. The obligations of customers with
substantial revenue in foreign currencies may be subject to unpredictable and
indeterminate increases in the event that such currencies devalue relative to
the U.S. dollar. Furthermore, such customers may become subject to exchange
control regulations restricting the conversion of their revenue currencies
into U.S. dollars. In such event, the affected customers may not be able to
pay us in U.S. dollars. In addition, where we invoice for our services in
currencies other than U.S. dollars, our net income may suffer due to currency
translations in the event that such currencies devalue relative to the U.S.
dollar and we do not elect to enter into currency hedging arrangements in
respect of those payment obligations. Declines in the value of foreign
currencies relative to the U.S. dollar could adversely affect our ability to
market our services to customers whose revenues are denominated in those
currencies.

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Our operations are subject to regulation in the United States and abroad and
require us to obtain and maintain a number of governmental licenses and
permits. If we fail to comply with those regulatory requirements or obtain
and maintain those licenses and permits, we may not be able to conduct our
business.

In the United States, our intrastate, interstate, and international
telecommunications networks and services are subject to regulation at the
federal, state, and local levels. We also have facilities and provide services
in numerous countries in Europe, Latin America, and Asia. Our operations in
those countries are subject to
regulation at the national level and, in some cases, at the state, provincial,
and local levels.

. Our interstate and international operations in the United States are
governed by the Communications Act of 1934, as amended by the Telecom
Act. There are several ongoing proceedings at the FCC and in the federal
courts regarding the implementation of various aspects of the Telecom
Act. The outcomes of these proceedings may affect the manner in which we
are permitted to provide our services in the United States and may have
a material adverse effect on our operations.

. The intrastate activities of our local telephone service companies are
regulated by the states in which they do business. A number of states in
which we operate are conducting proceedings related to the provision of
services in a competitive telecommunications environment. These
proceedings may affect the manner in which we are permitted to provide
our services in one or more states and may have a material adverse
effect on our operations.

. Our operations outside the United States are governed by the laws of the
countries in which we operate. The regulation of telecommunications
networks and services outside the United States varies widely. In some
countries, the range of services that we are legally permitted to
provide may be limited. In other countries, existing telecommunications
legislation is in the process of development, is unclear or
inconsistent, or is applied in an unequal or discriminatory fashion. Our
inability or failure to comply with the telecommunications laws and
regulations of one or more of the countries in which we operate could
result in the temporary or permanent suspension of operations in one or
more countries. We also may be prohibited from entering certain
countries at all or from providing all of our services in one or more
countries. In addition, many of the countries in which we operate are
conducting proceedings that will affect the implementation of their
telecommunications legislation. We cannot be certain of the outcome of
these proceedings. These proceedings may affect the manner in which we
are permitted to provide our services in these countries and may have a
material adverse effect on our operations.

. In the ordinary course of constructing our networks and providing our
services we are required to obtain and maintain a variety of
telecommunications and other licenses and authorizations in the
countries in which we operate. We also must comply with a variety of
regulatory obligations. Our failure to obtain or maintain necessary
licenses and authorizations, or to comply with the obligations imposed
upon license-holders in one or more countries, may result in sanctions,
including the revocation of authority to provide services in one or more
countries.

We depend on third parties for many functions. If the services of those
third parties are not available to us, we may not be able to conduct our
business.

We depend and will continue to depend upon third parties to:

. construct some of our systems and provide equipment and maintenance;

. provide access to a number of origination and termination points of our
systems in various jurisdictions;

. construct and operate landing stations in a number of those
jurisdictions;

. acquire rights of way,

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. provide terrestrial capacity to our customers through contractual
arrangements; and

. act as joint venture participants with regard to some of our current and
potential future systems.

We cannot assure you that third parties will perform their contractual
obligations or that they will not be subject to political or economic events
which may have a material adverse effect on their ability to provide us with
necessary services. If they fail to perform their obligations, we may not be
able to conduct our business. In addition, if any of our joint venture
participants experiences a change in strategic direction such that their
strategy regarding our mutual joint venture diverges from our own, we may not
be able to realize the benefits anticipated to be derived from the joint
venture.

We have substantial leverage which may limit our ability to comply with the
terms of our indebtedness and may restrict our ability to operate.

Our significant indebtedness could adversely affect us by leaving us with
insufficient cash to fund operations and impairing our ability to obtain
additional financing. The amount of our debt could have important consequences
for our future, including, among other things:

. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;

. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and

. restrictive debt covenants may impair our ability to obtain additional
financing.

We have incurred a high level of debt. As of December 31, 1999, we and our
consolidated subsidiaries had a total of $7,667 million of total liabilities,
including approximately $4,933 million in senior indebtedness, of which $1,295
million was secured. As of such date, Global Crossing Ltd. additionally had
outstanding cumulative convertible preferred stock with a face value of $1,650
million. Our subsidiary, Global Crossing Holdings, also had mandatorily
redeemable preferred stock outstanding with a face value of $500 million. In
addition, our Pacific Crossing joint venture entered into an $850 million non-
recourse credit facility, under which it had incurred $750 million of
indebtedness as of December 31, 1999.

Our ability to repay our debt depends upon a number of factors, many of
which are beyond our control. In addition, we rely on dividends, loan
repayments and other intercompany cash flows from our subsidiaries to repay
our obligations. Our operating subsidiaries have entered into a senior secured
corporate credit facility. Accordingly, the payment of dividends from these
operating subsidiaries and the making and repayments of loans and advances are
subject to statutory, contractual and other restrictions.

In addition, if we are unable to generate sufficient cash flow to meet our
debt service requirements, we may have to renegotiate the terms of our long-
term debt. We cannot assure you that we would be able to renegotiate
successfully those terms or refinance our indebtedness when required or that
satisfactory terms of any refinancing would be available. If we were not able
to refinance our indebtedness or obtain new financing under these
circumstances, we would have to consider other options, such as:
. sales of some assets;

. sales of equity;

. negotiations with our lenders to restructure applicable indebtedness; or

. other options available to us under applicable law.

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Officers and directors own a substantial portion of us and may have
conflicts of interest.

Our executive officers and directors have substantial equity interests in
us. As of July 21, 2000, all our directors and executive officers as a group
collectively beneficially owned 14.83% of our outstanding common stock,
including shares beneficially owned by Pacific Capital Group and certain
shares beneficially owned by Canadian Imperial Bank of Commerce. Some of these
individuals have also received amounts from us due to advisory services fees
paid to Pacific Capital Group and its affiliates.

Some of our directors and executive officers also serve as officers and
directors of other companies. Additionally, some of our officers and directors
are active investors in the telecommunications industry. Service as one of our
directors or officers and as a director or officer of another company could
create conflicts of interest when the director or officer is faced with
decisions that could have different implications for us and the other company.
A conflict of interest could also exist with respect to allocation of time and
attention of persons who are our directors or officers and directors and
officers of another company. The pursuit of these other business interests
could distract these officers from pursuing opportunities on our behalf.

We cannot predict our future tax liabilities. If we become subject to
increased levels of taxation, our results of operations could be adversely
affected.

We believe that a significant portion of the income derived from our
undersea systems will not be subject to tax by any of (1) Bermuda, which
currently does not have a corporate income tax, or (2) some other countries in
which we conduct activities or in which our customers are located. However, we
base this belief upon:

. the anticipated nature and conduct of our business, which may change;
and

. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effect.

We cannot predict the amount of tax to which we may become subject. Any
increase in the amount of taxation incurred as a result of our operations
could result in a material adverse effect on our net income and, accordingly,
our financial condition and results of operations.

Our shareholders may be subject to Foreign Personal Holding Company, Passive
Foreign Investment Company, Controlled Foreign Corporation and Personal
Holding Company rules that could result in increased tax liability.

We believe that neither we nor any of our non-United States subsidiaries are
a foreign personal holding company and do not expect that either we or any of
our affiliates will become a foreign personal holding company. However, we
cannot assure you in this regard. If one of our shareholders is a United
States person and

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we or one of our non-United States subsidiaries are classified as a foreign
personal holding company, then that shareholder would be required to pay tax
on its pro rata share of our or our relevant non-United States subsidiary's
undistributed foreign personal holding income. We intend to manage our affairs
so as to attempt to avoid or minimize having income imputed to United States
persons under these rules, to the extent this management of our affairs would
be consistent with our business goals, although we cannot assure you in this
regard.

We believe that we are not a passive foreign investment company and do not
expect to become a passive foreign investment company in the future. However,
we cannot assure you in this regard. In addition, our expectations are based,
in part, on interpretations of existing law that we believe are reasonable,
but which have
not been approved by any taxing authority. If we were a passive foreign
investment company, then any of our shareholders that is a United States
person could be liable to pay tax at the then prevailing rates on ordinary
income plus an interest charge upon some distributions by us or when that
shareholder sold our capital stock at a gain.

Furthermore, additional tax considerations would apply if we or any of our
affiliates were a controlled foreign corporation or a personal holding
company.

ITEM 2. PROPERTIES

Our principal offices are located in leased premises in Hamilton, Bermuda,
with corporate offices under lease in Beverly Hills, California; Morristown,
New Jersey; and Rochester, New York. We also own or lease sales,
administrative and support offices worldwide. In addition, our
telecommunication services segment owns undersea cables crossing the Atlantic
Ocean (AC-1 and AC-2); Pacific Ocean (58% economic interest in PC-1); Eastern
United States and Caribbean (MAC); South America (SAC); eastern Asia (EAC);
and Western United States, Mexico, Central & South America and Caribbean
(PAC); and primarily terrestrial cable systems connecting various cities
within the United States (NAC), Europe (PEC), Japan (GAL) and Hong Kong (HGC).
Our telecommunications services segment also owns or leases numerous cable
landing stations throughout the world related to these undersea and
terrestrial cable systems. GlobalCenter media distribution centers incorporate
web hosting infrastructure and are connected to the Company's international
fiber optic network. Media distribution centers are currently operational in
leased premises in Sunnyvale and Anaheim, California; London, England; South
Melbourne, Australia; Herndon, Virginia; and New York, New York.

Our installation and maintenance services segment owns, leases and operates
a fleet of vessels and submersible/remotely operated vehicles used in the
planning, installation and maintenance of undersea fiber optic cable systems.

Our discontinued operations, consisting of our ILEC services segment, owns
telephone properties which include: connecting lines between customers'
premises and the central offices; central office switching equipment;
buildings and land; and customer premise equipment. The connecting lines,
including aerial and underground cable, conduit, poles, wires and microwave
equipment, are located on public streets and highways or on privately owned
land. We have permission to use these lands pursuant to local governmental
consent or lease, permit, franchise, easement or other agreement.

We believe that substantially all of our existing properties are in good
condition and are suitable for the conduct of our business. A security
interest in some of these properties, in particular some of our undersea
cables, has been granted to lenders providing financing for those systems
under non-recourse facilities or to Global Crossing generally under our
corporate credit facility.

ITEM 3. LEGAL PROCEEDINGS

On June 25, 1999, Frontier Corporation (now known as Global Crossing North
America, Inc.), a wholly-owned subsidiary of Global Crossing Ltd., was served
with a summons and complaint in a lawsuit commenced in the New York State
Supreme Court, Monroe County by a Frontier shareholder alleging that Frontier
and its Board of Directors had breached their fiduciary duties to shareholders
by endorsing a definitive merger agreement with the Company without having
adequately considered an alternative merger proposal made by Qwest
Communications International, Inc. The lawsuit was framed as a purported class
action brought on behalf of all

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shareholders of Frontier and sought unstated compensatory damages and
injunctive relief compelling Frontier's board to evaluate Frontier's
suitability as a merger partner, to enhance Frontier's value as a merger
candidate, to engage in discussions with Qwest about possible business
combinations, to act independently to protect the interests of Frontier
shareholders, and to ensure that no conflicts of interest exist which would
prevent maximizing value to shareholders. In July 1999, three additional
lawsuits were also commenced against Frontier in the New York State Supreme
Court on behalf of a number of individual shareholders seeking essentially
identical relief. All four lawsuits were consolidated into a single proceeding
pending in Rochester New York. In February 2000, all four lawsuits were
voluntarily withdrawn.

On July 16, 1999, Frontier was served with a summons and complaint in a
lawsuit commenced in New York State Supreme Court, New York County by a
Frontier shareholder alleging that Frontier and its board breached their
fiduciary duties by failing to obtain the highest possible acquisition price
for Frontier in the definitive merger agreement with the Company. The action
has been framed as a purported class action and seeks compensatory damages and
injunctive relief. The claims against Frontier were asserted in the same
action as similar but separate claims against US West, Inc. However, the
claims against Frontier have been severed from the US West claims. In February
2000, the Court granted the Company's motion to transfer the action to Monroe
County. The Company believes the asserted claims are without merit and is
defending itself vigorously.

On May 22, 2000, Global Crossing Ltd. and its subsidiary, South American
Crossing (Subsea) Ltd., filed a lawsuit against Tyco Submarine Systems Ltd. in
the United States District Court for the Southern District of New York. Global
Crossing's complaint alleges fraud, theft of trade secrets, breach of
contract, and defamation related to Tyco's agreements to install the South
American Crossing fiber-optic cable system. Global Crossing seeks damages,
including punitive damages, in excess of $1 billion and attorneys' fees and
costs, as well as a declaration that the construction and development
agreement with Tyco is void due to Tyco's alleged fraud and injunctive relief
barring Tyco from further misappropriation of trade secrets and confidential
information. On June 13, 2000, Tyco answered the complaint, denying the
material allegations and asserting a variety of defenses to such claims.
Additionally, Tyco asserted counterclaims that South American Crossing
(Subsea) Ltd. breached its construction and development agreement with Tyco.
Tyco seeks damages of not less than $150 million, attorneys' fees and costs
and a declaration that, among other things, the construction and development
agreement is a valid, enforceable contract and that South American Crossing
(Subsea) Ltd. breached the contract or, in the alternative, terminated the
contract for convenience. On July 5, 2000, Global Crossing answered Tyco's
counterclaims, denying the material allegations.

In addition, on May 22, 2000, Global Crossing's subsidiary, Atlantic
Crossing Ltd., together with certain of its affiliates, filed arbitration
claims against Tyco for breaches of its obligations in connection with various
contracts for the development of the Atlantic Crossing-1 fiber-optic cable
system. Global Crossing seeks unspecified monetary damages, a declaration that
certain of its obligations under the various contracts relating to Atlantic
Crossing-1 are terminated and a return of misappropriated intellectual
property. On June 22, 2000, Tyco responded to such claims, denying the
material allegations. Tyco additionally asserted counterclaims that Global
Crossing and its subsidiaries breached their various obligations under the
various contracts relating to Atlantic Crossing-1. Tyco seeks, among other
things, the denial of all relief sought by Global Crossing and awards
aggregating not less than $155 million and unspecified damages for breach of
the agreements. In a settlement agreement dated as of August 30, 2000,
Atlantic Crossing entered into an agreement with Tyco for the early
termination of one of the contracts relating to Atlantic Crossing-1, the
Operations, Administration and Maintenance, or the OA&M Agreement, in return
for the payment of $19 million to Tyco. In addition, Atlantic Crossing and
Tyco have agreed to drop their respective claims under the OA&M Agreement in
the arbitration. The other claims asserted in the arbitration remain pending.

Global Crossing does not believe that the commencement of these actions with
Tyco will have an impact on Global Crossing's network and/or the timely
completion of any of its systems. Global Crossing intends to pursue its claims
against Tyco vigorously and to defend itself vigorously against Tyco's
counterclaims, which counterclaims it believes to be without merit.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

10-K/A 28th Page of 100 TOC 1st Previous Next ↓Bottom Just 28th
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS

Price Range of Common Stock

Our common stock began to trade on both the Nasdaq National Market ("NNM")
and the Bermuda Stock Exchange under the symbol "GBLX" following our Initial
Public Offering ("IPO") of common stock on August 14, 1998 at a per share
price of $9.50. The table below sets forth, on a per share basis for the
periods indicated, the high and low closing sales prices for the common stock
as reported by the NNM.

[Download Table]

Price Range
--------------------------
1999 1998
------------- ------------
High Low High Low
------ ------ ------ -----

First Quarter.................................. $56.75 $19.25 $ -- $ --
Second Quarter................................. $64.25 $39.05 $ -- $ --
Third Quarter (from August 14, 1998)........... $41.88 $20.25 $12.75 $8.00
Fourth Quarter................................. $55.75 $24.81 $23.50 $8.63

The closing sale price of the common stock as reported by the NNM on
September 1, 2000 was $35 1/8. As of September 1, 2000, there were 31,293
holders of record of our common stock.

Dividend Policy; Restriction on Payment of Dividends

The Company does not anticipate paying cash dividends on our common stock in
the foreseeable future. The terms of certain of our debt instruments also
place limitations on our ability to pay dividends. Future dividends, if any,
will be at the discretion of the Board of Directors and will depend upon,
among other things, our operations, capital requirements and surplus, general
financial condition, contractual restrictions and such other factors as the
Board of Directors may deem relevant.

Recent Sales of Unregistered Securities

In 1999, the Company issued the following equity securities that were not
registered under the Securities Act of 1933, as amended:

(a) 2,600,000 shares of 7% Cumulative Convertible Preferred Stock at a
liquidation preference of $250.00 per share were issued on December 15,
1999 by GCL for net proceeds of approximately $630 million and sold to
Salomon Smith Barney, Merrill Lynch & Co., Goldman, Sachs & Co., Chase
Securities Inc., Morgan Stanley Dean Witter, CIBC World Markets, Donald,
Lufkin & Jenrette and Credit Suisse First Boston as initial purchasers.
Each share of preferred stock is convertible into 4.6948 shares of GCL
common stock, based on a conversion price of $53.25 per share; and

(b) 10,000,000 shares of 6 3/8% Cumulative Convertible Preferred Stock at a
liquidation preference of $100.00 per share were issued on November 5, 1999
by GCL for net proceeds of approximately $969 million and sold to Merrill
Lynch & Co., Goldman, Sachs & Co. and Salomon Smith Barney as initial
purchasers. Each share of preferred stock is convertible into 2.2222 shares
of GCL common stock, based on a conversion price of $45.00 per share.

Each series of GCL preferred stock issued during 1999 was resold only to
institutional investors that are "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), and was issued in reliance upon an exemption from the
registration provisions of the Securities Act set forth in Section 4(2)
thereof relative to transactions by an issuer not involving any public
offering or the rules ad regulations thereunder.

10-K/A 29th Page of 100 TOC 1st Previous Next ↓Bottom Just 29th
ITEM 6. SELECTED FINANCIAL DATA

The table below shows selected historical financial data for Global Crossing
Ltd. This data has been prepared using our consolidated financial statements
as of the dates indicated and for each of the years ended December 31, 1999
and 1998, for the period from March 19, 1997, the date of our inception, to
December 31, 1997.

In reading the following selected historical financial data, please note the
following:

. The statement of operations data for the year ended December 31, 1999
includes the results of Global Marine Systems for the period from July
2, 1999, date of acquisition, through December 31, 1999; the results of
Frontier Corporation for the period from September 30, 1999, date of
acquisition, through December 31, 1999; and the results of Racal Telecom
for the period from November 24, 1999, date of acquisition, through
December 31, 1999. The Consolidated Balance Sheet as of December 31,
1999 includes amounts related to Global Marine Systems, Frontier
Corporation and Racal Telecom. This information should be read in
conjunction with pro forma financial information of Global Crossing Ltd.
and related notes included elsewhere in this Form 10-K/A.

. On July 11, 2000, we entered into an agreement to sell our incumbent
local exchange carrier business, acquired as part of our acquisition of
Frontier Corporation, to Citizens Communications for $3.65 billion in
cash, subject to adjustments concerning closing date liabilities and
working capital balances. We and Citizens Communications also entered
into a strategic agreement under which we will provide long distance
services to the incumbent local exchange carrier business. The
transaction is subject to both federal and state regulatory approvals,
which are expected to take approximately nine months to obtain. As a
result of this transaction we have restated our financial statements to
reflect the financial position and results of operations of the
incumbent local exchange carrier business as discontinued operations for
all periods presented since the date of the Frontier Corporation
acquisition.

. In July 2000, we restated our financial statements to revise the
estimated useful life of goodwill related to GlobalCenter from 10 years
to 5 years. As a result, loss applicable to common shareholders and loss
per share increased by $40,618,000 and $0.08 per share, respectively,
for the year ended December 31, 1999.

. During the year ended December 31, 1999, we recorded a $15 million
expense, net of tax benefit, due to the adoption of Statement of
Position 98-5, "Reporting on the Cost of Start-Up Activities". See the
"Cumulative effect of change in accounting principles" item in the
Statement of Operations Data.

. On December 15, 1999, we issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for
net proceeds of $630 million. Each share of preferred stock is
convertible into 4.6948 shares of Global Crossing group stock based on a
conversion price of $53.25. Dividends on the preferred stock are
cumulative from the date of issue and will be payable on February 1, May
1, August 1 and November 1 of each year, beginning on February 1, 2000,
at the annual rate of 7%.

. On November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for
approximately $1.6 billion in cash. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom,
consisting of approximately 4,650 route miles of fiber and reaching more
than 2,000 cities and towns.

. On November 12, 1999, Global Crossing Holdings Ltd., a wholly-owned
subsidiary of Global Crossing, issued two series of senior unsecured
notes. The 9 1/8% senior notes are due November 15, 2006 with a face
value of $900 million and the 9 1/2% senior notes are due November 15,
2009 with a face value of $1,100 million. The new senior notes are
guaranteed by Global Crossing Ltd. Interest will be paid on the notes on
May 15 and November 15 of each year, beginning on May 15, 2000.

. On November 5, 1999, we issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 for
net proceeds of approximately $969 million. Each share of preferred
stock is convertible into 2.2222 shares of Global Crossing group stock,
based on a conversion

10-K/A 30th Page of 100 TOC 1st Previous Next ↓Bottom Just 30th
price of $45.00. Dividends on the preferred stock are cumulative from
the date of issue and will be payable on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000, at the annual
rate of 6 3/8%.

. On September 28, 1999, we completed our acquisition of Frontier
Corporation in a merger transaction valued at over $10 billion, with
Frontier Corporation shareholders receiving 2.05 shares of Global
Crossing common stock for each share of Frontier Corporation common
stock held. Frontier Corporation is one of the largest long distance
telecommunications companies in the United States and one of the leading
providers of facilities-based integrated communications and Internet
services.

. On July 2, 1999, we completed our acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million
in cash and assumed liabilities. Global Marine Systems owns the largest
fleet of cable laying and maintenance vessels in the world and currently
services more than a third of the world's undersea cable miles.

. On May 16, 1999, we entered into a definitive agreement to merge with U
S WEST, Inc. On July 18, 1999, we and U S WEST agreed to terminate our
merger agreement, and U S WEST agreed to merge with Qwest Communications
International Inc. As a result, U S WEST paid us a termination fee of
$140 million in cash and returned 2,231,076 shares of Global Crossing
common stock purchased in a related tender offer, and Qwest committed to
purchase capacity on the Global Crossing network at established market
unit prices for delivery over the next four years and committed to make
purchase price payments to us for this capacity of $140 million over the
next two years. During the year ended December 31, 1999, we recognized
$210 million, net of merger related expenses, of other income in
connection with the termination of the U S WEST merger agreement.

. The "Termination of advisory services agreement" item in the Statements
of Operations Data includes a charge for the termination of the advisory
services agreement as of June 30, 1998. We acquired the rights from
those entitled to fees payable under the advisory services agreement in
consideration from the issuance of common stock having an aggregate
value of $135 million and the cancellation of approximately $3 million
owed to us under a related advance agreement. As a result of this
transaction, we recorded a non-recurring charge in the approximate
amount of $138 million during the year ended December 31, 1998. In
addition, we recognized as an expense approximately $2 million of
advisory fees incurred prior to termination of the contract.

. We granted warrants to Pacific Capital Group, Inc., a shareholder, and
some of our affiliates for the Pacific Crossing, Mid-Atlantic Crossing
and Pan American Crossing systems and related rights. The $275 million
value of the common stock was originally allocated to "Construction in
progress" in the amount of $112 million and as "Investment in and
advances to/from affiliates" in the amount of $163 million. See the
"property and equipment" item in the Balance Sheet Data. The "Investment
in and advance to/from affiliates" item in the balance sheet data
includes $163 million as of December 31, 1999 and 1998, respectively,
representing the value of the warrants described in the bullet point
immediately above applicable to the Pacific Crossing system.

. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization,
or Adjusted EBITDA, is calculated as operating income (loss), plus
goodwill amortization, depreciation and amortization, non-cash cost of
capacity sold, stock related expenses, incremental cash deferred revenue
and amounts relating to the termination of an advisory services
agreement. This definition is consistent with financial covenants
contained in our major financial agreements. Our management uses
Adjusted EBITDA to monitor compliance with our financial covenants and
to measure the performance and liquidity of our reportable segments.
This information should not be considered as an alternative to any
measure of performance as promulgated under GAAP. Our calculation of
adjusted EBITDA may be different from the calculation used by other
companies and, therefore, comparability may be limited.

10-K/A 31st Page of 100 TOC 1st Previous Next ↓Bottom Just 31st
The selected consolidated financial data as of December 31, 1997, 1998 and
1999, for the period from March 19, 1997 (Date of Inception) to December 31,
1997, and for the years ended December 31, 1998 and 1999, respectively, are
derived from our audited consolidated financial statements and should be read
in conjunction with our audited consolidated financial statements and notes
included elsewhere in this Form 10-K/A.

[Download Table]

Period from
March 19, 1997
(Date of Inception) to Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
---------------------- ------------ ------------
(in thousands, except share and per share
information)

Statement of Operations
Data:
Revenue..................... $ -- $ 419,866 $ 1,478,903
----------- ----------- -----------
Expenses:
Cost of sales............... -- 178,492 850,483
Operations, administration
and maintenance............ -- 18,140 87,182
Sales and marketing......... 1,366 31,748 128,450
Network development......... 78 14,204 33,304
General and administrative.. 1,618 56,797 229,636
Depreciation and
amortization............... 39 541 86,417
Goodwill and intangibles
amortization............... -- -- 149,489
Termination of advisory
services agreement......... 139,669 --
----------- ----------- -----------
3,101 439,591 1,564,961
----------- ----------- -----------
Operating income (loss)..... (3,101) (19,725) (86,058)
Equity in income (loss) of
affiliates................. -- (2,508) 15,708
Minority interest........... -- -- (1,338)
Other income (expense):
Interest income............ 2,941 29,986 61,235
Interest expense........... -- (42,880) (137,011)
Other expense, net......... -- -- 181,480
Benefit (provision) for
income taxes............... -- (33,067) (102,813)
----------- ----------- -----------
Income (loss) from
continuing operations..... (160) (68,194) (68,797)
Income from discontinued
operations, net of
provision for income tax... -- -- 17,644
Extraordinary loss on
retirement of debt......... -- (19,709) (45,681)
Cumulative effect of change
in accounting principle,
net of income tax benefit.. -- -- (14,710)
----------- ----------- -----------
Net loss.................... (160) (87,903) (111,544)
Preferred stock dividends... (12,690) (12,681) (66,642)
Redemption of preferred
stock...................... -- (34,140) --
----------- ----------- -----------
Income (loss) applicable to
common shareholders........ $ (12,850) $ (134,724) $ (178,186)
=========== =========== ===========
Income (loss) per Common
Share:
Income (loss) from
continuing operations
applicable to common
shareholders
Basic and diluted.......... $ (0.04) $ (0.32) $ (0.27)
=========== =========== ===========
Discontinued operations
Basic and diluted.......... $ -- $ -- $ 0.04
=========== =========== ===========
Extraordinary item
Basic and diluted.......... $ -- $ (0.06) $ (0.09)
=========== =========== ===========
Cumulative effect of change
in accounting principle
Basic and diluted.......... $ -- $ -- $ (0.03)
=========== =========== ===========
Income (loss) applicable to
common shareholders
Basic and diluted.......... $ (0.04) $ (0.38) $ (0.35)
=========== =========== ===========
Shares used in computing
basic and diluted loss per
share...................... 325,773,934 358,735,340 502,400,851
=========== =========== ===========
Operating Data:
Cash from operating
activities................. $ 5,121 $ 208,727 $ 396,305
Cash from investing
activities................. (428,743) (430,697) (3,973,547)
Cash from financing
activities................. 425,075 1,027,110 4,349,259
Adjusted EBITDA............. $ 2,263 $ 364,948 $ 613,575

10-K/A 32nd Page of 100 TOC 1st Previous Next ↓Bottom Just 32nd
[Enlarge/Download Table]

December 31,
---------------------------------
1997 1998 1999
-------- ---------- -----------
(in thousands)

Balance Sheet Data:
Current assets including cash and cash equivalents
and restricted cash and cash equivalents............ $ 27,744 $ 976,615 $ 2,732,083
Long term restricted cash and cash equivalents....... -- 367,600 138,118
Long term accounts receivable........................ -- 43,315 52,052
Capacity available for sale.......................... -- 574,849 --
Property and equipment, net.......................... 518,519 433,707 5,057,102
Other assets......................................... 25,934 65,757 655,594
Investments in and advances to/from affiliates, net.. -- 177,334 317,957
Goodwill and intangibles, net........................ -- -- 7,825,554
Net assets of discontinued operations................ -- -- 2,502,850
-------- ---------- -----------
Total assets....................................... $572,197 $2,639,177 $19,281,310
======== ========== ===========
Current liabilities.................................. $ 90,817 $ 256,265 $ 1,716,151
Long term debt....................................... 312,325 1,066,093 4,899,596
Deferred revenue..................................... -- 25,325 382,305
Deferred credits and other........................... 3,009 34,174 669,326
-------- ---------- -----------
Total liabilities.................................... 406,151 1,381,857 7,667,378
-------- ---------- -----------
Minority interest.................................... -- -- 351,338
-------- ---------- -----------
Mandatorily redeemable and cumulative convertible
preferred stock..................................... 91,925 483,000 2,084,697
-------- ---------- -----------
Shareholders' equity:
Common stock....................................... 3,258 4,328 7,992
Treasury stock..................................... -- (209,415) (209,415)
Other shareholders' equity......................... 71,023 1,067,470 9,578,927
Accumulated deficit................................ (160) (88,063) (199,607)
-------- ---------- -----------
Total shareholders' equity........................... 74,121 774,320 9,177,897
-------- ---------- -----------
Total liabilities and shareholders' equity........... $572,197 $2,639,177 $19,281,310
======== ========== ===========

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Recent Financial Accounting Developments

During the third and fourth quarters of 1999, changes in our business
activities, together with a newly effective accounting standard, caused us to
modify some of our practices regarding recognition of revenue and costs
related to sales of capacity. None of the accounting practices described below
affect our cash flows.

As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, we have accounted for revenue from
terrestrial circuits sold after that date as operating leases and have
amortized that revenue over the terms of the related contracts. Previously, we
had recognized these sales as current revenue upon activation of the circuits.
This deferral in revenue recognition has no impact on cash flow.

With the consummation of our acquisition of Frontier Corporation on
September 28, 1999, service offerings became a significant source of our
revenue. Consequently, we initiated service contract accounting for our subsea
systems during the fourth quarter, because we, since that date, no longer hold
subsea capacity exclusively for sale. As a result, since the beginning of the
fourth quarter, we have depreciated investments in both subsea and terrestrial
systems over their remaining economic lives and have recognized revenue
related to service contracts over the terms of the contracts. We have
recognized revenue and costs related to the sale of subsea circuits upon
activation, if the criteria of sales-type lease accounting have been satisfied
with respect to those circuits.

During the fourth quarter, our global network service capabilities were
significantly expanded by the activation of several previously announced
systems and by the integration of other networks obtained through acquisition
and joint venture agreements. With this network expansion, we began offering
our customers flexible bandwidth products to multiple destinations, which
makes the historical practice of fixed, point-to-point routing of traffic and
restoration capacity both impractical and inefficient. To ensure the required
network flexibility, we will modify our future capacity purchase agreements
and our network management in a manner that precludes the use of sales-type
lease accounting.

Because of these contract changes and the network management required to
meet customer demands for flexible bandwidth, multiple destinations and system
performance, we anticipate that most of the contracts for subsea circuits
entered into after January 1, 2000 will be part of a service offering and,
therefore, will not meet the criteria of sales-type lease accounting and will
be accounted for as operating leases. Consequently, we will defer revenue
related to those circuits and amortize it over the appropriate term of the
contract. In certain circumstances, if a contract meets all of the
requirements of sales-type lease accounting, we will recognize revenue without
deferral upon payment and activation.

The principal effect of the change in the type of contracts offered to our
customers beginning on January 1, 2000 is that an increasing percentage of our
capacity sales will be accounted for as operating leases rather than sales-
type leases, resulting in more revenue from such sales being deferred into
future periods than was previously the case. Accordingly, this change in
contract terms will reduce revenue recognized upon activation of the circuits
in earlier periods and increase revenue recognized in later periods.

As of December 31, 1999, we had an aggregate backlog of approximately $251
million in capacity sales contracts for which revenue will be recognized using
sales-type lease accounting upon activation. For the remaining backlog as of
that date, revenue will be recognized using operating lease accounting, that
is amortized over the life of the contract.

We note that accounting practice and authoritative guidance regarding the
applicability of sales-type lease accounting to the sale of capacity is still
evolving. Based on the accounting practices described above, we believe that
additional changes, if any, in accounting practice or authoritative guidance
affecting sales of capacity would

10-K/A 34th Page of 100 TOC 1st Previous Next ↓Bottom Just 34th
have little or no impact on our financial position, results of operations,
cash flows and the financial statements taken as a whole.

Restatements

Sale of Incumbent Local Exchange Carrier Business

On July 11, 2000, we entered into an agreement to sell our incumbent local
exchange carrier business, acquired as part of our acquisition of Frontier
Corporation, to Citizens Communications for $3.65 billion in cash, subject to
adjustments concerning closing date liabilities and working capital balances.
We and Citizens Communications also entered into a strategic agreement under
which we will provide long distance services to the customers of the ILEC
business. The transaction is subject to both federal and state regulatory
approvals, which are expected to take approximately nine months to obtain. As
a result of this transaction, our financial statements reflect the financial
position and results of operations of the incumbent local exchange carrier
business as discontinued operations for all periods presented since the date
of the Frontier Corporation acquisition.

Useful Life of GlobalCenter Goodwill

Subsequent to the issuance of our audited financial statements for the year
ended December 31, 1999 and our unaudited financial statements for the three
months ended March 31, 2000, and following discussion with representatives of
the Securities and Exchange Commission's Division of Corporation Finance
concerning its review of our financial statements, we restated our financial
statements for these periods to revise the estimated useful life of the $1.5
billion goodwill related to GlobalCenter from 10 years to 5 years.
GlobalCenter was acquired by us in September 1999 as part of the Frontier
merger.

As a result, loss applicable to common shareholders' and loss per share
increased by $41 million and $0.08 per share, respectively for the year ended
December 31, 1999. The restatement has no impact on cash flow or compliance
with our debt agreements.

Acquisitions

The Company completed its merger with Frontier (acquired September 28, 1999)
and acquisitions of Global Marine Systems (acquired July 2, 1999) and Racal
Telecom (acquired November 24, 1999). The acquisition of these entities is
referred to as the "Acquisitions", as adjusted for the sale of the ILEC
segment. The increase in revenue and expenses for the year ended December 31,
1999 is primarily due to these transactions, as a result, the comparability of
the results of operations for the year ended December 31, 1999 and 1998 is
limited.

Results of Operations for the Years Ended December 31, 1999 and December 31,
1998

HISTORICAL

Revenue. Revenue for 1999 increased 252% to $1,479 million as compared to
$420 million for 1998. For 1999, $728 million in revenue was recognized using
sales-type lease accounting, while the remaining $751 million in revenue from
our telecommunications services segment was accounted for using operating
lease accounting. The increase in revenue is attributable to our merger with
Frontier Corporation and our acquisitions of Global Marine Systems and Racal
Telecom, as well as growth from our existing business.

Cash revenue (revenue plus the cash portion of the change in deferred
revenue) for the year ended December 31, 1999 increased 230% to $1,600 million
compared to $484 million for the year ended December 31, 1998. The increase is
due to the Acquisitions, as well as growth from our existing business.

Cost of sales. Cost of sales during 1999 was $850 million (58% of revenue)
compared to $178 million (43% of revenue) in 1998. This increase is primarily
attributable to the Frontier Corporation merger and the

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Global Marine Systems and Racal Telecom acquisitions. Lower margins are
partially due to lower prices of capacity sold to customers and wholesale cost
of capacity purchased from unconsolidated joint ventures (Global Access
Limited and Pacific Crossing Ltd.), our profit on which is included in equity
in income of affiliates.

Non-cash cost of undersea capacity sold was $292 million and $141 million
during the years ended December 31, 1999 and 1998, respectively. For 1998 and
the first nine months of the year ended December 31, 1999, we calculated costs
of undersea capacity sold for the Atlantic Crossing cable system based on the
ratio of the period's actual revenue to total expected future revenues given a
minimum projected sales capacity of 1024 circuits (512 circuits in 1998) times
the construction cost of the system. Beginning in the fourth quarter of 1999,
we began to depreciate its undersea capacity and calculate cost of sales based
on the estimated net book value of the circuit at the time of sale.

Operations, administration and maintenance. Operations, administration and
maintenance for the year ended December 31, 1999 was $87 million (6% of
revenue), compared to $18 million (4% of revenue) for the year ended December
31, 1998. The increase is primarily the result of costs incurred in connection
with the development of our network operations center, expansion of our
network and the expenses of acquired companies.

Sales and marketing. Sales and marketing costs for the year ended December
31, 1999 were $128 million (9% of revenue), compared to $32 million (8% of
revenue) for the year ended December 31, 1998. The increase is primarily
attributable to additions in headcount, occupancy costs, plus marketing costs,
commissions paid and other promotional expenses to support our rapid growth
and the expenses of acquired companies.

Network development. Network development costs for the year ended December
31, 1999 were $33 million (2% of revenue), compared to $14 million (3% of
revenue) for the year ended December 31, 1998. The increase is primarily
attributable to the additional salaries, employee benefits, including stock
compensation, travel and professional fees associated with the construction of
our network.

General and administrative. General and administrative expenses for the year
ended December 31, 1999 were $230 million (16% of revenue), compared to $57
million (14% of revenue) for the year ended December 31, 1998. Such charges
are comprised principally of salaries, employee benefits, including stock
compensation and recruiting fees reflecting our staffing for multiple systems,
travel, professional fees, insurance costs and occupancy costs. The increase
in general and administrative expenses is primarily attributable to our merger
with Frontier Corporation and our acquisitions of Global Marine Systems and
Racal Telecom.

Depreciation and amortization. Depreciation and amortization for the year
ended December 31, 1999 was $86 million (6% as a percentage of revenue),
compared to $.54 million for the year ended December 31, 1998. This increase
was driven by charges from the newly acquired companies and depreciation of
subsea systems as of October 1, 1999.

Goodwill amortization. Goodwill amortization for the year ended December 31,
1999 of $149 million (10% of revenue) resulted from our merger with Frontier
Corporation and our acquisitions of Global Marine Systems and Racal Telecom
during the year ended December 31, 1999. There was no goodwill amortization
for the year ended December 31, 1998.

Operating loss. We incurred an operating loss for the year ended December
31, 1999 of $86 million (6% of revenue), compared to a loss of $20 million (5%
of revenue) for the year ended December 31, 1998.

Interest income and Interest expense. Interest income for the year ended
December 31, 1999 was $61 million, compared to $30 million for the year ended
December 31, 1998. The increase is due to earnings on investments of funds
from financings and operations for the year ended December 31 1999. Interest
expense for the year ended December 31, 1999 was $137 million, compared to $43
million for the year ended December 31, 1998, due to our merger with Frontier
Corporation and our acquisitions of Global Marine Systems and Racal Telecom
and increases in debt outstanding to support our capital spending.

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Other income, net. Other income, net for the year ended December 31, 1999
resulted primarily from a $210 million payment to us by US West, Inc. in
connection with the termination of its merger agreement with us, less related
expenses.

Provision for income taxes. The income tax provision of $103 million and $33
million for the years ended December 31, 1999 and 1998, respectively, provide
for taxes on profits earned from telecommunications services, installation and
maintenance services, ILEC services and other income where our subsidiaries
have a presence in taxable jurisdictions.

Extraordinary loss from retirement of debt. Extraordinary loss from
retirement of debt of $46 million for the year ended December 31, 1999
compared to $20 million for the year ended December 31, 1998. During 1999, we
recognized an extraordinary loss of $15 million in connection with the
prepayment of existing debt in connection with the issuance of our $3 billion
Senior Secured Credit Facility and an additional $31 million for the early
extinguishment of $2 billion, in principal value, under the Senior Secured
Credit Facility. During 1998, we recognized an extraordinary loss of $20
million in connection with the repurchase of Global Telesystems Holdings'
outstanding senior notes, comprising a premium of $10 million and a write-off
of $10 million of unamortized deferred financing costs.

Income from discontinued operations. During the year ended December 31,
1999, we reported income from discontinued operations, net of provision for
income tax of $18 million, resulting from our incumbent local exchange carrier
business.

Cumulative effect of change in accounting principle. We adopted Statement of
Position 98-5 (SOP 98-5), "Reporting on the Cost of Start-Up Activities,"
issued by the American Institute of Certified Public Accountants, during the
year ended December 31, 1999. SOP 98-5 requires that certain start-up
expenditures previously capitalized during system development must now be
expensed. We incurred a one-time charge during the first quarter of $15
million, net of tax benefit, that represents start-up costs incurred and
capitalized during previous periods.

Net loss. During the year ended December 31, 1999, we reported a net loss of
$112 million compared to a net loss of $88 million for the prior year.

Net loss applicable to common shareholders. During the years ended December
31, 1999 and 1998, we reported a net loss applicable to common shareholders of
$178 million and $135 million, respectively.

Adjusted EBITDA. Adjusted EBITDA of $614 million in 1999 increased 68% from
$365 million for the year ended December 31, 1998. The increase is primarily
due to the inclusion of Frontier Corporation, Global Marine Systems and Racal
as well as growth from our existing businesses for the year ended December 31,
1999. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization,
or Adjusted EBITDA, is defined as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity sold,
stock related expenses, incremental cash deferred revenue and amounts relating
to the termination of an advisory services agreement. This definition is
consistent with financial covenants contained in our major financial
agreements. Our management uses Adjusted EBITDA to monitor compliance with our
financial covenants and to measure the performance and liquidity of our
reportable segments. This information should not be considered as an
alternative to any measure of performance as promulgated under generally
accepted accounting principles. Our calculation of Adjusted EBITDA may be
different from the calculation used by other companies and, therefore,
comparability may be limited.

PRO FORMA REVENUE

This section of "Management's Discussion and Analysis of Financial Condition
and Results of Operations" focuses on pro forma revenue for the periods
covered giving effect to the acquisitions from the beginning of each period.
Our management believes that pro forma revenue provide the most meaningful
comparability among

10-K/A 37th Page of 100 TOC 1st Previous Next ↓Bottom Just 37th
periods presented, since historical results reflect full-company operations
only after the close of the Frontier Corporation merger and the acquisitions
of Racal Telecom and Global Marine Systems. However, pro forma revenue are not
necessarily indicative of the results that would have been achieved had such
transactions actually occurred at the beginning of each period, nor are they
necessarily indicative of our future results.

The following reflects pro forma revenue for the years ended December 31,
1999 and 1998:

[Download Table]

For the year ended
December 31,
---------------------
1999 1998
---------- ----------
(In thousands)

Telecommunications services ........................... $3,071,553 $2,591,066
Installation and maintenance services.................. 334,153 322,017
Corporate and other.................................... 4,960 28,503
---------- ----------
$3,410,666 $2,941,586
========== ==========

Pro forma revenue--Telecommunications services. Pro forma revenue for the
telecommunications services segment for the years ended December 31, 1999 and
1998 resulted from sales of the following products:

[Download Table]

For the year ended
December 31,
---------------------
1999 1998
---------- ----------
(In thousands, except
minutes)

Product Revenue:
Switched Voice......................................... $1,386,124 $1,416,088
CLEC (Local and LD).................................... 223,021 153,109
---------- ----------
Total Business Voice Products........................ 1,609,145 1,569,197
Data................................................... 1,274,689 782,087
Consumer long distance................................. 187,719 239,782
---------- ----------
Total Product Revenue.................................... $3,071,553 $2,591,066
========== ==========
Minutes.................................................. 20,472,178 14,481,697
========== ==========

In North America, data products continued to grow at triple digit rates--
data product revenue, primarily private line, from telecommunication carrier
customers grew 588% for the full year. Frame relay revenue, sales from
dedicated internet and web hosting revenue increased 304%, 159% and 187%,
respectively, over the prior year. Competitive Local Exchange Carrier (CLEC)
revenue increased 46% year-on-year.

Revenue from telecommunication commercial customers increased to $1.27
billion for the year ended December 31, 1999 from $1.26 billion for the year
ended December 31, 1998. Revenue from telecommunication consumer customers
fell to $188 million for the year ended December 31, 1999 from $240 million
for the year ended December 31, 1998. Revenue from telecommunication carrier
customers experienced a 48% increase in revenue year-on-year, from $1.09
billion to $1.61 billion, driven by strong growth in international city to
city circuit activations and an 87% increase in wholesale minutes sold on a
year-on-year basis.

Pro forma revenue--Installation and maintenance services. Pro forma revenue
increased by 4% year-on-year, despite delays in the installation of TAT-14 and
U.S.-Japan cables, which had been scheduled for installation during the fourth
quarter of 1999. Global Marine Systems added three ships to their fleet during
the year to service our growth in subsea cable installations. Revenue from
maintenance increased from $117 million to $139 million, while revenue from
installation decreased from $205 million to $195 million.

10-K/A 38th Page of 100 TOC 1st Previous Next ↓Bottom Just 38th
Historical Results of Operations for the Year Ended December 31, 1998 and the
Period from March 19, 1997 (Date of Inception) to December 31, 1997

Revenue. During the year ended December 31, 1998, we executed firm
commitments to sell capacity on its systems plus the sale of dark fiber on its
Pan European Crossing System totaling $911 million. Of this amount, we
recognized revenue of $418 million on sales of capacity relating to Atlantic
Crossing for the year ended December 31, 1998, in addition to revenue from
operations and maintenance services of $6 million.

Cost of sales. For the year ended December 31, 1998, we recognized $178
million in cost of capacity sold, resulting in a gross margin on capacity
sales of 57%. Cost of capacity sold for the year ended December 31, 1998 also
includes $38 million relating to terrestrial capacity sold which we had
purchased from third parties. We calculated undersea cost of capacity sold for
Atlantic Crossing based on the ratio of the period's actual revenue to total
expected revenue, assuming minimum projected sales capacity of 512 circuits,
multiplied by the construction cost of the system. This calculation of cost of
sales matches costs with the relative value of each sale. There were no sales
or related costs recognized during the period from March 19, 1997 (Date of
Inception) to December 31, 1997, as we were in our development stage.

Operations, administration and maintenance. We incurred operations,
administration and maintenance costs of $18 million during the year ended
December 31, 1998. We entered into an agreement with Tyco Submarine Systems
relating to operations, administration and maintenance of Atlantic Crossing,
which limits our total operations, administration and maintenance expense for
the system. We anticipate that our operations, administration and maintenance
costs will be largely recovered through charges to our customers under the
terms of CPAs. There were no operations, administration and maintenance costs
during the period from March 19, 1997, the date of our inception, to December
31, 1997, as we were in our development stage.

Sales and marketing. During the year ended December 31, 1998, we incurred
sales and marketing expenses of $32 million, including selling commissions of
$20 million incurred on capacity sales recognized during this period. During
the period from March 19, 1997, the date of our inception to December 31,
1997, we incurred sales and marketing costs of approximately $1 million. The
increase from 1997 was due to additions in personnel and occupancy costs, plus
marketing, commissions paid and other promotional expenses to support our
rapid growth.

Network development. We incurred network development costs during the year
ended December 31, 1998 of $14 million relating to the development of systems.
During the period from March 19, 1997, the date of our inception, to December
31, 1997, these costs were $0.1 million. The increase from 1997 was due to
additional personnel, and costs to explore new projects.

General and administrative. General and administrative expenses totaled $57
million during the year ended December 31, 1998 and were comprised principally
of salaries, employee benefits, including stock compensation and recruiting
fees for staffing of multiple systems, travel, insurance costs and rent
expenses. During the period from March 19, 1997, the date of our inception, to
December 31, 1997, we incurred general and administrative costs of $2 million.

Termination of Advisory Services Agreement with PCG Telecom Services LLC. In
connection with the development and construction of Atlantic Crossing, we
entered into an advisory services agreement with PCG Telecom Services LLC, an
affiliate, providing for the payment by us of an advisory fee of 2% of the
gross
revenue of Atlantic Crossing over a 25 year term. Our board of directors also
approved similar advisory fees and authorized us to enter into similar
agreements with respect to other cable systems under development by us. We
acquired the rights of the persons entitled to the fees payable under these
agreements in consideration for the issuance to such persons of shares of our
common stock, which had at the time of issuance an aggregate value of $135
million, and the cancellation of approximately $3 million owed to us under a
related advance agreement. In addition, we recognized approximately $2 million
of advisory fees incurred prior to termination of the contract.

10-K/A 39th Page of 100 TOC 1st Previous Next ↓Bottom Just 39th
Equity in loss of affiliates. During 1998, we entered into joint venture
agreements to construct and operate Pacific Crossing and Global Access Ltd.
Pacific Crossing is owned and operated by Pacific Crossing Ltd. We have an
economic interest in Pacific Crossing Ltd. represented by a 50% direct voting
interest and, through one of our joint venture partners, a further 8% economic
non-voting interest. We have a 49% interest in Global Access Ltd., which
operates Global Access Ltd. Our equity in the loss of Pacific Crossing Ltd.
for the year ended December 31, 1998 was $3 million.

Interest income. We reported interest income of $30 million during the year
ended December 31, 1998 and $3 million during the period from March 19, 1997,
the date of our inception, to December 31, 1997. Such interest income
represents earnings on cash raised from financing, its initial public
offering, the issuance by Global Crossing Holdings of preferred stock,
operations and CPA deposits.

Interest expense. During the year ended December 31, 1998, we incurred $93
million in interest costs, including the amortization of finance costs and
debt discount. Of this amount, we capitalized to construction in progress
interest of $50 million and expensed $43 million. During the period from March
19, 1997, the date of our inception, to December 31, 1997, we incurred
interest expense of $10 million, which was capitalized to construction in
progress.

Provision for income taxes. The income tax provision of $33 million for the
year ended December 31, 1998 provides for taxes on profits earned from
capacity sales and operations, administration and maintenance revenue where
our subsidiaries have a presence in taxable jurisdictions. During the period
from March 19, 1997, the date of our inception, to December 31, 1997, we
incurred operating losses, which relate to non-taxable jurisdictions and
therefore cannot be applied against future taxable earnings. Accordingly, no
tax provision or deferred tax benefit was recorded as of December 31, 1997.

Extraordinary item. During May 1998, we recognized an extraordinary loss of
$20 million in connection with the repurchase of Global Telesystem Holdings'
outstanding senior notes, comprising a premium of $10 million and a write-off
of $10 million of unamortized deferred financing costs.

Net loss. We incurred a net loss of $88 million for the year ended December
31, 1998, compared to a net loss of $0.2 million in the period from March 19,
1997, the date of our inception, to December 31, 1997. The net loss for the
year ended December 31, 1998 reflects an extraordinary loss on retirement of
the Global Telesystems Holdings' senior notes of $20 million and a non-
recurring charge of $140 million relating to the termination of the advisory
services agreement. Our net income before these items was $72 million.

Preferred stock dividends. During the year ended December 31, 1998, we
recorded preferred stock dividends of approximately $13 million. Preferred
stock dividends for the period from March 19, 1997, the date of our inception,
to December 31, 1997 were $13 million. Of the $13 million recorded in 1998, $4
million relates to the Global Crossing Holdings preferred stock issued during
December 1998.

Redemption of preferred stock. The redemption of Global Telesystems Holding
outstanding preferred stock occurred in June 1998 and resulted in a $34
million charge against equity. This amount was comprised of a $16 million
redemption premium and a write-off of $18 million of unamortized discount and
issuance costs. The redemption premium and write-off of unamortized discount
and issuance costs are treated as a deduction to arrive at net loss applicable
to common shareholders in the consolidated statements of operations.

Net loss applicable to common shareholders. During the year ended December
31, 1998, we reported a net loss applicable to common shareholders of $135
million. This loss reflects preferred stock dividends of $13 million and the
redemption cost of Global Telesystems Holdings preferred stock of $34 million.
During the period from March 19, 1997, the date of our inception, to December
31, 1997, we incurred a net loss applicable to common shareholders of $13
million after Global Telesystems Holdings preferred stock dividends of
$13 million.

10-K/A 40th Page of 100 TOC 1st Previous Next ↓Bottom Just 40th
Liquidity and Capital Resources

We estimate that the total remaining cost of developing and deploying the
announced systems on the Global Crossing network to be approximately $3.3
billion, excluding costs of potential future upgrades. We anticipate that all
of these systems will be completed by mid-2001. The remaining financing needed
to complete the Global Crossing network and to fund working capital
requirements is expected to be obtained from issuances of common or preferred
stock, bank financing or through other corporate financing. Some of this
financing is expected to be incurred by our wholly-owned subsidiaries or joint
venture companies as well as by us.

On July 11, 2000, we entered into an agreement to sell our incumbent local
exchange carrier business for $3.65 billion. The proceeds from the sale will
be used to reduce indebtedness and to invest in network and product
capabilities.

In April 2000, we issued 21,673,706 shares of its common stock for net
proceeds of approximately $694 million and 4,000,000 shares of 6 3/4%
cumulative convertible preferred stock at a liquidation preference of $250 for
net proceeds of approximately $970 million. In May 2000, pursuant to an over-
allotment option held by the underwriters of the preferred stock, we issued an
additional 600,000 shares of 6 3/4% cumulative convertible preferred stock for
net proceeds of approximately $146 million. We are using the proceeds of these
offerings for general corporate purposes, principally capital for the
expansion of our business.

On December 15, 1999, we issued $650 million aggregate liquidation
preference of 7% cumulative convertible preferred stock. The preferred stock
is convertible into common stock of Global Crossing based upon a conversion
price of $53.25 per share. We are using the proceeds of this offering
primarily to fund investments in fiber optic cable and telecommunications
systems and equipment, through both construction and acquisition, as well as
for general corporate purposes.

On November 24, 1999 we entered into a GBP 675 million (approximately $1,091
million as of December 31, 1999) credit facility to finance the acquisition of
Racal Telecom. The facility consists of two term loans due November 24, 2007.
As of December 31, 1999, we had an outstanding balance of $646 million under
this facility. Interest is payable at a rate equal to the London interbank
borrowing rate from time to time plus 2.5% (equivalent to 8.44% as of December
31, 1999).

On November 12, 1999, Global Crossing Holdings Ltd. issued $1.1 billion in
aggregate principal amount of its 9 1/2% senior notes due 2009, and $0.9
billion in aggregate principal amount of its 9 1/8% senior notes due 2006. The
proceeds were partially used to pay down the term loans under our corporate
credit facility.

On November 5, 1999, we issued $1.0 billion liquidation preference of 6 3/8%
cumulative convertible preferred stock. The preferred stock is convertible
into common stock of Global Crossing based upon a conversion price of $45.00
per share.

On July 2, 1999, we entered into a $3 billion senior secured corporate
credit facility with a group of several lenders and The Chase Manhattan Bank
as administrative agent. The initial proceeds under the facility were used to
refinance outstanding balances under the AC-1 and MAC project finance
facilities, to refinance balances under a vendor financing arrangement with
Lucent, to refinance debt used for the purchase of the Global Marine business
from Cable and Wireless and for general corporate purposes. The facility
consisted of two term loans and revolving credit facility maturing on July 2,
2004. The term loans were paid in full during fiscal year 1999 from a portion
of the proceeds from the issuance of the Global Crossing Holdings Ltd. senior
notes mentioned above. As of December 31, 1999, we had a remaining available
balance of $308 million under the senior revolving facility. Interest on the
revolving credit facility is payable at a rate equal to the London interbank
borrowing rate from time to time plus 2.25% (equivalent to 8.44% as of
December 31, 1999).

We have extended limited amounts of financing to customers in connection
with certain capacity sales. The financing terms provide for installment
payments of up to four years. We believe that our extension of financing to
our customers will not have a material effect on our liquidity.

10-K/A 41st Page of 100 TOC 1st Previous Next ↓Bottom Just 41st
Cash provided by operating activities was $396 million and $209 million for
the years ended December 31, 1999 and 1998, respectively. The balances
principally represent cash received from capacity sales, and interest income
received, less sales and marketing, network development, general and
administrative and interest expenses paid.

Cash used in investing activities was $3,974 million and $431 million for
the years ended December 31, 1999 and 1998, respectively, and represents cash
paid for construction in progress, acquisitions (net of cash acquired),
purchases of property, plant and equipment and cash investments in affiliates.

Cash provided by financing activities was $4,349 million for the year ended
December 31, 1999 and primarily represents borrowings under the senior secured
corporate facility, issuance of senior notes and proceeds from the issuance of
preferred stock, partially offset by repayments of borrowings under long term
debt. Cash provided by financing activities was $1,027 million for the year
ended December 31, 1998 and primarily relates to proceeds from borrowings
under the AC-1 and MAC Credit Facilities, proceeds from the issuance of GCH
Senior Notes, the GCH Preferred Stock and our IPO, less amounts paid for
finance and organization costs, the issuance of common preferred stock, the
repayment of long term debt, the redemption of the GTH Preferred Stock, the
retirement of the GTH Senior Notes and the increase in amounts held in
restricted cash and cash equivalents.

We have a substantial amount of indebtedness. Based upon the current level
of operations, our management believes that our cash flows from operations,
together with available borrowings under our credit facility, and our
continued ability to raise capital, will be adequate to meet our anticipated
requirements for working capital, capital expenditures, acquisitions and other
discretionary investments, interest payments and scheduled principal payments
for the foreseeable future. There can be no assurance, however, that our
business facility, and our continued ability to raise capital, will be
adequate to meet our anticipated requirements for working capital, capital
expenditures, acquisitions and other discretionary investments, interest
payments and scheduled principal payments for the foreseeable future. There
can be no assurance, however, that our business will continue to generate cash
flow at or above current levels or that currently anticipated improvements
will be achieved. If we are unable to generate sufficient cash flow and raise
capital to service our debt, we may be required to reduce capital
expenditures, refinance all or a portion of our existing debt or obtain
additional financing.

Euro Conversion

On January 1, 1999, a single currency called the Euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union agreed to
adopt the Euro as their common legal currency on that date. Fixed conversion
rates between these countries' existing currencies (legacy currencies) and the
Euro were established as of that date. The legacy currencies are scheduled to
remain legal tender in these participating countries between January 1, 1999
and January 1, 2002 (not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or a
participating country's legacy currency.

As most of our sales and expenditures are denominated in United States
dollars, management does not believe that the Euro conversion will have a
material adverse impact on our business or financial condition. We do not
expect the cost of system modifications to be material and we will continue to
evaluate the impact of the Euro conversion.

10-K/A 42nd Page of 100 TOC 1st Previous Next ↓Bottom Just 42nd
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market
risk exposure is changing interest rates. Our policy is to manage interest
rates through use of a combination of fixed and floating rate debt. Interest
rate swaps may be used to adjust interest rate exposures when appropriate,
based upon market conditions, and the Company does not engage in such
transactions for speculative purposes.

[Enlarge/Download Table]

Fair Value
---------------------
Expected maturity dates 2000 2001 2002 2003 2004 Thereafter Total 12/31/1999 12/31/1998
----------------------- ------ ------- ---- ---- -------- ---------- ---------- ---------- ----------
(in thousands)

DEBT
9 1/2% Senior Notes due
2009................... -- -- -- -- -- $1,100,000 $1,100,000 $1,086,937 N/A
Average interest
rates--fixed.......... 9.5%
9 1/8% Senior Notes due
2006................... -- -- -- -- -- 900,000 900,000 889,313 N/A
Average interest
rates--fixed.......... 9.1%
9 5/8% Senior Notes due
2008................... -- -- -- -- -- 800,000 800,000 798,000 $834,000
Average interest
rates--fixed.......... 9.6%
Senior Secured Revolving
Credit Facility........ -- -- -- -- $648,597 -- 648,597 648,597 N/A
Average interest
rates--variable....... (1)
Racal Term Loan A....... -- -- -- -- 97,000 549,130 646,130 646,130 N/A
Average interest
rates--variable....... (2)
Medium-Term Notes,
7.51%-9.3%, due 2000 to
2004................... -- $71,500 -- -- 107,500 -- 179,000 179,892 N/A
Average interest
rates--fixed.......... 8.9% 9.3% 9.0%
7 1/4% Senior Notes due
2004................... -- -- -- -- 300,000 -- 300,000 282,220 N/A
Average interest
rates--fixed.......... 7.3%
6% Dealer Remarketable
Securities (DRS) due
2013................... -- -- -- -- -- 200,000 200,000 187,182 N/A
Average interest
rates--fixed.......... (3)
Other................... $2,071 $46,389 -- -- 11,197 $ 99,998 159,655 153,731 N/A
Average interest
rates--fixed.......... (4)
DERIVATIVE INSTRUMENTS
Interest rate swap
floating for fixed
Contract notional
amount................. -- -- -- -- $200,000 -- $ 200,000 $ 206,602 N/A
Fixed rate paid by
counterparty.......... 7.3%
Floating rate paid by
GCL................... (5)

--------
(1) The interest rate is US dollar LIBOR + 2.25% which was 8.4% as of December
31, 1999.
(2) The interest rate is British pound LIBOR + 2.5% which was 8.4% as of
December 31, 1999.
(3) The interest rate is fixed at 6.0% until October 2003. At that time, the
remarketing dealer (J.P. Morgan) has the option to remarket the notes at
prevailing interest rates or tender the notes for redemption.
(4) Includes $58,557 of fixed rate debt with interest rates ranging from 2.0%
to 9.0%. $48,460 of floating rate debt with an interest rate of British
pound LIBOR + 2.5%, which was 8.4% as of December 31, 1999.
(5) The interest rate is US dollar LIBOR + 1.26%, which is set in arrears.

Foreign Currency Risk

For those subsidiaries using the U.S. dollar as their functional currency,
translation adjustments are recorded in the accompanying condensed
consolidated statements of operations. None of the Company's translation
adjustments were material as of and for the years ended December 31, 1999 and
1998.

For those subsidiaries not using the U.S. Dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts at average exchange
rates during the period. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity. As of and for the
year ended December 31, 1999, the Company incurred a foreign currency
translation adjustment of $21 million. For the year ended December 31, 1998,
the translation adjustments were immaterial.

Foreign currency forward transactions are used by the Company to hedge
exposure to foreign currency exchange rate fluctuations. The Euro was the
principal currency hedged by the Company. Changes in the value

10-K/A 43rd Page of 100 TOC 1st Previous Next ↓Bottom Just 43rd
of forward foreign exchange contracts, which are designated as hedges of
foreign currency denominated assets and liabilities, are classified in the
same manner as changes in the underlying assets and liabilities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the index included on page F-1, Index to Consolidated Financial
Statements and Schedule.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

10-K/A 44th Page of 100 TOC 1st Previous Next ↓Bottom Just 44th
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 10-K

(a) List of documents filed as part of this report:

1. Financial Statements-Included in Part II of this Form 10-K/A:

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operations for the years ended December
31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Cash Flows for the years ended December
31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Comprehensive Income for the years ended
December 31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Notes to Consolidated Financial Statements

2. Financial Statement Schedules--Included in Part II of this Form 10-K/A:

Schedule II--Valuation and Qualifying Accounts

3. Exhibit Index:

[Download Table]

Exhibit
Number Exhibit
------- -------

2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).

2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).

2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).

2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).

2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).

2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).

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[Download Table]

Exhibit
Number Exhibit
------- -------

2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).

2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).

2.9 Sale Agreement, made on October 10, 1999, between Controls and
Communications Limited, The Racal Corporation, Racal Electronics Plc
and the Registrant (incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed on October 21, 1999 (the
"October 21, 1999 8-K")).

2.10 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K filed on March 2, 2000 (the "March 2, 2000
8-K")).

3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).

3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).

3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).

3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).

3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).

3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).

3.7 Memorandum of Association of Global Crossing Holdings Ltd.
(incorporated by reference to Exhibit 3.1 of Global Crossing Holdings
Ltd.'s Registration Statement on Form S-4 (File No. 333-61457)).

3.8 Bye-laws of Global Crossing Holdings Ltd. (incorporated by reference
to Exhibit 3.2 to Global Crossing Holdings Ltd.'s Registration
Statement on Form S-4 (File No. 333-61457)).

3.9 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.2 to Global Crossing Holdings Ltd.'s
Registration Statement on Form S-4 (File No. 333-61457)).

3.10 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B of the Registrant, dated January 12, 2000
(incorporated by reference to Exhibit 3.10 to the Registrant's Annual
Report on Form 10-K filed on March 16, 2000).

4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998).

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[Download Table]

Exhibit
Number Exhibit
------- -------

4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).

4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).

4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).

4.5 Indenture, dated as of November 19, 1999, among the Registrant.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (i ncorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).

Except as hereinabove provided, there is no instrument with respect to long-
term debt of the Registrant and its consolidated subsidiaries under which the
total authorized amount exceeds 10 percent of the total consolidated assets of
the Registrant. The Registrant agrees to furnish to the SEC upon its request a
copy of any instrument relating to long-term debt.

10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).

10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).

10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).

10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).

10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Registration Statement on Form S-4 filed on January 11, 2000
(File No. 333-94449)) (portions have been omitted pursuant to a
request for confidential treatment).

10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).

10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).

10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).

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Exhibit
Number Exhibit
------- -------

10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).

10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").

10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).

10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).

10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).

10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).

10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).

10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).

10.21 Registration Rights Agreement dated as of November 5, 1999 among the
Registrant and the initial purchasers of the Registrant's 6-3/8%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to the Registrant's Registration Statement on Form S-3 filed
on January 18, 2000 relating to such securities).

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[Download Table]

Exhibit
Number Exhibit
------- -------

10.22 Registration Rights Agreement dated as of November 5, 1999 among the
Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to the Registrant's Registration Statement on Form S-3 filed
on January 18, 2000 relating to such securities).

10.23 1998 Global Crossing Ltd. Stock Incentive Plan as amended and restated
effective December 7, 1999 (incorporated by reference to Exhibit 10.21
to the Global Crossing Holdings Ltd. Registration Statement on Form S-
4 filed on January 11, 2000 (File No. 333-94449).

10.24 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).

10.25 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).

10.26 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).

10.27 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).

10.28 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).

10.29 Executive Contract dated March 25, 1996 between Robert L. Barrett and
Frontier Corporation (incorporated by reference to Exhibit 10.25 to
Frontier Corporation's Quarterly Report on Form 10-Q filed May 14,
1996).

10.30 Amendment dated May 1, 1999 to Executive Contract between Robert L.
Barrett and Frontier Corporation (incorporated by reference to Exhibit
10.7 to the November 15, 1999 10-Q).

10.31 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).

10.32 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).

10.33 Employment Agreement dated as of December 5, 1999 between the
Registrant and Leo J. Hindery, Jr. (incorporated by reference to
Exhibit 10.33 to the Registrant's Annual Report on Form 10-K filed on
March 16, 2000).

10.34 Form of Change in Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (incorporated by reference to Exhibit 10.34
to the Registrant's Annual Report on Form 10-K filed on March 16,
2000).

10.35 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).

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Exhibit
Number Exhibit
------- -------

10.36 Employment Agreement dated as of December 3, 1999 between the
Registrant and John A. Scarpati (incorporated by reference to Exhibit
10.36 to the Registrant's Annual Report on Form 10-K filed on March
16, 2000).

12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith).

21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to the Registrant's Annual Report on Form 10-K filed on March 16,
2000).

23.1 Consent of Arthur Andersen (filed herewith).

27.1 Financial Data Schedule (filed herewith).

(b) Reports on Form 8-K.

During the quarter ended December 31, 1999, the following reports on Form 8-
K were filed by the Registrant:

1. Current Report on Form 8-K dated October 11, 1999 (date of earliest
event reported), filed on October 12, 1999, for the purpose of
reporting, under Item 5, the execution of an agreement to acquire
Racal Telecom.

2. Current Report on Form 8-K dated October 11, 1999 (date of earliest
event reported), filed on October 21, 1999, for the purpose of
filing, under Item 2, the agreement governing the acquisition of
Racal Telecom.

3. Current Report on Form 8-K dated October 29, 1999 (date of earliest
event reported), filed on December 8, 1999, for the purpose of
reporting, under Item 5, recent issuances by Global Crossing Ltd. of
unregistered securities.

4. Current Report on Form 8-K dated November 24, 1999 (date of earliest
event reported), filed on December 3, 1999, for the purpose of
reporting, under Item 2, the acquisition of Racal Telecom.

(d) See Item 14(a)(2) above.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

[Download Table]

Page
----

Report of Independent Public Accountants................................... F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998............... F-3

Consolidated Statements of Operations for the years ended December 31, 1999
and 1998 and for the period March 19, 1997 (Date of Inception) to December
31, 1997.................................................................. F-4

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999 and 1998 and for the period March 19, 1997 (Date of
Inception) to December 31, 1997........................................... F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998 and for the period March 19, 1997 (Date of Inception) to December
31, 1997.................................................................. F-6

Consolidated Statements of Comprehensive Income for the years ended
December 31, 1999 and 1998 and for the period March 19, 1997 (Date of
Inception) to December 31, 1997........................................... F-8

Notes to Consolidated Financial Statements................................. F-9

Schedule:
Schedule II--Valuation and Qualifying Accounts........................... F-49

F-1

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Global Crossing Ltd.:

We have audited the accompanying consolidated balance sheets of Global
Crossing Ltd. (a Bermuda company) and subsidiaries as of December 31, 1999 (as
Revised--see Note 1) and 1998, and the related consolidated statements of
operations, shareholders' equity, cash flows and comprehensive income for the
years ended December 31, 1999 (as Revised--see Note 1) and 1998 and for the
period March 19, 1997 (Date of Inception) to December 31, 1997. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Crossing Ltd. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
and for the period March 19, 1997 (Date of Inception) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.

As explained in the Notes to the consolidated financial statements,
effective January 1, 1999, the Company changed its method of accounting for
start-up costs.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.

/s/ Arthur Andersen
_____________________________________
Arthur Andersen

Hamilton, Bermuda
February 23, 2000 (Except with
respect to the matters
discussed in Notes 1 and 24,
as to which the date is July
11, 2000)

F-2

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)

[Download Table]

December 31, 1999 December 31, 1998
----------------- -----------------

ASSETS:
Current assets:
Cash and cash equivalents................. $ 1,629,546 $ 806,593
Restricted cash and cash equivalents...... 17,092 77,190
Accounts receivable, net.................. 861,583 71,195
Other assets and prepaid costs............ 223,862 21,637
----------- ----------
Total current assets...................... 2,732,083 976,615
Restricted cash and cash equivalents...... 138,118 367,600
Accounts receivable....................... 52,052 43,315
Capacity available for sale............... -- 574,849
Property and equipment, net............... 5,057,102 433,707
Goodwill and intangibles, net............. 7,825,554 --
Investment in and advances to/from
affiliates, net.......................... 317,957 177,334
Other assets.............................. 655,594 65,757
Net assets of discontinued operations..... 2,502,850 --
----------- ----------
Total assets.............................. $19,281,310 $2,639,177
=========== ==========
LIABILITIES:
Current liabilities:
Accrued construction costs................ $ 275,361 $ 129,081
Accounts payable.......................... 448,873 2,018
Accrued cost of access.................... 149,150 --
Accrued liabilities....................... 264,410 29,972
Accrued interest and preferred dividends.. 64,333 14,428
Deferred revenue.......................... 124,775 44,197
Income taxes payable...................... 127,449 15,604
Current portion of long term debt......... 2,071 6,393
Other current liabilities................. 259,729 14,572
----------- ----------
Total current liabilities................. 1,716,151 256,265
Long-term debt............................ 4,899,596 1,066,093
Deferred revenue.......................... 382,305 25,325
Deferred credits and other................ 669,326 34,174
----------- ----------
Total liabilities......................... 7,667,378 1,381,857
----------- ----------
MINORITY INTEREST.......................... 351,338 --
----------- ----------
MANDATORILY REDEEMABLE AND CUMULATIVE
CONVERTIBLE PREFERRED STOCK:
10 1/2% Mandatorily Redeemable Preferred
Stock, 5,000,000 shares issued and
outstanding as of December 31, 1999 and
1998, $100 liquidation preference per
share.................................... 485,947 483,000
----------- ----------
6 3/8% Cumulative Convertible Preferred
Stock, 10,000,000 and 0 shares issued and
outstanding as of December 31, 1999 and
1998, respectively, $100 liquidation
preference per share..................... 969,000 --
----------- ----------
7% Cumulative Convertible Preferred Stock,
2,600,000 and 0 shares issued and
outstanding as of December 31, 1999 and
1998, $250 liquidation preference per
share.................................... 629,750 --
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares
authorized, par value $.01, 799,137,142
and 432,776,246 shares issued as of
December 31, 1999 and 1998,
respectively............................. 7,992 4,328
Treasury stock, 22,033,758 shares......... (209,415) (209,415)
Additional paid-in capital and other
shareholders' equity..................... 9,578,927 1,067,470
Accumulated deficit....................... (199,607) (88,063)
----------- ----------
9,177,897 774,320
----------- ----------
Total liabilities and shareholders'
equity................................... $19,281,310 $2,639,177
=========== ==========

See accompanying notes.

F-3

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share information)

[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

REVENUE................. $ 1,478,903 $ 419,866 $ --
----------- ----------- -----------
EXPENSES:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 87,182 18,140 --
Sales and marketing.... 128,450 31,748 1,366
Network development.... 33,304 14,204 78
General and
administrative........ 229,636 56,797 1,618
Depreciation and
amortization.......... 86,417 541 39
Goodwill and
intangibles
amortization.......... 149,489 -- --
Termination of advisory
services agreement.... -- 139,669 --
----------- ----------- -----------
1,564,961 439,591 3,101
----------- ----------- -----------
OPERATING INCOME
(LOSS)................. (86,058) (19,725) (3,101)
EQUITY IN INCOME (LOSS)
OF AFFILIATES.......... 15,708 (2,508) --
MINORITY INTEREST....... (1,338) -- --
OTHER INCOME (EXPENSE):
Interest income........ 61,235 29,986 2,941
Interest expense....... (137,011) (42,880) --
Other income, net...... 181,480 -- --
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE PROVISION FOR
INCOME TAXES........... 34,016 (35,127) (160)
Provision for income
taxes................. (102,813) (33,067) --
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS.. (68,797) (68,194) (160)
Income from
discontinued
operations, net of
income tax provision
of $23,726............ 17,644 -- --
Extraordinary loss on
retirement of debt.... (45,681) (19,709) --
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................ (14,710) -- --
----------- ----------- -----------
NET LOSS................ (111,544) (87,903) (160)
Preferred stock
dividends............. (66,642) (12,681) (12,690)
Redemption of preferred
stock................. -- (34,140) --
----------- ----------- -----------
INCOME (LOSS) APPLICABLE
TO COMMON
SHAREHOLDERS........... $ (178,186) $ (134,724) $ (12,850)
=========== =========== ===========
INCOME (LOSS) PER COMMON
SHARE:
Income (loss) from
continuing operations
applicable to common
shareholders, basic
and diluted........... $ (0.27) $ (0.32) $ (0.04)
=========== =========== ===========
Discontinued
operations, basic and
diluted............... $ 0.04 $ -- $ --
=========== =========== ===========
Extraordinary item,
basic and diluted..... $ (0.09) $ (0.06) $ --
=========== =========== ===========
Cumulative effect of
change in accounting
principle,
basic and diluted..... $ (0.03) $ -- $ --
=========== =========== ===========
Income (loss)
applicable to common
shareholders, basic
and diluted........... $ (0.35) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in
computing basic and
diluted loss per
share................. 502,400,851 358,735,340 325,773,934
=========== =========== ===========

See accompanying notes.

F-4

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share information)

[Enlarge/Download Table]

Other Shareholders'
Common Stock Treasury Stock Equity
------------------- -------------------- --------------------
Additional Total
Paid-in Accumulated Shareholders'
Shares Amount Shares Amount Capital(a) Other Deficit Equity
----------- ------ ---------- --------- ---------- -------- ----------- -------------

Issuance of common stock
for cash in March 1997
(Date of Inception),
net of $1,264 issuance
costs................. 325,773,934 $3,258 -- $ -- $ 83,713 $ -- $ -- $ 86,971
Preferred stock
dividends............. -- -- -- -- (12,690) -- -- (12,690)
Net loss for the
period................ (160) (160)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1997................... 325,773,934 3,258 -- -- 71,023 -- (160) 74,121
Issuance of common
stock for cash........ 1,575,000 16 -- -- 2,772 -- -- 2,788
Cash reimbursement to
certain shareholders.. -- -- -- -- (7,047) -- -- (7,047)
Unearned compensation.. -- -- -- -- 93,758 (93,758) -- --
Amortization of
compensation expense.. -- -- -- -- -- 37,111 -- 37,111
PCG Warrants........... 24,406,340 244 -- -- 275,054 -- -- 275,298
Issuance of common
stock in exchange for
termination of
advisory services
agreement............. 14,210,526 142 -- -- 134,858 -- -- 135,000
Preferred stock
dividends............. -- -- -- -- (12,681) -- -- (12,681)
Premium on redemption
of preferred stock.... -- -- -- -- (34,140) -- -- (34,140)
Common stock
transactions with
certain shareholders.. 21,733,758 217 22,033,758 (209,415) 209,198 -- -- --
Issuance of common
stock in connection
with initial public
offering, net of
$30,916 issuance
costs................. 44,420,000 444 -- -- 390,630 -- -- 391,074
Issuance of common
stock from exercise of
stock options......... 656,688 7 -- -- 692 -- -- 699
Net loss............... -- -- -- -- -- -- (87,903) (87,903)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1998................... 432,776,246 4,328 22,033,758 (209,415) 1,124,117 (56,647) (88,063) 774,320
Issuance of common
stock from exercise of
stock options......... 10,058,073 101 -- -- 111,263 -- -- 111,364
Income tax benefit from
exercise of stock
options............... -- -- -- -- 9,368 -- -- 9,368
Unearned compensation.. -- -- -- -- 55,066 (55,066) -- --
Amortization of
compensation expense.. -- -- -- -- -- 51,306 -- 51,306
Issuance of common
stock in exchange for
non-compete rights and
licenses.............. 2,239,632 22 -- -- 19,978 -- -- 20,000
Cancellation of shares
issued in connection
with terminated merger
with US West.......... (2,231,076) (22) -- -- (103,362) -- -- (103,384)
Preferred stock
dividends............. -- -- -- -- (66,642) -- -- (66,642)
Shares issued in
connection with
Frontier acquisition.. 355,263,135 3,553 -- -- 8,503,974 -- -- 8,507,527
Shares issued for
retirement of debt.... 1,031,132 10 -- -- 5,290 -- -- 5,300
Foreign currency
translation
adjustment............ -- -- -- -- -- (20,698) -- (20,698)
Unrealized gain on
securities............ -- -- -- -- -- 980 -- 980
Net loss............... -- -- -- -- -- -- (111,544) (111,544)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1999................... 799,137,142 $7,992 22,033,758 $(209,415) $9,659,052 $(80,125) $(199,607) $9,177,897
=========== ====== ========== ========= ========== ======== ========= ==========

--------
(a) Additional Paid-in-Capital has been charged retroactively for the par
value of the shares issued as a result of the 2-for-1 stock split effected
in the form of a stock dividend effective on March 9, 1999.

See accompanying notes.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

[Download Table]

Period From
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net loss............... $ (111,544) $ (87,903) $ (160)
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
(Income) loss from
discontinued
operations............ (17,644) -- --
Extraordinary loss on
retirement of senior
notes................. 45,681 19,709 --
Cumulative effect of
change in accounting
principle............. 14,710 -- --
Non-cash portion of US
West termination
agreement............. (103,384) -- --
Stock related
expenses.............. 51,306 39,374 --
Termination of advisory
services agreement.... -- 135,000 --
Equity in (income) loss
of affiliates......... (15,708) 2,508 --
Depreciation and
amortization.......... 235,906 541 39
Provision for doubtful
accounts.............. 36,483 4,233 --
Deferred income taxes.. 29,384 9,654 --
Capacity available for
sale excluding cash
expenditures for
investing activities.. -- 123,329 (21,200)
Other.................. 7,726 -- --
Changes in operating
assets and
liabilities........... 223,389 (37,718) 26,442
---------- --------- --------
Net cash provided by
operating
activities........... 396,305 208,727 5,121
---------- --------- --------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Cash paid for
construction in
progress and capacity
available for sale.... (1,577,044) (413,996) (428,743)
Acquisitions, net of
cash acquired......... (2,456,811) -- --
Proceeds from sale of
unconsolidated
subsidiary............ 379,086 -- --
Purchases of property
and equipment......... (145,560) -- --
Investments in and
advances to
affiliates............ (173,218) (16,701) --
---------- --------- --------
Net cash used in
investing
activities........... (3,973,547) (430,697) (428,743)
---------- --------- --------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net.. 111,364 392,298 73,736
Proceeds from issuance
of preferred stock,
net................... 1,598,750 483,000 92,470
Proceeds from issuance
of senior notes....... 2,000,000 796,495 150,000
Proceeds from long-term
debt.................. 3,544,083 290,556 162,325
Repayment of long-term
debt.................. (3,351,062) (176,890) --
Retirement of 1997
issued senior notes... -- (159,750) --
Redemption of 1997
issued preferred
stock................. -- (134,372) --
Finance costs
incurred.............. (141,027) (37,665) (28,181)
Cash reimbursement to
certain shareholders.. -- (7,047) --
Minority interest
investment in
subsidiary............ 350,000 -- --
Preferred dividends.... (52,429) -- --
Decrease (increase) in
restricted cash and
cash equivalents...... 289,580 (419,515) (25,275)
---------- --------- --------
Net cash provided by
financing
activities........... 4,349,259 1,027,110 425,075
---------- --------- --------
Cash provided by (used
in) discontinued
operations........... 50,936 -- --
NET INCREASE IN CASH AND
CASH EQUIVALENTS....... 822,953 805,140 1,453
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 806,593 1,453 --
---------- --------- --------
CASH AND CASH
EQUIVALENTS, end of
period................. $1,629,546 $ 806,593 $ 1,453
========== ========= ========

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(In thousands)

[Download Table]

Period From
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

SUPPLEMENTAL INFORMATION
ON NON-CASH FINANCING
ACTIVITIES:
Common stock issued to
holders of preferred
stock................. $ -- $ -- $ 13,325
=========== ========= =========
Common stock issued
upon conversion of
debt.................. $ 5,300 $ -- $ --
=========== ========= =========
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Costs incurred for
construction in
progress and capacity
available for sale.... $(1,704,258) $(607,865) $(497,319)
Increase in accrued
construction costs.... 119,405 77,077 52,414
Increase in accrued
interest.............. -- 8,412 1,641
Amortization of
deferred finance
costs................. 7,809 7,883 2,223
(Increase) decrease in
obligations under
capital leases........ -- (11,660) 12,298
PCG Warrants........... -- 112,157 --
----------- --------- ---------
Cash paid for
construction in
progress and capacity
available for sale.... $(1,577,044) $(413,996) $(428,743)
=========== ========= =========
Non-cash purchases of
property and
equipment............. $ 38,300 $ -- $ --
=========== ========= =========
Transfer of capacity
available for sale to
property and
equipment............. $ 574,849 $ -- $ --
=========== ========= =========
Common stock issued for
non-compete rights.... $ 20,000 $ -- $ --
=========== ========= =========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Changes in operating
assets and
liabilities:
Accounts receivable.... $ (299,668) $(118,743) $ --
Other current assets... (34,154) (46,662) (1,032)
Other Long-Term
Assets................ (113,264) -- --
Deferred revenue....... 331,475 64,197 5,325
Accounts payable and
accrued liabilities... 229,148 30,332 1,249
Income taxes payable... 75,320 15,604 --
Obligations under
inland services
agreement............. (21,994) 17,554 20,900
Deferred credits and
other................. 56,526 -- --
----------- --------- ---------
$ 223,389 $ (37,718) $ 26,442
=========== ========= =========
Detail of acquisitions:
Assets acquired........ $11,120,676 $ -- $ --
Liabilities assumed.... (2,613,149) -- --
----------- --------- ---------
Common stock issued.... $ 8,507,527 $ -- $ --
=========== ========= =========
Net cash paid for
acquisitions.......... $ 2,456,811 $ -- $ --
Cash acquired in
acquisitions.......... 123,855 -- --
----------- --------- ---------
Cash paid for
acquisition, including
transaction fees...... $ 2,580,666 $ -- $ --
=========== ========= =========
Investments in
Affiliates:
Cost of investments in
affiliates............ $ (161,337) $(179,842) $ --
PCG Warrants........... -- 163,141 --
=========== ========= =========
$ (161,337) $ (16,701) $ --
=========== ========= =========
Cash paid for interest
and income taxes:
Interest paid and
capitalized........... $ 217,709 $ 39,424 $ 8,136
=========== ========= =========
Interest paid (net of
capitalized
interest)............. $ 140,630 $ 33,854 $ --
=========== ========= =========
Cash paid for taxes.... $ 14,589 $ 7,809 $ --
=========== ========= =========

See accompanying notes.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Net loss................ $(111,544) $(87,903) $(160)
Foreign currency
translation
adjustment............ (20,698) -- --
Unrealized gain on
securities............ 980 -- --
--------- -------- -----
Comprehensive loss...... $(131,262) $(87,903) $(160)
========= ======== =====

See accompanying notes.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND ORGANIZATION

Global Crossing Ltd. (a Bermuda company, together with its consolidated
subsidiaries, "GCL" or the "Company") is building and offering services over
the world's first independent global fiber optic network, consisting of
101,000 announced route miles and serving five continents, 27 countries and
more than 200 major cities. Upon completion of our currently announced
systems, our network and our telecommunications and Internet product offerings
will be available in markets constituting over 80% of the world's
international communications traffic.

The Company's strategy is to be the premier provider of global broadband
Internet Protocol ("IP") and data services for both wholesale and retail
customers. The Company is building a state-of-the-art fiber optic network that
management believes to be of unprecedented global scope and scale to serve as
the backbone for this strategy. Management believes that the Company's network
will enable it to be the low cost service provider in most of its addressable
markets.

Asia Global Crossing, a joint venture with Softbank Corp. and Microsoft
Corporation intends to become the first truly pan-Asian carrier to offer
worldwide bandwidth and data communications. The Asia Global Crossing joint
venture was established on November 24, 1999.

GlobalCenter, a wholly-owned subsidiary of GCL, will expand its product set
to become a single-source e-commerce service solution that will provide web-
centric businesses with the high availability, flexibility and scalability
necessary to compete in the rapidly expanding digital economy.

Global Crossing Ltd. serves as a holding company for its subsidiaries'
operations, including Global Marine Systems (acquired July 2, 1999), Frontier
Corporation (acquired September 28, 1999), and Racal Telecom (acquired
November 24, 1999).

In February 1999, the Company's Board of Directors declared a 2-for-1 split
of the Company's common stock in the form of a stock dividend which was
effective on March 9, 1999. All share information presented in these
consolidated financial statements gives retroactive effect to the 100-for-1
stock split in January 1998, 1.5-for-1 stock dividend in August 1998 and 2-
for-1 stock dividend on March 9, 1999.

In July 2000, the Company restated its financial statements to revise the
estimated useful life of goodwill related to GlobalCenter from 10 years to 5
years. As a result, loss applicable to common stockholders' and loss per share
increased by $41 million and $0.08 per share, respectively, for the year ended
December 31, 1999.

2. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
significant accounting policies are summarized as follows:

a) Principles of Consolidation

The consolidated financial statements include the accounts of GCL and its
wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As described in Note 3, the Company completed the acquisitions of Global
Marine Systems, Frontier and Racal Telecom during 1999. These acquisitions
have had a major impact on the comparability of the Company's financial
statements. To assist the reader of these financial statements and related
notes, the Company has disclosed certain financial information in Note 3
including the pro forma impact of these acquisitions.

b) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenue and expenses
during the reporting period. Actual amounts and results could differ from
those estimates.

The Company's operations and ability to grow may be affected by numerous
factors, including changes in customer requirements, new laws and governmental
regulations and policies, technological advances, entry of new competitors and
changes in the willingness of financial institutions and other lenders to
finance acquisitions and operations. The Company cannot predict which, if any,
of these or other factors might have a significant impact on the
telecommunications industry in the future, nor can it predict what impact, if
any, the occurrence of these or other events might have on the Company's
operations.

c) Development Stage Company

The Company was in its development stage until May 1998 when the United
States to United Kingdom segment of the AC-1 system was placed into service,
and the Company began generating significant amounts of revenue.

d) Revenue Recognition

Services

Revenue derived from telecommunication, incumbent local exchange ("ILEC")
and maintenance services, including sales of capacity under operating type
leases, are recognized as services are provided, net of an estimate for
uncollectible accounts. Payments received from customers before the relevant
criteria for revenue recognition are satisfied are included in deferred
revenue in the accompanying consolidated balance sheets.

Sales-Type Leases

Revenue from Capacity Purchase Agreements ("CPAs") that meet the criteria of
sales-type lease accounting are recognized in the period that the rights and
obligations of ownership transfer to the purchaser, which occurs when (i) the
purchaser obtains the right to use the capacity, which can only be suspended
if the purchaser fails to pay the full purchase price or fulfill its
contractual obligations, (ii) the purchaser is obligated to pay Operations,
Administration and Maintenance ("OA&M") costs and (iii) the segment of a
system related to the capacity purchased is available for service. Certain
customers who have entered into CPAs for capacity have paid deposits toward
the purchase price which have been included as deferred revenue in the
accompanying consolidated balance sheets.

Prior to July 1, 1999, substantially all CPAs were treated as sales-type
leases as described in Statement of Financial Accounting Standards No. 13,
"Accounting for Leases" ("SFAS 13"). On July 1, 1999, the Company adopted
Financial Accounting Standards Board Interpretation No. 43, "Real Estate
Sales, an interpretation of FASB Statement No. 66" ("FIN 43"), which requires
prospective transactions to meet the criteria set forth in Statement of
Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate"
("SFAS 66") to qualify for sales-type lease accounting. Since sales of
terrestrial capacity did not meet the new criteria, the terrestrial portion of
CPAs executed subsequent to June 30, 1999 were recognized over the terms of
the contracts, as services.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company offers customers flexible bandwidth products to multiple
destinations and anticipates that many of the contracts for subsea circuits
entered into will be part of a service offering. Therefore, the Company
anticipates that many of these contracts will not meet the criteria of sales-
type lease accounting and will be accounted for as operating leases.
Consequently, the Company will defer revenue related to those circuits and
amortize that revenue over the appropriate term of the contract. Accordingly,
the Company will treat cash received, but not recognized, as deferred revenue.
In certain circumstances, should a contract meet all of the requirements of
sales-type lease accounting, the Company will recognize revenue without
deferral upon payment and activation.

The principal effect of the change in the type of contracts offered to the
Company's customers beginning on January 1, 2000 is that an increasing
percentage of capacity sales will be accounted for as operating leases rather
than sales-type leases, resulting in more revenue from such sales being
deferred into future periods than was previously the case. Accordingly, this
change in contract terms will reduce revenue recognized upon activation of
circuits in earlier periods and increase revenue recognized in later periods.

As of December 31, 1999, the Company had an aggregate backlog of
approximately $251 million in capacity sales contracts for which revenue will
be recognized using sales-type lease accounting upon activation. For the
remaining backlog as of that date, revenue will be recognized using operating
lease accounting, that is amortized over the life of the contract.

For years ended December 31, 1999 and December 31, 1998, $728 million and
$415 million in revenue, respectively, was recognized using sales-type lease
accounting.

Percentage-of-Completion

Revenue and estimated profits under long-term contracts for undersea
telecommunication installation by Global Marine Systems are recognized under
the percentage-of-completion method of accounting, whereby sales and profits
are recognized as work is performed based on the relationship between actual
costs incurred and total estimated costs to complete. Provisions for
anticipated losses are made in the period in which they first become
determinable.

e) Cost of Sales

Services

Costs of the network relating to capacity contracts accounted for as
operating leases are treated as fixed assets and, accordingly, are depreciated
over the estimated useful life of the capacity.

Sales-Type Leases

Prior to October 1, 1999, the effective date of the Frontier merger, cost of
sales for subsea circuits was calculated based on the ratio of capacity
revenue recognized in the period to total expected capacity revenue over the
life of the network system, multiplied by the total remaining costs of
constructing the network system. This calculation of cost of sales matches
costs with the value of each sale relative to total expected revenue. Until
the entire system was completed, for purposes of calculating cost of sales,
the total system costs incurred included an estimate of remaining costs to be
incurred to complete the entire system plus the cost of system upgrades that
management had the intent and ability to complete, provided the need for such
upgrades was supported by a third party consultant's independent revenue
forecast.

Beginning October 1, 1999, the Company initiated service contract accounting
and therefore began depreciating all of its systems; however, certain
contracts still qualified for sales-type lease accounting. For these

F-11

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

transactions, the Company's policy provided for recording cost of sales in the
period in which the related revenue was recognized, in addition to the
depreciation charge described below (see Property and Equipment and
Construction in Progress). Under service contract accounting, the amount
charged to cost of sales relating to subsea capacity was calculated by
determining the estimated net book value of the specific subsea capacity at
the time of the sale. The estimated book value includes expected costs of
capacity the Company has the intent and ability to add through upgrades of
that system, provided the need for such upgrades is supported by a third-party
consultant's independent revenue forecast.

f) Commissions and Advisory Services Fees

The Company's policy is to record sales commissions and advisory fee
expenses and related payables upon the recognition of revenue so as to
appropriately match these costs with the related revenue. Under the Advisory
Services Agreement ("ASA"), which was terminated by December 31, 1998, the
Company paid PCG Telecom Services LLC ("PCG Telecom") and its affiliates 2% of
revenue for advisory services performed. Under the Sales Agency Agreement, the
Company paid Tyco Submarine Systems Ltd. ("TSSL") a commission based on a
percentage of revenue from the sale of capacity on certain of the Company's
systems.

g) Cash and Cash Equivalents, Restricted Cash and Cash Equivalents (Current
and Long Term)

The Company considers cash in banks and short term highly liquid investments
with an original maturity of three months or less at the date of purchase to
be cash equivalents. Cash and cash equivalents and restricted cash and cash
equivalents are stated at cost which approximates fair value.

h) Property and Equipment and Construction in Progress

Property and equipment, which includes capitalized leases, are stated at
cost, net of depreciation and amortization. Major enhancements are
capitalized, while expenditures for repairs and maintenance are expensed when
incurred. Costs incurred prior to a segment's completion are reflected as
construction in progress in the accompanying consolidated balance sheets and
recorded as property and equipment at the date each segment of the applicable
system becomes operational.

Construction in progress includes direct expenditures for construction of
network systems and is stated at cost. Capitalized costs include costs
incurred under the construction contract; advisory, consulting and legal fees;
interest; and amortized finance costs incurred during the construction phase.
Once it is probable that a cable system will be constructed, costs directly
identifiable with the cable system under development are capitalized. Costs
relating to the evaluation of new projects incurred prior to the date the
development of the network system becomes probable are expensed as incurred.

In connection with the construction of the Global Crossing network, the
Company has entered into various agreements to sell or exchange dark fiber,
ducts, rights of ways, and certain capacity. These non-monetary exchanges are
recorded at the cost of the asset transferred or, if applicable, the fair
value of the asset received.

Interest incurred, which includes the amortization of deferred finance fees
and issuance discount ("interest cost"), are capitalized to construction in
progress. Total interest cost incurred and interest capitalized to
construction in progress during the periods presented were:

[Download Table]

For the period
March 31, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
(In thousands)

Interest cost incurred.. $214,090 $92,813 $9,777
======== ======= ======
Interest cost
capitalized to
construction in
progress............... $ 77,079 $49,933 $9,777
======== ======= ======

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets, with the exception of leasehold improvements and assets
acquired through capital leases, which are depreciated over the lesser of the
estimated useful lives or the term of the lease. Estimated useful lives are as
follows:

[Download Table]

Buildings...................................................... 10-40 years
Leasehold improvements......................................... 2-25 years
Furniture, fixtures and equipment.............................. 2-30 years
Transmission equipment......................................... 3-25 years

Beginning October 1, 1999, the Company commenced service contract
accounting. Carrying amounts related to completed subsea systems were
reclassified from capacity available for sale to depreciable assets, and are
being depreciated over their remaining economic useful lives.

When property or equipment is retired or otherwise disposed of, the cost and
accumulated depreciation are relieved from the accounts, and resulting gains
or losses are reflected in the determination of current net income.

The Company reviews the carrying value of property and equipment for
impairment whenever events and circumstances indicate that the carrying value
of an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. In cases where
undiscounted expected future cash flows are less than the carrying value, an
impairment loss would be recognized equal to an amount by which the carrying
value exceeds the fair value of the assets.

i) Goodwill and Intangibles

Costs in excess of net assets of acquired businesses are amortized on the
straight-line method over 3 to 25 years. In cases where undiscounted expected
future cash flows are less than the carrying value, the impairment
loss would be included in the determination of current net income. Subsequent
to acquisitions, the Company continually evaluates whether later events and
circumstances have occurred which indicate that the remaining estimated useful
life of intangible assets may warrant revision or that the remaining balance
of such assets may not be recoverable. When factors indicate that intangible
assets should be evaluated for possible impairment, the Company uses an
estimate of the undiscounted operating income over the remaining life of the
intangible assets in measuring whether the intangible assets are recoverable.

j) Deferred Finance Costs

Costs incurred to obtain financing through the issuance of senior notes and
long-term debt have been reflected as an asset included in other assets in the
accompanying consolidated balance sheets. Costs incurred to obtain financing
through the issuance of preferred stock have been reflected as a reduction in
the carrying value of the issued preferred stock. The financing costs relating
to the debt are amortized over the lesser of the term of the related debt
agreements or the expected payment date of the debt obligation. In 1998,
certain preferred stock was redeemed at which time the remaining balance of
unamortized discount and offering costs was charged against additional paid-in
capital. In 1999 and 1998, certain long-term debt was extinguished, at which
time the remaining balance of unamortized discount and offering costs was
written off and included in extraordinary loss on retirement of debt.

During the construction period, the amortized portion of deferred financing
costs relating to the senior notes and the long-term debt are included in
construction in progress as a component of interest capitalized or recorded as
interest expense in accordance with Statement of Financial Accounting
Standards (SFAS) No. 34, "Capitalization of Interest Cost". The amortized
portion of the deferred financing costs relating to the preferred stock is
included as a component of preferred stock dividends.

F-13

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

k) Investments

Investments in which the Company does not have significant influence or in
which the Company holds an ownership interest of less than 20% are recorded
using the cost method of accounting. The equity method of accounting is
applied for investments in affiliates, if the Company owns an aggregate of 20%
to 50% of the affiliate and if the Company exercises significant influence
over the affiliate. The equity method is also applied for entities in which
the Company's ownership is in excess of 50% but over which the Company is
unable to exercise effective control, due to minority shareholders
participating in significant decisions in the ordinary course of business.
During the three years ended December 31, 1999, the only entity meeting this
standard was Pacific Crossing Ltd. If the Company holds more than 50% of the
ownership and is able to exercise effective control, the owned entity's
financial statements and the appropriate deductions for minority interest are
included in the accompanying consolidated financial statements.

l) Financial Instruments

The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest rates and foreign currency exchange rates.
The Company has established policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument
activities. The Company does not enter into financial instruments for trading
or speculative purposes. Accordingly, they are presented on the accompanying
consolidated balance sheet at their carrying values, which approximates their
fair values. Fair values are based on market quotes, current interest rates or
management estimates, as appropriate.

The Company has entered into forward currency contracts, hedging the
exchange risk on committed foreign currency transactions. Gains and losses on
these contracts are recognized at the time the underlying transaction is
completed.

As discussed in Note 15, the Company has entered into an interest rate swap
agreement to hedge its variable interest-rate exposure on debt. Hedge
accounting was applied in respect of these instruments; accordingly, the
net cash amounts to be paid or received on the agreement are accrued and
recognized as an adjustment to interest expense on the related debt.

m) Income Taxes

The Company recognizes current and deferred income tax assets and
liabilities based upon all events that have been recognized in the
consolidated financial statements as measured by the enacted tax laws.

n) Effect of Foreign Currencies

For those subsidiaries using the U.S. Dollar as their functional currency,
transaction loss is recorded in the accompanying consolidated statements of
operations. The Company's foreign transaction loss was $26.9 million for the
year ended December 31, 1999. The effect of foreign currency transactions in
all periods prior to the year ended December 31, 1999 were immaterial.

For those subsidiaries not using the U.S. Dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts are translated at
average exchange rates during the period. Resulting translation adjustments
are recorded directly to a separate component of shareholders' equity. For the
year ended December 31, 1999, the Company incurred a foreign currency
translation loss of $20.7 million. For all periods prior to December 31, 1999,
the translation adjustments were immaterial.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

o) Stock Option Plan

The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and, accordingly, recognizes compensation expense for stock option
grants to the extent that the estimated fair value of the stock exceeds the
exercise price of the option at the measurement date. The compensation expense
is charged against operations ratably over the vesting period of the options.

p) Concentration of Credit Risk

The Company has some concentration of credit risk among its customer base.
The Company performs ongoing credit evaluations of its larger customer's
financial condition. As of and for the year ended December 31, 1999, five
customers represented 14% and 29% of the Company's receivables and revenue,
respectively.

q) Change in Accounting Policy

The Company adopted Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") in the first quarter of 1999. Accordingly, a
one-time charge of $15 million (net of tax benefit), representing start-up
costs incurred and capitalized during previous periods, was charged against
net income.

r) Pending Accounting Standards

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No.
133", which deferred SFAS No. 133's effective date to fiscal quarters
beginning after June 15, 2000. This statement standardizes the accounting for
derivatives and hedging activities and requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities at fair value. Changes in the fair value of derivatives that do
not meet the hedge accounting criteria are to be reported in earnings. The
impact of the adoption of this standard has not been quantified.

s) Reclassifications

Certain prior year amounts have been reclassified in the consolidated
financial statements to conform to current year presentation.

3. MERGERS AND ACQUISITIONS

The following mergers and acquisitions occurred during 1999 and have been
accounted for in the accompanying consolidated financial statements under the
purchase method of accounting for business combinations. The purchase price
was allocated based on the estimated fair value of acquired assets and
liabilities at the date of acquisition.

Global Marine Systems Acquisition

On July 2, 1999, the Company acquired the Global Marine business of Cable &
Wireless Plc for approximately $908 million, consisting of a combination of
cash and assumed indebtedness. This resulted in an excess of purchase price
over net assets acquired of $693 million, which was allocated to goodwill and
other intangible assets and are being amortized on the straight-line method
over 3-25 years. Global Marine Systems provides services, including
maintenance under a number of long-term contracts, to cables built by carriers
and is the world's largest undersea cable installation and maintenance
company. The Company initially financed the acquisition with committed bank
financing in the amount of $600 million and the remainder with cash on hand.

F-15

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Frontier Corporation Merger

On September 28, 1999, the Company completed its merger with Frontier
Corporation, resulting in Frontier becoming a wholly owned subsidiary of the
Company.

Frontier shareholders received 2.05 shares of the Company's common stock for
each outstanding share of common stock of Frontier Corporation, for a total of
355 million shares of Global Crossing common stock, including outstanding and
unexercised stock options. The purchase price of $10.3 billion reflects a
Global Crossing stock price of $22 15/16 per share, the average closing price
of Global Crossing common stock from September 1, 1999 through September 3,
1999, and includes long term debt and Frontier stock options assumed by Global
Crossing. For accounting purposes, the merger with the Company is deemed to
have occurred as of the close of business on September 30, 1999. The excess of
purchase price over net assets acquired, as adjusted for the sale of the ILEC
business, of $6.1 billion was allocated to goodwill and other intangible
assets; goodwill and intangible assets are being amortized on the straight-
line method over 5-25 years.

Racal Telecom Acquisition

On November 24, 1999, the Company acquired Racal Telecom for approximately
$1.6 billion in cash. The Company entered into a (Pounds)675 million
(approximately $1,091 million as of December 31, 1999) credit facility to
finance the acquisition. The excess of purchase price over net assets acquired
of $1.3 billion was allocated to goodwill and is being amortized on the
straight-line method over 6-25 years. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom. For
accounting purposes, the acquisition is deemed to have occurred as of the
close of business on November 30, 1999.

Asia Global Crossing

On November 24, 1999, the Asia Global Crossing joint venture was
established. In exchange for a majority interest, the Company contributed to
the joint venture its development rights in East Asia Crossing ("EAC") and its
58% interest in Pacific Crossing ("PC-1"). Softbank Corp. and Microsoft
Corporation each contributed
$175 million in cash to Asia Global Crossing. In addition, Softbank and
Microsoft committed to make a total of at least $200 million in capacity
purchases on our network over a three-year period, expected to be utilized
primarily on PC-1 and EAC. Softbank and Microsoft have also agreed to use Asia
Global Crossing's network in the region, subject to specified conditions.
Minority interest of $351 million was recorded in 1999 in connection with this
joint venture.

Hutchison Global Crossing

On November 15, 1999, the Company entered into an agreement with Hutchison
Whampoa Limited ("Hutchison") to form a joint venture called Hutchison Global
Crossing, which began operations on January 12, 2000. The joint venture is
owned in equal parts by the Company and Hutchison. In exchange for its 50
percent interest, the Company will contribute certain assets and services to
the joint venture and, in January 2000, issued to Hutchison $400 million
aggregate liquidation preference of its 6 3/8% cumulative convertible
preferred stock, series B, convertible into its common stock. Hutchison Global
Crossing will be accounted for as an unconsolidated joint venture under the
equity method of accounting.

The initial purchase price allocations for the 1999 business combinations
are based on current estimates. The Company will make final purchase price
allocations based upon final values for certain assets and liabilities. As a
result, the final purchase price allocation may differ from the presented
estimate.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following unaudited pro forma condensed combined financial information
of Global Crossing, Global Marine Systems, Frontier, as adjusted for the sale
of the ILEC business, Racal Telecom and the Hutchison Global Crossing joint
venture demonstrates the results of operations had the merger and acquisitions
related transactions been completed at the beginning of the periods presented.

[Download Table]

December 31,
--------------------------
1999 1998
------------ ------------
(unaudited)
(In thousands, except
share and per share data)

Revenue........................................ $ 3,410,666 $ 2,941,586
============ ============
Income (loss) from continuing operations....... $ (1,144,063) $ (630,778)
============ ============
Net loss....................................... $ (1,186,810) $ (577,205)
============ ============
Income (loss) from continuing operations
applicable to common shareholders ............ $ (1,422,795) $ (668,959)
============ ============
Income (loss) applicable to common
shareholders.................................. $ (1,465,542) $ (649,346)
============ ============
Income (loss) per common share:
Income (loss) applicable to common
shareholders
Basic and diluted............................ $ (1.91) $ (0.92)
============ ============
Income (loss) from continuing operations
applicable to common shareholders
Basic and diluted............................ $ (1.85) $ (0.94)
============ ============
Shares used in computing loss per share
Basic and diluted............................ 767,355,151 708,518,640
============ ============

4. RESTRICTED CASH AND CASH EQUIVALENTS

Current and long term restricted cash and cash equivalents include the
following:

[Download Table]

December 31,
-----------------
1999 1998
-------- --------
(In thousands)

Funds restricted for PC-1 construction.................... $138,118 $231,790
Funds restricted under the AC-1 Credit Facility........... -- 89,000
Funds restricted for MAC construction..................... -- 65,000
Funding for future interest on senior notes............... -- 38,000
Other..................................................... 17,092 21,000
-------- --------
$155,210 $444,790
======== ========

5. ACCOUNTS RECEIVABLE

Current and long term accounts receivable are comprised of:

[Download Table]

December 31,
------------------
1999 1998
-------- --------
(In thousands)

Accounts receivable...................................... $999,394 $118,743
Allowance for doubtful accounts.......................... (85,759) (4,233)
-------- --------
Accounts receivable, net................................. $913,635 $114,510
======== ========

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

[Download Table]

December 31,
--------------------
1999 1998
---------- --------
(In thousands)

Land................................................... $ 689 $ --
Buildings.............................................. 87,928 --
Leasehold improvements................................. 26,412 774
Furniture, fixtures and equipment...................... 717,570 5,306
Transmission equipment................................. 1,851,401 --
---------- --------
2,684,000 6,080
Accumulated depreciation............................... (82,663) (580)
---------- --------
2,601,337 5,500
Construction in progress............................... 2,455,765 428,207
---------- --------
Total property and equipment, net...................... $5,057,102 $433,707
========== ========

Depreciation and amortization expense for the year ended December 31, 1999
was approximately $86 million. Depreciation expense for December 31, 1998 and
for the period ended March 19, 1997 (date of inception) to December 31, 1997
was insignificant.

7. GOODWILL AND INTANGIBLES

The Company acquired three companies in 1999 as described in Note 3. All
companies acquired have been accounted for as purchases with the excess of the
purchase price over the estimated fair value of the net assets acquired
recorded as goodwill.

Goodwill and intangibles are as follows:

[Download Table]

December 31,
----------------
1999 1998
---------- ----
(In thousands)

Goodwill and intangibles................................... $7,975,043 $--
Accumulated amortization................................... (149,489) --
---------- ----
Goodwill and intangibles, net.............................. $7,825,554 $--
========== ====

8. INVESTMENT IN AND ADVANCES TO/FROM AFFILIATES

Investment in Pacific Crossing Ltd. ("PCL")

In April 1998, the Company entered into a joint venture to construct the PC-
1 cable system which is owned and operated by PCL. The Company has an economic
interest in PCL represented by a 50% direct voting interest and, through one
of the joint venture partners, owns a further 8% economic non-voting interest.

Investment in Global Access Ltd.

In December 1998, the Company entered into a joint venture, Global Access
Ltd., to construct and operate GAL, a terrestrial cable system connecting
Tokyo, Osaka and Nagoya with PC-1. The Company has a 49% interest in Global
Access Ltd.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's investments in PCL and GAL are accounted for as interest in
affiliates under the equity method because the Company is not able to exercise
effective control over their operations.

The Company's investment in affiliates consists of the following:

[Download Table]

December 31,
-----------------
1999 1998
-------- --------
(In thousands)

Investment in Pacific Crossing Ltd........................ $266,068 $160,639
Investment in Global Access Ltd........................... 22,693 16,695
Other investments and advances to/from affiliates......... 29,196 --
-------- --------
Investment in and advances to/from affiliates............. $317,957 $177,334
======== ========

9. TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). The provision for income taxes is
comprised of the following:

[Download Table]

December 31,
-----------------
1999 1998
-------- -------
(In thousands)

Current................................................... $121,701 $23,413
Deferred.................................................. (18,888) 9,654
-------- -------
Total income tax expense.................................. $102,813 $33,067
======== =======

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.

Bermuda does not impose a statutory income tax and consequently the
provision for income taxes recorded relates to income earned by certain
subsidiaries of the Company which are located in jurisdictions which impose
income taxes.

The following is a summary of the significant items giving rise to
components of the Company's deferred tax assets and liabilities:

[Download Table]

December 31,
------------------------------------------
1999 1998
--------------------- --------------------
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
(In thousands) (In thousands)

Bad debt reserve................ $ 7,220 $ -- $ -- $ --
Research and development costs.. -- (41,018) -- --
Depreciation.................... -- (212,401) -- (4,042)
Basis adjustment to purchased
companies...................... -- (32,096) -- --
Employee benefits obligation.... -- (52,203) -- --
Net operating loss (NOL)
carryforwards.................. 58,876 -- -- --
Deferred and stock related
compensation................... 10,831 -- 504 --
Other........................... 34,480 (15,235) -- (6,116)
-------- --------- -------- --------
111,407 (352,953) 504 (10,158)
Valuation allowance............. (54,780) -- -- --
-------- --------- -------- --------
$ 56,627 $(352,953) $ 504 $(10,158)
======== ========= ======== ========

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company established a valuation allowance of $54,780 as of December 31,
1999. The valuation allowance is related to deferred tax assets due to the
uncertainty of realizing the full benefit of the NOL carryforwards. In
evaluating the amount of valuation allowance needed, the Company considers the
acquired companies' prior operating results and future plans and expectations.
The utilization period of the NOL carryforwards and the turnaround period of
other temporary differences are also considered. The Company's NOLs begin to
expire in 2004.

10. LONG-TERM DEBT

Outstanding debt consists of the following:

[Download Table]

December 31,
----------------------
1999 1998
---------- ----------
(In thousands)

9 1/2% Senior Notes due 2009........................ $1,100,000 $ --
9 1/8% Senior Notes due 2006........................ 900,000 --
9 5/8% Senior Notes due 2008........................ 800,000 800,000
Senior Secured Revolving Credit Facility............ 648,597 --
Racal Telecom Term Loan A........................... 646,130 --
Medium-Term Notes, 7.51%--9.3%, due 2000 to 2004.... 179,000 --
7 1/4% Senior Notes due 2004........................ 300,000 --
6% Dealer Remarketable Securities (DRS) due 2013.... 200,000 --
AC-1 Credit Facility................................ -- 266,799
Other............................................... 159,655 9,192
---------- ----------
Total debt.......................................... 4,933,382 1,075,991
Less: discount on long-term debt, net............... (31,715) (3,505)
Less: current portion of long-term debt............. (2,071) (6,393)
---------- ----------
Long-term debt...................................... $4,899,596 $1,066,093
========== ==========

Maturities of long-term debt are as follows (in thousands):

[Download Table]

Year Ending December 31,

2000.......................................................... $ 2,071
2001.......................................................... 117,889
2002.......................................................... --
2003.......................................................... --
2004.......................................................... 1,164,294
Thereafter.................................................... 3,649,128
----------
Total......................................................... $4,933,382
==========

Senior Notes

On November 12, 1999, Global Crossing Holdings Ltd. ("GCH"), a wholly-owned
subsidiary of GCL, issued two series of senior unsecured notes ("New Senior
Notes"). The 9 1/8% senior notes are due November 15, 2006 with a face value
of $900 million and the 9 1/2% senior notes are due November 15, 2009 with a
face value of $1.1 billion. The New Senior Notes are guaranteed by GCL.
Interest will be paid on the notes on May 15 and November 15 of each year,
beginning on May 15, 2000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On May 18, 1998, GCH also issued 9 5/8% senior notes due May 15, 2008, with
a face value of $800 million ("9 5/8% Senior Notes"). The 9 5/8% Senior Notes
are guaranteed by GCL. Interest will be paid on the notes on May 15 and
November 15 of each year.

The 12% senior notes issued by Global Telesystems Holdings Ltd. ("GTH"), now
known as Atlantic Crossing Holdings Ltd., with a face value of $150 million,
due March 31, 2004 ("Old Senior Notes"), were repurchased in May 1998 with the
proceeds from the issuance of the 9 5/8% Senior Notes. The Company
recognized an extraordinary loss of approximately $20 million on repurchase
comprised of a premium of approximately $10 million and a write-off of
approximately $10 million of unamortized deferred financing costs during 1998.

Senior Secured Revolving Credit Facility

On July 2, 1999, the Company, through GCH, entered into a $3 billion senior
secured corporate credit facility ("Corporate Credit Facility") with several
lenders. The proceeds from the Corporate Credit Facility were used to repay
existing indebtedness and fund capital expenditures. The Corporate Credit
Facility consisted of two term loans and a revolving credit facility, which
matures on July 2, 2004. The term loans were paid in full during fiscal year
1999. Unused credit under the revolving credit facility is approximately $350
million as of December 31, 1999. Interest is payable at LIBOR plus 2.25
percent (8.44 percent at December 31, 1999).

During 1999, the Company recognized an extraordinary loss resulting from the
payoff of existing debt in connection with the issuance of the Corporate
Credit Facility, comprised of a write-off of $15 million of unamortized
deferred financing costs.

On November 12, 1999, the proceeds from the issuance of the New Senior Notes
were used to pay down the fixed term portion of the Corporate Credit Facility,
resulting in a write-off of $31 million of unamortized deferred financing
costs.

AC-1 Credit Facility

During 1997, the Company's wholly-owned subsidiary, Atlantic Crossing Ltd.
("ACL"), entered into a $482 million aggregate senior secured non-recourse
loan facility (the "AC-1 Credit Facility") with a group of banks led by CIBC
and Deutsche Bank AG, for the construction and financing costs of AC-1. The
AC-1 Credit Facility was paid in full in July 1999.

MAC Credit Facility

During November 1998, the Company's wholly-owned subsidiary, Mid-Atlantic
Crossing Ltd. ("MACL"), entered into a $260 million aggregate senior secured
non-recourse loan facility (the "MAC Credit Facility"). As of December 31,
1998, the outstanding balance was $9 million. The MAC Credit Facility was paid
in full in July 1999.

6% Dealer Remarketable Securities

The 6% DRS were issued by Frontier Corporation and were outstanding at the
date of acquisition. The 6% DRS are due on October 15, 2013. Interest will be
paid on April 15 and October 15 each year. These notes may be put back to the
Company in October 2003, depending on the interest rate environment at that
time.

7 1/4% Senior Notes

The 7 1/4% Senior Notes were issued by Frontier Corporation and were
outstanding at the date of acquisition. The 7 1/4% Senior Notes are due May
14, 2004. Interest will be paid on May 15 and November 15 each year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In December 1997, the Company entered into an interest rate hedge agreement
that effectively converts $200 million of the Company's 7.25% fixed-rate notes
due May 2004 into a floating rate based on the US dollar London Interbank
Offered Rate ("LIBOR") index rate plus 1.26%. The agreement expires in May
2004. Interest expense and the related cash flows under the agreement are
accounted for on an accrual basis. The Company periodically enters into such
agreements to balance its floating rate and fixed rate obligations to insulate
against interest rate risk and minimize interest expense.

Racal Telecom Term Loan A

On November 24, 1999, the Company entered into a GBP 675 million
(approximately $1,091 million as of December 31, 1999) credit facility to
finance the acquisition of Racal Telecom. The facility consists of two term
loans due November 24, 2007. Interest is payable at LIBOR plus 2.5 percent
(8.44 percent at December 31, 1999).

Medium Term Notes

The Medium Term Notes were issued by Frontier Corporation and were
outstanding at the date of acquisition. The Company intends to refinance the
notes due in fiscal 2000 with proceeds from the other available debt
facilities.

Certain of the debt facilities mentioned above contain various financial and
non financial restrictive covenants and limitations, including, among other
things, the satisfaction of tests of "consolidated cash flow", as defined.
Additionally, certain ILEC assets are pledged as security.

11. OBLIGATIONS UNDER INLAND SERVICES AGREEMENT, CAPITAL LEASES AND OPERATING
LEASES

The Company has capitalized the minimum lease payment of property and
equipment under leases that qualify as capital leases.

At December 31, 1999, future minimum payments under these capital leases are
as follows (in thousands) and are included in Deferred credits and other in
the accompanying Consolidated Balance Sheet:

[Download Table]

Year Ending December 31,
2000.............................................................. $ 53,235
2001.............................................................. 43,279
2002.............................................................. 38,390
2003.............................................................. 36,486
2004.............................................................. 53,195
Thereafter........................................................ 436,580
---------
Total minimum lease payments...................................... 661,165
Less: Amount representing maintenance payments.................... (133,240)
Less: Amount representing interest................................ (272,358)
---------
Present value of minimum lease payments........................... $ 255,567
=========

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has commitments under various non-cancelable operating leases.
Estimated future minimum lease payments on operating leases are approximately
as follows (in thousands):

[Download Table]

Year Ending December 31,
2000.............................................................. $129,299
2001.............................................................. 79,121
2002.............................................................. 76,833
2003.............................................................. 69,863
2004.............................................................. 65,759
Thereafter........................................................ 347,797
--------
Total............................................................. $768,672
========

Rental expense for the years December 31, 1999 and 1998 and period from
March 19, 1997 (Date of Inception) to December 31, 1997 is $73,711, $754 and
none, respectively (in thousands).

12. COMMITMENTS, CONTINGENCIES AND OTHER

As of December 31, 1999, ACL was committed under contracts with Tyco
Submarine Systems Ltd. ("TSSL") for AC-1 upgrades totaling approximately $59
million and is committed under the OA&M contract with TSSL to quarterly
payments, over the next eight years, totaling approximately $247 million which
will be borne by the Company's customers or by the Company to the extent there
is unsold capacity.

ACL was committed to paying TSSL commissions ranging from 3% to 7% on
revenue received until 2002, subject to certain reductions. The Company also
had a commission sharing agreement with TSSL whereby GCL had primary
responsibility for the marketing and sale of capacity of AC-1 and PC-1 and
shared a percentage of commissions payable to TSSL as consideration for
assuming primary responsibility for the sales effort and marketing of the
Company's projects. The Sales Agency Agreement with TSSL will terminate in
March 2002 with an option by the Company to extend it until March 2005. The
Company provided TSSL with a notice of termination with respect to these
agreements effective February 22, 2000.

As of December 31, 1999, the Company was committed under the contracts to
construct its Mid-Atlantic Crossing, Pan American Crossing, South American
Crossing, Pan European Crossing and East Asia Crossing systems for future
construction costs totaling approximately $2 billion.

In addition, as of December 31, 1999, the Company was committed to make
future equity contributions to PCL in the amount of $240 million.

The Company and a number of its subsidiaries in the normal course of
business are party to a number of judicial, regulatory and administrative
proceedings. The Company's management does not believe that any material
liability will be imposed as a result of any of these matters.

13. PREFERRED STOCK

Cumulative Convertible Preferred Stock

In September 1999, GCL authorized 20,000,000 shares of preferred stock on
terms and conditions to be established from time to time at the discretion of
the Board of Directors.

In December 1999, GCL issued 2,600,000 shares of 7% cumulative convertible
preferred stock at a liquidation preference of $250.00 per share for net
proceeds of $630 million. Each share of preferred stock is convertible into
4.6948 shares of common stock based on a conversion price of $53.25. Dividends
on the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

preferred stock are cumulative from the date of issue and will be payable on
February 1, May 1, August 1 and November 1 of each year, beginning on February
1, 2000, at the annual rate of 7%. Dividends accrued as of December 31, 1999
were $1.9 million.

In November 1999, GCL issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 per share
for net proceeds of approximately $969 million. Each share of preferred stock
is convertible into 2.2222 shares of common stock, based on a conversion price
of $45.00. Dividends on the preferred stock are cumulative from the date of
issue and will be payable on February 1, May 1, August 1 and November 1 of each
year, beginning on February 1, 2000, at the annual rate of 6 3/8%. Dividends
accrued as of December 31, 1999 were $9.7 million.

The convertible preferred stock ranks junior to each other class of capital
stock other than common stock of GCL with respect to dividend rights, rights of
redemption or rights on liquidation and on a parity with any future preferred
stock of GCL. The convertible preferred stock is junior in right of payment of
all indebtedness of GCL and its subsidiaries. The preferred stock is non-voting
unless the accumulation of unpaid dividends on the outstanding preferred stock
is an amount equal to six quarterly dividend payments. The preferred stock can
be redeemed, at the Company's option, starting in 2004 at specified premiums
declining to par in 2009. Holders of preferred stock have the right to require
the Company to repurchase shares of the preferred stock at par following the
occurrence of certain change of control transactions.

10 1/2% Mandatorily Redeemable Preferred Stock

In December 1998, GCH authorized the issuance of 7,500,000 shares of
preferred stock ("GCH Preferred Stock") at a liquidation preference of $100.00
per share plus accumulated and unpaid dividends. In December 1998, 5,000,000
shares of GCH Preferred Stock were issued for $500 million in cash. The Company
reserved for future issuances up to 2,500,000 shares to pay dividends.
Dividends accrued as of December 31, 1999 and 1998 were $4 million. Unamortized
issuance costs were $14.1 million and $17 million as of December 31, 1999 and
1998, respectively.

The holders of the GCH Preferred Stock are entitled to receive cumulative,
semi-annual compounding dividends at an annual rate of 10 1/2% of the $100
liquidation preference per share. At the Company's option, accrued dividends
may be paid in cash or paid by issuing additional preferred stock (i.e. pay-in-
kind) until June 1, 2002, at which time they must be paid in cash. As of
December 31, 1999, all dividends had been paid in cash. Dividends are payable
semi-annually in arrears on each June 1 and December 1. The preferred stock
ranks senior to all common stock of GCH with respect to dividend rights, rights
of redemption or rights on liquidation and on a parity with any future
preferred stock of GCH. The preferred stock is junior in right of payment of
all indebtedness of GCH and its subsidiaries. The preferred stock is non-voting
unless the accumulation of unpaid dividends (or if, beginning on June 1, 2002,
such dividends are not paid in cash) on the outstanding preferred stock is an
amount equal to three semi-annual dividend payments.

The preferred stock has a mandatory redemption on December 1, 2008 at a price
in cash equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends thereon to the date of redemption. The
preferred stock can be redeemed, in whole or in part, at the Company's option
at redemption prices starting at 105.25% of the liquidation preference in 2003,
declining to 103.5% in 2004, 101.75% in 2005 and 100% thereafter.

The certificate of designation governing the preferred stock imposes certain
limitations on the ability of the Company to, among other things, (i) incur
additional indebtedness and (ii) pay certain dividends and make certain other
restricted payments and investments, which limitations are in part based upon
satisfaction of tests of "consolidated cash flow," as defined.

F-24

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

14% Mandatorily Redeemable Preferred Stock

In March 1997, GTH authorized and issued 500,000 shares of preferred stock
("GTH Preferred Stock") at a liquidation preference of $1,000 per share.

In June 1998, proceeds from the issuance of the 9 5/8% Senior Notes were
used to redeem this preferred stock. The redemption resulted in a $34 million
charge against additional paid-in capital comprised of a $16 million
redemption premium and $18 million of unamortized discount and issuance cost
on the preferred stock on the date of the redemption. The redemption premium
and write-off of unamortized discount and issuance costs on the preferred
stock were treated as a deduction to arrive at the net loss applicable to
common shareholders in the consolidated statement of operations.

Preferred stock dividends included the following:

[Download Table]

December 31,
---------------
1999 1998
------- -------
(In thousands)

Preferred stock dividends................................. $63,742 $11,712
Amortization of discount on preferred stock............... -- 618
Amortization of preferred stock issuance costs............ 2,900 351
------- -------
$66,642 $12,681
======= =======

14. NET LOSS PER SHARE

Losses per share are calculated in accordance with SFAS No. 128, "Earnings
Per Share." Share and per share data presented reflects all stock dividends
and stock splits.

The following is a reconciliation of the numerators and the denominators of
the basic and diluted loss per share:

[Enlarge/Download Table]

For the period
December 31, March 31, 1997
-------------------------------- (Date of Inception)
1999 1998 to December 31, 1997
--------------- --------------- --------------------------
(In thousands, except share and per share data)

Income (loss) from
continuing operations.. $ (68,797) $ (68,194) $ (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
--------------- --------------- ---------------
Income (loss) from
continuing operations
applicable to common
shareholders........... $ (135,439) $ (115,015) $ (12,850)
=============== =============== ===============
Weighted average share
outstanding:
Basic and diluted..... 502,400,851 358,735,340 325,773,934
=============== =============== ===============
Income (loss) from
continuing operations
applicable to common
shareholders
Basic and diluted..... $ (0.27) $ (0.32) $ (0.04)
=============== =============== ===============

Dilutive options and warrants did not have an effect on the computation of
diluted loss per share in 1999 and 1998 since they were anti-dilutive. The
impact of dilutive options and warrants increases the weighted average shares
outstanding to 552,466,665 shares as of December 31, 1999.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

15. FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, restricted cash and cash
equivalents, accounts receivable, accrued construction costs, accounts payable
and accrued liabilities, accrued interest, obligations under inland services
agreements and capital leases and long term debt approximate their fair value.
The fair value of the senior notes (the New Senior Notes and 9 5/8% Senior
Notes), mandatorily redeemable preferred stock, cumulative convertible
preferred stock and the interest rate swap are based on market quotes and the
fair values are as follows:

[Download Table]

December 31, 1999 December 31, 1998
-------------------------- --------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
(In thousands) (In thousands)

Senior notes............ $3,100,000 $3,056,471 $796,495 $834,000
Mandatorily redeemable
preferred stock........ 485,947 498,750 483,000 480,000
Cumulative convertible
preferred stock........ 1,598,750 1,975,300 -- --
Interest rate swap...... $ -- $ 6,602 $ -- $ 26

16. STOCK OPTION PLAN

GCL maintains a stock option plan under which options to acquire shares may
be granted to directors, officers, employees and consultants of the Company.
The Company accounts for this plan under APB Opinion No. 25, under which
compensation cost is recognized only to the extent that the market price of
the stock exceeds the exercise price. Terms and conditions of the Company's
options, including exercise price and the period in which options are
exercisable, generally are at the discretion of the Compensation Committee of
the Board of Directors; however, no options are exercisable more than ten
years after date of grant.

Prior to its merger with the Company, Frontier maintained stock option plans
for its directors, executives and certain employees. The exercise price for
options under all Frontier plans was the fair market value of the stock on the
date of the grant. The stock options expire ten years from the date of the
grant and vest over a period from one to three years. The Frontier plans
provided for discretionary grants of stock options which were subject to the
passage of time and continued employment restrictions.

In connection with the Frontier merger, the Company exchanged all of the
outstanding Frontier stock options for 25.3 million Global Crossing stock
options which vested immediately at the date of the merger. As of December 31,
1999, 17.7 million stock options under the Frontier plans remained vested and
outstanding.

Additional information regarding options granted and outstanding for the
years ended December 31, 1998 and 1999 are summarized below:

[Download Table]

Weighted
Options Number of Average
Available Options Exercise
For Grant Outstanding Price
----------- ----------- --------

Balance as of December 31, 1997........... -- -- --
Authorized.............................. 33,215,730 -- --
Granted................................. (30,762,466) 30,762,466 $ 2.85
Exercised............................... (656,688) 1.06
Cancelled............................... 3,253,000 (3,253,000) 1.11
----------- ----------- ------
Balance as of December 31, 1998........... 5,706,264 26,852,778 3.11
Authorized.............................. 82,010,014 -- --
Granted................................. (65,019,955) 65,019,955 24.20
Exercised............................... (10,058,073) 11.07
Cancelled............................... 3,175,154 (3,175,154) 22.17
----------- ----------- ------
Balance as of December 31, 1999........... 25,871,477 78,639,506 $18.76
=========== =========== ======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following tables summarize information concerning outstanding and
exercisable options:

[Enlarge/Download Table]

December 31, 1999
------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average Weighted Average
Range of Number Remaining Contractual Exercise Price Number Exercise Price
Exercise Prices Outstanding Life (in years) per Share Exercisable per Share
--------------- ---------------- --------------------- ---------------- ----------- ----------------

$ 0.35 to $ 1.43 14,153,480 7.79 $ 0.83 7,871,980 $ 0.83
2.00 to 9.00 7,157,036 8.18 3.14 3,635,345 3.29
9.30 to 13.80 12,539,297 7.71 11.61 10,207,026 11.60
13.96 to 19.82 11,961,988 8.54 17.15 8,961,988 16.26
20.60 to 23.44 19,975,778 9.65 25.82 1,175,228 24.48
$33.00 to $61.38 12,851,927 9.73 44.68 1,741,334 46.15
---------------- ---------- ---- ------ ---------- ------
Total 78,639,506 8.73 $18.76 33,592,901 $11.66
========== ==== ====== ========== ======

[Enlarge/Download Table]

December 31, 1998
------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average Weighted Average
Range of Number Remaining Contractual Exercise Price Number Exercise Price
Exercise Prices Outstanding Life (in years) per Share Exercisable per Share
--------------- ---------------- --------------------- ---------------- ----------- ----------------

$0.35 to $ 0.83 15,717,280 9.2 $ 0.83 4,803,833 $ 0.83
2.00 to 3.33 6,844,598 9.5 3.13 1,625,000 3.33
$9.50 to $13.26 4,290,900 9.7 11.44 302,834 11.34
--------------- ---------- --- ------ --------- ------
Total 26,852,778 9.3 $ 3.11 6,731,667 $ 1.91
========== === ====== ========= ======

During the years ended December 31, 1999 and 1998, the Company recorded in
additional paid-in capital $55 million and $94 million, respectively, of
unearned compensation, relating to awards under the stock incentive plan plus
the grant of certain economic rights and options to purchase common stock.
During 1999 and 1998 the Company recognized expense of $51 million and $39
million, respectively, of stock related compensation relating to the stock
incentive plan and the vested economic rights to purchase common stock. The
remaining $60 million of unearned compensation will be recognized as follows:
$36 million in 2000, $20 million in 2001 and $4 million in 2002.

The Company entered into an employment arrangement with a key executive, and
granted him economic rights to purchase two million shares of common stock at
$2.00 per share. One-third of these economic rights vested immediately and the
balance vests over two years. The Company recorded the excess of the fair
market value of these options and rights over the purchase price as unearned
stock compensation in the amount of $15 million during the year ended December
31, 1998. The unearned compensation is being recognized as expense over the
vesting period of the economic right.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), the Company accounted for employee stock options under APB 25
and is recognizing compensation expense over the vesting period to the extent
that the fair value of the stock on the date the options were granted exceeded
the exercise price. Had compensation cost for the Company's stock-based
compensation plans been determined consistent with the SFAS 123 fair value
approach, the impact on the Company's income (loss) applicable to common
shareholders and loss per share would be as follows:

[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
(In thousands, except per share information)

Income (loss) applicable
to common shareholders:
As reported........... $(178,186) $(134,724) $(12,850)
Pro forma............. $(275,937) $(141,585) $(12,850)
Basic and diluted income
(loss) per share:
As reported........... $ (0.35) $ (0.38) $ (0.04)
Pro forma............. $ (0.55) $ (0.39) $ (0.04)

Under SFAS 123, the fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model assuming the following
weighted average assumptions used for the year ended December 31, 1999; zero
dividend yield, expected volatility of 40.00, weighted average risk free rate
of return of 6.56% and expected life of 4 years. For the year ended December
31, 1998; zero dividend yield, expected volatility of 0% to 42%, weighted
average risk free rate of return of 5.45% and expected life of 4 years.

17. EMPLOYEE BENEFIT PLANS

401(k) Plan

Beginning in 1998, the Company offered its qualified employees the
opportunity to participate in a defined contribution retirement plan
qualifying under the provisions of Section 401(k) of the Internal Revenue
Code. Each eligible employee may contribute on a tax-deferred basis a portion
of their annual earnings not to exceed certain limits. The Company matches
one-half of individual employee contributions up to a maximum level not to
exceed 7.5% of the employee's compensation. The Company's contributions to the
plan vest immediately. Expenses recorded by the Company relating to its 401(k)
plan were approximately $0.6 million and $0.2 million for the years ended
December 31, 1999 and 1998, respectively.

The Company also sponsors a number of defined contribution plans for
Frontier employees. The most significant plan covers non-bargaining employees,
who can elect to make contributions through payroll deduction. The Company
provides a contribution of .5 percent of gross compensation in common stock
for every employee eligible to participate in the plan. The common stock used
for matching contributions is purchased on the open market by the plan's
trustee. The Company also provides one hundred percent matching contributions
in its common stock up to three percent of gross compensation, and may, at the
discretion of the Management Benefit Committee, provide additional matching
contributions based upon Frontier's financial results. The total cost
recognized for all defined contribution plans was $2.6 million from the date
of the merger through December 31, 1999.

Pension Plan

As a result of the merger with Frontier, the Company has noncontributory
plans which have been frozen, providing for service pensions and certain death
benefits for substantially all Frontier employees. The assets and

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liabilities related to these plans were recorded at fair market value at the
date of the merger. In 1995 and 1996, these defined benefit plans were frozen.
On an annual basis, contributions are remitted to the trustees to ensure
proper funding of the plans.

The majority of the Company's pension plans have plan assets that exceed
accumulated benefit obligations. There are certain plans, however, with
accumulated benefit obligations which exceed plan assets. The following table
summarizes the funded status of the Company's pension plans and the related
amounts that are included in "Other assets" in the Consolidated Balance Sheet
of the Company as of December 31, 1999 (in thousands):

[Download Table]

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at September 30, 1999........................ $451,600
Service cost.................................................... 14
Interest cost................................................... 8,397
Actuarial gain.................................................. (11,025)
Benefits paid................................................... (9,151)
--------
Benefit obligation at December 31, 1999......................... $439,835
========
CHANGE IN PLAN ASSETS
Fair value of plan assets at September 30, 1999................. $621,100
Actual return on plan assets.................................... 86,516
Employer contribution........................................... 550
Benefits paid................................................... (9,151)
--------
Fair value of plan assets at December 31, 1999.................. $699,015
========
Funded status................................................... $259,180
Unrecognized net gain........................................... (83,192)
--------
Prepaid benefit cost, net....................................... $175,988
========

The net periodic pension cost consists of the following for the three month
period ended December 31, 1999 (in thousands):

Service cost...................................................... $ 14
Interest cost on projected benefit obligation..................... 8,397
Return on plan assets............................................. (14,349)
--------
Net periodic pension benefit...................................... $ (5,938)
========

The following rates and assumptions were used to calculate the projected
benefit obligation as of December 31, 1999:

Weighted average discount rate.................................... 8.00%
Rate of salary increase........................................... 5.00%
Expected return on plan assets.................................... 9.50%

The Company's policy is to make contributions for pension benefits based on
actuarial computations which reflect the long-term nature of the pension plan.
However, under SFAS No. 87, "Employers' Accounting for Pensions," the
development of the projected benefit obligation essentially is computed for
financial reporting purposes and may differ from the actuarial determination
for funding due to varying assumptions and methods of computation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Postretirement Benefit Other Than Pensions

The Company provides postretirement health care and life insurance benefits,
which have been frozen, to most of its employees. Plan assets consist
principally of life insurance policies and money market instruments. In 1996,
Frontier amended its healthcare benefits plan to cap the cost absorbed by the
Company for healthcare and life insurance for its bargaining employees who
retire after December 31, 1996. The assets and liabilities related to these
plans were recorded at fair market value at the date of the merger.

The following table summarizes the funded status of the plan (in thousands)
and the related amounts included in "Deferred credits and other" in the
Consolidated Balance Sheet of the Company as of December 31, 1999 (in
thousands):

[Download Table]

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at September 30, 1999....................... $100,143
Service cost................................................... 36
Interest cost.................................................. 1,867
Actuarial gain................................................. (2,413)
Benefits paid.................................................. (2,016)
--------
Benefit obligation at December 31, 1999........................ $ 97,617
========
CHANGE IN PLAN ASSETS
Fair value of plan assets at September 30, 1999................ $ 2,989
Actual return on plan assets................................... 180
Employer contribution.......................................... 1,902
Benefits paid.................................................. (2,016)
--------
Fair value of plan assets at December 31, 1999................. $ 3,055
========
Funded status.................................................. $(94,562)
Unrecognized net loss.......................................... (1,576)
--------
Accrued benefit cost, net...................................... $(96,138)
========

The components of the estimated postretirement benefit cost are as follows
for the three month period ended December 31, 1999 (in thousands):

Service cost..................................................... $ 36
Interest cost on projected benefit obligation.................... 1,867
Expected return on plan assets................................... (67)
--------
Net periodic pension cost (benefit).............................. $ 1,836
========

The following rates and assumptions were used to calculate the projected
benefit obligation as of December 31, 1999:

Weighted average discount rate................................... 8.00%
Rate of salary increase.......................................... 5.00%
Expected return on plan assets................................... 9.50%
Assumed rate of increase in cost of covered health care
benefits........................................................ 6.17%

Increases in health care costs were assumed to decline consistently to a
rate of 5.0% by 2006 and remain at that level thereafter. If the health care
cost trend rates were increased by one percentage point, the accumulated

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postretirement benefit health care obligation as of December 31, 1999 would
increase by $7.3 million while the sum of the service and interest cost
components of the net postretirement benefit health care costs for 1999 would
increase by $158,000. If the health care cost trend rates were decreased by
one percentage point, the accumulated postretirement benefit health care
obligations as of December 31, 1999 would decrease by $6.6 million while the
sum of the service interest cost components of the net postretirement benefit
health care cost for 1999 would decrease by $139,000.

18. RELATED PARTY TRANSACTIONS

Transactions with Global Access Ltd. and Pacific Crossing Ltd.

During 1999, Global Crossing entered into certain transactions with GAL and
PCL to purchase $101.4 million of terrestrial and subsea capacity.

Transactions with Pacific Capital Group and its Affiliates

Prior to 1999, Global Crossing entered into certain transactions with
affiliates of Pacific Capital Group ("PCG"), including the acquisition of
development rights to certain of the Company's fiber optic cable systems. PCG
is controlled by certain officers and directors of Global Crossing who either
currently are or at one time were affiliated with PCG. During 1999, Global
Crossing subleased from PCG two suites of offices in Beverly Hills for
payments aggregating approximately $287,000 over the year. In October 1999,
Global Crossing entered into a lease with North Crescent Realty V, LLC, which
is managed by and affiliated with PCG, for an aggregate monthly cost of
approximately $400,000. North Cresent Realty, LLC paid approximately $7.5
million to improve the property to meet Global Crossing's specifications and
was reimbursed approximately $3.2 million of this amount by Global Crossing.
Global Crossing engaged an independent real estate consultant to review the
terms of Global Crossing's occupancy of the building, which terms were found
by the consultant to be consistent with market terms and conditions and the
product of an arm's length negotiation. Global Crossing subleases
approximately 12,000 square feet of the building to PCG for an aggregate
monthly cost of approximately $53,000.

PCG has fractional ownership interests in aircrafts used by Global Crossing
during 1999. Global Crossing reimburses PCG for PCG's cost of maintaining
these ownership interests such that PCG realizes no profit from the
relationship. During 1999, PCG billed Global Crossing approximately $2 million
in aggregate under this arrangement.

In 1997, the Company paid $7 million in fees to PCG and certain of its key
executives, who are shareholders of GCL, and another shareholder for services
provided in respect of obtaining the AC-1 Credit Facility, Old Senior Notes
and the GTH Preferred Stock financing. Of the fees paid, $5 million was
allocated to the AC-1 Credit Facility and Old Senior Notes and recorded as
deferred finance costs, $1 million was allocated to the GCH Preferred Stock
and recorded as a reduction in the carrying value of the preferred stock and
$1 million was recorded as common stock issuance costs.

Transactions with Canadian Imperial Bank of Commerce and its affiliates

During 1999, Canadian Imperial Bank of Commerce and its affiliates ("CIBC")
entered into certain financing transactions with Global Crossing. In
particular, CIBC: (1) acted as an arranger for the $600 million ten-day demand
note issued by Global Marine Systems in July, (2) acted as an arranger for the
$3 billion senior secured credit facility entered into by GCH in July, (3) was
an initial purchaser of the $2 billion aggregate principal amount of unsecured
senior notes issued by GCH in November, and (4) was an initial purchaser of
GCL's $650 million aggregate liquidation preference 7% cumulative convertible
preferred stock issued in

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December. During 1999, Global Crossing paid CIBC approximately $5.6 million in
fees in connection with these transactions. CIBC has a substantial beneficial
ownership interest in Global Crossing, and certain directors of Global
Crossing are employees of an affiliate of CIBC.

In 1998, CIBC was one of the initial purchasers of the New Senior Notes and
GCH Preferred Stock, a member of the PC-1 and MAC credit facility syndicates,
and was also one of the underwriters of the Company's initial public offering
("IPO"). CIBC was paid $19 million in fees and credit facility interest during
the year ended December 31, 1998. In 1997, GCL paid CIBC approximately $25
million in fees related to the financing obtained under the Old Senior Notes,
the AC-1 Credit Facility, and the issuance of the GTH Preferred Stock. Of the
fees incurred, approximately $6 million related to underwriting and commitment
fees pertaining to the issuance of the GTH Preferred Stock and was recorded as
a reduction in the carrying value of the GTH Preferred Stock, approximately $9
million related to underwriting, commitment and advisory fees in connection
with the issuance of the Old Senior Notes and approximately $10 million
related to fees associated with obtaining the AC-1 Credit Facility which was
recorded as deferred finance costs.

Relationship to Ziff-Davis Inc. and Affiliates

A director of Global Crossing is the chairman and chief executive officer of
Ziff-Davis Inc., a majority of the common stock of which is beneficially owned
by Softbank Corp. Softbank is a party to the Asia Global Crossing joint
venture established to provide advanced network-based telecommunications
services to businesses and consumers throughout Asia. Global Crossing, which
is responsible for the management and operation of the network, contributed to
the venture its 57.75% share of the Pacific Crossing system and its
development rights in East Asia Crossing. Softbank and Microsoft each
contributed $175 million in cash to Asia Global Crossing and also committed to
make a total of at least $200 million in Global Crossing Network capacity
purchases over a three-year period, expected to be utilized primarily on the
Pacific Crossing system and East Asia Crossing. Softbank and Microsoft also
agreed to use Asia Global Crossing's network in the region. Global Crossing
currently owns 93% of Asia Global Crossing, with Softbank and Microsoft each
owning 3.5%. When the fair market value of Asia Global Crossing is determined
to exceed $5 billion, the ownership interest of Softbank and Microsoft will
increase to a maximum of 19% each at a valuation of $7.5 billion and above.
The Global Crossing director is Softbank's representative on the Asia Global
Crossing board of directors. In addition, Ziff-Davis is one of the largest
web-hosting customers of our GlobalCenter subsidiary.

Relationship to Hutchison Whampoa Limited

The managing director of Hutchison was recently appointed a director of
Global Crossing. In November 1999, Hutchison and Global Crossing entered into
an agreement to form a 50/50 joint venture to pursue fixed-line
telecommunications and Internet opportunities in the Hong Kong Special
Administrative Region, China. The joint venture, the formation of which was
completed in January 2000, combines Hutchison's existing territory-wide,
building-to-building fixed-line fiber optic telecommunications network and
certain Internet-related assets in Hong Kong with Global Crossing's
international fiber optic broadband cable capacity and web hosting, Internet
applications and data services. For its 50% share, Global Crossing provided to
Hutchison $400 million in Global Crossing 6 3/8% cumulative convertible
preferred stock. Additionally, Global Crossing committed to contribute to the
joint venture international telecommunications capacity rights on its global
fiber optic network and data center related capabilities which together are
valued at $350 million, as well as $50 million in cash.

Agreements with Global Crossing Stockholders

In August 1998, PCG, GKW Unified Holdings (an affiliate of PCG), affiliates
of CIBC, Global Crossing and some other Global Crossing shareholders,
including some officers and directors and their affiliates, entered

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into a Stockholders Agreement and a Registration Rights Agreement. Under the
Stockholders Agreement, Global Crossing has been granted a right of first
refusal on specified private transfers by these shareholders during the first
two years after the consummation of the IPO on August 14, 1998. In addition,
subject to the exceptions in the Stockholders Agreement, some of these
shareholders have rights, which are referred to as tag-along rights,
permitting these shareholders to participate, on the same terms and
conditions, in some transfers of shares by any other of these shareholders as
follows: (1) PCG, GKW Unified Holdings and CIBC and their affiliates and
permitted transferees have the right to participate in any transaction
initiated by any of them to transfer 5% or more of our outstanding securities;
and (2) PCG, GKW Unified Holdings, CIBC and their affiliates and permitted
transferees have the right to participate in any transaction initiated by any
of them to transfer any Global Crossing securities if that transaction would
result in a change of control of Global Crossing. Under the Registration
Rights Agreement, Global Crossing shareholders who are parties to that
agreement and a number of their transferees have demand and piggyback
registration rights and will receive indemnification and, in some
circumstances, reimbursement for expenses from the Company in connection with
an applicable registration.

Principal shareholders of Global Crossing, representing at that time over a
majority of the voting power of the Company's common stock, entered into a
Voting Agreement with Frontier Corporation in March 1999 in connection with
the Frontier merger. These Global Crossing shareholders reaffirmed their
voting obligations under the Voting Agreement in connection with subsequent
amendments made to the merger agreement during 1999. Pursuant to the Second
Reaffirmation of Voting Agreement and Share Transfer Restriction Agreement
dated September 2, 1999, the Global Crossing shareholders that are parties to
the Voting Agreement also agreed, from September 2, 1999 until March 28, 2000,
not to transfer record or beneficial ownership of any shares of Global
Crossing common stock held by such shareholders, other than transfers to
charities, transfers made with the consent of the Company and other limited
exceptions, and to work in good faith toward implementing a program with the
purpose that, if the Global Crossing shareholders that are parties to the
Voting Agreement wish to sell or transfer their shares after March 28, 2000,
these sales or transfers would be completed in a manner that would provide for
an orderly trading market for the shares of Global Crossing common stock.

Also on September 2, 1999, fourteen of the Company's executive officers and
three executive officers of Frontier entered into a Share Transfer Restriction
Agreement with Global Crossing. Under this agreement, the Global Crossing
executive officers agreed not to sell or transfer shares of the Company's
common stock, and the Frontier executive officers agreed not to sell or
transfer shares of Frontier common stock and the shares of Global Crossing
common stock they would receive in exchange for their Frontier common stock in
the merger, until March 28, 2000, subject in each case to substantially the
same exceptions as are applicable to the Second Reaffirmation of Voting
Agreement and Share Transfer Restriction Agreement described in the
immediately preceding paragraph.

Advisory Services Agreement ("ASA")

ACL entered into the ASA with PCG Telecom, an affiliate of PCG which is a
shareholder of GCL. Under the ASA, PCG Telecom provided ACL with advice in
respect of the development and maintenance of AC-1, development and
implementation of marketing and pricing strategies and the preparation of
business plans and budgets. As compensation for its advisory services, PCG
Telecom received a 2% fee on the gross revenue of the Company over a 25 year
term, subject to certain restrictions, with the first such payment to occur at
the AC-1 RFS date. Advances on fees payable under the ASA were being paid to
PCG Telecom at a rate of 1% on signed CPAs until the ASA was terminated, as
described below. Fees paid under the ASA to PCG Telecom were shared amongst
Union Labor Life Insurance Company ("ULLICO"), PCG, CIBC, and certain
directors and officers of the Company, all of whom are shareholders of GCL.
Effective June 1998, GCL acquired the rights under the ASA on behalf of the
Company for common stock and contributed such rights to the Company as the ASA
was terminated. This transaction was recorded in the consolidated financial
statements as an increase in additional

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paid-in capital of $135 million and a charge against operations in the amount
of $138 million. The $138 million is comprised of a $135 million settlement of
the fees that would have been payable and the cancellation of $3 million owed
to the Company under a related advance agreement. The $135 million amount was
calculated by applying the 2% advisory services fee to projected future
revenue and discounting the amount relating to AC-1 revenue by 12% and the
amount relating to all other system's revenue by 15%. The result of this
calculation was $156 million, which amount was subsequently reduced to $135
million. Both the discount rates and the ultimate valuation were determined as
a result of a negotiation process including a non management director of the
Company and the various persons entitled to fees under the ASA. The Company
obtained a fairness opinion from an independent financial advisor in
connection with this transaction. In addition, the Company incurred
approximately $2 million of advisory fees prior to termination of the
contract, for a total expense of $140 million for the year ended December 31,
1998.

PCG Warrants

PCG Warrants, issued in 1998 by the Company's predecessor, Global Crossing
Ltd., LDL ("Old GCL") became exercisable upon the completion of the IPO. The
PCG Warrants gave each holder the option to convert each share under warrant
into a fraction of a Class B of Old GCL share based upon the ratio of the
current per share valuation at the time of conversion less the per share
exercise price of the warrant divided by the current per share valuation at
the time of conversion multiplied by the 36,906,372 shares available under the
PCG Warrants, together with a new warrant ("New PCG Warrants") to purchase the
remaining fraction of such Class B share at an exercise price equal to the
then current per share valuation. Prior to the IPO, the holders of the PCG
Warrants exercised their warrants to acquire Class B of Old GCL shares by way
of the cashless conversion and the New PCG Warrants were issued with an
exercise price based on the per share valuation at the conversion date, the
obligation on which were assumed by GCL.

The Company accounted for the cashless conversion of the PCG Warrants, which
occurred as of June 1998, using the current estimated per share valuation at
the expected conversion date, multiplied by the number of Class B shares of
Old GCL estimated to be converted in exchange for the PCG Warrants. The
resulting value under this calculation is approximately $213 million, which
was allocated to the new systems in exchange for the PCG Warrants. In
connection with the formation of PCL, the Company agreed to make available to
PCL the consideration received by the Company in connection with the grant of
the PCG Warrants, in addition to the $231 million cash investment made by the
Company. Therefore, the Company recorded an increase in its investment in PCL
in the amount of approximately $127 million and an increase in construction in
progress for PAC and MAC in the amounts of approximately $50 million and $36
million, respectively, with a corresponding increase of $213 million in
additional paid-in capital. The $213 million was allocated on a pro rata basis
to the three projects according to the estimated cost of each system. The
Company's accounting for the PCG Warrants is pursuant to Emerging Issues Task
Force 96-18, "Accounting for Equity Instruments with Variable Terms that are
Issued for Consideration other than Employee Services under FASB Statement No.
123" ("EITF 96-18"). Under EITF 96-18, the fair value of equity instruments
issued for consideration other than employee services should be measured using
the stock price or other measurement assumptions as of the date at which a
firm commitment for performance level has been reached. The Company has
recorded the estimated value of the PCG Warrants as of June 1998, since the
IPO was probable at that date. The $213 million value attributed to the PCG
Warrants as of June 1998 was adjusted to the actual value of $275 million on
the date of the IPO based upon the $9.50 price per share of the IPO.

The Company gave accounting recognition for the New PCG Warrants on the date
these warrants were issued, which was the date of the IPO. The Company valued
each of the New PCG Warrants at $3.48 based on an independent valuation based
on the IPO price of $9.50 per share. The New PCG Warrants had a total value of
approximately $43 million. The Company recorded the actual value of the New
PCG Warrants in a manner

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similar to that described above whereby the total value was allocated to the
investment in PC-1, MAC and PAC based on their relative total contract costs.

Other transactions

In 1998, GCL purchased all common shares owned by Telecommunications
Development Corporation ("TDC") in the Company in exchange for 300,000 fewer
newly issued shares of common stock based upon the per share value at the
repurchase date. The transaction benefited GCL since 300,000 fewer shares were
outstanding after the repurchase without any cost to GCL. This transaction was
accounted for as the acquisition of treasury stock and was recorded as $209
million, the fair value of the consideration given. Certain officers and
directors of the Company held direct or indirect equity ownership positions in
TDC, resulting in these officers and directors having a majority of the
outstanding common stock of TDC. Following this transaction, TDC distributed
all of its shares of common stock and GCL warrants to the holders of its
common stock and was then liquidated.

19. SEGMENT REPORTING

The Company is a worldwide provider of Internet and long distance
telecommunications facilities and related services supplying its customers
with global "point to point" connectivity and, through its Global Marine
Systems subsidiary, providing cable installation and maintenance services. The
Company's reportable segments include telecommunications services and
installation and maintenance services. There are other corporate related
charges not attributable to a specific segment. While the Company's chief
decision maker monitors the revenue streams of the various products and
geographic locations, operations are managed and financial performance
evaluated based on the delivery of multiple, integrated services to customers
over a single network. As a result, there are many shared expenses generated
by the various revenue streams and management believes that any allocation of
the expenses incurred to multiple revenue streams would be impractical and
arbitrary.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The information below summarizes certain financial data of the Company by
segment (in thousands):

[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Telecommunication
Services
Revenue:
Commercial............ $ 279,603 $ -- $ --
Consumer.............. 46,661 -- --
Carrier:
Sales-type leases.... 727,643 414,596 --
Services............. 264,341 5,270 --
----------- ---------- --------
Total carrier....... 991,984 419,866 --
----------- ---------- --------
Total revenue....... 1,318,248 419,866 --
Operating expenses..... (1,395,152) (299,922) (3,101)
----------- ---------- --------
Operating income
(loss)................ $ (76,904) $ 119,944 $ (3,101)
=========== ========== ========
Adjusted EBITDA........ $ 581,912 $ 364,948 $ 2,263
=========== ========== ========
Cash paid for capital
expenditures.......... $ 1,552,019 $ 413,996 $428,743
=========== ========== ========
Total assets........... $15,259,294 $2,639,177 $572,197
=========== ========== ========
Installation and
Maintenance Services
Revenue................ $ 160,655 $ -- $ --
Operating expenses..... (162,209) -- --
----------- ---------- --------
Operating income
(loss)................ $ (1,554) $ -- $ --
=========== ========== ========
Adjusted EBITDA........ $ 39,263 $ -- $ --
=========== ========== ========
Cash paid for capital
expenditures.......... $ 170,585 $ -- $ --
=========== ========== ========
Total assets........... $ 1,519,166 $ -- $ --
=========== ========== ========
Corporate and Other
Revenue................ $ -- $ -- $ --
Operating expenses..... (7,600) (139,669) --
----------- ---------- --------
Operating income
(loss)................ $ (7,600) $ (139,669) $ --
=========== ========== ========
Adjusted EBITDA........ $ (7,600) $ -- $ --
=========== ========== ========
Cash paid for capital
expenditures.......... $ -- $ -- $ --
=========== ========== ========
Total assets........... $ 2,502,850 $ -- $ --
=========== ========== ========

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[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Consolidated
Consolidated revenue... $ 1,478,903 $ 419,866 $ --
Consolidated operating
expense............... (1,564,961) (439,591) (3,101)
----------- ---------- --------
Consolidated operating
income (loss)......... $ (86,058) $ (19,725) $ (3,101)
=========== ========== ========
Adjusted EBITDA........ $ 613,575 $ 364,948 $ 2,263
=========== ========== ========
Consolidated cash paid
for capital
expenditures.......... $ 1,722,604 $ 413,996 $428,743
=========== ========== ========
Consolidated total
assets................ $19,281,310 $2,639,177 $572,197
=========== ========== ========

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, or
Adjusted EBITDA, is calculated as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity sold,
stock related expenses, incremental cash deferred revenue and amounts relating
to the termination of an advisory services agreement. This definition is
consistent with financial covenants contained in the Company's major financial
agreements. The Company's management uses Adjusted EBITDA to monitor
compliance with its financial covenants and to measure the performance and
liquidity of its reportable segments. This information should not be
considered as an alternative to any measure of performance as promulgated
under GAAP. The Company's calculation of adjusted EBITDA may be different from
the calculation used by other companies and, therefore, comparability may be
limited. The calculation of Adjusted EBITDA is as follows:

[Download Table]

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Operating income
(loss)................. $(86,058) $(19,725) $(3,101)
Goodwill amortization... 149,489 -- --
Depreciation and
amortization........... 86,417 541 39
Stock related expense... 51,306 39,374 --
Non-cash cost of
capacity sold.......... 291,764 140,892 --
Incremental cash
deferred revenue....... 120,657 64,197 5,325
Termination of Advisory
Services Agreement..... -- 139,669 --
-------- -------- -------
Adjusted EBITDA......... $613,575 $364,948 $ 2,263
======== ======== =======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

[Download Table]

1999 1998
--------------------- ---------------------
Long-Lived Long-Lived
Revenue Assets Revenue(1) Assets(2)
---------- ---------- ---------- ----------
(In thousands)

North America
United States.................. $ 811,104 $2,060,877 $193,142 $ 76,055
Other.......................... 64,040 26,515 64,558 --
---------- ---------- -------- ----------
875,144 2,087,392 257,700 76,055
Europe
The Netherlands................ 89,600 92,251 46,770 82,433
Germany........................ 145,289 204,564 36,047 30,021
England........................ 106,815 722,462 34,777 49,081
Other.......................... 244,351 302,645 44,572 --
---------- ---------- -------- ----------
586,055 1,321,922 162,166 161,535
International waters............. -- 1,339,614 -- 770,966
Other............................ 17,704 308,174 -- --
---------- ---------- -------- ----------
Consolidated..................... $1,478,903 $5,057,102 $419,866 $1,008,556
========== ========== ======== ==========

--------
(1) During 1998, there was one customer located in the United States that
accounted for 16% of consolidated revenue, another customer located in
Canada that accounted for 16% of consolidated revenue, and one customer
located in the Netherlands that accounted for 11% of consolidated revenue.
There were no individual customers in 1999 that accounted for more than
10% of consolidated revenue.
(2) Long-lived assets include capacity available for sale and construction in
progress as of December 31, 1999 and 1998.

20. QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's unaudited quarterly results are as follows:

[Download Table]

1999 Quarter Ended
--------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
(In thousands, except per share data)

Revenue.......................... $176,319 $188,459 $234,582 $ 879,543
Operating income (loss).......... 41,067 39,764 13,226 (180,115)
Income (loss) from continuing
operations...................... 12,802 9,978 135,854 (227,431)
Net income (loss)................ (1,908) 9,978 120,989 (240,603)
Income (loss) applicable to
common shareholders............. (14,952) (4,219) 106,918 (265,933)
Income (loss) from continuing
operations per common share..... (0.00) (0.01) 0.30 (0.45)
Income (loss) per common share,
basic........................... (0.04) (0.01) 0.26 (0.48)
Income (loss) from continuing
operations per common share..... (0.00) (0.01) 0.27 (0.45)
Income (loss) per common share,
diluted......................... $ (0.04) $ (0.01) $ 0.24 $ (0.48)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant 1999 interim events:

On December 15, 1999, the Company issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for net
proceeds of $630 million.

On November 24, 1999, the Company acquired Racal Telecom, a group of wholly
owned subsidiaries of Racal Electronics plc, for approximately $1.6 billion in
cash.

On November 12, 1999, GCH issued two series of senior unsecured notes. The 9
1/8% senior notes are due November 15, 2006 with a face value of $900 million,
for net proceeds of $887 million and the 9 1/2% senior notes are due
November 15, 2009 with a face value of $1,100 million, for net proceeds of
$1,084 million.

On November 5, 1999, the Company issued 10,000,000 shares of 6 3/8%
cumulative convertible preferred stock at a liquidation preference of $100.00
for net proceeds of approximately $969 million.

On September 28, 1999, the Company consummated its merger with Frontier
Corporation in a transaction valued at $10.3 billion.

On July 2, 1999, the Company completed its acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million in
cash and assumed liabilities.

During the third quarter, the Company recognized $210 million, net of merger
related expenses, of other income in connection with the termination of the US
WEST merger agreement.

[Download Table]

1998 Quarter Ended
---------------------------------------------
March 31 June 30 September 30 December 31
-------- --------- ------------ -----------
(In thousands, except per share data)

Revenue......................... $ -- $ 100,244 $116,494 $203,128
Operating income (loss)......... (3,794) (123,649) 31,994 75,724
Income (loss) before
extraordinary loss............. (3,722) (135,725) 15,229 56,024
Net income (loss)............... (3,722) (155,434) 15,229 56,024
Net income (loss) applicable to
common shareholders............ (8,129) (193,473) 15,229 51,649
Income (loss) per common share
before extraordinary item,
basic.......................... (0.02) (0.52) 0.04 0.13
Net income (loss) per common
share, basic................... (0.02) (0.58) 0.04 0.13
Income (loss) per common share
before extraordinary item,
diluted........................ (0.02) (0.52) 0.04 0.12
Net income (loss) per common
share, diluted................. $ (0.02) $ (0.58) $ 0.04 $ 0.12

Significant 1998 interim events:

In December 1998, 5,000,000 shares of GCH 10 1/2% Preferred Stock were
issued for proceeds of $483 million.

During August 1998, the Company completed an IPO for which the Company
received net proceeds of approximately $391 million.

In May 1998, the first segment of AC-1, the United States to United Kingdom
route, was completed and commenced operations.

During the second quarter, the Company acquired the rights from those
entitled to fees payable under the advisory services agreement in
consideration for the issuance of common stock having an aggregate value of

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$135 million and the cancellation of approximately $3 million owed to the
Company under a related advance agreement. As a result of this transaction,
the Company recorded a non-recurring charge in the approximate amount of $138
million during the second quarter. In addition, the Company recognized as an
expense approximately $2 million of advisory fees incurred prior to
termination of the contract.

On May 18, 1998, the Company issued 9 5/8% senior notes due May 15, 2008,
with a face value of $800 million.

21. SHAREHOLDERS' EQUITY

Share Cancellation

As part of the Company's break-up fee received from US West, Inc. ("US
West"), the Company received 2,231,076 shares of its common stock from US West
which were cancelled by the Company. For the year ended December 31, 1999,
other income, net was composed primarily of a $210 million termination fee
paid by US West in connection with the termination of its merger agreement
with the Company, net of related expenses.

Old GCL Common Stock and Additional Paid-in Capital

During March 1997, Old GCL, formerly GT Parent Holdings LDC, was
incorporated as an exempted limited duration company in the Cayman Islands. In
March 1998, GCL, a Bermuda company, was formed as a wholly-owned subsidiary of
Old GCL. At that time, Old GCL contributed its investment in Global
Telesystems Holdings Ltd. ("GTH") to GCL. During April 1998, GCL formed a
wholly-owned subsidiary, Global Crossing Holdings Ltd. ("GCH"), a Bermuda
company, and contributed its investment in GTH to GCH upon its formation.

In January 1998, Old GCL effected a 100-for-1 stock split of each of its
Class A, B, C and D common stock and undesignated stock and amended the par
value of each share of common stock from $.0001 per share to $.000001 per
share. Prior to GCL's IPO in August 1998, GCL declared a stock dividend to Old
GCL resulting in Old GCL holding 1.5 shares of common stock of GCL for each
share of common stock of Old GCL outstanding. Pursuant to the terms of the
Articles of Association of Old GCL and prior to the Company's IPO, each holder
of Class D shares of Old GCL converted such shares into a fraction of a Class
E share of Old GCL based upon a valuation at the time of such conversion,
together with a warrant to purchase the remaining fraction of such Class E
share at an exercise price based upon such market valuation. In addition, each
holder of Class E shares of Old GCL had such Class E shares converted into
Class B shares of Old GCL. Accordingly, each holder of Class D and Class E
shares ultimately received Class B shares, with the warrants to purchase Class
E shares received by former Class D shareholders then cancelled in exchange
for warrants ("New GCL Warrants") to purchase shares of Common Stock of GCL at
an exercise price equal to the IPO price of $9.50 per share.

Subsequent to the above transaction and prior to the Company's IPO, each
shareholder of Old GCL (other than CIBC) exchanged their interests in Old GCL
for shares of common stock of GCL held by Old GCL at a rate of 1.5 shares of
common stock of GCL for each share of common stock of Old GCL ("Old GCL
Exchange"). CIBC did not participate in the above mentioned transaction and
continued to maintain its ownership of GCL through Old GCL, which became a
wholly owned subsidiary of CIBC.

Because Old GCL, GCL and GCH were entities under common control, the
transfers by Old GCL to GCL and GCL to GCH and the Old GCL Exchange were
accounted for similar to a pooling of interests. The consolidated financial
statements presented have been retroactively restated to reflect these
transactions as if they had occurred as of March 19, 1997 (Date of Inception).

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Information with respect to Old GCL common stock and additional paid-in
capital prior to the Old GCL Exchange is as follows:

Common Stock:

Authorized:

1,000,000,000 Class A common stock of $.00000067 par value

1,000,000,000 Class B common stock of $.00000067 par value

1,000,000,000 Class C common stock of $.00000067 par value

3,000,000,000 Class D common stock of $.00000067 par value

1,000,000,000 Class E common stock of $.00000067 par value

43,000,000,000 undesignated common stock of $.00000067 par value

Class A shares, Class B shares and Class C shares all had voting rights. On
March 25, 1997, Old GCL issued 22,500,000 Class A shares, 101,250,000 Class B
shares, 101,250,000 Class C shares for $.33 per share, resulting in aggregate
proceeds of $75 million. In addition to the 22,500,000 Class A shares issued
to the preference shareholders for cash in connection with the issuance of the
preference shares, a total of 39,705,900 Class A shares were distributed to
the initial preference shareholder representing 15% of the aggregate number of
Class A, B and C shares outstanding. In addition, warrants to acquire a
maximum of 92,880 shares of common stock of Old GCL were issued into escrow
for the benefit of the holders of preferred stock. Effective January 21, 1998,
Old GCL authorized 1,000,000,000 new Class E non-voting shares.

Certain of the Class B shareholders were issued a total of 66,176,400 Class
D shares on March 25, 1997. Of the $34 million of proceeds received from the
issuance of Class B shares, $3 million was allocated to the Class D shares
representing the estimated fair value of the Class D shares based on an
independent valuation. Class D shares were non-voting shares which carried
special preference rights on the cash distributions made by Old GCL. Class D
shareholders were to receive 10% of cash distributions to common shareholders
once the internal rate of return to Class C shareholders exceeded 10%, and
then increasing to 20% of cash distributions to common shareholders once the
internal rate of return to Class C shareholders exceeded 30%. Effective
January 1998, Class D share rights were amended such that Class D shareholders
received the option to convert each Class D share into one Class E share upon
payment to Old GCL of $.74 per share or to a fraction of a Class E share based
upon a valuation at the time of such conversion, together with a warrant to
purchase the remaining fraction of such Class E share at an exercise price
based upon such market valuation. By granting to holders of the Class D shares
an option to convert such shares into Class E shares, the Company obtained
effective assurance that it could effect a change to a corporate structure in
the event of a major equity event, such as a merger or other business
combination or in the event of an IPO by GCL, of its common stock, since the
holders of the Class D shares would need to exercise their options in order to
participate directly in benefits of a merger or acquisition of the Company or
in order to obtain the benefits of any trading market for the common stock of
the Company; no trading market was expected to develop for the Class D shares.
The grant of the options to Class D shareholders represents an equity
transaction since the Company granted these shareholders amended share rights
in the form of options with new warrants. Since the Company had an accumulated
deficit, the charge was made against additional paid in capital, which had no
impact on the consolidated financial statements. The Company accounted for the
new warrants as an equity transaction on the date the warrants were issued,
which was the IPO date of August 13, 1998.

In 1998, the Company issued, at a price of $0.33 per share, 900,000 Class B
shares and 675,000 Class E shares. Since the estimated fair value of shares
exceeded the issue price, the Company increased stock related expense and
shareholders' equity by $2 million in 1998.

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22. GLOBAL CROSSING LTD. CONSOLIDATING FINANCIAL INFORMATION

After shareholder approval and the implementation of the proposed tracking
stock structure discussed in Note 24, the Company intends to separate for
financial reporting purposes the Global Crossing group and the GlobalCenter
group. Below is the consolidating financial information of the Global Crossing
group and the GlobalCenter group. The financial information reflects the
businesses of the Global Crossing group and the GlobalCenter group, including
the allocation of revenues and expenses between the Global Crossing group and
the GlobalCenter group in accordance with the Company's allocation policies.
The Global Crossing group financial information presented below excludes the
shares of GlobalCenter group stock reserved for issuance for the benefit of
the Global Crossing group or to holders of Global Crossing group stock.

For each group, the Company attributes assets, liabilities, equity, revenue
and expenses, except shared corporate services, based on specific
identification of the companies which we include in each group.

The Company directly charges specifically identified costs for shared
corporate services to each group based upon use of those services. Where
determinations based on use alone are not practical, the Company uses other
methods and criteria, based on revenues, expenses, net assets or income that
we believe are fair and provide a reasonable allocation of the cost of shared
corporate services used by the groups. Shared corporate services include
executive management, human resources, legal accounting and auditing, tax,
treasury, strategic planning, media and investor relations and corporate
technology.

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22. GLOBAL CROSSING LTD. CONSOLIDATING FINANCIAL INFORMATION--(Continued)

[Download Table]

As of December 31, 1999
------------------------------------
Global Global Global
Crossing Center Crossing
Group Group Ltd.
----------- ---------- -----------

ASSETS:
Current assets:
Cash and cash equivalents.............. $ 1,629,546 $ -- $ 1,629,546
Restricted cash and cash equivalents... 17,092 -- 17,092
Accounts receivable, net............... 842,772 18,811 861,583
Other assets and prepaid costs......... 211,170 12,692 223,862
----------- ---------- -----------
Total current assets.................. 2,700,580 31,503 2,732,083
Restricted cash and investments.......... 138,118 -- 138,118
Accounts receivable...................... 52,052 -- 52,052
Property, plant and equipment, net....... 4,940,787 116,315 5,057,102
Goodwill, net............................ 6,414,424 1,411,130 7,825,554
Investment in affiliates................. 317,957 -- 317,957
Other assets............................. 655,594 -- 655,594
Net assets of discontinued operations.... 2,502,850 -- 2,502,850
----------- ---------- -----------
Total assets.......................... $17,722,362 $1,558,948 $19,281,310
=========== ========== ===========
LIABILITIES:
Current liabilities:
Accrued construction costs............. $ 275,361 $ -- $ 275,361
Accounts payable....................... 420,827 28,046 448,873
Accrued cost of access................. 149,150 -- 149,150
Accrued liabilities.................... 264,410 -- 264,410
Accrued interest and preferred
dividends............................. 64,333 -- 64,333
Deferred revenue....................... 124,775 -- 124,775
Income taxes payable................... 127,449 -- 127,449
Current portion of long term debt...... 2,071 -- 2,071
Other current liabilities.............. 250,841 8,888 259,729
----------- ---------- -----------
Total current liabilities............. 1,679,217 36,934 1,716,151
Long-term debt........................... 4,899,596 -- 4,899,596
Deferred revenue......................... 382,305 -- 382,305
Deferred credits and other............... 641,027 28,299 669,326
----------- ---------- -----------
Total liabilities..................... 7,602,145 65,233 7,667,378
----------- ---------- -----------
MINORITY INTEREST........................ 351,338 -- 351,338
----------- ---------- -----------
MANDATORILY REDEEMABLE AND CUMULATIVE
CONVERTIBLE PREFERRED STOCK............. 2,084,697 -- 2,084,697
----------- ---------- -----------
SHAREHOLDERS' EQUITY:
Common stock............................. 7,992 -- 7,992
Treasury stock........................... (209,415) -- (209,415)
Other shareholders' equity............... 8,006,057 1,572,872 9,578,927
Accumulated deficit...................... (120,452) (79,155) (199,607)
----------- ---------- -----------
7,684,192 1,493,715 9,177,897
----------- ---------- -----------
Total liabilities and shareholders'
equity............................... $17,722,362 $1,558,948 $19,281,310
=========== ========== ===========

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22. GLOBAL CROSSING LTD. CONSOLIDATING FINANCIAL INFORMATION--(Continued)

[Download Table]

For the Year Ended December 31, 1999
---------------------------------------------
Global Global Global
Crossing Center Crossing
Group Group Eliminations Ltd.
---------- -------- ------------ ----------

REVENUE......................... $1,457,157 $ 23,724 $(1,978) $1,478,903
EXPENSES:
Cost of sales.................. 829,768 22,693 (1,978) 850,483
Operations, administration and
maintenance................... 87,182 -- -- 87,182
Sales and marketing............ 122,362 6,088 -- 128,450
Network development............ 33,304 -- -- 33,304
General and administrative..... 226,569 3,067 -- 229,636
Depreciation and amortization.. 84,504 1,913 -- 86,417
Goodwill and intangibles
amortization.................. 75,219 74,270 -- 149,489
---------- -------- ------- ----------
1,458,908 108,031 (1,978) 1,564,961
---------- -------- ------- ----------
OPERATING INCOME (LOSS) ........ (1,751) (84,307) -- (86,058)
EQUITY IN INCOME (LOSS) OF
AFFILIATES..................... 15,708 -- -- 15,708
MINORITY INTEREST............... (1,338) -- -- (1,338)
OTHER INCOME (EXPENSE):
Interest income................ 61,235 -- -- 61,235
Interest expense............... (137,011) -- -- (137,011)
Other income (expense), net.... 181,366 114 -- 181,480
---------- -------- ------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE PROVISION FOR
INCOME TAXES................... 118,209 (84,193) -- 34,016
(Provision) benefit for income
taxes......................... (107,851) 5,038 -- (102,813)
---------- -------- ------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS..................... 10,358 (79,155) -- (68,797)
Income from discontinued
operations, net of provision
for income tax................ 17,644 -- -- 17,644
Extraordinary loss on
retirement of debt............ (45,681) -- -- (45,681)
Cumulative effect of change in
accounting principle, net of
income tax benefit............ (14,710) -- -- (14,710)
---------- -------- ------- ----------
NET LOSS........................ (32,389) (79,155) -- (111,544)
Preferred stock dividends...... (66,642) -- -- (66,642)
---------- -------- ------- ----------
INCOME (LOSS) APPLICABLE TO
COMMON SHAREHOLDERS............ $ (99,031) $(79,155) $ -- $ (178,186)
========== ======== ======= ==========
ADJUSTED EBITDA:
Operating income (loss)........ $ (1,751) $(84,307) $ -- $ (86,058)
Depreciation and amortization.. 159,723 76,183 -- 235,906
Cash portion of change in
deferred revenue.............. 120,657 -- -- 120,657
Stock related expenses......... 51,306 -- -- 51,306
Cost of capacity sold-
undersea...................... 291,764 -- -- 291,764
---------- -------- ------- ----------
ADJUSTED EBITDA................. $ 621,699 $(8,124) $ -- $ 613,575
========== ======== ======= ==========

F-44

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

22. GLOBAL CROSSING LTD. CONSOLIDATING FINANCIAL INFORMATION--(Continued)

[Download Table]

For the Year Ended December 31,
1999
----------------------------------
Global Global Global
Crossing Center Crossing
Group Group Ltd.
----------- -------- -----------

CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net loss.................................. $ (32,389) $(79,155) $ (111,544)
Adjustments to reconcile net loss to net
cash provided by operating activities:
(Income) loss from discontinued
operations............................... (17,644) -- (17,644)
Extraordinary loss on retirement of senior
notes.................................... 45,681 -- 45,681
Cumulative effect of change in accounting
principle................................ 14,710 -- 14,710
Non-cash portion of US West termination
agreement................................ (103,384) -- (103,384)
Stock related expenses.................... 51,306 -- 51,306
Equity in (income) loss of affiliates..... (15,708) -- (15,708)
Depreciation and amortization............. 159,723 76,183 235,906
Provision for doubtful accounts........... 36,483 -- 36,483
Deferred income taxes..................... 32,368 (2,984) 29,384
Other..................................... 7,726 -- 7,726
Changes in operating assets and
liabilities.............................. 218,976 4,413 223,389
----------- -------- -----------
Net cash provided by operating
activities.............................. 397,848 (1,543) 396,305
----------- -------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Cash paid for construction in progress and
capacity available for sale.............. 1,577,044 -- (1,577,044)
Acquisitions, net of cash acquired........ (2,456,811) -- (2,456,811)
Proceeds from sale of unconsolidated
subsidiary............................... 379,086 -- 379,086
Purchases of property and equipment....... (76,161) (69,399) (145,560)
Investments in and advances to
affiliates............................... (173,218) -- (173,218)
----------- -------- -----------
Net cash used in investing activities.... (3,904,148) (69,399) (3,973,547)
----------- -------- -----------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from issuance of common stock,
net...................................... 111,364 -- 111,364
Proceeds from issuance of preferred stock,
net...................................... 1,598,750 -- 1,598,750
Proceeds from issuance of senior notes.... 2,000,000 -- 2,000,000
Proceeds from long-term debt.............. 3,544,083 -- 3,544,083
Repayment of long-term debt............... (3,350,979) (83) (3,351,062)
Finance costs incurred.................... (141,027) -- (141,027)
Cash reimbursement to certain
shareholders............................. -- -- --
Minority interest investment in
subsidiary............................... 350,000 -- 350,000
Preferred dividends....................... (52,429) -- (52,429)
Decrease (increase) in restricted cash and
cash equivalents......................... 289,580 -- 289,580
----------- -------- -----------
Funds allocated by Frontier
Corporation/Global Crossing Ltd., net.... (71,025) 71,025 --
----------- -------- -----------
Net cash provided by financing
activities.............................. 4,278,317 70,942 4,349,259
----------- -------- -----------
Cash provided by (used in) discontinued
operations.............................. 50,936 -- 50,936
NET INCREASE IN CASH AND CASH EQUIVALENTS.. 822,953 -- 822,953
CASH AND CASH EQUIVALENTS, beginning of
period.................................... 806,593 -- 806,593
----------- -------- -----------
CASH AND CASH EQUIVALENTS, end of period... $ 1,629,546 $ -- $ 1,629,546
=========== ======== ===========

F-45

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

23. DISCONTINUED OPERATIONS

On July 11, 2000, the Company entered into an agreement to sell the
Incumbent Local Exchange Carrier ("ILEC") business segment to Citizens
Communications Company ("Citizens") for $3.65 billion in cash, subject to
certain adjustments concerning closing date liabilities, working capital
balances and performance measurements as defined in the agreement. In
connection with the sales agreement, the Company and Citizens entered into a
strategic agreement to provide long distance services to the ILEC business. As
a result of this transaction, the Company's financial statements reflect the
financial position and results of operations of the ILEC business as
discontinued operations for all periods presented since the date of the
Frontier acquisition. The sale is anticipated to be completed in early 2001.
The Company anticipates income from discontinued operations; therefore, no
losses have been accrued. The estimated gain (net of tax) from the disposal of
discontinued operations will decrease goodwill recorded upon the Acquisition
of Frontier by the Company in September 1999. Summary financial information of
the ILEC business segment is as follows:

[Download Table]

As of
December 31,
1999
------------

Balance Sheet Data:
Assets........................................................... $2,886,502
Liabilities...................................................... (383,652)
----------
Net Assets of discontinued operations............................ $2,502,850
==========

[Download Table]

For the Year
Ended
December 31,
1999
------------

Income Statement Data:
Revenue.......................................................... $ 185,921
Expenses......................................................... (147,942)
---------
Operating income................................................. 37,979
Interest income, net............................................. 4,106
Other expenses................................................... (715)
Provision for income taxes....................................... (23,726)
---------
Income from discontinued operations.............................. $ 17,644
=========

24. SUBSEQUENT EVENTS

Tyco Litigation

The Company and its subsidiary, South American Crossing (Subsea) Ltd., filed
a lawsuit, on May 22, 2000, against Tyco Submarine Systems Ltd., in the United
States District Court for the Southern District of New York. The complaint
alleges fraud, theft of trade secrets, breach of contract, and defamation
related to Tyco's agreements to install the South American Crossing fiber-
optic cable system. The Company is seeking damages, including punitive
damages, in excess of $1 billion and attorneys' fees and costs, as well as a
declaration that the construction and development agreement with Tyco is void
due to Tyco's alleged fraud and injunctive relief barring Tyco from further
misappropriation of trade secrets and confidential information. On June 13,
2000, Tyco answered the complaint, denying material allegations and asserting
a variety of defenses to such claims. Additionally, Tyco asserted
counterclaims that South American Crossing (Subsea) Ltd. breached its
construction and development agreement with Tyco. Tyco seeks damages of not
less than $150 million, attorneys' fees and costs and a declaration that,
among other things, the construction and development agreement with Tyco is a
valid, enforceable contract and that South American Crossing (Subsea) Ltd.
breached the contract or, in the alternative, terminated the contract for
convenience. On July 5, 2000, the Company answered Tyco's counterclaims,
denying the material allegations.

F-46

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In addition, on May 22, 2000, the Company's subsidiary, Atlantic Crossing
Ltd., together with certain of its affiliates, filed arbitration claims
against Tyco for breaches of its obligations in connection with various
contracts for the development of its Atlantic Crossing-1 fiber-optic cable
system. The Company is seeking unspecified monetary damages, a declaration
that the various contracts for the development of Atlantic Crossing-1 are
terminated and a return of misappropriated intellectual property. On June 22,
2000, Tyco responded to such claims, denying material allegations. Tyco
additionally asserted counterclaims that the Company and its subsidiaries
breached their various obligations under the development contracts. Tyco seeks
among other things the denial of all relief sought by the Company and awards
aggregating not less than $155 million and unspecified damages for breach of
the agreements. In a settlement agreement dated as of August 30, 2000,
Atlantic Crossing entered into an agreement with Tyco for the early
termination of one of the contracts relating to Atlantic Crossing-1, the
Operations, Administration and Maintenance, or the OA&M Agreement, in return
for the payment of $19 million to Tyco. In addition, Atlantic Crossing and
Tyco have agreed to drop their respective claims under the OA&M Agreement in
the arbitration. The other claims asserted in the arbitration remain pending.

IXnet and IPC Acquisitions

On June 14, 2000, we completed our acquisition of IXnet, Inc. and its parent
company, IPC Communications, Inc., resulting in IXnet and IPC becoming our
wholly owned subsidiaries. IXnet shareholders received 1.184 shares of Global
Crossing common stock for each outstanding share of common stock of IXnet and
FPC shareholders received 5.417 shares of Global Crossing common stock for
each outstanding share of common stock of IPC, for a total of 58.2 million
shares of Global Crossing common stock. The purchase price of $3.8 billion
reflects a Global Crossing stock price of $49.77 per share, the average price
before and after the definitive merger agreement was entered into (February
22, 2000) and includes long-term debt assumed and the fair market value of
options issued by Global Crossing. The excess of the purchase price over net
liabilities assumed of $3.4 billion was allocated to goodwill and other
intangible assets, which are being amortized on the straight-line method over
10 years. IXnet operates a global network, providing a variety of voice, data
and content distribution services to the financial services community. IPC
provides integrated telecommunications equipment and services that facilitate
the execution of transactions by the worldwide financial services community.

Common and Cumulative Convertible Preferred Stock Issuances

In April 2000, Global Crossing Ltd. issued 21,673,706 shares of its common
stock for net proceeds of approximately $694 million and 4,000,000 shares of 6
3/4% cumulative convertible preferred stock at a liquidation preference of
$250 for net proceeds of approximately $970 million. In May 2000, pursuant to
an over-allotment option held by the underwriters of the preferred stock,
Global Crossing Ltd. issued an additional 600,000 shares of 6 3/4% cumulative
convertible preferred stock for net proceeds of approximately $146 million.
The Company is using the proceeds of these offerings for general corporate
purposes, principally capital for the expansion of its business.

Asia Global Crossing Equity Offering

On March 31, 2000, AGC announced its intention to effectuate an initial
public offering of its common stock and to file a registration statement under
the Securities Act of 1933 in respect of the proposed offering.

Pacific Crossing Ltd. Consolidation

On March 24, 2000, the Company increased its interest in the PC-1 cable
system from 57.75% to 64.50% for approximately $21 million by acquiring the
remaining ownership of another partner in PC-1. In connection with this
transaction, the PC-1 Shareholder Agreement was amended, which enabled the
Company to exercise effective control over PC-1.

F-47

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Global Center Tracking Stock

On March 2, 2000, the Company announced plans to create a new class of
Global Crossing Ltd. common stock that would track the performance of the
complex web hosting business operated by its wholly-owned subsidiary,
GlobalCenter, Inc. The creation of this new class of stock will be subject to
shareholder approval.

GlobalCenter Japan

On January 26, 2000, the Company's Asia Global Crossing joint venture
announced an agreement to create GlobalCenter Japan, a joint venture with
Japan's Internet Research Institute, Inc. ("IRI"). GlobalCenter Japan will
design, develop and construct a media distribution center in Japan providing
connectivity worldwide through
the Global Crossing Network. The joint venture will also develop and provide
complex web hosting services, e-commerce support and applications hosting
solutions. Asia Global Crossing will own 89 percent of GlobalCenter Japan,
with IRI owning the remaining 11 percent.

Hutchison Global Crossing Joint Venture

On January 12, 2000, the Company established a joint venture, called
Hutchison Global Crossing, with Hutchison to pursue fixed-line
telecommunications and Internet opportunities in Hong Kong. For its 50% share,
Hutchison contributed to the joint venture its building-to-building fixed-line
telecommunications network in Hong Kong and a number of Internet-related
assets. In addition, Hutchison has agreed that any fixed-line
telecommunications activities it pursues in China will be carried out by the
joint venture. For its 50% share, the Company provided to Hutchison $400
million in Global Crossing convertible preferred stock (convertible into
shares of Global Crossing common stock at a rate of $45 per share) and
committed to contribute to the joint venture international telecommunications
capacity rights on our network and global media distribution center
capabilities which together are valued at $350 million, as well as $50 million
in cash. The Company intends to integrate its interest in Hutchison Global
Crossing into Asia Global Crossing.

F-48

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

[Download Table]

Column A Column B Column C Column D Column E
------------ ---------- -------- ---------- ------------
Additions
-------------------
Balance at Charged to Charged Balance at
December 31, costs and to other December 31,
Description 1998 expenses accounts Deductions 1999
----------- ------------ ---------- -------- ---------- ------------

Reserve for
uncollectible
accounts............... $4,233 $36,483 $76,800 $(31,757) $85,759
Deferred tax valuation
allowance.............. $ -- $ -- $54,780 $ -- $54,780

F-49

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf on September 21, 2000 by the undersigned, thereunto duly
authorized.

Global Crossing Ltd.

/s/ Dan J. Cohrs
By: _________________
Dan J. Cohrs
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on September 21, 2000 by the following persons on
behalf of the registrant and in the capacities indicated.

[Enlarge/Download Table]

Signatures Title
---------- -----

/s/ Gary Winnick Chairman of the Board and Director
___________________________________________
Gary Winnick

/s/ Lodwrick M. Cook Co-Chairman of the Board and Director
___________________________________________
Lodwrick M. Cook

Vice Chairman of the Board and Director
___________________________________________
Thomas J. Casey

Director
___________________________________________
Jack M. Scanlon

/s/ Leo J. Hindery, Jr. Chief Executive Officer and Director
___________________________________________
Leo J. Hindery, Jr.

/s/ David L. Lee Director
___________________________________________
David L. Lee

/s/ Joseph P. Clayton Director; President, Global Crossing North
___________________________________________ America
Joseph P. Clayton

/s/ Dan J. Cohrs Chief Financial Officer
___________________________________________ (principal financial officer and principal
Dan J. Cohrs accounting officer)

S-1

10-K/A Last Page of 100 TOC 1st Previous Next ↓Bottom Just 100th
[Download Table]

Signatures Title
---------- -----

/s/ Norman Brownstein Director
___________________________________________
Norman Brownstein

/s/ William E. Conway, Jr. Director
___________________________________________
William E. Conway, Jr.

/s/ Eric Hippeau Director
___________________________________________
Eric Hippeau

/s/ Geoffrey J.W. Kent Director
___________________________________________
Geoffrey J.W. Kent

___________________________________________ Director
James F. McDonald

/s/ Douglas H. McCorkindale Director
___________________________________________
Douglas H. McCorkindale

/s/ Michael R. Steed Director
___________________________________________
Michael R. Steed

S-2

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K/A’ Filing	Date	First	Last	Other Filings

	10/15/13	70
	11/15/09	29	88
	12/1/08	73
	5/15/08	70	89	4
	11/24/07	40	71
	11/15/06	29	88	4
	7/2/04	40	70
	5/14/04	70
	3/31/04	70		10-Q, 4, 4/A, NTN 10Q
	7/1/02	41
	6/1/02	73
	1/1/02	41
	1/1/01	15
	12/31/00	71	72	10-K, 11-K
Filed as of:	9/21/00	99		10-Q/A, POS AM
Filed on:	9/20/00
	9/1/00	1	28
	8/30/00	27	96
	7/21/00	25		PRER14A
	7/11/00	2	95	8-K
	7/5/00	27	95
	6/22/00	27	96
	6/15/00	64		8-K, DEF 14A, PRER14A, PRES14A, S-8, S-8 POS
	6/14/00	4	96	8-K, S-3/A, S-8
	6/13/00	27	95
	5/22/00	27	96
	5/15/00	29	69	10-Q
	3/31/00	34	96	10-Q, 10-Q/A, S-3/A
	3/30/00	16
	3/28/00	82		S-3/A
	3/24/00	4	96
	3/17/00	2		10-K
	3/16/00	45	49	10-K
	3/2/00	5	97	425, 8-K
	2/29/00	5		425
	2/23/00	51
	2/22/00	4	96	3, 8-K
	2/17/00	9
	2/1/00	18	73
	1/26/00	5	97
	1/18/00	17	48	S-3, S-8
	1/12/00	5	97
	1/11/00	46	48	8-K, S-4
	1/1/00	33	60
For Period End:	12/31/99	1	95	10-K, 11-K
	12/22/99	17
	12/15/99	28	88
	12/8/99	49		8-K
	12/7/99	48
	12/5/99	48
	12/3/99	49		8-K
	11/30/99	65
	11/24/99	3	88	8-K
	11/19/99	46
	11/15/99	45	65	10-Q, 8-K, 8-K/A
	11/12/99	29	88
	11/5/99	28	88
	10/29/99	49		8-K
	10/21/99	45	49	8-K
	10/14/99	45
	10/12/99	49		8-K
	10/11/99	49		8-K
	10/10/99	45		8-K
	10/1/99	35	62
	9/30/99	29	79	10-Q, 8-K
	9/28/99	4	88	8-K
	9/27/99	45
	9/21/99	48
	9/8/99	47		8-K, S-4
	9/3/99	44	65	8-K
	9/2/99	44	82	8-K
	9/1/99	65
	8/25/99	16
	8/5/99	46		S-4/A
	8/3/99	48
	7/30/99	46
	7/20/99	45	47	8-K
	7/18/99	30	47	8-K
	7/16/99	27	44	8-K
	7/12/99	46		S-4
	7/2/99	4	88	8-K
	7/1/99	33	59
	6/30/99	59		10-Q
	6/25/99	26	46
	6/2/99	17
	5/21/99	44	47	8-K, SC 13D, SC 14D1
	5/18/99	44		8-K
	5/16/99	30	47	8-K
	5/10/99	48		10-Q
	5/1/99	48
	4/26/99	44		8-K
	3/19/99	44		8-K
	3/16/99	44	48	8-K
	3/9/99	54	58
	2/19/99	48
	1/25/99	14
	1/1/99	41	51
	12/31/98	29	87	10-K405
	12/22/98	45	46
	12/1/98	45
	11/16/98	46		10-Q
	8/14/98	28	82	424B4, S-4
	8/13/98	90		S-1/A
	8/12/98	46
	7/23/98	45	46	S-1/A
	7/21/98	46
	7/9/98	45
	7/2/98	45		8-A12G, S-1/A
	6/30/98	30
	6/2/98	46
	5/18/98	46	89
	4/30/98	45
	4/21/98	46
	3/26/98	48
	1/21/98	90
	1/1/98	48
	12/31/97	29	86
	3/31/97	61	74
	3/28/97	48
	3/25/97	90
	3/19/97	29	89
	3/18/97	46
	12/31/96	79
	5/14/96	48
	3/25/96	48
	1/1/96	48
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Filing Submission 0000950130-00-005135 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Global Crossing Ltd – ‘10-K/A’ for 12/31/99

On: Wednesday, 9/20/00, at 8:13pm ET · As of: 9/21/00 · For: 12/31/99 · Accession #: 950130-0-5135 · File #: 0-24565

Previous ‘10-K’: ‘10-K’ on 3/17/00 for 12/31/99 · Next: ‘10-K’ on 4/2/01 for 12/31/00 · Latest: ‘10-K/A’ on 2/28/11 for 12/31/10

Amendment to Annual Report — Form 10-KFiling Table of Contents

10-K/A — Amendment #1 to Form 10-KDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Amendment to Annual Report — Form 10-K
Filing Table of Contents

10-K/A — Amendment #1 to Form 10-K
Document Table of Contents