SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 4, 2002
Equant N.V.
(Translation of Registrant's Name Into English)
Gatwickstraat 21-23
1043 GL Amsterdam Sloterdijk, The Netherlands
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
------- -----
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3- 2(b) under the Securities Exchange Act of
1934.)
Yes No X
------- -----
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2 (b): 82-795.)
EQUANT ANNOUNCES FIRST HALF 2002 RESULTS
Strong control of costs and working capital drive improved cash position
HIGHLIGHTS OF THE FIRST HALF:
- NETWORK SERVICES REVENUES INCREASED TO $783 MILLION
- TOTAL COSTS, EXCLUDING DEPRECIATION, DECLINED BY $169 MILLION COMPARED WITH
PRO FORMA 2001 FIRST HALF
- EBITDA OF $76 MILLION COMPARED WITH PRO FORMA EBITDA LOSS OF $10 MILLION IN
FIRST HALF 2001
- NET CASH AND CASH EQUIVALENTS TOTALED $426 MILLION AT JUNE 30, 2002
AMSTERDAM, THE NETHERLANDS -- SEPTEMBER 4, 2002 -- Equant (New York Stock
Exchange: ENT; Euronext Paris: EQU) today announced financial results for the
first half of the 2002 financial year. Revenues for the first six months of 2002
were $1,474 million and EBITDA was $76 million. The net loss, inclusive of
non-recurring charges of $66 million, was $253 million or $0.86 per share for
the half year.
Commenting on Equant's results, Didier Delepine, president and chief executive
officer of Equant said: "These results confirm our ability to manage the
business towards profitability as we aggressively control our costs and improve
our cash position.
"The synergies arising from the merger of the two companies are showing through
in significantly reduced direct costs and SG&A expenses with further reductions
to come in the second half of the year. Our ability to continue cutting our
costs is a key component of our drive to profitability against the backdrop of a
difficult economic environment.
"We are making no changes to our guidance for the current financial year"
The Company presents its results under French Generally Accepted Accounting
Principles (French GAAP). The actual results for the first half of 2002 are for
the merged company. The actual results for the first half of 2001 exclude the
results of Global One and discontinued operations.
The pro forma results for the first half of 2001 have been prepared as if the
Global One acquisition had occurred on January 1, 2001. These pro forma results
exclude discontinued operations, assume that the new SITA contractual
arrangements were in place from January 1, 2001 and have been prepared on a
basis comparable with that of the first half of 2002. Some Global One entities
had been allocating costs differently from the Company. Consequently, the
1
Company has also made reallocations in the pro forma results among costs of
services and products sold, selling expenses and G&A expenses. Details are shown
on page 12. The reallocations did not affect EBITDA, EBITDA margin or adjusted
operating loss, but did reduce pro forma gross profit by $28 million and gross
margin by 1.8 percentage points.
FINANCIAL RESULTS HIGHLIGHTS ($ millions unless otherwise indicated):
H1 02 H1 01 CHANGE H1 01
----- ----- ------ -----
ACTUAL PRO FORMA % ACTUAL
------ --------- - ------
REVENUES (1) (2)
Network Services (Direct) 567.6 522.6 8.6% 398.2
Network Services (Indirect) (3) 215.6 238.2 (9.5%) 76.9
----------------------- ------------
Total Network Services 783.2 760.8 2.9% 475.1
Integration Services 209.1 263.9 (20.8%) 208.6
Other Services 119.8 148.1 (19.1%) -
SITA Contract (4) 361.8 384.4 (5.9%) 197.4
----------------------- ------ ------------
TOTAL REVENUES 1,473.9 1,557.2 (5.4%) 881.1
----------------------- ------ ------------
Total Costs before depreciation 1,398.3 1,567.3 (10.8%) 747.2
EBITDA (5) 75.6 (10.1) NM 133.9
Depreciation 229.5 255.4 (10.1%) 101.8
ADJUSTED OPERATING (LOSS)/PROFIT (153.9) (265.5) (42.0%) 32.1
The footnotes for the table above are shown on page 7.
A more detailed set of results is shown in Annex A. A reconciliation of the
actual 2001 first half year results of Equant to the pro forma results is
included in Annex B. The discussion that follows compares the results for the
first six months of 2002 with the pro forma results for the first six months of
2001 unless otherwise noted.
REVENUES
Revenues for the first half of 2002 were $1,474 million, a 5.4 percent decrease
compared with the first half of 2001.
Network Services' revenues increased by 2.9 percent to $783 million in the first
half of 2002. Revenues from the multi national customer base serviced by the
direct sales force increased 8.6 percent and showed growth in all regions. The
increase from direct sales more than offset a 9.5 percent decrease from the
indirect sales channels where the revenue Equant derived from two of its key
indirect channels, Deutsche Telekom and Sprint, declined year over year.
Orders received in the first half totaled $996 million. Orders with a value
greater than one million dollars accounted for more than $750 million of the
Company's
2
half-year order intake for the direct sales force. During the half year, the
Company signed 47 contracts with major international corporations each valued at
more than one million dollars.
Integration Services' revenues declined by 20.8 percent to $209 million this
half reflecting the economic slowdown and customers' cutbacks in capital
expenditures. As a result of these cutbacks, revenues for fulfillment services
were 30 percent below last year's levels, which in turn, resulted in lower
installation and maintenance revenues.
Revenues from SITA were $362 million in the first half reflecting the new
contractual arrangements with SITA. The revenues for the first half of 2001
totaled $384 million.
Other Services revenues in the first half were $120 million, a decrease of 19.1
percent from the 2001 half year. The decrease reflects a change in the product
management agreements with France Telecom Transpac reached in the second half of
2001, together with the expected fall in revenues from circuit switched voice
services.
ADDITIONAL FINANCIAL HIGHLIGHTS ($ millions unless otherwise indicated)
H1 02 H1 01 CHANGE H1 01
----- ----- ------ -----
ACTUAL PRO FORMA % ACTUAL
------ --------- - ------
Net Cost of Services and Products Sold 1,049.0 1,163.1 (9.8%) 598.9
Gross Profit 424.9 394.1 7.8% 282.2
Gross Margin % 28.8% 25.3% 32.0%
Selling Expenses 150.2 178.6 (15.9%) 80.4
As % of Revenue 10.2% 11.5% 9.1%
G & A Expenses 199.1 225.6 (11.7%) 67.9
As % of Revenue 13.5% 14.5% 7.7%
Total Costs before Depreciation 1398.3 1567.3 (10.8%) 747.2
Depreciation 229.5 255.4 (10.1%) 101.8
As % of Revenue 15.6% 16.4% 11.6%
Adjusted Operating (Loss)/Profit (153.9) (265.5) (42.0%) 32.1
Operating Margin % (10.4%) (17.0%) 3.6%
GROSS PROFIT AND GROSS MARGIN
The Company's gross profit was $425 million in the first half of 2002, an
increase of $31 million, or 7.8 percent, from the $394 million in the same
period of 2001, despite the $83 million decline in revenue. The gross margin was
28.8 percent this half compared with 25.3 percent in the 2001 half year.
The 9.8 percent decline in the cost of services and products sold arises mainly
from an improvement in the network cost structure. The actions taken by the
3
Company to integrate its two networks have already yielded significant synergies
including $90 million for circuit costs in the first half of 2002.
OPERATING EXPENSES
Selling expenses of $150 million for the first half were down 15.9 percent from
the comparable period last year, reflecting the rationalization of the Company's
sales and marketing operations. The Company has integrated the two sales forces,
made significant headcount reductions and closed 10 under-performing sales
offices. Selling expenses as a percent of revenue declined to 10.2 percent this
half compared with 11.5 percent in the first half of 2001.
General and administrative (G&A) expenses in the half-year were $199 million, an
11.7 percent decrease from the 2001 first half. The reduced G&A expenses result
from the Company's continuing restructuring and integration program, which has
reduced headcount and cut associated expenses for premises, equipment and
information technology. G&A costs as a percent of revenue decreased to 13.5
percent in the first half of 2002 from 14.5 percent in 2001.
Total costs and expenses, excluding depreciation, fell by $169 million or 10.8
percent to $1,398 million. The Company is on track to deliver its targeted
synergies for 2002 of $300 million.
EBITDA AND MARGIN
Earnings before interest, taxes, depreciation and amortization, share plan costs
and non-recurring charges (EBITDA) were $76 million in the 2002 first half
compared to an EBITDA loss of $10 million in the comparable period in 2001. As a
result of the improved gross profit and the reduction in expenses, the EBITDA
margin for the half-year was 5.1 percent compared with a negative 0.6 percent in
the comparative period.
OTHER OPERATING INCOME AND EXPENSES
Depreciation and Amortization (excluding goodwill)
Depreciation and amortization expense decreased 10.1 percent to $230 million for
the half compared with $255 million in the first half of 2001. The first half
2001 charge included accelerated depreciation of $68 million for assets acquired
with Global One. The underlying increased depreciation charge reflects the high
levels of capital expenditure in the first half of 2001 and the movement of
assets into service from work in progress after July 1, 2001.
Share Plan Costs
4
Under French GAAP there is no charge upon the issuance of options and share
awards but the Company continues to accrue for social charges related to these
grants. In 2001 and 2002, the financial statements reflect a reversal of excess
accrued social charges that had been built up in prior years because of a higher
stock price at that time. The charge for the six months would have been
approximately $3 million under FAS 123 of US GAAP.
Non-recurring Charges - Restructuring and Integration Costs
The costs incurred to integrate and restructure Global One and Equant, before
reimbursement of $42 million from France Telecom, were $90 million in the first
half. The major components of the charge, before recoveries from France Telecom,
include $42 million for integration of the transmission networks and other
network elements, and $19 million for personnel related costs.
Other Non-recurring Charges
In the first half of 2002 the Company took a charge of $18 million for the write
off of certain assets, of which $17 million related to capacity purchases from
bankrupt providers.
The charge of $18 million in 2001 for non-recurring items primarily reflects the
costs of other potential corporate transactions prior to the transactions with
Global One and France Telecom.
ADJUSTED OPERATING LOSS
The adjusted operating loss of $154 million in the first half of 2002 reflects a
substantial improvement from the loss of $266 million in the comparable period
of 2001 driven by the growth in gross profit and reductions in SG&A.
NON-OPERATING EXPENSES
Financial Income
Interest income for the first half of 2002 was $2 million compared with $11
million interest expense in the 2001 pro forma period. The cash injection from
the transaction with France Telecom allowed the Company to repay debt, which had
built up through June 2001.
In the first half of 2002, the Company recognized a foreign exchange gain of $4
million compared with a loss of $20 million in the 2001 period. Following the
acquisition of Global One, foreign exchange hedging was applied to Global One
entities.
Employee Profit Share
5
As required by the French legal code, Equant's French operations make
contributions to France Telecom's employee profit sharing plan.
Equity in Loss of Affiliate
This charge represents the Company's share of the post-tax losses of Radianz,
its 49 percent-owned affiliate. The loss is broadly in line with the 2001 full
year run rate.
ADDITIONAL INFORMATION
Capital expenditures totaled approximately $176 million for the first six months
of 2002, less than half of the $381 million in the pro forma 2001 first half.
The reduction is a direct result of integration synergies and stringent controls
on capital expenditures. The Company has also been able to reduce capital
expenditures by redeploying network equipment made surplus by the integration of
the two networks.
At June 30, 2002, the Company's net cash and cash equivalents totaled $426
million, an increase of $53 million from December 31, 2001. The improved cash
position reflects the Company's continued focus on cash management together with
increased EBITDA, continued optimization of capital expenditures and reduced
working capital requirements.
On the basis of current activity levels and the associated cash burn rates, and
without recourse to either the loan from France Telecom or any other source of
finance, the Company does not expect to require additional funding before 2004.
Employment at June 30, 2002 was 10,800 compared with 11,300 at December 2001.
The reduction reflects the reorganization of the businesses undertaken after the
merger, including the transfer of activities to related parties.
RELATED PARTY REVENUES AND AGREEMENTS
France Telecom
Revenues derived from the France Telecom Group totaled $135 million in the first
half, compared with $120 million in the 2001 first half. The increase is
primarily due to the transfer of some of Equant's customers in France to France
Telecom Transpac under the arrangements put in place at the time of the merger.
In addition, in the first half of 2002, some $144 million of costs were incurred
on behalf of France Telecom and transferred to them on a pass-through basis by
the Company. The revenues from these businesses are shown as "other
6
operating income" while the associated costs are primarily included in "costs of
services and products sold". In the first half of 2001 other income was netted
against costs.
Radianz
Revenues from Radianz, the Company's 49 percent-owned joint venture with
Reuters, totaled $51 million in the first half year of 2002 compared with $44
million in the first six months of 2001. The majority of these revenues arise
from the pass-through of costs incurred by the Company to Radianz.
Footnotes:
(1) Equant sold its Application Services division in October 2001. Its
results have, therefore, been excluded from the 2001 information.
(2) The pro forma results have been prepared, where information is
available, as if the France Telecom transaction, including the
acquisition of Global One, had occurred on January 1, 2001.
(3) Network Services (Indirect) refers to revenues derived from agreements
with Radianz, Deutsche Telekom, Sprint, France Telecom Transpac, and
other indirect channels.
(4) First half 2001 actual SITA revenue is as billed under the former "Joint
Venture" contractual arrangements. The 2001 half-year pro forma results
and the 2002 half-year actual results reflect the new contractual
arrangements with SITA.
(5) EBITDA: earnings before finance charges, income taxes, share plan costs,
non-recurring charges and depreciation and amortization.
The Company will host a conference call for investors on September 5, 2002 at
8:30 a.m. (EDT) and 2:30 p.m. (CET). The call can be accessed via the Equant web
site at (www.equant.com) or by dialing +1 913-981-5517 in North America or
+44-20-7984-7572 in Europe. A replay will be available through mid-night,
September 9 and can be accessed by dialing +1 -719-457-0820. The pass-code is
136063.
ABOUT EQUANT
Equant (NYSE: ENT, Euronext Paris: EQU) is a recognized industry leader in
global IP and data services for multinational businesses, offering network,
integration and managed services to global business. The network has unmatched
seamless global reach, connecting key business centers in 220 countries and
territories, with local support in 145 countries and territories. Building on
more than 50 years of experience in data communications, Equant serves thousands
of the world's top companies. Equant, a member of the France Telecom Group,
meets the diverse needs of global companies with the industry's most extensive
portfolio of managed data network services.
This release may contain projections or other forward-looking statements related
to Equant that involve risks and uncertainties. Readers are cautioned that these
statements are only predictions and may differ
7
materially from actual future results or events. Readers are referred to the
documents filed by Equant with the SEC, specifically the most recent filing on
Form 20-F, which identify important risk factors that could cause actual results
to differ from those contained in the forward-looking statements, including,
among other things, risks relating to Equant's history of operating losses, the
unpredictability of growth in Equant's markets, changing technology, uncertain
and changing regulatory restrictions, Equant's international operations,
dependence on suppliers, network security issues, competition, and volatility of
Equant's stock price and risks relating to the combination with Global One. All
forward-looking statements are based on information available to Equant on the
date hereof, and Equant assumes no obligation to update such statements.
CONTACTS:
EQUANT MEDIA RELATIONS EQUANT INVESTOR RELATIONS
Fredric Emmert Jim Armstrong
+1 703 689 6010 +1 678 346 3754
fredric.emmert@equant.com james.armstrong@equant.com
-------------------------
Europe Europe
Frederic Gielec Ashley Rayfield
+33 1 46 46 2189 +44 208 321 4581
frederic.gielec@equant.com ashley.rayfield@equant.com
--------------------------
Asia Pacific Australasia France
Shirley Ng Isabelle Guibert
+65 335 6730 +33 1 46 46 99 53
shirley.ng@equant.com isabelle.guibert@equant.com
Annexes to Follow:
A Consolidated Statements of Operations, Condensed Consolidated Balance
Sheets, and Condensed Consolidated Statements of Cash Flow.
B Reconciliation of actual to pro forma results for the six months ended
June 30, 2001.
8
ANNEX A 1 OF 3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(U.S. DOLLARS MILLIONS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30,
--------------------------------------------
2002 2001 2001
PRO FORMA ACTUAL
ACTUAL (1) (2)
------------ ------------ ------------
Sales of services and products $ 1,473.9 $ 1,557.2 $ 881.1
Cost of services and products sold 1,193.3 1,163.1 (3) 598.9
Other operating income 144.3 - -
------------ ------------ ------------
Gross profit 424.9 394.1 (3) 282.2
Selling 150.2 178.6 (3) 80.4
General and Administrative 199.1 225.6 (3) 67.9
------------ ------------ ------------
EBITDA 75.6 (10.1) 133.9
Depreciation and amortization (excluding
goodwill) 229.5 255.4 101.8
Share plan costs (0.3) 1.9 1.9
Non-recurring charges 66.3 18.0 18.6
------------ ------------ ------------
OPERATING (LOSS)/PROFIT (219.9) (285.4) 11.6
Financial income / (charges) 5.8 (31.2) (16.2)
Income taxes (9.3) (11.8) 3.9
Employee profit sharing (3.5) - -
Equity in loss of affiliate (13.8) (5.9) (5.9)
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS, BEFORE MINORITY (240.7) (334.3) (6.6)
INTERESTS AND GOODWILL AMORTIZATION
Goodwill amortization (11.8) (12.0) (12.0)
Minority interests (0.4) (0.2) (0.4)
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS $ (252.9) (346.5) (19.0)
------------ ------------ ------------
PER SHARE DATA - BASIC AND DILUTED
Net (loss) from continuing operations $ (0.86) $ (1.19) $ (0.09)
------------ ------------ ------------
Basic weighted average number of shares 292,705,497 292,187,391 202,571,339
(1) The pro forma results for the first half of 2001 have been prepared as
if the Global One acquisition had occurred on January 1, 2001. These pro
forma results exclude discontinued operations and assume that the new
SITA contractual arrangements were in place from January 1, 2001.
Certain costs have been reallocated for comparative purposes with the
first half of 2002.
(2) The actual results for the first half of 2001 comprise six months of
activity for Equant only. These results exclude discontinued operations
and are presented under French GAAP.
(3) The detail of changes to the 2001 pro forma are shown in Annex B on
page 12.
9
ANNEX A 2 OF 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS MILLIONS)
JUNE DECEMBER
30, 31,
2002 2001
------------ -----------
Unaudited
ASSETS
Cash and cash equivalents $ 437.3 $ 385.8
Accounts receivable from SITA, Radianz and France
Telecom 786.3 688.4
Accounts receivable and other current assets 853.8 873.5
------------ -----------
Total Current Assets 2,077.4 1,947.7
Goodwill 165.7 177.5
Other intangible assets, net 264.8 301.2
Property and equipment, net 1,054.6 1,077.4
Investments accounted for using the equity method 119.8 133.6
Investments at cost 5.1 6.2
Other non-current assets 77.0 75.5
------------ -----------
Total Non-current Assets 1,687.0 1,771.4
------------ -----------
TOTAL ASSETS $ 3,764.4 $ 3,719.1
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank loans & current portion of long-term debt $ 7.8 $ 8.8
Trade accounts payable to SITA, Radianz and France
Telecom 489.0 451.4
Trade accounts payable, accruals and other current
liabilities 1023.7 845.6
------------ -----------
Total Current Liabilities 1,520.5 1,305.8
Provisions for liabilities and charges 49.0 29.6
Long-term debt, less current portion 3.4 4.0
Other non-current liabilities 79.6 101.8
------------ -----------
Total Non-current Liabilities 132.0 135.4
Minority Interests 0.4 0.4
Shareholders' Equity 2,111.5 2,277.5
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,764.4 $ 3,719.1
------------ -----------
10
ANNEX A 3 OF 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS MILLIONS)
SIX MONTHS YEAR ENDED
ENDED DEC 31, (1)
JUNE 30,
2002 2001
----------
(Unaudited)
OPERATING ACTIVITIES
Net (loss) $ (252.9) $ (376.4)
ADJUSTMENTS TO RECONCILE NET LOSS TO FUNDS GENERATED FROM
OPERATIONS
Depreciation and amortization 241.3 320.9
Other 95.3 79.2
----------- ----------
FUNDS GENERATED FROM OPERATIONS 83.7 23.7
CHANGES IN OPERATING ASSETS AND LIABILITIES 117.5 (141.1)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 201.2 (117.4)
INVESTING ACTIVITIES
Net investment in property and equipment (155.7) (279.1)
Net investment in intangible assets (19.9) (119.6)
Net cash acquired from acquisitions (net of transaction
costs in 2001 of $29.4) - 265.9
Proceeds from disposal of discontinued operations - 3.6
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (175.6) (129.2)
FINANCING ACTIVITIES
Proceeds from issuance of shares - 1,000.0
Net repayment of borrowings and bank overdrafts (0.5) (425.2)
Other cash flows from financing activities 26.2 -
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 25.7 574.8
Effect of changes in exchange rates on cash and cash
equivalents 0.2 4.1
INCREASE IN CASH AND CASH EQUIVALENTS 51.5 332.3
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 385.8 53.5
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD/ YEAR $ 437.3 $ 385.8
----------- ----------
(1) Represents actual cash flow for 12 months ended December 31, 2001.
Includes cash flow of Equant for 12 months and cash flow of Global
One for 6 months since June 29, 2001.
11
ANNEX B
RECONCILIATION OF HALF YEAR 2001 ACTUAL TO PRO FORMA
EQUANT (1) GLOBAL GLOBAL REALLOCATED OTHER (5) PRO
(US dollars millions) ONE (2) ONE (3) (4) FORMA
Sales of services and products 881.1 595.4 (95.4) 176.1 1,557.2
Cost of services and products sold 598.9 554.8 (183.2) 28.0 (4) 164.6 1,163.1
------------------------------------------------------------------
Gross profit 282.2 40.6 87.8 (28.0) (4) 11.5 394.1
Selling 80.4 152.8 (8.0) (56.0) (4) 9.4 178.6
General and Administrative 67.9 97.1 (9.7) 28.0 (4) 42.3 225.6
------------------------------------------------------------------
EBITDA 133.9 (209.3) 105.5 - (40.2) (10.1)
Depreciation and amortization 101.8 85.6 68.0 255.4
Share plan costs 1.9 1.9
Non-recurring charges 18.6 (0.6) 18.0
------------------------------------------------------------------
OPERATING PROFIT / (LOSS) 11.6 (294.9) 105.5 - (107.6) (285.4)
Financial income / (charges) (16.2) (34.0) 19.0 (31.2)
Income taxes 3.9 (2.4) (13.2) (11.8)
Equity in loss of unconsolidated affiliate (5.9) (5.9)
------------------------------------------------------------------
NET PROFIT / (LOSS) FROM CONTINUING (6.6) (331.3) 105.5 - (101.8) (334.3)
OPERATIONS, BEFORE MINORITY INTERESTS AND
GOODWILL AMORTIZATION
Goodwill amortization (12.0) (2.4) 2.4 (12.0)
Minority interests (0.4) 0.2 (0.2)
------------------------------------------------------------------
NET PROFIT / (LOSS) (19.0) (333.5) 107.9 - (101.8) (346.5)
Notes
1 Results of operations for unmerged Equant for the period from January
through June 2001.
2 Global One from January through June 2001.
3 Global One excluded businesses.
4 Reallocation of costs to align the pro forma results to the current
accounting basis. The main reallocations are moving staff and associated
costs for sales support and other post-sales activities of $ 50 million from
selling costs to costs of services and products sold and the transfer of
information systems costs of $22 million from costs of services and products
sold to G&A. The effect of these reallocations on the previously reported
full year 2001 pro forma is to reduce gross profit by $28 million to $802
million and gross margin to 26.2 percent; to reduce selling expenses by $56
million to $353.3 million and to increase G&A expenses by $28 million to
$457.4 million.
5 Other adjustments principally reflect the new contractual arrangements with
SITA.
12