BROOMFIELD, Colo., July 29, 2014 /PRNewswire/ -- Level 3
Communications, Inc. (NYSE: LVLT) reported total revenue of
$1.625 billion for the second quarter
2014, compared to $1.565 billion for
the second quarter 2013.
In the second quarter 2014, the company generated net income of
$51 million and $0.21 basic and diluted net income per share,
which included a $0.14 loss for the
devaluation of the Venezuelan Bolivar, and $0.02 of tw telecom transaction-related
fees. Excluding these items, the company generated basic and
diluted net income per share of $0.37.
Adjusted EBITDA was $463 million
in the second quarter 2014, excluding $4
million of tw telecom transaction-related fees. For the
second quarter 2013, Adjusted EBITDA on a pro forma basis was
$385 million, which has been adjusted
to include $15 million in
bonus-related non-cash compensation expense and to exclude
$13 million of severance charges,
both of which were recognized in that quarter.
"Level 3 delivered another quarter of solid revenue and Adjusted
EBITDA growth," said Jeff Storey,
president and CEO of Level 3. "Our ability to help enterprise
customers solve their evolving, global telecommunications needs is
a key differentiator in the industry. During the second quarter, we
also indicated our intent to acquire tw telecom and the integration
planning process is well underway."
Financial Results
Metric
($ in millions,
except per share data)
|
Second Quarter
2014
|
Second Quarter
2013
|
Core Network Services
Revenue
|
$1,479
|
$1,379
|
Wholesale Voice
Services and Other Revenue
|
$146
|
$186
|
Total
Revenue
|
$1,625
|
$1,565
|
Adjusted
EBITDA(1)(2)(3)(4)
|
$463
|
$385
|
Capital
Expenditures
|
$241
|
$208
|
Unlevered Cash
Flow(1)
|
$211
|
$153
|
Free Cash
Flow(1)
|
$62
|
$8
|
Gross
Margin(1)
|
62.3%
|
60.6%
|
Adjusted EBITDA
Margin(1)(2)(3)(4)
|
28.5%
|
24.6%
|
Net Income
(Loss)
|
$51
|
($24)
|
Basic Earnings (Loss)
Per Share
|
$0.21
|
($0.11)
|
Diluted Earnings
(Loss) Per Share
|
$0.21
|
($0.11)
|
(1)
|
See schedule of
non-GAAP metrics for definition and reconciliation to GAAP
measures.
|
(2)
|
Adjusted EBITDA
for the second quarter 2014 excludes tw telecom transaction-related
fees of $4 million.
|
(3)
|
In 2013, the
company accrued 60 percent of its annual employee bonus
compensation expense in the form of equity and 40 percent in cash,
compared to 100 percent cash in 2014. The amount of the bonus
accrued as equity-based compensation in the second quarter of 2013
was $15 million. Adjusted EBITDA and the resulting Adjusted EBITDA
margin in the second quarter of 2013 have been adjusted on a pro
forma basis to include the $15 million to present the results on a
consistent basis with the accrual of bonus compensation expense in
2014 as 100 percent cash.
|
(4)
|
Adjusted EBITDA
for the second quarter 2013 excludes $13 million of severance
charges.
|
Revenue
Core Network
Services (CNS) Revenue
($ in
millions)
|
Second Quarter
2014
|
Second Quarter
2013
|
Percent
Change,
Constant
Currency
|
North
America
|
$1,051
|
$970
|
8%
|
Wholesale
|
$367
|
$367
|
-
|
Enterprise
|
$684
|
$603
|
13%
|
|
|
|
|
EMEA
|
$229
|
$220
|
(2%)
|
Wholesale
|
$86
|
$88
|
(8%)
|
Enterprise(1)
|
$143
|
$132
|
2%
|
|
|
|
|
Latin
America
|
$199
|
$189
|
10%
|
Wholesale
|
$42
|
$40
|
7%
|
Enterprise
|
$157
|
$149
|
10%
|
|
|
|
|
Total CNS
Revenue
|
$1,479
|
$1,379
|
7%
|
Wholesale
|
$495
|
$495
|
(1%)
|
Enterprise(1)
|
$984
|
$884
|
11%
|
(1)
|
Includes EMEA UK
Government.
|
Core Network Services (CNS)
CNS revenue was
$1.479 billion in the second quarter
2014, increasing 6.9 percent year-over-year on a constant currency
basis.
Deferred Revenue
The deferred revenue balance was
$1.143 billion at the end of the
second quarter 2014, compared to $1.132
billion at the end of the second quarter 2013.
Cost of Revenue
Cost of revenue was $613 million in the second quarter 2014, compared
to $616 million in the second quarter
2013.
Gross margin continued to expand, increasing to 62.3 percent for
the second quarter 2014, compared to 60.6 percent in the second
quarter 2013.
Selling, General and Administrative Expenses
(SG&A)
Excluding non-cash compensation expense, SG&A expenses were
$553 million in the second quarter
2014, which included $4 million of
transaction-related fees. This compared to $564 million in the second quarter 2013, on a pro
forma basis, adjusted to include the $15
million in bonus-related non-cash compensation and to
exclude $13 million of severance
charges.
Non-cash compensation expense was $16
million for the second quarter 2014. For the second quarter
2013, non-cash compensation was $48
million. Second quarter 2013 non-cash compensation expense
was $16 million excluding
$15 million in bonus-related non-cash
compensation expense and $17 million
related to the termination of former CEO Jim Crowe's employment agreement.
Adjusted EBITDA
For the second quarter 2014, Adjusted
EBITDA was $463 million, excluding
$4 million of transaction-related
fees. For the second quarter 2013, Adjusted EBITDA on a pro forma
basis was $385 million.
Adjusted EBITDA margin increased to 28.5 percent for the second
quarter 2014, compared to Adjusted EBITDA margin of 24.6 percent
for the second quarter 2013, on a pro forma basis.
Cash Flow and Liquidity
During the second quarter
2014, Unlevered Cash Flow was $211
million, compared to $153
million in the second quarter 2013.
Free Cash Flow was positive $62
million for the second quarter 2014, compared to positive
$8 million in the second quarter
2013.
Capital expenditures were $241
million for the second quarter 2014, compared to
$208 million for the second quarter
2013.
As of June 30, 2014, the company
had cash and cash equivalents of approximately $637 million.
Corporate Transactions
On June
16, 2014, Level 3 announced that it entered into a
definitive agreement to acquire tw telecom. Under the terms and
subject to conditions of the agreement, tw telecom shareholders
will receive $10 cash and 0.7 shares
of Level 3 common stock for each share of tw telecom common stock
that is owned at closing. Based on Level 3's closing stock price on
June 13, 2014, the last trading day
prior to the announcement of the transaction, the transaction is
valued at $40.86 per tw telecom
share, or approximately $7.3 billion,
including the assumption of approximately $1.6 billion of net debt as of March 31, 2014.
Business Outlook
"We remain confident in our
performance for the rest of year," said Sunit Patel, CFO of Level 3. "On a standalone
basis, and excluding the effects from the tw telecom acquisition,
we are reiterating our outlook for the full year 2014."
Conference Call and Web Site Information
Level 3 will
hold a conference call to discuss the company's second quarter 2014
results today at 10 a.m. ET. The call
will be broadcast live on Level 3's Investor Relations website at
http://investors.level3.com. Additional information regarding the
second quarter 2014 results, including the presentation management
will review on the conference call, will be available on Level 3's
Investor Relations website. If you are unable to join the call via
the Web, the call can be accessed live at 1 877-283-5643 (U.S.
Domestic) or 1 312-281-1201 (International). Questions should be
sent to investor.relations@level3.com.
For additional information, please call 1 720-888-2518.
About Level 3 Communications
Level 3 Communications,
Inc. (NYSE: LVLT) is a Fortune 500 company that provides local,
national and global communications services to enterprise,
government and carrier customers. Level 3's comprehensive portfolio
of secure, managed solutions includes fiber and infrastructure
solutions; IP-based voice and data communications; wide-area
Ethernet services; video and content distribution; data center and
cloud-based solutions. Level 3 serves customers in more than 500
markets in over 60 countries on a global services platform anchored
by owned fiber networks on three continents and connected by
extensive undersea facilities. For more information, please visit
www.level3.com or get to know us on Twitter, Facebook and
LinkedIn.
© Level 3 Communications, LLC. All Rights Reserved. Level 3,
Level 3 Communications, Level (3) and the Level 3 Logo are either
registered service marks or service marks of Level 3
Communications, LLC and/or one of its Affiliates in the United States and/or other countries. Any
other service names, product names, company names or logos included
herein are the trademarks or service marks of their respective
owners. Level 3 services are provided by subsidiaries of Level 3
Communications, Inc.
Forward-Looking Statement
Some statements
made in this press release are forward-looking in nature and are
based on management's current expectations or beliefs. These
forward-looking statements are not a guarantee of performance and
are subject to a number of uncertainties and other factors, many of
which are outside Level 3's control, which could cause actual
events to differ materially from those expressed or implied by the
statements. Important factors that could prevent Level 3 from
achieving its stated goals include, but are not limited to, the
company's ability to: successfully integrate the tw telecom
acquisition or otherwise realize the anticipated benefits thereof;
manage risks associated with continued uncertainty in the global
economy; maintain and increase traffic on its network; develop and
maintain effective business support systems; manage system and
network failures or disruptions; avert the breach of its network
and computer system security measures; develop new services that
meet customer demands and generate acceptable margins; defend
intellectual property and proprietary rights; manage the future
expansion or adaptation of its network to remain competitive;
manage continued or accelerated decreases in market pricing for
communications services; obtain capacity for its network from other
providers and interconnect its network with other networks on
favorable terms; attract and retain qualified management and other
personnel; successfully integrate future acquisitions; effectively
manage political, legal, regulatory, foreign currency and other
risks it is exposed to due to its substantial international
operations; mitigate its exposure to contingent liabilities; and
meet all of the terms and conditions of its debt obligations.
Additional information concerning these and other important factors
can be found within Level 3's filings with the Securities and
Exchange Commission. Statements in this press release should be
evaluated in light of these important factors. Level 3 is under no
obligation to, and expressly disclaims any such obligation to,
update or alter its forward-looking statements, whether as a result
of new information, future events, or otherwise.
Contact
Information
|
|
Media:
|
Investors:
|
Ashley
Pritchard
|
Mark
Stoutenberg
|
+1
720-888-5950
|
+1
720-888-2518
|
ashley.pritchard@level3.com
|
mark.stoutenberg@level3.com
|
Level 3 Communications:
Non-GAAP Metrics
Pursuant to Regulation G, the company is hereby providing
definitions of non-GAAP financial metrics and reconciliations to
the most directly comparable GAAP measures.
The following describes and reconciles those financial measures
as reported under accounting principles generally accepted in
the United States (GAAP) with
those financial measures as adjusted by the items detailed below
and presented in the accompanying news release. These calculations
are not prepared in accordance with GAAP and should not be viewed
as alternatives to GAAP. In keeping with its historical financial
reporting practices, the company believes that the supplemental
presentation of these calculations provides meaningful non-GAAP
financial measures to help investors understand and compare
business trends among different reporting periods on a consistent
basis.
In addition, measures referred to in the accompanying news
release as being calculated "on a constant currency basis" or "in
constant currency terms" are non-GAAP metrics intended to present
the relevant information assuming a constant exchange rate between
the two periods being compared. Such metrics are calculated by
applying the currency exchange rates used in the preparation of the
prior period financial results to the subsequent period
results.
Consolidated Revenue is defined as total revenue from the
Consolidated Statements of Operations.
Core Network Services Revenue includes revenue from
colocation and datacenter services, transport and fiber, IP and
data services, and voice services (local and enterprise).
Gross Margin ($) is defined as total revenue less
cost of revenue from the Consolidated Statements of Operations.
Gross Margin (%) is defined as gross margin ($) divided
by total revenue. Management believes that gross margin is a
relevant metric to provide to investors, as it is a metric that
management uses to measure the margin available to the company
after it pays third party network services costs; in essence, a
measure of the efficiency of the company's network.
Adjusted EBITDA is defined as net income (loss) from the
Consolidated Statements of Operations before income taxes, total
other income (expense), non-cash impairment charges, depreciation
and amortization and non-cash stock compensation expense.
Adjusted EBITDA Margin is defined as Adjusted EBITDA
divided by total revenue.
Adjusted EBITDA
Metric
|
Q2
2014
|
(in
millions)
|
|
|
|
Net Income
|
$
|
51
|
|
Income Tax
Expense
|
12
|
|
Total Other
Expense
|
193
|
|
Depreciation and
Amortization
|
187
|
|
Non-Cash Stock
Compensation
|
16
|
|
Adjusted
EBITDA
|
$
|
459
|
|
|
|
|
Adjusted EBITDA
Margin
|
28.2
|
%
|
Adjusted EBITDA
Metric
|
Q1
2014
|
(in
millions)
|
|
|
|
Net Income
|
$
|
112
|
|
Income Tax
Expense
|
7
|
|
Total Other
Expense
|
145
|
|
Depreciation and
Amortization
|
184
|
|
Non-Cash Stock
Compensation
|
10
|
|
Adjusted
EBITDA
|
$
|
458
|
|
|
|
|
Adjusted EBITDA
Margin
|
28.5
|
%
|
Adjusted EBITDA
Metric
|
Q2 2013
(1)
|
(in
millions)
|
|
|
|
Net Loss
|
$
|
(24)
|
|
Income Tax
Expense
|
11
|
|
Total Other
Expense
|
153
|
|
Depreciation and
Amortization
|
199
|
|
Non-Cash Stock
Compensation
|
48
|
|
Adjusted
EBITDA
|
$
|
387
|
|
|
|
|
Adjusted EBITDA
Margin
|
24.7
|
%
|
(1)Adjusted EBITDA and the resulting Adjusted EBITDA
Margin includes $15 million in the
second quarter of 2013 in non-cash bonus related compensation.
Management believes that Adjusted EBITDA and Adjusted EBITDA
Margin are relevant and useful metrics to provide to investors, as
they are an important part of the company's internal reporting and
are key measures used by Management to evaluate profitability and
operating performance of the company and to make resource
allocation decisions. Management believes such measures are
especially important in a capital-intensive industry such as
telecommunications. Management also uses Adjusted EBITDA and
Adjusted EBITDA Margin to compare the company's performance to that
of its competitors and to eliminate certain non-cash and
non-operating items in order to consistently measure from period to
period its ability to fund capital expenditures, fund growth,
service debt and determine bonuses. Adjusted EBITDA excludes
non-cash impairment charges and non-cash stock compensation expense
because of the non-cash nature of these items. Adjusted EBITDA also
excludes interest income, interest expense and income taxes because
these items are associated with the company's capitalization and
tax structures. Adjusted EBITDA also excludes depreciation and
amortization expense because these non-cash expenses primarily
reflect the impact of historical capital investments, as opposed to
the cash impacts of capital expenditures made in recent periods,
which may be evaluated through cash flow measures. Adjusted
EBITDA excludes the gain (or loss) on extinguishment and
modification of debt and other, net because these items are not
related to the primary operations of the company.
There are limitations to using Adjusted EBITDA as a financial
measure, including the difficulty associated with comparing
companies that use similar performance measures whose calculations
may differ from the company's calculations. Additionally, this
financial measure does not include certain significant items such
as interest income, interest expense, income taxes, depreciation
and amortization, non-cash impairment charges, non-cash stock
compensation expense, the gain (or loss) on extinguishment and
modification of debt and net other income (expense). Adjusted
EBITDA and Adjusted EBITDA Margin should not be considered a
substitute for other measures of financial performance reported in
accordance with GAAP.
Unlevered Cash Flow is defined as net cash provided by
(used in) operating activities less capital expenditures, plus cash
interest paid and less interest income all as disclosed in the
Consolidated Statements of Cash Flows or the Consolidated
Statements of Operations. Management believes that Unlevered Cash
Flow is a relevant metric to provide to investors, as it is an
indicator of the operational strength and performance of the
company and, measured over time, provides management and investors
with a sense of the underlying business' growth pattern and ability
to generate cash. Unlevered Cash Flow excludes cash used for
acquisitions and debt service and the impact of exchange rate
changes on cash and cash equivalents balances.
There are material limitations to using Unlevered Cash Flow to
measure the company's cash performance as it excludes certain
material items such as payments on and repurchases of long-term
debt, interest income, cash interest expense and cash used to fund
acquisitions. Comparisons of Level 3's Unlevered Cash Flow to that
of some of its competitors may be of limited usefulness since Level
3 does not currently pay a significant amount of income taxes due
to net operating losses, and therefore, generates higher cash flow
than a comparable business that does pay income taxes.
Additionally, this financial measure is subject to variability
quarter over quarter as a result of the timing of payments related
to accounts receivable and accounts payable and capital
expenditures. Unlevered Cash Flow should not be used as a
substitute for net change in cash and cash equivalents in the
Consolidated Statements of Cash Flows.
Free Cash Flow is defined as net cash provided by (used
in) operating activities less capital expenditures as disclosed in
the Consolidated Statements of Cash Flows. Management believes that
Free Cash Flow is a relevant metric to provide to investors, as it
is an indicator of the company's ability to generate cash to
service its debt. Free Cash Flow excludes cash used for
acquisitions, principal repayments and the impact of exchange rate
changes on cash and cash equivalents balances.
There are material limitations to using Free Cash Flow to
measure the company's performance as it excludes certain material
items such as principal payments on and repurchases of long-term
debt and cash used to fund acquisitions. Comparisons of Level 3's
Free Cash Flow to that of some of its competitors may be of limited
usefulness since Level 3 does not currently pay a significant
amount of income taxes due to net operating losses, and therefore,
generates higher cash flow than a comparable business that does pay
income taxes. Additionally, this financial measure is subject to
variability quarter over quarter as a result of the timing of
payments related to interest expense, accounts receivable and
accounts payable and capital expenditures. Free Cash Flow should
not be used as a substitute for net change in cash and cash
equivalents on the Consolidated Statements of Cash Flows.
Unlevered Cash
Flow and Free Cash Flow
|
|
|
|
|
|
Three Months Ended
June 30, 2014
|
Unlevered
|
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
303
|
|
|
$
|
303
|
|
Capital
Expenditures
|
(241)
|
|
|
(241)
|
|
Cash Interest
Paid
|
149
|
|
|
N/A
|
Interest
Income
|
—
|
|
|
N/A
|
Total
|
$
|
211
|
|
|
$
|
62
|
|
Unlevered Cash
Flow and Free Cash Flow
|
|
|
|
|
|
Three Months Ended
March 31, 2014
|
Unlevered
|
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
141
|
|
|
$
|
141
|
|
Capital
Expenditures
|
(163)
|
|
|
(163)
|
|
Cash Interest
Paid
|
128
|
|
|
N/A
|
Interest
Income
|
—
|
|
|
N/A
|
Total
|
$
|
106
|
|
|
$
|
(22)
|
|
Unlevered Cash
Flow and Free Cash Flow
|
|
|
|
|
|
Three Months Ended
June 30, 2013
|
Unlevered
|
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
216
|
|
|
$
|
216
|
|
Capital
Expenditures
|
(208)
|
|
|
(208)
|
|
Cash Interest
Paid
|
145
|
|
|
N/A
|
Interest
Income
|
—
|
|
|
N/A
|
Total
|
$
|
153
|
|
|
$
|
8
|
|
|
Regional Revenue
Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q14/
|
|
2Q14/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q13%
|
|
1Q14%
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q14/
|
Change
|
2Q14/
|
Change
|
2Q14
|
|
|
|
|
|
|
|
|
|
|
|
2Q13%
|
Constant
|
1Q14%
|
Constant
|
%
|
|
2Q13
|
3Q13
|
4Q13
|
1Q14
|
2Q14
|
Change
|
Currency
|
Change
|
Currency
|
CNS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNS
Revenue
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
$
|
970
|
|
$
|
987
|
|
$
|
1,025
|
|
$
|
1,043
|
|
$
|
1,051
|
|
8.4%
|
8.3%
|
0.8%
|
0.7%
|
71%
|
Wholesale
|
$
|
367
|
|
$
|
365
|
|
$
|
374
|
|
$
|
368
|
|
$
|
367
|
|
—%
|
(0.2)%
|
(0.3)%
|
(0.4)%
|
25%
|
Enterprise
|
$
|
603
|
|
$
|
622
|
|
$
|
651
|
|
$
|
675
|
|
$
|
684
|
|
13.4%
|
13.4%
|
1.3%
|
1.3%
|
46%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
$
|
220
|
|
$
|
222
|
|
$
|
223
|
|
$
|
225
|
|
$
|
229
|
|
4.1%
|
(1.8)%
|
1.8%
|
0.8%
|
16%
|
Wholesale
|
$
|
88
|
|
$
|
88
|
|
$
|
89
|
|
$
|
87
|
|
$
|
86
|
|
(2.3)%
|
(7.7)%
|
(1.1)%
|
(1.9)%
|
6%
|
Enterprise
|
$
|
132
|
|
$
|
134
|
|
$
|
134
|
|
$
|
138
|
|
$
|
143
|
|
8.3%
|
2.2%
|
3.6%
|
2.5%
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin
America
|
$
|
189
|
|
$
|
188
|
|
$
|
195
|
|
$
|
189
|
|
$
|
199
|
|
5.3%
|
9.7%
|
5.3%
|
3.4%
|
13%
|
Wholesale
|
$
|
40
|
|
$
|
39
|
|
$
|
41
|
|
$
|
40
|
|
$
|
42
|
|
5.0%
|
7.2%
|
5.0%
|
2.5%
|
3%
|
Enterprise
|
$
|
149
|
|
$
|
149
|
|
$
|
154
|
|
$
|
149
|
|
$
|
157
|
|
5.4%
|
10.4%
|
5.4%
|
3.6%
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
1,379
|
|
$
|
1,397
|
|
$
|
1,443
|
|
$
|
1,457
|
|
$
|
1,479
|
|
7.3%
|
6.9%
|
1.5%
|
1.1%
|
100%
|
Wholesale
|
$
|
495
|
|
$
|
492
|
|
$
|
504
|
|
$
|
495
|
|
$
|
495
|
|
—%
|
(0.9)%
|
—%
|
(0.5)%
|
34%
|
Enterprise
|
$
|
884
|
|
$
|
905
|
|
$
|
939
|
|
$
|
962
|
|
$
|
984
|
|
11.3%
|
11.2%
|
2.3%
|
1.8%
|
66%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
CNS
|
$
|
1,379
|
|
$
|
1,397
|
|
$
|
1,443
|
|
$
|
1,457
|
|
$
|
1,479
|
|
7.3%
|
6.9%
|
1.5%
|
1.1%
|
|
Wholesale Voice
Services and Other Revenue
|
186
|
|
172
|
|
159
|
|
152
|
|
146
|
|
(21.5)%
|
(21.2)%
|
(3.9)%
|
(3.7)%
|
|
Total
Revenue
|
$
|
1,565
|
|
$
|
1,569
|
|
$
|
1,602
|
|
$
|
1,609
|
|
$
|
1,625
|
|
3.8%
|
3.5%
|
1.0%
|
0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q14/
|
2Q14/
|
2Q14
|
|
|
|
|
|
|
|
|
|
|
|
2Q13%
|
1Q14%
|
%
|
|
2Q13
|
3Q13
|
4Q13
|
1Q14
|
2Q14
|
Change
|
Change
|
CNS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Network
Services Revenue ($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colocation and
Datacenter Services
|
$
|
145
|
|
$
|
144
|
|
$
|
154
|
|
$
|
145
|
|
$
|
146
|
|
0.7%
|
0.7%
|
10%
|
Transport and
Fiber
|
$
|
480
|
|
$
|
483
|
|
$
|
496
|
|
$
|
502
|
|
$
|
508
|
|
5.8%
|
1.2%
|
34%
|
IP and Data
Services
|
$
|
522
|
|
$
|
536
|
|
$
|
557
|
|
$
|
573
|
|
$
|
588
|
|
12.6%
|
2.6%
|
40%
|
Voice Services (Local
and Enterprise)
|
$
|
232
|
|
$
|
234
|
|
$
|
236
|
|
$
|
237
|
|
$
|
237
|
|
2.2%
|
—%
|
16%
|
Total Core Network
Services
|
$
|
1,379
|
|
$
|
1,397
|
|
$
|
1,443
|
|
$
|
1,457
|
|
$
|
1,479
|
|
7.3%
|
1.5%
|
100%
|
Wholesale Voice
Services and Other
|
$
|
186
|
|
$
|
172
|
|
$
|
159
|
|
$
|
152
|
|
$
|
146
|
|
(21.5)%
|
(3.9)%
|
|
Total
Revenue
|
$
|
1,565
|
|
$
|
1,569
|
|
$
|
1,602
|
|
$
|
1,609
|
|
$
|
1,625
|
|
3.8%
|
1.0%
|
|
Debt is defined as total gross debt, including capital
leases from the Consolidated Balance Sheet.
Net Debt to Last Twelve Months (LTM) Adjusted EBITDA
Ratio is defined as debt, reduced by cash and cash equivalents
and divided by LTM Adjusted EBITDA.
Level 3
Communications, Inc. and Consolidated Subsidiaries
|
Net Debt to LTM
Adjusted EBITDA Ratio as of June 30, 2014
|
($ in
millions)
|
|
|
|
Debt
|
$
|
8,386
|
|
Cash and Cash
Equivalents
|
(637)
|
|
Net Debt
|
$
|
7,749
|
|
LTM Adjusted
EBITDA
|
$
|
1,768
|
|
Net Debt to LTM
Adjusted EBITDA Ratio
|
4.4
|
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Operations
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
March 31,
|
June 30,
|
(dollars in millions,
except per share data)
|
2014
|
2014
|
2013
|
|
|
|
|
Revenue
|
$
1,625
|
$
1,609
|
$
1,565
|
|
|
|
|
Costs and Expenses
(exclusive of depreciation and amortization shown separately
below):
|
|
|
|
Cost of
Revenue
|
613
|
614
|
616
|
Depreciation
and Amortization
|
187
|
184
|
199
|
Selling,
General and Administrative
|
569
|
547
|
610
|
Total Costs and
Expenses
|
1,389
|
1,345
|
1,425
|
|
|
|
|
Operating
Income
|
256
|
264
|
140
|
|
|
|
|
Other Income
(Expense):
|
|
|
|
Interest
income
|
—
|
—
|
—
|
Interest
expense
|
(149)
|
(151)
|
(167)
|
Other,
net
|
(44)
|
6
|
14
|
Total Other
Expense
|
(193)
|
(145)
|
(153)
|
|
|
|
|
Income (Loss) Before
Income Taxes
|
63
|
119
|
(13)
|
|
|
|
|
Income Tax
Expense
|
(12)
|
(7)
|
(11)
|
|
|
|
|
Net Income
(Loss)
|
$
51
|
$
112
|
$
(24)
|
|
|
|
|
Basic Earnings per
Common Share:
|
|
|
|
Net Income (Loss) per
Share
|
$
0.21
|
$
0.48
|
$
(0.11)
|
Weighted-Average
Shares Outstanding (in thousands)
|
237,376
|
235,635
|
221,609
|
|
|
|
|
Diluted Earnings per
Common Share:
|
|
|
|
Net Income (Loss) per
Share
|
$
0.21
|
$
0.47
|
$
(0.11)
|
Weighted-Average
Shares Outstanding (in thousands)
|
241,406
|
239,294
|
221,609
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Balance Sheets
|
(unaudited)
|
|
|
|
|
|
June 30,
|
December
31,
|
June 30,
|
(dollars in
millions)
|
2014
|
2013
|
2013
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
637
|
$
631
|
$
596
|
Restricted
cash and securities
|
6
|
7
|
7
|
Receivables,
less allowances for doubtful accounts
|
722
|
673
|
721
|
Other
|
174
|
143
|
179
|
Total Current
Assets
|
1,539
|
1,454
|
1,503
|
|
|
|
|
Property, Plant and
Equipment, net
|
8,355
|
8,240
|
8,171
|
Restricted Cash and
Securities
|
23
|
23
|
27
|
Goodwill
|
2,578
|
2,577
|
2,565
|
Other Intangibles,
net
|
169
|
205
|
232
|
Other
Assets
|
364
|
375
|
367
|
Total
Assets
|
$
13,028
|
$
12,874
|
$
12,865
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
613
|
$
625
|
$
688
|
Current
portion of long-term debt
|
503
|
31
|
30
|
Accrued
payroll and employee benefits
|
145
|
209
|
177
|
Accrued
interest
|
166
|
160
|
192
|
Current
portion of deferred revenue
|
258
|
253
|
226
|
Other
|
139
|
168
|
190
|
Total Current
Liabilities
|
1,824
|
1,446
|
1,503
|
|
|
|
|
Long-Term Debt, less
current portion
|
7,855
|
8,331
|
8,506
|
Deferred Revenue,
less current portion
|
885
|
906
|
906
|
Other
Liabilities
|
785
|
780
|
842
|
Total
Liabilities
|
11,349
|
11,463
|
11,757
|
|
|
|
|
Stockholders'
Equity
|
1,679
|
1,411
|
1,108
|
Total Liabilities and
Stockholders' Equity
|
$
13,028
|
$
12,874
|
$
12,865
|
|
|
|
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
March 31,
|
June 30,
|
(dollars in
millions)
|
2014
|
2014
|
2013
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
Net income
(loss)
|
$
51
|
$
112
|
$
(24)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
187
|
184
|
199
|
Non-cash compensation
expense attributable to stock awards
|
16
|
10
|
48
|
Accretion of debt
discount and amortization of debt issuance costs
|
8
|
9
|
9
|
Accrued interest on
long-term debt
|
(8)
|
14
|
13
|
Non-cash tax
adjustments
|
1
|
(5)
|
(2)
|
Deferred income
taxes
|
7
|
7
|
(14)
|
Gain on sale of
property, plant and equipment and other assets
|
—
|
(1)
|
(1)
|
Other, net
|
12
|
(12)
|
(19)
|
Changes in working
capital items:
|
|
|
|
Receivables
|
(23)
|
(26)
|
4
|
Other current
assets
|
(12)
|
(18)
|
(8)
|
Payables
|
51
|
(69)
|
(48)
|
Deferred
revenue
|
(23)
|
1
|
7
|
Other current
liabilities
|
36
|
(65)
|
52
|
Net Cash Provided by
Operating Activities
|
303
|
141
|
216
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
Capital
expenditures
|
(241)
|
(163)
|
(208)
|
Change in restricted
cash and securities, net
|
1
|
1
|
5
|
Other
|
—
|
—
|
(14)
|
Net Cash Used in
Investing Activities
|
(240)
|
(162)
|
(217)
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
Long-term debt
borrowings, net of issuance costs
|
—
|
—
|
—
|
Payments on and
repurchases of long-term debt and capital leases
|
(3)
|
(3)
|
(13)
|
Net Cash Used in
Financing Activities
|
(3)
|
(3)
|
(13)
|
|
|
|
|
Effect of Exchange
Rates on Cash and Cash Equivalents
|
(30)
|
—
|
—
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
30
|
(24)
|
(14)
|
|
|
|
|
Cash and Cash
Equivalents at Beginning of Period
|
607
|
631
|
610
|
|
|
|
|
Cash and Cash
Equivalents at End of Period
|
$
637
|
$
607
|
$
596
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
Cash interest
paid
|
$
149
|
$
128
|
$
145
|
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SOURCE Level 3 Communications, Inc.