DENVER, Aug. 3, 2021
/PRNewswire/ -- Lumen Technologies, Inc. (NYSE: LUMN) reported
results for the second quarter ended June
30, 2021.
"Lumen delivered solid Adjusted EBITDA and Free Cash Flow in the
second quarter, and we are executing on our strategy to optimize
the Lumen asset portfolio, positioning the company for future
growth," said Jeff Storey, president
and CEO of Lumen. "We are well positioned strategically with our
significant and accelerating fiber investments across both Business
and Mass Markets."
Total revenue was $4.924 billion
for the second quarter 2021, compared to $5.192 billion for the second quarter 2020.
Financial Results
Metric
|
Second
Quarter
|
Second
Quarter
|
($ in millions,
except per share data)
|
2021
|
2020
|
International and
Global Accounts
|
$
|
1,004
|
|
1,031
|
|
Large
Enterprise
|
931
|
|
973
|
|
Mid-Market
Enterprise
|
682
|
|
755
|
|
Wholesale
|
905
|
|
958
|
|
Business Segment
Revenue
|
3,522
|
|
3,717
|
|
Mass Markets Segment
Revenue
|
1,402
|
|
1,475
|
|
Total
Revenue
|
$
|
4,924
|
|
5,192
|
|
Cost of Services and
Products
|
2,115
|
|
2,232
|
|
Selling, General and
Administrative Expenses
|
762
|
|
895
|
|
Share-based
Compensation Expenses
|
42
|
|
20
|
|
Adjusted
EBITDA(1)
|
2,089
|
|
2,085
|
|
Adjusted EBITDA,
Excluding Special Items(1)(2)
|
2,109
|
|
2,135
|
|
Adjusted EBITDA
Margin(1)
|
42.4
|
%
|
40.2
|
%
|
Adjusted EBITDA
Margin, Excluding Special Items(1)(2)
|
42.8
|
%
|
41.1
|
%
|
Net Cash Provided by
Operating Activities
|
1,639
|
|
1,749
|
|
Capital
Expenditures
|
646
|
|
1,009
|
|
Unlevered Cash
Flow(1)
|
1,350
|
|
1,184
|
|
Unlevered Cash Flow,
Excluding Cash Special Items(1)(3)
|
1,401
|
|
1,216
|
|
Free Cash
Flow(1)
|
993
|
|
740
|
|
Free Cash Flow,
Excluding Cash Special Items(1)(3)
|
1,044
|
|
772
|
|
Net Income
|
506
|
|
377
|
|
Net Income, Excluding
Special Items(1)(4)
|
521
|
|
420
|
|
Net Income per Common
Share - Diluted
|
0.46
|
|
0.35
|
|
Net Income per Common
Share - Diluted, Excluding Special
Items(1)(4)
|
0.48
|
|
0.39
|
|
Weighted Average
Shares Outstanding (in millions) - Diluted
|
1,093.4
|
|
1,082.6
|
|
|
|
|
|
|
(1)
|
See the attached
schedules for definitions of non-GAAP metrics, reconciliations to
GAAP figures and further explanations of the adjustments referred
to in notes 2, 3 and 4.
|
(2)
|
Excludes Special
Items in the amounts of (i) $20 million for the second quarter of
2021, and (ii) $50 million for the second quarter of
2020.
|
(3)
|
Excludes cash paid
for Special Items of (i) $51 million for the second quarter of
2021, and (ii) $32 million for the second quarter of
2020.
|
(4)
|
Excludes Special
Items (net of the income tax effect therof) in the amounts of (i)
$15 million for the second quarter of 2021, and (ii) $43 million
for the second quarter of 2020.
|
Revenue
|
Second
Quarter
|
First
Quarter
|
QoQ
Percent
|
Second
Quarter
|
YoY
Percent
|
($ in
millions)
|
2021
|
2021
|
Change
|
2020
|
Change
|
By Business Sales
Channel
|
|
|
|
|
|
International and
Global Accounts
|
$1,004
|
|
1,013
|
|
(1)%
|
|
1,031
|
|
(3)%
|
|
Large
Enterprise
|
931
|
|
937
|
|
(1)%
|
|
973
|
|
(4)%
|
|
Mid-Market
Enterprise
|
682
|
|
716
|
|
(5)%
|
|
755
|
|
(10)%
|
|
Wholesale
|
905
|
|
929
|
|
(3)%
|
|
958
|
|
(6)%
|
|
Business Segment
Revenue
|
3,522
|
|
3,595
|
|
(2)%
|
|
3,717
|
|
(5)%
|
|
Mass Markets Segment
Revenue
|
1,402
|
|
1,434
|
|
(2)%
|
|
1,475
|
|
(5)%
|
|
Total
Revenue
|
$
|
4,924
|
|
5,029
|
|
(2)%
|
|
5,192
|
|
(5)%
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow
Free Cash Flow, excluding Special Items, was $1.044 billion in the second quarter 2021,
compared to $772 million in the
second quarter 2020.
As of June 30, 2021, Lumen had
cash and cash equivalents of $935
million.
Sale of Assets
After the close of the second quarter 2021:
- On Aug. 3, 2021, Lumen reached a
definitive agreement to sell its ILEC (incumbent local exchange
carrier) assets, including its consumer, small business, wholesale
and mostly copper-served enterprise customers and assets, in 20
states to funds managed by affiliates of Apollo Global Management,
Inc. for $7.5 billion, representing a
transaction enterprise multiple of ~5.5x 2020 Estimated Adjusted
EBITDA.
- On July 25, 2021, Lumen reached a
definitive agreement to sell its Latin American business to
Stonepeak for $2.7 billion,
representing a transaction multiple of ~9x 2020 Estimated Adjusted
EBITDA.
Stock Buyback
Effective immediately, our Board of Directors has authorized a
24-month program to repurchase up to an aggregate of $1.0 billion of our outstanding common stock in
the open market or in privately negotiated transactions.
2021 Outlook
The company updated full-year 2021 financial outlook which is
detailed below:
2021 Metric
(1)(2)
|
Current
Outlook
|
Previous
Outlook(3)
|
Adjusted EBITDA
(excluding Special Items)
|
$8.4 to $8.6
billion
|
$8.4 to $8.6
billion
|
Free Cash Flow
(excluding Special Items)(4)
|
$3.1 to $3.3
billion
|
$2.8 to $3.0
billion
|
Net Cash
Interest
|
$1.525 to $1.575
billion
|
$1.525 to $1.575
billion
|
GAAP Interest
Expense
|
$1.550
billion
|
$1.550
billion
|
Dividends
(5)
|
$1.1
billion
|
$1.1
billion
|
Capital
Expenditures
|
$3.2 to $3.5
billion
|
$3.5 to $3.8
billion
|
Depreciation and
Amortization
|
$4.2 to $4.4
billion
|
$4.2 to $4.4
billion
|
Share-based
Compensation Expenses
|
~$200
million
|
~$200
million
|
Cash Income
Taxes
|
$100
million
|
$100
million
|
Full Year Effective
Income Tax Rate
|
27%
|
27%
|
|
|
(1)
|
For definitions of
non-GAAP metrics and reconciliations to GAAP figures, see the
attached schedules and our Investor Relations website.
|
(2)
|
Outlook measures in
this chart and the accompanying schedules (i) exclude the effects
of Special Items, future changes in our operating or capital
allocation plans, unforeseen changes in regulation, laws or
litigation, and other unforeseen events or circumstances impacting
our financial performance and (ii) speak only as of August 3,
2021. See "Forward-Looking Statements".
|
(3)
|
Refers to full-year
2021 financial outlook provided on Feb. 10, 2021
|
(4)
|
Free Cash Flow
outlook does not include any potential discretionary pension fund
contribution.
|
(5)
|
Dividends is defined
as dividends paid as disclosed in the Consolidated Statements of
Cash Flows. Assumes payment of dividends at the rate of $1.00
per share per year, based on the number of shares outstanding on
June 30, 2021. Payments of all dividends are at the
discretion of the Board of Directors.
|
Investor Call
Our management will host a conference call at 5:00p.m. ET today, August 3, 2021. The
conference call will be streamed live over the Lumen website at
ir.lumen.com. Additional information regarding second quarter 2021
results, including the presentation materials management will
review during the conference call, will be available on the
Investor Relations website prior to the call. If you are unable to
join the call via the web, the call can be accessed live at +1
877-283-5145 (U.S. Domestic) or +1 312-281-1201
(International).
A telephone replay of the call will be available beginning at
7:00p.m. ET on August 3, 2021,
and ending Nov. 2, 2021, at
6:00p.m. ET. The replay can be
accessed by dialing +1 800-633-8284 (U.S. Domestic) or +1
402-977-9140 (International), reservation code 21996448. A webcast
replay of the call will also be available on our website beginning
at 7:00p.m. ET on August 3,
2021, and ending Nov. 1, 2021, at
6:00p.m. ET.
About Lumen
Lumen Technologies Inc. (NYSE: LUMN) is guided by our
belief that humanity is at its best when technology advances the
way we live and work. With approximately 450,000 route fiber miles
and serving customers in more than 60 countries, we deliver the
fastest, most secure platform for applications and data to help
businesses, government and communities deliver amazing
experiences.
Learn more about the Lumen network, edge cloud, security,
communication and collaboration solutions and our purpose to
further human progress through technology at news.lumen.com,
LinkedIn: /lumentechnologies, Twitter: @lumentechco, Facebook:
/lumentechnologies, Instagram: @lumentechnologies and YouTube:
/lumentechnologies. Lumen and Lumen Technologies are registered
trademarks of Lumen Technologies LLC in the United States. Lumen Technologies LLC is a
wholly-owned affiliate of Lumen Technologies, Inc.
Forward-Looking Statements
Except for historical and factual information, the matters set
forth in this release and other of our oral or written statements
identified by words such as "estimates," "expects," "anticipates,"
"believes," "plans," "intends," "will," and similar expressions are
forward-looking statements as defined by the federal securities
laws, and are subject to the "safe harbor" protections thereunder.
These forward-looking statements are not guarantees of future
results and are based on current expectations only, are inherently
speculative, and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond our control. Actual
events and results may differ materially from those anticipated,
estimated, projected or implied by us in those statements if one or
more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect. Factors that could affect actual
results include but are not limited to: the effects of competition
from a wide variety of competitive providers, including decreased
demand for our more mature service offerings and increased pricing
pressures; the effects of new, emerging or competing technologies,
including those that could make our products less desirable or
obsolete; our ability to attain our key operating imperatives,
including simplifying and consolidating our network, simplifying
and automating our service support systems, strengthening our
relationships with customers and attaining projected cost savings;
our ability to safeguard our network, and to avoid the adverse
impact of possible security breaches, service outages, system
failures, or similar events impacting our network or the
availability and quality of our services; the effects of ongoing
changes in the regulation of the communications industry, including
the outcome of legislative, regulatory or judicial proceedings
relating to content liability standards, intercarrier compensation,
universal service, broadband deployment, data protection, privacy
and net neutrality; our ability to effectively retain and hire key
personnel and to successfully negotiate collective bargaining
agreements on reasonable terms without work stoppages; possible
changes in the demand for our products and services, including
increased demand for high-speed data transmission services; our
ability to successfully maintain the quality and profitability of
our existing product and service offerings and to introduce
profitable new offerings on a timely and cost-effective basis; our
ability to generate cash flows sufficient to fund our financial
commitments and objectives, including our capital expenditures,
operating costs, debt repayments, dividends, pension contributions
and other benefits payments; our ability to successfully and timely
implement our operating plans and corporate strategies, including
our delevering strategy; our ability to successfully and timely
consummate our pending divestitures on the terms proposed, to
realize the anticipated benefits therefrom, and to operate our
retained business successfully thereafter; changes in our operating
plans, corporate strategies, dividend payment plans or other
capital allocation plans, whether based upon changes in our cash
flows, cash requirements, financial performance, financial
position, market conditions or otherwise; the impact of any future
material acquisitions or divestitures that we may engage in; the
negative impact of increases in the costs of our pension, health,
post-employment or other benefits, including those caused by
changes in markets, interest rates, mortality rates, demographics
or regulations; the potential negative impact of customer
complaints, government investigations, security breaches or service
outages impacting us or our industry; adverse changes in our access
to credit markets on favorable terms, whether caused by changes in
our financial position, lower credit ratings, unstable markets or
otherwise; our ability to meet the terms and conditions of our debt
obligations and covenants, including our ability to make transfers
of cash in compliance therewith; our ability to maintain favorable
relations with our securityholders, key business partners,
suppliers, vendors, landlords and financial institutions; our
ability to meet evolving environmental, social and governance
("ESG") expectations and benchmarks, and effectively communicate
and implement our ESG strategies; our ability to collect our
receivables from, or continue to do business with,
financially-troubled customers, including, but not limited to,
those adversely impacted by the economic dislocations caused by the
COVID-19 pandemic; our ability to use our net operating loss
carryforwards in the amounts projected; any adverse developments in
legal or regulatory proceedings involving us; changes in tax,
pension, healthcare or other laws or regulations, in governmental
support programs, or in general government funding levels,
including those arising from pending proposals of the Biden
Administration to increase infrastructure spending and federal
income tax rates; the effects of changes in accounting policies,
practices or assumptions, including changes that could potentially
require additional future impairment charges; uncertainties
regarding the extent to which COVID-19 health and economic
disruptions will continue to impact our business, operations, cash
flows and corporate initiatives; the effects of adverse weather,
terrorism, epidemics, pandemics, rioting, societal unrest, or other
natural or man-made disasters or disturbances; the potential
adverse effects if our internal controls over financial reporting
have weaknesses or deficiencies, or otherwise fail to operate as
intended; the effects of more general factors such as changes in
interest rates, in exchange rates, in operating costs, in public
policy, in the views of financial analysts, or in general market,
labor, economic or geo-political conditions; and other risks
referenced from time to time in our filings with the U.S.
Securities and Exchange Commission. You are cautioned not to unduly
rely upon our forward-looking statements, which speak only as of
the date made. We undertake no obligation to publicly update or
revise any forward-looking statements for any reason, whether as a
result of new information, future events or developments, changed
circumstances, or otherwise. Furthermore, any information about our
intentions contained in any of our forward-looking statements
reflects our intentions as of the date of such forward-looking
statement, and is based upon, among other things, regulatory,
technological, industry, competitive, economic and market
conditions, and our related assumptions, as of such date. We may
change our intentions, strategies or plans without notice at any
time and for any reason.
Reconciliation to GAAP
This release includes certain historical and forward-looking
non-GAAP financial measures, including but not limited to Adjusted
EBITDA, Free Cash Flow, Unlevered Cash Flow, and adjustments to
GAAP and non-GAAP measures to exclude the effect of Special Items.
In addition to providing key metrics for management to evaluate the
company's performance, we believe these measurements assist
investors in their understanding of period-to-period operating
performance and in identifying historical and prospective
trends.
Reconciliations of non-GAAP financial measures to the most
comparable GAAP measures are included in the attached financial
schedules. Reconciliation of additional non-GAAP historical
financial measures that may be discussed during the call described
above, along with further descriptions of non-GAAP financial
measures, will be available in the Investor Relations portion of
the company's website at ir.lumen.com. Non-GAAP measures are not
presented to be replacements or alternatives to the GAAP measures,
and investors are urged to consider these non-GAAP measures in
addition to, and not in substitution for, measures prepared in
accordance with GAAP. Lumen may present or calculate its non-GAAP
measures differently from other companies.
Lumen
Technologies, Inc.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
THREE AND SIX MONTHS
ENDED JUNE 30, 2021 AND 2020
|
(UNAUDITED)
|
($ in millions,
except per share amounts; shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30,
|
|
Increase /
(decrease)
|
|
Six months
ended
June 30,
|
|
Increase /
(decrease)
|
|
|
|
2021
|
|
2020
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
REVENUE
|
|
$
|
4,924
|
|
|
5,192
|
|
|
(5)%
|
|
|
$
|
9,953
|
|
|
10,420
|
|
|
(4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and
products
|
|
2,115
|
|
|
2,232
|
|
|
(5)%
|
|
|
4,251
|
|
|
4,467
|
|
|
(5)%
|
|
|
Selling, general and
administrative
|
|
762
|
|
|
895
|
|
|
(15)%
|
|
|
1,518
|
|
|
1,748
|
|
|
(13)%
|
|
|
Depreciation and
amortization
|
|
1,041
|
|
|
1,162
|
|
|
(10)%
|
|
|
2,191
|
|
|
2,322
|
|
|
(6)%
|
|
|
Total operating
expenses
|
|
3,918
|
|
|
4,289
|
|
|
(9)%
|
|
|
7,960
|
|
|
8,537
|
|
|
(7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
1,006
|
|
|
903
|
|
|
11%
|
|
|
1,993
|
|
|
1,883
|
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE)
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(384)
|
|
|
(414)
|
|
|
(7)%
|
|
|
(773)
|
|
|
(863)
|
|
|
(10)%
|
|
|
Other income
(expense), net
|
|
52
|
|
|
24
|
|
|
117%
|
|
|
86
|
|
|
(74)
|
|
|
nm
|
|
|
Income tax
expense
|
|
(168)
|
|
|
(136)
|
|
|
24%
|
|
|
(325)
|
|
|
(255)
|
|
|
27%
|
|
NET INCOME
|
|
$
|
506
|
|
|
377
|
|
|
34%
|
|
|
$
|
981
|
|
|
691
|
|
|
42%
|
|
BASIC EARNINGS PER
SHARE
|
|
$
|
0.47
|
|
|
0.35
|
|
|
34%
|
|
|
$
|
0.90
|
|
|
0.64
|
|
|
41%
|
|
DILUTED EARNINGS PER
SHARE
|
|
$
|
0.46
|
|
|
0.35
|
|
|
31%
|
|
|
$
|
0.90
|
|
|
0.64
|
|
|
41%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
1,086,453
|
|
|
1,079,475
|
|
|
1%
|
|
|
1,084,464
|
|
|
1,077,755
|
|
|
1%
|
|
|
Diluted
|
|
1,093,402
|
|
|
1,082,567
|
|
|
1%
|
|
|
1,092,494
|
|
|
1,082,218
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER COMMON
SHARE
|
|
$
|
0.25
|
|
|
0.25
|
|
|
—%
|
|
|
$
|
0.50
|
|
|
0.50
|
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exclude: Special
Items(1)
|
|
$
|
15
|
|
|
43
|
|
|
(65)%
|
|
|
$
|
15
|
|
|
103
|
|
|
(85)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
EXCLUDING
SPECIAL ITEMS
|
|
$
|
521
|
|
|
420
|
|
|
24%
|
|
|
$
|
996
|
|
|
794
|
|
|
25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER
SHARE
EXCLUDING SPECIAL ITEMS
|
|
$
|
0.48
|
|
|
0.39
|
|
|
23%
|
|
|
$
|
0.91
|
|
|
0.73
|
|
|
25%
|
|
|
|
(1)
|
Excludes the
Special Items described in the accompanying Non-GAAP Special Items
table, net of the income tax effect thereof.
|
nm - Percentages greater than 200% and comparisons
between positive and negative values are considered not
meaningful.
|
Lumen
Technologies, Inc.
|
CONSOLIDATED BALANCE
SHEETS
|
AS OF JUNE 30, 2021
AND DECEMBER 31, 2020
|
(UNAUDITED)
|
($ in
millions)
|
|
June 30,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
935
|
|
|
406
|
|
Accounts receivable,
less allowance of $152 and $191
|
1,905
|
|
|
1,962
|
|
Other
|
906
|
|
|
808
|
|
Total
current assets
|
3,746
|
|
|
3,176
|
|
Property, plant and
equipment, net of accumulated depreciation of $32,917
and $31,596
|
25,993
|
|
|
26,338
|
|
GOODWILL AND OTHER
ASSETS
|
|
|
|
Goodwill
|
18,867
|
|
|
18,870
|
|
Other intangible
assets, net
|
7,663
|
|
|
8,219
|
|
Other, net
|
2,678
|
|
|
2,791
|
|
Total goodwill and other assets
|
29,208
|
|
|
29,880
|
|
TOTAL
ASSETS
|
$
|
58,947
|
|
|
59,394
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Current maturities of
long-term debt
|
$
|
2,595
|
|
|
2,427
|
|
Accounts
payable
|
966
|
|
|
1,134
|
|
Accrued expenses and
other liabilities
|
|
|
|
Salaries and
benefits
|
931
|
|
|
1,008
|
|
Income and other
taxes
|
294
|
|
|
314
|
|
Current operating
lease liabilities
|
389
|
|
|
379
|
|
Interest
|
301
|
|
|
291
|
|
Other
|
286
|
|
|
328
|
|
Current portion of
deferred revenue
|
748
|
|
|
753
|
|
Total current liabilities
|
6,510
|
|
|
6,634
|
|
LONG-TERM
DEBT
|
28,574
|
|
|
29,410
|
|
DEFERRED CREDITS AND
OTHER LIABILITIES
|
|
|
|
Deferred income taxes,
net
|
3,643
|
|
|
3,342
|
|
Benefit plan
obligations, net
|
4,321
|
|
|
4,556
|
|
Other
|
4,193
|
|
|
4,290
|
|
Total deferred credits
and other liabilities
|
12,157
|
|
|
12,188
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
Common stock
|
1,105
|
|
|
1,097
|
|
Additional paid-in
capital
|
20,361
|
|
|
20,909
|
|
Accumulated other
comprehensive loss
|
(2,710)
|
|
|
(2,813)
|
|
Accumulated
deficit
|
(7,050)
|
|
|
(8,031)
|
|
Total stockholders'
equity
|
11,706
|
|
|
11,162
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
58,947
|
|
|
59,394
|
|
Lumen
Technologies, Inc.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
SIX MONTHS ENDED JUNE
30, 2021 AND 2020
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
|
Six months
ended
|
|
June 30,
2021
|
|
June 30,
2020
|
OPERATING
ACTIVITIES
|
|
|
|
Net Income
|
$
|
981
|
|
|
691
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
2,191
|
|
|
2,322
|
|
Deferred income
taxes
|
279
|
|
|
220
|
|
Provision for
uncollectible accounts
|
53
|
|
|
90
|
|
Net (gain) loss on
early retirement and modification of debt
|
(8)
|
|
|
86
|
|
Share-based
compensation
|
62
|
|
|
89
|
|
Changes in current
assets and liabilities, net
|
(414)
|
|
|
(435)
|
|
Retirement
benefits
|
(131)
|
|
|
(62)
|
|
Changes in other
noncurrent assets and liabilities, net
|
120
|
|
|
51
|
|
Other, net
|
31
|
|
|
(4)
|
|
Net cash provided by
operating activities
|
3,164
|
|
|
3,048
|
|
INVESTING
ACTIVITIES
|
|
|
|
Capital
expenditures
|
(1,362)
|
|
|
(1,983)
|
|
Proceeds from sale of
property, plant and equipment and other assets
|
66
|
|
|
84
|
|
Other, net
|
1
|
|
|
1
|
|
Net cash used in
investing activities
|
(1,295)
|
|
|
(1,898)
|
|
FINANCING
ACTIVITIES
|
|
|
|
Net proceeds from
issuance of long-term debt
|
1,881
|
|
|
2,425
|
|
Payments of long-term
debt
|
(2,464)
|
|
|
(3,696)
|
|
Net (payments of)
proceeds from revolving line of credit
|
(150)
|
|
|
825
|
|
Dividends
paid
|
(568)
|
|
|
(562)
|
|
Other, net
|
(49)
|
|
|
(75)
|
|
Net cash used in
financing activities
|
(1,350)
|
|
|
(1,083)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
519
|
|
|
67
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
427
|
|
|
1,717
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
946
|
|
|
1,784
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash:
|
|
|
|
Cash and cash
equivalents
|
$
|
935
|
|
|
1,763
|
|
Restricted
cash
|
11
|
|
|
21
|
|
Total
|
$
|
946
|
|
|
1,784
|
|
Lumen
Technologies, Inc.
|
OPERATING
METRICS
|
(UNAUDITED)
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
March 31,
2021
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
Operating
Metrics
|
|
|
|
|
|
|
Mass Markets broadband
subscribers
|
|
4,666
|
|
|
4,728
|
|
|
4,871
|
|
____________________
|
|
|
Mass Markets
broadband subscribers are customers that purchase broadband
connection service through their existing telephone lines,
stand-alone telephone lines, or fiber-optic cables. Our methodology
for counting our Mass Markets broadband subscribers includes only
those lines that we use to provide services to external customers
and excludes lines used solely by us and our affiliates. It also
excludes unbundled loops and includes stand-alone Mass Markets
broadband subscribers. We count lines when we install the service.
Other companies may use different methodologies.
|
Description of 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.
We use the term Special Items as a non-GAAP measure to
describe items that impacted a period's statement of operations for
which investors may want to give special consideration due to their
magnitude, nature or both. We do not call these items
non-recurring because, while some are infrequent, others may
recur in future periods.
Adjusted EBITDA ($) is defined as net income (loss) from
the Statements of Operations before income tax (expense) benefit,
total other income (expense), depreciation and amortization,
share-based compensation expense and impairments.
Adjusted EBITDA Margin (%) is defined as Adjusted EBITDA
divided by total revenue.
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 our internal reporting and are key
measures used by Management to evaluate profitability and operating
performance of Lumen 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 (and similarly
uses these terms excluding Special Items) to compare our
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 stock compensation expense and impairments
because of the non-cash nature of these items. Adjusted EBITDA also
excludes interest income, interest expense and income taxes, and in
our view constitutes an accrual-based measure that has the effect
of excluding period-to-period changes in working capital and shows
profitability without regard to the effects of capital or tax
structure. 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 Lumen.
There are material 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 our calculations. Additionally, this
financial measure does not include certain significant items such
as interest income, interest expense, income taxes, depreciation
and amortization, 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
(either with or without Special Items) 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 Statements of Cash Flows or the Statements of Operations.
Management believes that Unlevered Cash Flow is a relevant metric
to provide to investors, because it reflects the operational
performance of Lumen 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 our 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 our Unlevered Cash Flow to that of some of its
competitors may be of limited usefulness since Lumen does not
currently pay a significant amount of income taxes due to net
operating loss carryforwards, and therefore, currently 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, accounts payable, payroll
and capital expenditures. Unlevered Cash Flow should not be used as
a substitute for net change in cash, cash equivalents and
restricted cash 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 Statements of Cash Flows. Management believes that
Free Cash Flow is a relevant metric to provide to investors, as it
is an indicator of our 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 our 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 our Free Cash Flow to
that of some of its competitors may be of limited usefulness since
Lumen does not currently pay a significant amount of income taxes
due to net operating loss carryforwards, 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, accounts
payable, payroll and capital expenditures. Free Cash Flow should
not be used as a substitute for net change in cash, cash
equivalents and restricted cash on the Consolidated Statements of
Cash Flows.
Estimated Adjusted EBITDA is intended to represent
the divestiture transactions consistent with the proposed sales, as
further explained on our website.
Lumen
Technologies, Inc.
|
Non-GAAP Special
Items
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Special Items
Impacting Adjusted EBITDA
|
2Q21
|
2Q20
|
|
2Q21
|
2Q20
|
Consumer and other
litigation
|
$
|
11
|
|
6
|
|
|
19
|
|
6
|
|
Severance
|
—
|
|
44
|
|
|
—
|
|
44
|
|
Transaction and
separation costs
|
9
|
|
—
|
|
|
9
|
|
—
|
|
Total Special Items
impacting Adjusted EBITDA
|
$
|
20
|
|
50
|
|
|
28
|
|
50
|
|
|
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Special Items
Impacting Net Income
|
2Q21
|
2Q20
|
|
2Q21
|
2Q20
|
Consumer and other
litigation
|
$
|
11
|
|
6
|
|
|
19
|
|
6
|
|
(Gain) loss on early
debt retirement (1)
|
—
|
|
7
|
|
|
(8)
|
|
86
|
|
Severance
|
—
|
|
44
|
|
|
—
|
|
44
|
|
Transaction and
separation costs
|
9
|
|
—
|
|
|
9
|
|
—
|
|
Total Special Items
impacting Net Income
|
20
|
|
57
|
|
|
20
|
|
136
|
|
Income tax effect of
Special Items (2)
|
(5)
|
|
(14)
|
|
|
(5)
|
|
(33)
|
|
Total Special Items
impacting Net Income, net of tax
|
$
|
15
|
|
43
|
|
|
15
|
|
103
|
|
|
|
(1)
|
There was no early
debt retirement, debt modification or debt extinguishment in Q2
2021. Gain as a result of $1.1 billion in early debt retirement in
Q1 2021. Loss as a result of $1.2 billion in net debt early
retirement, debt modification, and debt extinguishment in Q2 2020.
Loss as a result of $2.4 billion in net early debt retirement, debt
modification, and debt extinguishment in Q1 2020.
|
(2)
|
Tax effect calculated
using the annualized effective statutory tax rate, excluding any
non-recurring discrete items, which was 24.5% for all periods
presented.
|
Lumen
Technologies, Inc.
|
Non-GAAP Cash Flow
Reconciliation
|
(UNAUDITED)
|
($ in
millions)
|
|
Actual
QTD
|
|
2Q21
|
2Q20
|
Net cash provided by
operating activities
|
$
|
1,639
|
|
1,749
|
|
Capital
expenditures
|
(646)
|
|
(1,009)
|
|
Free Cash
Flow
|
993
|
|
740
|
|
Cash interest
paid
|
357
|
|
445
|
|
Interest
income
|
—
|
|
(1)
|
|
Unlevered Cash
Flow
|
$
|
1,350
|
|
$
|
1,184
|
|
|
|
|
Free Cash
Flow
|
$
|
993
|
|
$
|
740
|
|
Add back:
Severance
|
29
|
|
20
|
|
Add back: Other
Special Items (1)
|
20
|
|
12
|
|
Add back: Transaction
and separation costs(1)
|
2
|
|
—
|
|
Free Cash Flow
excluding cash Special Items
|
$
|
1,044
|
|
$
|
772
|
|
|
|
|
Unlevered Cash
Flow
|
$
|
1,350
|
|
$
|
1,184
|
|
Add back:
Severance
|
29
|
|
20
|
|
Add back: Other
Special Items (1)
|
20
|
|
12
|
|
Add back: Transaction
and separation costs(1)
|
2
|
|
—
|
|
Unlevered Cash
Flow excluding cash Special Items
|
$
|
1,401
|
|
$
|
1,216
|
|
|
|
|
(1)
|
Refer to Non-GAAP
Special Items table for details of the Special Items impacting
cash included above.
|
Lumen
Technologies, Inc.
|
Adjusted EBITDA
Non-GAAP Reconciliation
|
(UNAUDITED)
|
($ in
millions)
|
|
Actual
QTD
|
|
2Q21
|
2Q20
|
Net
income
|
$
|
506
|
|
377
|
|
Income tax
expense
|
168
|
|
136
|
|
Total other expense,
net
|
332
|
|
390
|
|
Depreciation and
amortization expense
|
1,041
|
|
1,162
|
|
Share-based
compensation expense
|
42
|
|
20
|
|
Adjusted
EBITDA
|
$
|
2,089
|
|
2,085
|
|
|
|
|
Add back:
Severance
|
$
|
—
|
|
44
|
|
Add back: Other
Special Items (1)
|
11
|
|
6
|
|
Add back: Transaction
and separation costs (1)
|
9
|
|
—
|
|
Adjusted EBITDA
excluding Special Items
|
$
|
2,109
|
|
2,135
|
|
|
|
|
Total
revenue
|
$
|
4,924
|
|
5,192
|
|
|
|
|
Adjusted EBITDA
margin
|
42.4%
|
|
40.2%
|
|
Adjusted EBITDA
margin excluding Special Items
|
42.8%
|
|
41.1%
|
|
|
(1) Refer to Non-GAAP Special
Items table for details of the Special Items included
above.
|
Outlook
To enhance the information in our outlook with respect to
non-GAAP metrics, we are providing a range for certain GAAP
measures that are components of the reconciliation of the non-GAAP
metrics. The provision of these ranges is in no way meant to
indicate that Lumen is explicitly or implicitly providing an
outlook on those GAAP components of the reconciliation. In order to
reconcile the non-GAAP financial metric to GAAP, Lumen has to use
ranges for the GAAP components that arithmetically add up to the
non-GAAP financial metric. While Lumen believes that it has used
reasonable assumptions in connection with developing the outlook
for its non-GAAP financial metrics, it fully expects that the
ranges used for the GAAP components will vary from actual results.
We will consider our outlook of non-GAAP financial metrics to be
accurate if the specific non-GAAP metric is met or exceeded, even
if the GAAP components of the reconciliation are different from
those provided in an earlier reconciliation.
Lumen
Technologies, Inc.
|
2021 OUTLOOK (1)
(2)
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
Adjusted EBITDA
Outlook
|
|
|
|
Twelve Months Ended
December 31, 2021
|
|
|
|
|
Range
|
|
Low
|
|
High
|
Net
income
|
$
|
1,625
|
|
|
1,975
|
|
Income tax
expense
|
500
|
|
|
800
|
|
Total other
expense
|
1,650
|
|
|
1,450
|
|
Depreciation and
amortization expense
|
4,400
|
|
|
4,200
|
|
Share-based
compensation expenses
|
225
|
|
|
175
|
|
Adjusted
EBITDA
|
$
|
8,400
|
|
|
$
|
8,600
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
Outlook
|
|
|
|
Twelve Months Ended
December 31, 2021
|
|
|
|
|
Range
|
|
Low
|
|
High
|
Net cash provided
by operating activities
|
$
|
6,300
|
|
|
6,800
|
|
Capital
expenditures
|
(3,200)
|
|
|
(3,500)
|
|
Free Cash
Flow
|
$
|
3,100
|
|
|
3,300
|
|
|
|
(1)
|
For definitions of
non-GAAP metrics and reconciliation to GAAP figures, see the above
schedules and our Investor Relations website.
|
(2)
|
Outlook measures in
this chart (i) exclude the effects of Special Items, future changes
in our operating or capital allocation plans, unforeseen changes in
regulation, laws or litigation, and other unforeseen events or
circumstances impacting our financial performance and (ii) speak
only as of August 3, 2021. See "Forward-Looking
Statements".
|
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SOURCE Lumen Technologies