BROOMFIELD, Colo., Oct. 28, 2015 /PRNewswire/ -- Level 3
Communications, Inc. (NYSE: LVLT) today reported results for the
third quarter 2015.
"As we approach the one year mark of the tw telecom acquisition,
we are pleased with the progress we have made as a combined company
to strengthen Level 3's competitive position," said Jeff Storey, president and CEO of Level 3. "The
continued transition in technology creates an ongoing opportunity
for Level 3. We are continuing to invest in the business to
position the company for the future."
Reported results through the third quarter 2015 include the
results from the company's Venezuelan subsidiary's operations using
the SICAD I exchange rate. Total revenue was $2.062 billion for the third quarter 2015,
compared to $2.038 billion on a pro
forma basis, for the third quarter 2014, assuming the tw telecom
acquisition took place on January 1,
2014.
In the third quarter 2015, the company generated net income of
$172 million and basic earnings per
share of $0.48, which excludes a
non-recurring charge related to the deconsolidation of the
company's Venezuelan subsidiary's operations. That charge was
approximately $171 million or
$0.48 per share. Including this
charge, net income was $1 million and
basic and diluted earnings per share were $0.00 per share. For the third quarter 2014, pro
forma net income was $81 million and
basic earnings per share was $0.24.
Financial Results
Metric
($ in millions,
except per share data)
|
Third Quarter
2015(1)
|
Third Quarter 2014
Pro Forma(1)(2)
|
Core Network Services
Revenue(3)
|
$1,946
|
$1,894
|
Wholesale Voice
Services and Other Revenue(3)
|
$116
|
$144
|
Total
Revenue
|
$2,062
|
$2,038
|
Adjusted EBITDA,
including acquisition related expenses(4)(5)
|
$657
|
$612
|
Capital
Expenditures
|
$328
|
$302
|
Unlevered Cash
Flow(4)
|
$376
|
$294
|
Free Cash
Flow(4)
|
$247
|
$139
|
Network Access
Margin
|
65.8%
|
64.8%
|
Adjusted EBITDA
Margin(4)(5)
|
31.9%
|
30.0%
|
Net Income
|
$1
|
$81
|
Net Income per
Common Share- Basic and Diluted
|
$0.00
|
$0.24
|
Weighted Average
Shares Outstanding (in thousands)- Basic
|
355,791
|
335,165
|
(1)
|
As reported
results include results from the company's Venezuelan subsidiary's
operations using the SICAD I exchange rate.
|
(2)
|
References to "pro
forma" figures assume the tw telecom acquisition took place on
January 1, 2014.
|
(3)
|
The reported
third quarter 2014 results have been adjusted to reflect
changes made to customer assignments between the wholesale and
enterprise channels as of the beginning of
2015.
|
(4)
|
See schedule of
non-GAAP metrics for definitions and reconciliation to GAAP
measures.
|
(5)
|
Includes tw
telecom acquisition-related expenses of $18 million for the third
quarter 2015 and $8 million for the third quarter
2014.
|
Revenue
Core Network
Services (CNS) Revenue
($ in
millions)
|
Third Quarter
2015(1)
|
Third Quarter 2014
Pro Forma(1)(2)(3)
|
Percent
Change,
Constant
Currency
|
North
America
|
$1,551
|
$1,471
|
6%
|
Wholesale
|
$421
|
$428
|
(1%)
|
Enterprise
|
$1,130
|
$1,043
|
8%
|
|
|
|
|
EMEA
|
$212
|
$222
|
2%
|
Wholesale
|
$69
|
$80
|
(6%)
|
Enterprise
|
$117
|
$114
|
8%
|
UK
Government
|
$26
|
$28
|
-
|
|
|
|
|
Latin
America
|
$183
|
$201
|
9%
|
Wholesale
|
$39
|
$41
|
10%
|
Enterprise
|
$144
|
$160
|
9%
|
|
|
|
|
Total CNS
Revenue
|
$1,946
|
$1,894
|
6%
|
Wholesale
|
$529
|
$549
|
(1%)
|
Enterprise
|
$1,417
|
$1,345
|
8%
|
(1)
|
As reported
results include results from the company's Venezuelan subsidiary's
operations using the SICAD I exchange rate.
|
(2)
|
References to "pro
forma" figures assume the tw telecom acquisition took place on
January 1, 2014.
|
(3)
|
The reported third
quarter 2014 results have been adjusted to reflect changes made to
customer assignments between the wholesale and enterprise channels
as of the beginning of 2015.
|
CNS Revenue
CNS Revenue was $1.946 billion in
the third quarter 2015, increasing 6 percent year-over-year on a
pro forma and constant currency basis.
Deferred Revenue
The Deferred Revenue balance was $1.215
billion at the end of the third quarter 2015, compared to
$1.172 billion at the end of the
second quarter 2015.
Network Access Costs
Network Access Costs were $706
million in the third quarter 2015, compared to $717 million on a pro forma basis in the third
quarter 2014.
Network Related Expenses
For the third quarter 2015, excluding non-cash compensation and
integration-related expenses, Network Related Expenses were
$356 million. This compares to
$365 million on a pro forma basis for
the third quarter 2014.
Selling, General and Administrative Expenses
(SG&A)
Excluding non-cash compensation and integration-related
expenses, SG&A expenses were $325
million in the third quarter 2015. This compares to
$336 million on a pro forma basis for
the third quarter 2014.
Non-cash Compensation Expense
Non-cash compensation expense was $34
million for the third quarter 2015. For the third quarter
2014, non-cash compensation expense was $32
million on a pro forma basis.
Adjusted EBITDA
For the third quarter 2015, Adjusted EBITDA was $657 million, including $18 million of integration-related expenses. For
the third quarter 2014, Adjusted EBITDA on a pro forma basis was
$612 million, which included
$8 million of tw telecom
acquisition-related expenses.
Cash Flow
Free Cash Flow was $247 million
for the third quarter 2015, compared to $139
million on a pro forma basis for the third quarter 2014.
For the third quarter 2015, capital expenditures were
$328 million.
As of September 30, 2015, the
company had cash and cash equivalents of approximately $691 million.
Venezuela
Effective September 30, 2015, the
company deconsolidated its Venezuelan subsidiary and its related
operations from its consolidated financial statements and began
accounting for its investment in that Venezuelan subsidiary using
the cost method of accounting. In future periods, the company's
financial results will not include Venezuela operations. During the third
quarter 2015, the company reported revenue of $25 million and Adjusted EBITDA of $16 million from its Venezuela operations at the SICAD I exchange
rate which was devalued from 12.8 to 13.5
Bolivars to the US Dollar effective September 1, 2015.
This change in accounting treatment does not directly
affect the company's Venezuelan operations. The company
continues to operate in the region and remains committed to serving
Venezuelan customers.
Release of Deferred Tax Valuation Allowance
With the company's Federal net operating loss carryforward
position of $10.3 billion as of
December 31, 2014 in the U.S. and
continued expectation to generate income before taxes, the company
expects to release a significant portion of its valuation allowance
against its U.S. deferred tax assets in the fourth quarter 2015.
The company expects the release of the valuation allowance to
benefit fourth quarter Income Tax expense and Net Income by
approximately $3.1 billion to $3.3
billion.
2015 Business Outlook
"We are confident in our full year financial performance,
despite the change in the accounting for our Venezuelan operations
and continued currency headwinds," said Sunit Patel, executive vice president and CFO of
Level 3. "We now expect 2015 Adjusted EBITDA growth of 15 to 17
percent, compared to our previous outlook of 14 to 17
percent. We continue to expect to generate $600 to $650 million of Free Cash Flow for the
full year 2015. All other outlook measures remain unchanged."
Conference Call and Web Site Information
Level 3 will hold a conference call to discuss the company's
third quarter 2015 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 third quarter 2015 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 +1 877-283-5145 (U.S. Domestic) or +1 312-281-1200
(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 across 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 elsewhere. 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; manage risks
associated with continued uncertainty in the global economy;
increase revenue from its services to realize its targets for
financial and operating performance; 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; manage the future expansion or adaptation of
its network to remain competitive; defend intellectual property and
proprietary rights; 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:
|
D. Nikki Wheeler
|
Mark
Stoutenberg
|
+1
720-888-0560
|
+1 720-888-2518
|
nikki.wheeler@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).
Network Access Costs includes leased capacity,
right-of-way costs, access charges, satellite transponder lease
costs and other third party costs directly attributable to
providing access to customer locations from the Level 3 network,
but excludes Network Related Expenses, and depreciation and
amortization. Network Access Costs do not include any employee
expenses or impairment expenses; these expenses are allocated to
Network Related Expenses or Selling, General and Administrative
Expenses.
Network Related Expenses includes certain expenses
associated with the delivery of services to customers and the
operation and maintenance of the Level 3 network, such as facility
rent, utilities, maintenance and other costs, each related to the
operation of its communications network, as well as salaries, wages
and related benefits (including non-cash stock-based compensation
expenses) associated with personnel who are responsible for the
delivery of services, operation and maintenance of its
communications network, and accretion expense on asset retirement
obligations, but excludes depreciation and amortization.
Network Access Margin ($) is defined as total Revenue
less Network Access Costs from the Consolidated Statements of
Operations, and excludes Network Related Expenses.
Network Access Margin (%) is defined as Network Access
Margin ($) divided by total Revenue. Management believes that
network access 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
|
Q3 2015 (as
reported)
|
(in
millions)
|
|
|
Net Income
|
$
|
1
|
|
Income Tax
Expense
|
16
|
|
Total Other
Expense
|
310
|
|
Depreciation and
Amortization
|
296
|
|
Non-Cash Stock
Compensation
|
34
|
|
Adjusted
EBITDA
|
$
|
657
|
|
|
|
Total
Revenue
|
$
|
2,062
|
|
Adjusted EBITDA
Margin
|
31.9
|
%
|
Venezuela Adjusted
EBITDA Metric
|
Q3 2015 (as
reported)
|
(in
millions)
|
|
|
Net Income
|
$
|
9
|
|
Income Tax
Expense
|
—
|
|
Total Other
Expense
|
5
|
|
Depreciation and
Amortization
|
2
|
|
Non-Cash Stock
Compensation
|
—
|
|
Venezuela Adjusted
EBITDA
|
$
|
16
|
|
Adjusted EBITDA
Metric
|
Q3 2014 (Pro
Forma) (1)
|
(in
millions)
|
|
|
Net Income
|
$
|
81
|
|
Income Tax
Expense
|
11
|
|
Total Other
Expense
|
208
|
|
Depreciation and
Amortization
|
280
|
|
Non-Cash Stock
Compensation
|
32
|
|
Adjusted
EBITDA
|
$
|
612
|
|
|
|
Total
Revenue
|
$
|
2,038
|
|
Adjusted EBITDA
Margin
|
30.0
|
%
|
|
(1) Third
quarter of 2014 Pro Forma Adjusted EBITDA reflects a full three
months of both Level 3's and tw telecom's results.
|
Adjusted EBITDA
Metric
|
Q3 2014 (as
reported)
|
(in
millions)
|
|
|
Net Income
|
$
|
85
|
|
Income Tax
Expense
|
8
|
|
Total Other
Expense
|
169
|
|
Depreciation and
Amortization
|
187
|
|
Non-Cash Stock
Compensation
|
22
|
|
Adjusted
EBITDA
|
$
|
471
|
|
|
|
Total
Revenue
|
$
|
1,629
|
|
Adjusted EBITDA
Margin
|
28.9
|
%
|
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
September 30, 2015 (as reported)
|
Unlevered
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
575
|
|
|
$
|
575
|
|
Capital
Expenditures
|
(328)
|
|
|
(328)
|
|
Cash Interest
Paid
|
129
|
|
|
N/A
|
|
Interest
Income
|
—
|
|
|
N/A
|
|
Total
|
$
|
376
|
|
|
$
|
247
|
|
Unlevered Cash
Flow and Free Cash Flow
|
|
|
|
Three Months Ended
September 30, 2014 (Pro Forma) (1)
|
Unlevered
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
441
|
|
|
$
|
441
|
|
Capital
Expenditures
|
(302)
|
|
|
(302)
|
|
Cash Interest
Paid
|
156
|
|
|
N/A
|
|
Interest
Income
|
(1)
|
|
|
N/A
|
|
Total
|
$
|
294
|
|
|
$
|
139
|
|
|
|
(1) Third
quarter of 2014 Pro Forma Cash Flows reflects a full three months
of both Level 3's and tw telecom's results.
|
Unlevered Cash
Flow and Free Cash Flow
|
|
|
|
Three Months Ended
September 30, 2014 (as reported)
|
Unlevered
|
|
|
($ in
millions)
|
Cash
Flow
|
|
Free Cash
Flow
|
|
|
|
|
Net Cash Provided by
Operating Activities
|
$
|
321
|
|
|
$
|
321
|
|
Capital
Expenditures
|
(204)
|
|
|
(204)
|
|
Cash Interest
Paid
|
131
|
|
|
N/A
|
|
Interest
Income
|
(1)
|
|
|
N/A
|
|
Total
|
$
|
247
|
|
|
$
|
117
|
|
3Q14 Pro Forma
Combined Company Results
|
($ in
millions)
|
|
Historical Level
3
|
Historical tw telecom
as adjusted *
|
Intercompany
Eliminations
|
Pro Forma Adjustments
(1)
|
Total
|
Core Network
Services (CNS) Revenue
|
|
|
|
|
|
|
North
America
|
|
$
|
1,063
|
|
$
|
424
|
|
$
|
(14)
|
|
$
|
(2)
|
|
$
|
1,471
|
|
Wholesale
|
|
$
|
368
|
|
$
|
88
|
|
$
|
(14)
|
|
$
|
(14)
|
|
$
|
428
|
|
Enterprise
|
|
$
|
695
|
|
$
|
336
|
|
$
|
—
|
|
$
|
12
|
|
$
|
1,043
|
|
|
|
|
|
|
|
|
EMEA
|
|
$
|
219
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3
|
|
$
|
222
|
|
Wholesale
|
|
$
|
80
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
80
|
|
Enterprise
|
|
$
|
139
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3
|
|
$
|
142
|
|
|
|
|
|
|
|
|
Latin
America
|
|
$
|
200
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
$
|
201
|
|
Wholesale
|
|
$
|
42
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1)
|
|
$
|
41
|
|
Enterprise
|
|
$
|
158
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2
|
|
$
|
160
|
|
|
|
|
|
|
|
|
Total CNS
Revenue
|
|
$
|
1,482
|
|
$
|
424
|
|
$
|
(14)
|
|
$
|
2
|
|
$
|
1,894
|
|
Wholesale Voice
Services and Other
|
|
147
|
|
—
|
|
—
|
|
(3)
|
|
144
|
|
Total
Revenue
|
|
$
|
1,629
|
|
$
|
424
|
|
$
|
(14)
|
|
$
|
(1)
|
|
$
|
2,038
|
|
|
|
|
|
|
|
|
Network Access
Costs
|
|
$
|
(607)
|
|
$
|
(122)
|
|
$
|
12
|
|
$
|
—
|
|
$
|
(717)
|
|
Network Related
Expenses
|
|
(307)
|
|
(65)
|
|
3
|
|
—
|
|
(369)
|
|
Selling, General and
Administrative Expenses
|
|
(266)
|
|
(106)
|
|
—
|
|
—
|
|
(372)
|
|
Add back: Non-Cash
Compensation Expenses
|
|
22
|
|
10
|
|
—
|
|
—
|
|
32
|
|
Add back: Non-Cash
Impairment
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Adjusted EBITDA
Including Acquisition-Related Expenses
|
|
$
|
471
|
|
$
|
141
|
|
$
|
1
|
|
$
|
(1)
|
|
$
|
612
|
|
|
|
|
|
|
|
|
Transaction
Costs
|
|
$
|
3
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4
|
|
Integration
Costs
|
|
4
|
|
—
|
|
—
|
|
—
|
|
4
|
|
Total Acquisition
Related Costs
|
|
$
|
7
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Excluding Acquisition-Related Expenses
|
|
$
|
478
|
|
$
|
142
|
|
$
|
1
|
|
$
|
(1)
|
|
$
|
620
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
$
|
204
|
|
$
|
98
|
|
$
|
—
|
|
$
|
—
|
|
$
|
302
|
|
|
|
|
|
|
|
|
Colocation and
Datacenter Services
|
|
$
|
147
|
|
$
|
12
|
|
$
|
(1)
|
|
$
|
—
|
|
$
|
158
|
|
Transport and
Fiber
|
|
511
|
|
74
|
|
(12)
|
|
2
|
|
575
|
|
IP and Data
Services
|
|
590
|
|
271
|
|
(1)
|
|
(1)
|
|
859
|
|
Voice Services (Local
and Enterprise)
|
|
234
|
|
67
|
|
—
|
|
1
|
|
302
|
|
Total Core Network
Services
|
|
$
|
1,482
|
|
$
|
424
|
|
$
|
(14)
|
|
$
|
2
|
|
$
|
1,894
|
|
Wholesale Voice
Services and Other
|
|
147
|
|
—
|
|
—
|
|
(3)
|
|
144
|
|
Total
Revenue
|
|
$
|
1,629
|
|
$
|
424
|
|
$
|
(14)
|
|
$
|
(1)
|
|
$
|
2,038
|
|
|
* Certain
reclassifications have been made to the historical presentation of
tw telecom's historical results to conform to the presentation used
by Level 3, primarily related to network access costs, network
related expenses, depreciation and amortization and selling,
general and administrative expenses.
|
|
|
(1) The
2014 quarterly results have been adjusted to reflect changes made
to customer assignments between the wholesale and enterprise
channels as of the beginning of 2015.
|
Debt is defined as total gross debt, including capital
leases from the Consolidated Balance Sheet.
Net Debt to Pro Forma Last Twelve Months (LTM) Adjusted
EBITDA Ratio is defined as debt, reduced by cash and cash
equivalents and divided by LTM Adjusted EBITDA Pro Forma to include
tw telecom results excluding acquisition-related expenses.
Level 3
Communications, Inc. and Consolidated Subsidiaries
|
Pro Forma LTM
Adjusted EBITDA
|
($ in
millions)
|
|
4Q14 (Pro Forma)
(1)
|
1Q15 (as
reported)
|
2Q15 (as
reported)
|
3Q15 (as
reported)
|
Total: LTM (Pro
Forma) (1)
|
|
|
|
|
|
|
Total
Revenue
|
$
|
2,052
|
|
$
|
2,053
|
|
$
|
2,061
|
|
$
|
2,062
|
|
$
|
8,228
|
|
Network Access
Costs
|
(732)
|
|
(723)
|
|
(696)
|
|
(706)
|
|
(2,857)
|
|
Network Related
Expenses
|
(378)
|
|
(356)
|
|
(363)
|
|
(369)
|
|
(1,466)
|
|
Selling, General and
Administrative Expenses
|
(567)
|
|
(370)
|
|
(364)
|
|
(364)
|
|
(1,665)
|
|
Add back: Non-Cash
Compensation Expenses
|
93
|
|
31
|
|
27
|
|
34
|
|
185
|
|
Add back: Non-Cash
Impairment
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
Add back:
Acquisition-Related Expenses
|
156
|
|
5
|
|
5
|
|
18
|
|
184
|
|
Adjusted EBITDA
Excluding Acquisition-Related Expenses
|
$
|
625
|
|
$
|
640
|
|
$
|
670
|
|
$
|
675
|
|
$
|
2,610
|
|
|
|
(1)
Quarterly 2014 Pro Forma Adjusted EBITDA
assumes the acquisition of tw telecom took place on January 1,
2014.
|
Level 3
Communications, Inc. and Consolidated Subsidiaries
|
Net Debt to Pro
Forma LTM Adjusted EBITDA Ratio as of September 30,
2015
|
($ in
millions)
|
|
|
Debt
|
$
|
11,030
|
|
Cash and Cash
Equivalents
|
(691)
|
|
Net Debt
|
$
|
10,339
|
|
Pro Forma LTM
Adjusted EBITDA Excluding Acquisition-Related Expenses
|
$
|
2,610
|
|
Net Debt to Pro Forma
LTM Adjusted EBITDA Ratio
|
4.0
|
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
(dollars in millions,
except per share data)
|
September 30,
2015
|
June 30,
2015
|
September 30,
2014
|
|
|
|
|
Revenue
|
$
2,062
|
$
2,061
|
$
1,629
|
|
|
|
|
Costs and
Expenses
|
|
|
|
Network Access
Costs
|
706
|
696
|
607
|
Network Related
Expenses
|
369
|
363
|
307
|
Depreciation and
Amortization
|
296
|
288
|
187
|
Selling, General and
Administrative Expenses
|
364
|
364
|
266
|
Total Costs
and Expenses
|
1,735
|
1,711
|
1,367
|
|
|
|
|
Operating
Income
|
327
|
350
|
262
|
|
|
|
|
Other Income
(Expense):
|
|
|
|
Interest
income
|
—
|
—
|
1
|
Interest
expense
|
(145)
|
(165)
|
(159)
|
Loss on modification
and extinguishment of debt
|
—
|
(163)
|
—
|
Venezuela
deconsolidation charge
|
(171)
|
—
|
—
|
Other, net
|
6
|
(17)
|
(11)
|
Total Other
Expense
|
(310)
|
(345)
|
(169)
|
|
|
|
|
Income Before Income
Taxes
|
17
|
5
|
93
|
|
|
|
|
Income Tax
Expense
|
(16)
|
(18)
|
(8)
|
|
|
|
|
Net Income
(Loss)
|
$
1
|
$
(13)
|
$
85
|
|
|
|
|
Basic Earnings per
Common Share:
|
|
|
|
Net Income (Loss) per
Share
|
$
—
|
$
(0.04)
|
$
0.36
|
Weighted-Average
Shares Outstanding (in thousands)
|
355,791
|
354,471
|
238,265
|
|
|
|
|
Diluted Earnings per
Common Share:
|
|
|
|
Net Income (Loss) per
Share
|
$
—
|
$
(0.04)
|
$
0.35
|
Weighted-Average
Shares Outstanding (in thousands)
|
358,714
|
354,471
|
242,464
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Balance Sheets
|
(unaudited)
|
|
|
|
|
|
September
30,
|
December
31,
|
September
30,
|
(dollars in
millions)
|
2015
|
2014
|
2014
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
691
|
$
580
|
$
729
|
Restricted cash and
securities
|
7
|
7
|
1,020
|
Receivables, less
allowances for doubtful accounts
|
810
|
737
|
678
|
Other
|
155
|
165
|
173
|
Total Current
Assets
|
1,663
|
1,489
|
2,600
|
|
|
|
|
Property, Plant and
Equipment, net
|
9,812
|
9,860
|
8,268
|
Restricted Cash and
Securities
|
44
|
20
|
21
|
Goodwill
|
7,753
|
7,689
|
2,570
|
Other Intangibles,
net
|
1,182
|
1,414
|
154
|
Other
Assets
|
429
|
475
|
370
|
Total
Assets
|
$
20,883
|
$
20,947
|
$
13,983
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
630
|
$
664
|
$
607
|
Current portion of
long-term debt
|
16
|
349
|
502
|
Accrued payroll and
employee benefits
|
230
|
273
|
165
|
Accrued
interest
|
137
|
174
|
184
|
Current portion of
deferred revenue
|
273
|
287
|
244
|
Other
|
184
|
167
|
151
|
Total Current
Liabilities
|
1,470
|
1,914
|
1,853
|
|
|
|
|
Long-Term Debt, less
current portion
|
10,997
|
10,984
|
8,856
|
Deferred Revenue,
less current portion
|
942
|
921
|
877
|
Other
Liabilities
|
694
|
765
|
749
|
Total
Liabilities
|
14,103
|
14,584
|
12,335
|
|
|
|
|
Stockholders'
Equity
|
6,780
|
6,363
|
1,648
|
Total Liabilities and
Stockholders' Equity
|
$
20,883
|
$
20,947
|
$
13,983
|
LEVEL 3
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
June 30,
|
September
30,
|
(dollars in
millions)
|
2015
|
2015
|
2014
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
Net income
(loss)
|
$
1
|
$
(13)
|
$
85
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
296
|
288
|
187
|
Non-cash
compensation expense attributable to stock awards
|
34
|
27
|
22
|
Loss on
modification and extinguishment of debt
|
—
|
163
|
—
|
Venezuela
deconsolidation charge
|
171
|
—
|
—
|
Accretion of
debt discount and amortization of debt issuance
costs
|
5
|
6
|
10
|
Accrued
interest on long-term debt
|
12
|
(62)
|
18
|
Non-cash tax
adjustments
|
—
|
—
|
(5)
|
Deferred
income taxes
|
15
|
—
|
(12)
|
Gain (loss) on
sale of property, plant and equipment and other assets
|
—
|
2
|
(2)
|
Other,
net
|
2
|
9
|
(19)
|
Changes in
working capital items:
|
|
|
|
Receivables
|
(98)
|
(9)
|
24
|
Other current
assets
|
15
|
(17)
|
(1)
|
Payables
|
21
|
2
|
(17)
|
Deferred
revenue
|
63
|
(12)
|
(7)
|
Other current
liabilities
|
38
|
35
|
38
|
Net Cash Provided by
Operating Activities
|
575
|
419
|
321
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
Capital
expenditures
|
(328)
|
(317)
|
(204)
|
Cash related to
deconsolidated Venezuela operations
|
(83)
|
—
|
—
|
Change in restricted
cash and securities, net
|
—
|
(25)
|
(12)
|
Proceeds from sale of
property, plant and equipment and other assets
|
1
|
1
|
2
|
Other
|
(14)
|
—
|
(1)
|
Net Cash Used in
Investing Activities
|
(424)
|
(341)
|
(215)
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
Long-term debt
borrowings, net of issuance costs
|
(1)
|
3,456
|
(1)
|
Payments on and
repurchases of long-term debt and capital leases
|
(4)
|
(4,096)
|
(2)
|
Net Cash Used in
Financing Activities
|
(5)
|
(640)
|
(3)
|
|
|
|
|
Effect of Exchange
Rates on Cash and Cash Equivalents
|
(4)
|
(3)
|
(11)
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
142
|
(565)
|
92
|
|
|
|
|
Cash and Cash
Equivalents at Beginning of Period
|
549
|
1,114
|
637
|
|
|
|
|
Cash and Cash
Equivalents at End of Period
|
$
691
|
$
549
|
$
729
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
Cash interest
paid
|
$
129
|
$
219
|
$
131
|
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SOURCE Level 3 Communications, Inc.