SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported): March 22, 2001
Level 3 Communications, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 47-0210602
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1025 Eldorado Blvd., Broomfield, Colorado 80021
(Address of principal executive offices) (Zip code)
720-888-1000
(Registrant's telephone number including area code)
Not applicable
(Former name and former address, if changed since last report)
Item 7. Financial Statements and Exhibits
(a) Financial Statements of business acquired
None
(b) Pro forma financial information
None
(c) Exhibits
None.
Item 9. Regulation FD Disclosure
On March 22, 2001, Level 3 Communications, Inc. ("Level 3") conducted a
conference call to discuss the details of the closing of a $400 million
incremental secured bank facility. In a press release issued prior to the
opening of the securities trading markets on March 22, 2001 announcing the
facility, Level 3 included instructions for accessing the conference call and
indicated that the conference call would be simultaneously web cast on Level 3's
web site. The following summarizes disclosures provided by James Q. Crowe, chief
executive officer of Level 3, and Sureel A. Choksi, chief financial officer of
Level 3, on the conference call. The furnishing of this information shall not be
deemed an admission as to the materiality of the information included in this
Current Report. This information is not filed but is furnished pursuant to
Regulation FD.
Mr. Choksi reported that Level 3 had closed and funded a $400 million
incremental loan through an expansion of Level 3's existing senior secured
credit facility. In September 1999, Level 3 had closed a $1.375 billion senior
secured credit facility that contained certain expansion provisions. The $400
million incremental loan is part of that facility and therefore increases the
aggregate size of the existing facility from $1.375 billion to $1.775 billion.
Mr. Choksi indicated that the expansion is structured as a seven year term loan,
and is priced at LIBOR + 400 basis points. At current rates, the resulting
interest rate is approximately 8.8%.
Mr. Choksi confirmed previous public statements that the Level 3 business plan
continues to be substantially pre-funded to free cash flow breakeven. By
substantially prefunded, Mr. Choksi stated that to the extent the Company grows
at a rate that is faster than what has been projected, additional success-based
capital would be required to generate that revenue.
Prior to this transaction Level 3's cumulative funding totaled approximately $14
billion dollars, including the undrawn $650 million revolving credit facility
portion of the September 1999 senior secured credit facility. As a result of the
$400 million financing, Level 3 is able to reserve a significant portion of the
existing revolver portion of the credit facility for future contingencies and
opportunities.
Mr. Choksi further summarized the guidance that the Company provided at its
analyst conference in January 2001 and more recently to banks and institutions
who participated in the incremental loan facility transaction, which banks and
institutions were parties to a confidentiality obligation.
With respect to revenue, Mr. Choksi stated that the Company expects
communications cash revenue of between $2.4 billion and $2.6 billion for the
full year 2001 and $3.4 billion to $3.6 billion for 2002. Level 3 expects to
report communications GAAP revenue of between $360 million and $370 million in
the first quarter of this year, $1.7 billion for the full year 2001 and $2.9
billion for 2002. In commenting on Mr. Choksi's remarks, Mr. Crowe stated that
the company remains comfortable with its year 2001 guidance and that it is
comfortable that the company will meet or exceed its first quarter 2001
guidance.
Both Mr. Choksi and Mr. Crowe confirmed that Level 3 is projecting average gross
margins of 50% for the full year 2001 as the Company migrates traffic over the
course of the year from third party leased facilities to Level 3 constructed
facilities and as Level 3 continues to build-out additional colocation space.
Mr. Choksi reiterated that Level 3 is comfortable that it is now on a clear path
to free cash flow breakeven. At December 31, 2000 on a pro forma basis for the
incremental loan transaction, Level 3 would have had available liquidity of $5.3
billion. In addition, Level 3 expects to report $600 million to $700 million in
Adjusted EBITDA for the full year 2001 and $750 million to $850 million for
2002. Adjusted EBITDA is a key measure that the Company views as a proxy for
pre-tax operating cash flow to fund the Company's ongoing capital expenditures.
Level 3 also confirmed that it expects to turn EBITDA positive on a run-rate
basis sometime during the 4th quarter of this year.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Level 3 Communications, Inc.
March 22, 2001 By: /s/ Neil J. Eckstein
Date Neil J. Eckstein, Vice President