Exhibit 99.2
[Logo]
Level 3 Communications, Inc.
1025 Eldorado Boulevard
Broomfield, CO 80021
www.Level3.com
NEWS RELEASE
FOR IMMEDIATE RELEASE
Level 3 Contacts:
Media: Josh Howell Investors: Robin Grey
720/888-2517 720/888-2518
Level 3 Provides Updated Financial Information
BROOMFIELD, Colo., February 25, 2002 -- Level 3 Communications, Inc.
(Nasdaq:LVLT) today announced that it has signed a definitive agreement to
acquire CorpSoft, Inc., which conducts business under the name Corporate
Software. As a result of this transaction, the company is updating certain
financial information.
Financial Projections: Level 3 expects to meet or exceed first quarter 2002
financial projections provided on January 29, including positive Consolidated
EBITDA for the first quarter. The company plans to provide full year 2002
projections in April in conjunction with reporting its first quarter 2002
results.
Credit Facility: The company has a $1.775 billion senior secured credit
facility. Currently, $1.125 billion of the $1.775 billion senior secured credit
facility is drawn. The balance represents the undrawn $650 million revolving
credit facility.
The credit facility has customary covenants, or requirements that the company
and certain of its subsidiaries must meet to remain in compliance with the
contract, including a financial covenant that measures minimum revenues (Minimum
Telecom Revenue). The subsidiaries of the company that must comply with the
terms and conditions of the credit facility are referred to as Restricted
Subsidiaries.
The Minimum Telecom Revenue covenant generally requires that the company meets
or exceeds specified levels of cash revenue from communications and information
services businesses
generated by the Restricted Subsidiaries. The Minimum Telecom Revenue covenant
is calculated quarterly on a trailing four quarter basis. The Restricted
Subsidiaries currently include those engaged in the company's communications
businesses and certain subsidiaries of (i)Structure engaged in the company's
information services businesses.
Those subsidiaries of the company that are not subject to the limitations of the
Credit Agreement are referred to as Unrestricted Subsidiaries. The Unrestricted
Subsidiaries include Level 3's coal mining and toll road properties and its
holdings in RCN Corporation and Commonwealth Telephone Enterprises, Inc.
On January 29, 2002, the company stated that it was in compliance with all of
the terms, conditions, and covenants under its credit facility and expected to
remain in compliance through the end of the first quarter based on its publicly
disclosed financial projections. However, the company stated that if sales,
disconnects and cancellations were to continue at the levels experienced during
the second half of 2001, it may violate the Minimum Telecom Revenue covenant as
early as the end of the second quarter 2002. The company also stated that to the
extent the company's operational performance improves or it completes
acquisitions that generate sufficient incremental revenue, a potential violation
of the covenant could be delayed beyond the second quarter of 2002 or eliminated
entirely.
Level 3 announced earlier today that it has signed a definitive agreement to
acquire Corporate Software, Inc., a Norwood, Massachusetts based marketer,
distributor and reseller of business software. Corporate Software had 2001
revenues of approximately $1.1 billion. Corporate Software had 2001 EBITDA of
approximately $18 million, excluding stock-based compensation expense, one-time
restructuring charges and other non-recurring employee costs. The transaction is
expected to close by the end of the first quarter 2002. Upon closing, revenues
as measured by the Minimum Telecom Revenue covenant will include Corporate
Software revenues.
"As a result of this transaction, we believe that the company will remain in
compliance with the terms and conditions of our credit facility until the second
half of 2003," said Sureel Choksi, CFO of Level 3. "This expectation assumes
that we take no other actions, our sales levels do not improve beyond those
experienced during the second half of 2001, and disconnects and cancellations
trend down during the second half of 2002 in accordance with the company's
previously disclosed customer credit analysis."
"Additionally, given other actions the company may take, and based on our longer
term expectations for improvements in our rate of sales, disconnects and
cancellations, new product and service introductions and the potential for
additional acquisitions, we believe we will continue to remain in compliance
with the terms and conditions of our credit facility over the term of that
agreement," added Choksi.
Funding Update: As of the end of fourth quarter 2001, Level 3 had available
liquidity of approximately $2.1 billion, consisting of $1.5 billion in cash and
marketable securities and $650 million under its undrawn and available revolving
credit facility. These amounts exclude any proceeds from the sale of
non-strategic assets, such as the proposed Commonwealth Telephone transaction
described below.
Since the end of 2001, Level 3 has completed a number of strategic transactions,
including the sale of its Asian operations to Reach Ltd. As a result of this
sale, the company expects to save approximately $300 million through free cash
flow breakeven. Additionally, Level 3 has closed the acquisition of McLeodUSA's
wholesale Internet dial access business.
Level 3 has also recently announced or completed certain financial transactions
to further strengthen its balance sheet and funding position. On February 8,
2002, the company announced its plan to sell approximately 2.75 million shares
of Commonwealth Telephone in an underwritten public offering. Additionally,
during the first quarter, Level 3 has retired approximately $195 million face
amount of debt securities, approximately half through debt for equity swaps and
the balance using excess cash to repurchase debt. Including these transactions,
Level 3 has retired approximately $2.1 billion face amount of debt over the past
six months on what the company believes are attractive terms.
"Taking into account all recent transactions and events," said James Q. Crowe,
CEO of Level 3, "we believe that Level 3 remains fully funded to free cash flow
breakeven with a substantial cushion in accordance with our business plan, even
if our current rate of sales does not improve over time."
Level 3 will hold an investor conference call to discuss the transaction and to
provide a financial update at 11 a.m. eastern time today. The dial-in numbers
are (651) 291-0900 and (612) 338-1917. Additionally, the conference call will be
webcast on Level 3's website, www.Level3.com. A replay of the conference call
will be available until Wednesday, February 27, 2002 at (320) 365-3844, access
code 629107, as well as on Level 3's web site, www.Level3.com.
About Level 3 Communications
Level 3 (Nasdaq:LVLT) is a global communications and information services
company offering a wide selection of services including IP services, broadband
transport, colocation services and the industry's first Softswitch based
services. Its Web address is www.Level3.com.
Forward Looking Statement
Some of the statements made by Level 3 in this press release are forward-looking
in nature. Actual results may differ materially from those projected in
forward-looking statements. Level 3 believes that its primary risk factors
include, but are not limited to: changes in the overall economy relating to,
among other things, the September 11 attacks and subsequent events, substantial
capital requirements; development of effective internal processes and systems;
the ability to attract and retain high quality employees; technology; the number
and size of competitors in its markets; law and regulatory policy; and the mix
of products and services offered in the company's target markets. 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 release should be evaluated in light of these important factors.
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