SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 4, 2003
Commission file number: 0-15658
Level 3 Communications, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 47-0210602
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1025 Eldorado Boulevard, Broomfield, Colorado 80021
(Address of principal executive offices) (Zip Code)
(720) 888-1000
(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 4, 2003, Level 3 Communications, LLC, a Delaware corporation
and indirect wholly-owned subsidiary of the Registrant, and Greenland Managed
Services, LLC, a Delaware limited liability company and indirect wholly-owned
subsidiary of the Registrant (together, the "Purchasers"), consummated the
purchase of substantially all of the assets, and the assumption of certain of
the liabilities, of Genuity Inc., a Delaware corporation, and certain
subsidiaries of Genuity Inc. (the "Seller" or "Genuity"), which operate a
telecommunications and internet services business. The transaction was
consummated pursuant to the terms of an Asset Purchase Agreement, dated as of
November 27, 2002, as amended (the "Asset Purchase Agreement"), among the
Registrant, the purchasers and the Sellers.
This Current Report on Form 8-K/A of Level 3 Communications, Inc. ("Level
3"), amends the Current Report on Form 8-K of Level 3 Communications, Inc. dated
February 13, 2003 to include (i) as required by Item 7(a) Financial Statements
of Businesses Acquired, consolidated financial statements of Genuity as of
December 31, 2001 and December 31, 2000 and for each of the years ended December
31, 2001, 2000 and 1999 and the unaudited interim consolidated financial
statements of Genuity as of September 30, 2002 and for the nine months ended
September 30, 2002 and 2001 and (ii) as required by Item 7(b) Pro Forma
Financial Information, unaudited pro forma combined condensed financial
statements of Level 3 Communications, Inc. as of September 30, 2002 and for the
nine months ended September 30, 2002 and the year ended December 31, 2001 giving
effect to the Genuity transaction.
The audited consolidated financial statements of Genuity as of and for the
period ending December 31, 2002 are not available at the time of this filing.
The Company expects to include these financial statements in a subsequent 8-K/A
filing when they become available.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED:
I. Genuity Inc. financial statements as of December 31, 2001 and December
31, 2000 and for each of the three years in the period ended December
31, 2001 (included herein as Exhibit 99.3).
II. Genuity Inc. unaudited interim consolidated condensed financial
statements as of September 30, 2002 and for the nine months ended
September 30, 2002 and 2001 (included herein as Exhibit 99.4).
(b) PRO FORMA FINANCIAL INFORMATION.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS OF LEVEL 3
COMMUNICATIONS, INC.
The following Unaudited Pro Forma Combined Condensed Balance Sheet of Level
3 Communications, Inc. as of September 30, 2002 and the Unaudited Pro Forma
Combined Condensed Statements of Operations of Level 3 Communications, Inc. for
the nine months ended September 30, 2002 and the year ended December 31, 2001
give effect to the Genuity transaction. The pro forma financial statements
account for the Genuity transaction under the purchase method of accounting.
The Unaudited Pro Forma Combined Condensed Balance Sheet assumes the
Genuity transaction occurred on September 30, 2002. The Unaudited Pro Forma
Combined Condensed Statements of Operations for the nine months ended September
30, 2002 and the year ended December 31, 2001 assume the Genuity transaction
occurred on January 1, 2001. The unaudited pro forma financial data is based on
the historical consolidated financial statements of Level 3 Communications, Inc.
and the historical consolidated financial statements of Genuity and under the
pro forma assumptions and adjustments set forth in the accompanying explanatory
notes.
The Genuity transaction has been accounted for as an acquisition by Level
3. As Level 3 is considered the accounting acquiror, the historical basis of
Level 3's assets and liabilities were not affected by the Genuity Inc.
transaction, with the
exception of revenue and deferred revenue attributable to transactions between
Genuity and Level 3 executed in periods prior to the acquisition of Genuity by
Level 3. For purposes of developing the Unaudited Pro Forma Combined Condensed
Balance Sheet as of September 30, 2002, the acquired current assets and assumed
liabilities of Genuity have been recorded at their estimated fair values. The
values assigned in these pro forma financial statements are preliminary and
represent management's best estimate of current values which are subject to
revision. The preliminary values assigned to the intangible assets includes a
significant customer contract and a related obligation for which a contingency
exists. The preliminary values assigned to these items were based on estimates
which could significantly impact the final purchase price allocation. Level 3
acquired the assets and assumed the liabilities of Genuity while Genuity was
protected under Chapter 11 of the U.S. Bankruptcy Code. Under the terms of the
Asset Purchase Agreement, Level 3 has the option to reject certain customer and
vendor contracts for up to three months following the purchase date. Management
currently knows of no events or circumstances other than those disclosed in
these pro forma notes that would require a material change to the preliminary
purchase price allocation. However, a determination of required purchase
accounting adjustments will be made upon the completion of a study to be
undertaken by Level 3 in conjunction with an independent valuation firm, to
determine the value of certain of Genuity Inc.'s assets, including identifiable
intangible assets, and liabilities. The actual financial position and results of
operations will differ, perhaps significantly, from the pro forma amounts
reflected herein due to a variety of factors, including access to additional
information, changes in value not currently identified and changes in operating
results between the dates of the pro forma financial data and the date of the
Genuity Inc. transaction. See Note (c) to Unaudited Pro Forma Combined Condensed
Balance Sheet.
Under the terms of the Asset Purchase Agreement, the purchase price paid by
the Purchasers was approximately $137 million (the "Purchase Price"), of which
(a) approximately $117 million was paid to the Sellers in cash, and (b) $20
million was placed in escrow to fund any indemnification claims pursuant to the
terms of the Asset Purchase Agreement.
The Purchase Price was calculated using an agreed base price as of November
27, 2002 of approximately $242 million, which was reduced by (a) approximately
$13 million relating to the actual timing of the closing, (b) approximately $65
million, representing the maximum amount of payments the Purchaser may later
make to cover the rejection claims of creditors in the Sellers' bankruptcy case,
(c) and approximately $27 million, representing the estimated severance amount
payable to certain of Sellers' former employees whose employment could be
terminated, which will be expensed as incurred by Level 3. Of the Purchase
Price, approximately $60 million represents cash consideration paid to Sellers,
and approximately $77 million represents cash payments related to assumed
network obligations. The Purchasers financed the entire amount of the Purchase
Price from cash on hand.
The Asset Purchase Agreement also provides for post-closing Purchase Price
adjustments related to the amount of (a) annualized recurring revenue, (b)
various prepaid items and deposits, (c) property taxes payable on purchased
property, (d) severance payments to certain of the Sellers' former employees and
(e) an adjustment based on the aggregate dollar value of rejection claims in the
Sellers' bankruptcy estate. No amounts have been recorded in the Pro Forma
information related to post-closing adjustments. These adjustments are expected
to be identified within 120 days following the acquisition date.
The assets acquired under the Asset Purchase Agreement include real estate
and leases comprising office space, and space used for equipment related to the
telecommunications and Internet services business of Sellers. Purchaser intends
to continue substantially the same uses of these assets going forward.
The distressed financial condition of Genuity has resulted in the
deterioration of its recurring revenue base. Level 3 expects revenue to be
significantly below historical results reported by Genuity in the Pro Forma
Combined Condensed Statements of Operations for the year ended December 31, 2001
and nine months ended September 30, 2002, as a result of these customers
disconnecting service. The Company also expects to reject certain customer
contracts that will also result in a decrease in revenue. Level 3 intends to
review the synergies of the combined business, which may result in a plan to
realign or reorganize certain of Genuity s existing operations. The costs of
implementing such a plan, if it were to occur, have not been reflected in the
accompanying pro forma financial statements. The impact of a potential
realignment, assuming such a plan were in place at the consummation date of the
Genuity transaction, could increase or decrease the amount of long-lived assets
recognized by Level 3 in accordance with Emerging Issues Task Force No. 95-3,
"Recognition of Liabilities in Connection with a Purchase Business Combination."
The Unaudited Combined Condensed Statements of Operations exclude any benefits
that may result from synergies that may be derived, or the elimination of
duplicative efforts. Level 3 expects to reduce its combined workforce by
approximately 800 employees during the next twelve months
and may incur significant severance costs as these reductions occur. The costs
associated with these future workforce reductions have not been included in the
Unaudited Pro Forma Combined Condensed Statements of Operations.
Management believes that the assumptions used provide a reasonable basis on
which to present the unaudited pro forma financial data. The unaudited pro forma
financial data may not be indicative of the financial position or results that
would have occurred if the Genuity transaction had been in effect on the dates
indicated or which may be obtained in the future.
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements and accompanying notes thereto
for Level 3 Communications, Inc., and the historical consolidated financial
statements and accompanying notes thereto for Genuity incorporated by reference
to this Current Report on Form 8-K/A.
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2002
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
(dollars in millions, except per share data) LEVEL 3(a) GENUITY(a) ADJUSTMENTS LEVEL 3
Assets
Current Assets
$ (938) b
Cash and cash equivalents $ 963 $ 938 (144) c1 $ 819
Restricted cash and securities 541 26 (26) b 541
Accounts receivable, net 443 138 (138) b 443
(50) b
Other 121 50 13 c2 134
----- ----- ----- -----
Total Current Assets 2,068 1,152 (1,283) 1,937
(751) b
Property, Plant and Equipment, net 6,360 751 259 c3 6,619
(22) b
Goodwill and Intangibles, net 375 22 131 c4 506
(18) b
Other Assets, net 291 18 42 c5 333
----- ----- ----- -----
$ 9,094 $1,943 $(1,642) $9,395
======= ====== ======= ======
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 560 $ 139 $ (139) b $ 560
Current portion of long-term debt 12 - 121 c6 133
Short-term obligations, including $2.8 billion
of debt in default as of September 30, 2002 - 2,987 (2,987) b -
Accrued payroll and employee benefits 173 16 (16) b 173
(121) b
Deferred revenue 158 121 (4) c7 154
(291) b
Other 308 291 41 c8 349
----- ----- ----- -----
Total Current Liabilities 1,211 3,554 (3,396) 1,369
(297) b
Long-Term Debt, less current portion 6,385 297 188 c6 6,573
(72) c7
Deferred Revenue 1,291 - 6 c9 1,225
Accrued Reclamation Costs 92 - - 92
(115) b
Other Liabilities 369 115 21 c10 390
Stockholders' Deficit:
Common stock 4 - - 4
Additional paid-in capital 5,939 6,109 (6,109) b 5,939
Accumulated other comprehensive loss (125) (2) 2 b (125)
Accumulated deficit (6,072) (8,130) 8,130 b (6,072)
------ ------ ----- ------
Total Stockholders' Deficit (254) (2,023) 2,023 (254)
----- ------ ----- -----
$ 9,094 $ 1,943 $ (1,642) $9,395
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See Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
LEVEL 3 COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
(a) These columns reflect the historical balance sheets of the respective
companies. Certain reclassifications have been made to the combined
historical financial statements of Genuity to conform to the presentation
expected to be used by Level 3.
(b) This entry removes the Genuity assets and liabilities not included in the
Asset Purchase Agreement.
(c) This entry reflects the preliminary allocation of the purchase price to
identifiable net assets acquired and liabilities assumed.
(c1) Cash consideration paid for acquisition. Includes $7 million of transaction
costs.
(c2) Miscellaneous prepaid assets assumed in the acquisition.
(c3) Adjustment to reflect value of Genuity property, plant and equipment
received in acquisition which have estimated useful lives of 2 to 40 years.
(c4) Adjustment to reflect value of intangible assets associated with customer
contracts and relationships acquired in transaction which have estimated
useful lives of 3 to 5 years based on preliminary estimates. The
preliminary purchase price did not result in any goodwill.
(c5) Adjustment to reflect certain corporate facilities acquired in the
transaction as available for sale and other noncurrent assets.
(c6) Adjustment to reflect current and noncurrent portions of assumed capital
lease obligations.
(c7) Adjustment to remove Level 3 deferred revenue attributable to Genuity
contracts which existed prior to the transaction.
(c8) Adjustment to reflect current obligations assumed in the acquisition.
(c9) Adjustment to reflect deferred revenue obligations assumed in the
acquisition based on estimated incremental costs to provide service plus a
normal profit margin.
(c10)Adjustment to reflect other noncurrent obligations assumed in the
acquisition.
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
HISTORICAL HISTORICAL INTER-COMPANY PRO FORMA PRO FORMA
(dollars in millions, except per share data) LEVEL 3(a) GENUITY(a) ADJUSTMENTS ADJUSTMENTS LEVEL 3
Revenue $ 1,533 $ 1,220 $ (6) b $ (8) c $ 2,739
Costs and Expenses:
Cost of revenue 742 1,322 (6) b (12) c 2,046
(6) c
(41) d
(469) e
Depreciation and amortization 1,122 475 - 117 f 1,198
Selling, general and administrative 1,297 575 - (10) c 1,862
Restructuring and impairment charges 3,353 2,757 - (2,717) g 3,393
----- ----- ----- ------ -----
Total costs and expenses 6,514 5,129 (6) (3,138) 8,499
----- ----- ----- ------ -----
Loss from Operations (4,981) (3,909) - 3,130 (5,760)
Other Income (Expense):
Interest income 161 - - - 161
1 c
- 49 h
Interest expense (646) (50) (41) i (687)
Other, net 18 3 - (3) c 18
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Total other expense (467) (47) - 6 (508)
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Loss from Continuing Operations Before Income Tax
(5,448) (3,956) - 3,136 (6,268)
Income Tax Benefit (Expense) - (4) - - (4)
----- ----- ----- ----- -----
Net Loss from Continuing Operations $(5,448) $(3,960) $ - $3,136 $(6,272)
======= ======= ===== ====== =======
Earnings (Loss) Per Share of Level 3 Common Stock
(Basic and Diluted):
Continuing operations $(14.58) $(16.78)
======= =======
Weighted Average Shares Outstanding used to Compute
Basic and Dilutive Earnings Per Share
(in thousands) 373,792 373,792
======= =======
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
INTER-COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA PRO FORMA
(dollars in millions, except per share data) LEVEL 3(a) GENUITY(a) ADJUSTMENTS LEVEL 3
Revenue $ 2,203 $ 776 (5) b - $ 2,974
Costs and Expenses:
Cost of revenue 1,389 808 (5) b - 2,192
(224) e
Depreciation and amortization 601 224 - 88 f 689
Selling, general and administrative 726 272 - - 998
Restructuring and impairment charges 50 1,134 - (1,128) g 56
----- ----- ----- ------ -----
Total costs and expenses 2,766 2,438 (5) (1,264) 3,935
----- ----- ----- ------ -----
Loss from Operations (563) (1,662) - 1,264 (961)
Other Income (Expense):
Interest income 23 - - - 23
99 h
Interest expense (414) (99) - (32) i (446)
Other, net 79 (3) - - 76
----- ----- ----- ----- -----
-
Total other income (expense) (312) (102) - 67 (347)
----- ----- ----- ----- -----
Loss from Continuing Operations Before Income Tax
(875) (1,764) - 1,331 (1,308)
Income Tax Benefit (Expense) 119 (3) - - 116
----- ----- ----- ----- -----
Net Loss from Continuing Operations $ (756) $(1,767) $ - $ 1,331 $(1,192)
======= ======= ======= ======= =======
Loss Per Share of Level 3 Common Stock
(Basic and Diluted):
Continuing operations $ (1.89) $ (2.98)
======= =======
Weighted Average Shares Outstanding used to Compute
Basic and Dilutive Earnings Per Share
(in thousands) 400,371 400,371
======= =======
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations
LEVEL 3 COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(a) These columns reflect the historical statements of operations of the
respective companies.
(b) Adjustment reflects the elimination of historical intercompany sales
transactions between Level 3 and Genuity.
(c) In August 2002, Genuity elected to stop providing funding to Integra, a
company in which Genuity owned 93% of the common stock. Integra
subsequently filed for bankruptcy in France and the court approved the
liquidation of the Company in October 2002. This adjustment removes
Integra's results of operations from the Pro Forma Statement of Operations
for the year ended December 31, 2001. Integra's results were classified as
discontinued by Genuity for the nine months ended September 30, 2002.
(d) Level 3 incurred goodwill amortization expense of approximately $41 million
for the year ended December 31, 2001. Effective January 1, 2002, Level 3,
in accordance with the provisions of SFAS No. 142, no longer amortized
goodwill. This adjustment removes the goodwill amortization from the
Unaudited Pro Forma Combined Condensed Statement of Operations for the year
ended December 31, 2001.
(e) Remove historical depreciation and amortization expense attributable to
Genuity (after Integra adjustment in 2001.)
(f) Record depreciation and amortization expense for tangible and intangible
assets obtained in acquisition based on preliminary purchase price
allocation.
(g) In 2001 and 2002, Genuity recorded impairment charges related to deployed
assets, assets held for sale, goodwill and intangibles, as well as lease
termination charges for abandoned facilities. This adjustment eliminates
these charges as Level 3 has reflected the assets at or below their fair
value and is not assuming the lease obligations for the abandoned
facilities. Genuity also recorded restructuring charges for workforce
reduction initiatives in 2001 and 2002. These amounts have not been removed
from the pro-forma statements of operations.
(h) Remove historical interest expense attributable to Genuity (after Integra
adjustment in 2001.)
(i) Record interest expense to reflect interest attributable to the capitalized
leases assumed in the transaction. The interest rate on the capitalized
leases have been adjusted to reflect rates available to Level 3 for debt
obligations with similar terms and features.
(j) The pro forma combined condensed financial statements reflect a preliminary
allocation to tangible assets, liabilities and other intangible assets. The
final purchase price allocation may result in different allocations for
tangible and intangible assets than that presented in these pro forma
combined condensed financial statements. Adjustments to these assets would
also affect depreciation and amortization expense. A $50 million adjustment
to the value assigned to the long-lived tangible and intangible assets
would result in a $14 change in depreciation and amortization expense per
year based on the weighted average life (approximately 3.5 years) of the
assets obtained in the acquisition.
ITEM 7(C). EXHIBITS.
Exhibit
Number Description
- ------ -----------
23.1 Information regarding consent of Arthur Andersen LLP with respect to
Level 3 Communications Inc.
23.2 Information regarding consent of Arthur Andersen LLP with respect to
Genuity Inc.
99.1 Level 3 Communications, Inc. and subsidiaries consolidated financial
statements for the years ended December 31, 2001, 2000 and 1999
(incorporated by reference to the Level 3 Communications, Inc Annual
Report on Form 10-K/A for the year ended December 31, 2001).
99.2 Level 3 Communications, Inc. and subsidiaries unaudited interim
financial statements for the nine months ended September 30, 2002 and
2001 (incorporated by reference to the Level 3 Communications, Inc.
Quarterly Report on Form 10-Q for the quarter ended September 30,
2002).
99.3 Genuity Inc. and subsidiaries consolidated financial statements for
the years ended December 31, 2001, 2000 and 1999 (incorporated by
reference to the Genuity Inc. Annual Report on Form 10-K for the year
ended December 31, 2001).
99.4 Genuity Inc. and subsidiaries unaudited interim financial statements
for the nine months ended September 30, 2002 and 2001 (incorporated by
reference to the Genuity Inc. Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002).
SIGNATURE
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 hereunto duly authorized.
Level 3 Communications, Inc.
Dated: April 21, 2003 /s/ Eric J. Mortensen
Eric J. Mortensen
Vice President, Controller and
Principal Accounting Officer
Exhibit 23.1
Information Regarding Consent of Arthur Andersen LLP
Section 11(a) of the Securities Act of 1933, as amended (the "Securities
Act"), provides that if part of a registration statement at the time it becomes
effective contains an untrue statement of a material fact, or omits a material
fact required to be stated therein or necessary to make the statements therein
not misleading, any person acquiring a security pursuant to such registration
statement (unless it is proved that at the time of such acquisition such person
knew of such untruth or omission) may assert a claim against, among others, an
accountant who has consented to be named as having certified any part of the
registration statement or as having prepared any report for use in connection
with the registration statement.
Level 3 Communications, Inc. ("Level 3") dismissed Arthur Andersen LLP
("Andersen") as its independent auditors, effective June 14, 2002. For
additional information, see Level 3's Report on Form 8-K dated June 21, 2002.
After reasonable efforts, Level 3 has been unable to obtain Andersen's written
consent to the incorporation by reference into Level 3's registration statements
on Forms S-3 (File Nos. 333-53914, 333-91899, 333-68887 and 333-71713) and on
Forms S-8 (File Nos. 333-79533, 333-42465, 333-68447, 333-58691 and 333-52697)
(collectively the "Registration Statements") of Andersen's audit report with
respect to Level 3's consolidated financial statements as of December 31, 2001
and for the two years in the period then ended. Under these circumstances,
Rule 437a under the Securities Act permits Level 3 to file this Form 8-K/A,
without a written consent from Andersen. As a result, with respect to
transactions in Level 3 securities pursuant to the Registration Statements that
occur subsequent to the date this Form 8-K/A is filed with the Securities and
Exchange Commission, Andersen will not have any liability under Section 11(a) of
the Securities Act for any untrue statements of a material fact contained in the
financial statements audited by Andersen or any omissions of a material fact
required to be stated therein. Accordingly, you would be unable to assert a
claim against Andersen under Section 11(a) of the Securities Act.
Exhibit 23.2
Information Regarding Consent of Arthur Andersen LLP
Section 11(a) of the Securities Act of 1933, as amended (the "Securities
Act"), provides that if part of a registration statement at the time it becomes
effective contains an untrue statement of a material fact, or omits a material
fact required to be stated therein or necessary to make the statements therein
not misleading, any person acquiring a security pursuant to such registration
statement (unless it is proved that at the time of such acquisition such person
knew of such untruth or omission) may assert a claim against, among others, an
accountant who has consented to be named as having certified any part of the
registration statement or as having prepared any report for use in connection
with the registration statement.
Genuity, Inc. ("Genuity") dismissed Arthur Andersen LLP ("Andersen") as its
independent auditors, effective April 4, 2002. For additional information, see
Genuity's Report on Form 8-K dated April 5, 2002. After reasonable efforts,
Genuity has been unable to obtain Andersen's written consent to the
incorporation by reference into Genuity's registration statements on Forms S-8
(File Nos. 333-73708 and 333-54524) (collectively the "Registration Statements")
of Andersen's audit report with respect to Genuity's consolidated financial
statements as of December 31, 2001 and for the two years in the period then
ended. Under these circumstances, Rule 437a under the Securities Act permits
Level 3 to file this Form 8-K/A, without a written consent from Andersen. As a
result, with respect to transactions in Level 3 securities pursuant to the
Registration Statements that occur subsequent to the date this Form 8-K/A is
filed with the Securities and Exchange Commission, Andersen will not have any
liability under Section 11(a) of the Securities Act for any untrue statements of
a material fact contained in the financial statements audited by Andersen or any
omissions of a material fact required to be stated therein. Accordingly, you
would be unable to assert a claim against Andersen under Section 11(a) of the
Securities Act.