Exhibit 99.1
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Level 3 Communications, Inc.
1025 Eldorado Boulevard
Broomfield, Colorado 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 Reports Second Quarter Results
Reports Communications Revenue of $391 Million
New VoIP Customer Contracts Announced
Increases Investment to Support New Services
And Customer Contracts
Outstanding Debt Decreased By $230 Million
BROOMFIELD, Colo., July 28, 2004 - Level 3 Communications, Inc. (Nasdaq:LVLT)
today announced its second quarter results. Consolidated revenue was $918
million for the second quarter compared to $899 million for the first quarter
2004. Communications revenue was $391 million versus $389 million for the
previous quarter, and information services revenue was $503 million compared to
$494 million for the previous quarter.
The net loss for the second quarter 2004 decreased to $63 million or $0.09 per
share compared to a net loss for the previous quarter of $147 million or $0.22
per share. Included in the net loss for the second quarter was a $147 million
gain, or $0.22 per share, associated with the elimination of $213 million in
capital lease obligations due to the termination of a vendor contract. Included
in the net loss for the previous quarter was a $23 million gain on the sale of
the company's remaining investment in Commonwealth Telephone Enterprises, Inc.
Consolidated Adjusted OIBDA(1) was $94 million in the second quarter 2004, which
exceeded the projection of $80 million to $90 million and compares to $128
million for the previous quarter.
Overview
"During the second quarter, we completed the launch of our consumer-oriented
VoIP services and the expansion of our IP VPN service," said James Q. Crowe, CEO
of Level 3. "We also began to see increasing acceptance of these new services in
the marketplace along with significant customer interest. In addition, we
commenced market trials with potential customers and received several contract
awards for these new services."
Second Quarter Financial Results Compared to Projections (1)
Metric Second Quarter Actuals Second Quarter
($ in millions) Projections (1)
Communications Services Revenue (2) (excluding termination $363
and settlement revenue)
Reciprocal Compensation $26
Termination and Settlement Revenue $2
Communications Revenue $391 $375-$395
Information Services Revenue $503
Other Revenue $24
Consolidated Revenue $918
Consolidated Adjusted OIBDA (3)(4) $94 $80-$90
Capital Expenditures (5) $64 $70
Unlevered Cash Flow (4) $15
Free Cash Flow (4) ($109)
Communications Gross Margin (4) 70%
(1) Projections issued April 29, 2004
(2) Communications Services Revenue is GAAP communications revenue minus
reciprocal compensation revenue
(3) Consolidated Adjusted OIBDA excludes $10 million in stock-based
compensation expense
(4) See schedule of non-GAAP metrics for definition and reconciliation to
GAAP measures
(5) Gross capital expenditures were $66 million for the quarter and
accrual reversals were $2 million
Consolidated Cash Flow and Liquidity
During the second quarter 2004, unlevered cash flow(1) was $15 million, versus
$44 million during the first quarter. Consolidated free cash flow for the second
quarter was negative $109 million, versus negative $40 million for the previous
quarter.
As of June 30, 2004, the company had cash and marketable securities of
approximately $957 million compared to $1.1 billion at March 31, 2004.
"Our consolidated free cash flow for the second quarter declined primarily due
to the timing of certain of our interest expense payments and expected increases
in capital expenditures associated with new service initiatives and network
build-out related to previously awarded contracts," said Sunit Patel, CFO of
Level 3. "Additionally, as a result of the acquisition of ICG's managed modem
business and the termination of certain vendor agreements, we saw an increase in
network expenses related to the integration of the ICG and Allegiance dial-up
networks. We expect to see the benefits of these expenditures in future
periods."
2
Communications Business
Revenue
Communications revenue for the second quarter 2004 was $391 million, versus $389
million for the previous quarter. Total communications revenue for the second
quarter consisted of $365 million of communications services revenue and $26
million of reciprocal compensation revenue, compared to $366 million and $23
million in the first quarter.
Included in communications services revenue was $2 million and $7 million of
settlement and termination revenue for the second and first quarters,
respectively. Communications services revenue, excluding settlement and
termination revenue, increased by $4 million quarter over quarter.
This increase is primarily due to additional managed modem revenue from the ICG
acquisition completed during the second quarter, partially offset by expected
declines in the company's existing managed modem business.
The communications deferred revenue balance increased by $2 million during the
quarter.
Cost of Revenue
Communications cost of revenue for the second quarter was $119 million versus
$81 million for the previous quarter. Communications gross margin(1) was 70
percent for the second quarter compared to 79 percent in the first quarter.
Communications cost of revenue increased in the second quarter primarily due to
expected increases in network expenses associated with the ICG acquisition, and
the termination and renegotiation of vendor agreements with Allegiance and KMC
Telecom. In addition, the completion of the Genuity migration in the second
quarter resulted in higher than expected network expenses in the second quarter.
The Genuity integration is now substantially complete and as a result, no
additional expenses associated with this acquisition are expected.
As a result of the contract termination with Allegiance, the company assumed a
network contract obligation with KMC. This contract was subsequently
renegotiated in the second quarter, which resulted in a payment obligation of
$10 million to KMC. This obligation is being paid over the course of 2004, and
recognized as cost of revenue. As a result of this renegotiation, the company
expects to migrate this traffic to its network by the end of the year, with
corresponding improvements in gross margin.
"While the ICG, Allegiance and KMC transactions have a short-term negative
effect on gross margins and result in the use of cash, we believe the
longer-term benefits from these transactions will be substantial," said Kevin
O'Hara, president and COO of Level 3. "We have successfully begun the network
migration for the previously announced ICG and Allegiance transactions, and
expect to complete these activities over the balance of the year.
Selling, General and Administrative Expenses (SG&A)
Communications SG&A expenses were $202 million for the second quarter, versus
$201 million for the previous quarter. For both periods, communications SG&A
expenses include $9 million of non-cash stock compensation expense.
3
The total number of employees in the communications business increased to
approximately 3,500 during the second quarter from approximately 3,380 in the
first quarter.
Adjusted Operating Income Before Depreciation and Amortization (OIBDA)
Adjusted OIBDA(1) for the communications business decreased to $79 million for
the second quarter from $116 million for the previous quarter. Communications
Adjusted OIBDA margin(1) was 20 percent for the second quarter versus 30 percent
in the previous quarter. This decrease in Communications Adjusted OIBDA was
primarily the result of the expected increase in network expenses as previously
described.
Communications Adjusted OIBDA for the second and first quarter excludes $9
million in non-cash stock compensation expense.
Information Services Business
Results for the information services business include the Software Spectrum and
(i)Structure subsidiaries.
Revenue and Adjusted Operating Income before Depreciation and Amortization
(OIBDA)
Information services revenue was $503 million for the second quarter. This
compares to revenue of $494 million for the previous quarter, which included $4
million of termination revenue at (i)Structure, and $491 million for the same
period last year.
Adjusted OIBDA(1) for the information services business was $11 million for the
second quarter, which excludes $1 million in non-cash stock compensation
expense, compared to $11 million for the previous quarter, which included $2
million in restructuring charges.
"I am pleased with the second quarter performance of the information services
business," said Charles C. Miller, vice chairman of Level 3. "The strong revenue
performance of our information services business reflects the continued strength
in the global software market and the benefit of normal seasonal effects.
Additionally, our improving margins are a testament to the success of our
ongoing cost optimization efforts, which we began last year."
The total number of employees in the information services business decreased to
approximately 1,300 at the end of the second quarter from approximately 1,310 at
the end of the previous quarter.
Other Businesses
The company's other businesses consist primarily of coal mining operations.
Revenue and Adjusted OIBDA
Revenue and Adjusted OIBDA(1) from other businesses were $24 million and $4
million in the second quarter compared to $16 million and $1 million for the
previous quarter.
Debt Reduction
As a result of the company's termination of its vendor agreement with Allegiance
and principal payments on capital leases during the second quarter, capital
lease obligations decreased by approximately $245 million during the second
quarter.
4
New Customer Agreements and Service Offerings
"Level 3 has been focused on the successful launch of several new service
offerings in 2004, particularly VoIP and IP-based data networking services,
which leverage our existing network and increase our addressable market," said
O'Hara. "I am pleased that during the second quarter, we began to see early
customer acceptance, revenue growth and corresponding network usage increases
from these new services.
"The company has recently announced new customer agreements with AOL's
Moviefone, Intelsat, Net2Phone, Skype, Tiscali, Teliris and 8x8. The company has
seen substantial activity including market trials and contract awards with cable
companies, local exchange carriers, long-haul carriers, systems integrators,
ISPs, VARs and enhanced service providers. While these contracts were not
individually disclosed at the request of the customer, they collectively
represent significant opportunities over time."
"Our customers are choosing Level 3 as a provider of VoIP services because of
our extensive local infrastructure, our IP network coverage and our softswitch
leadership," said O'Hara. "We are pleased that two of our VoIP services, (3)
VoIP SM Local Inbound and (3) ToneSM Business, received notable industry awards
this quarter that underscore our role as a recognized leader in VoIP innovation
and network design."
Softswitch Services
During the quarter, the company announced two new consumer VoIP services aimed
at cable operators, enhanced service providers, ISPs, IXCs and others who
provide residential voice services to end-users.
(3)VoIPSM Enhanced Local service is targeted towards customers who currently
operate their own switching infrastructure, but want to deploy residential voice
services cost effectively with minimal involvement in local interconnection
issues.
The service gives VoIP providers the flexibility to select from a number of
functionalities, including: local and long distance calling, access to the
traditional telephone network (PSTN), local phone numbers, operator assistance,
directory listings, E911 emergency and local number portability.
HomeToneSM is a turnkey VoIP residential service offering local and long
distance capabilities. Along with the features of (3)VoIP Enhanced Local
service, HomeTone service also includes additional features such as voice mail,
call waiting, caller ID, three-way conferencing, and end-user Web-based account
management.
IP & Data Services
During the second quarter, the company expanded its offering of data networking
services, including (3)FlexSM Network IP VPN, to channel partners and value
added resellers in the U.S. and Europe. Additionally, Level 3 expanded its
wide-area Ethernet, ATM and Frame Relay data networking offerings by adding new
lower speed data services.
5
Business Outlook
Revenue
"Given our performance for the year so far and the progress we have made in
launching our new services, we are confident that we can meet or exceed our
previously issued projection for communications revenue, excluding termination
revenue, of a high single-digit percent decline in 2004 versus 2003," said
Crowe.
Adjusted OIBDA
"We are reaffirming our previously issued projection for Consolidated Adjusted
OIBDA for 2004. This projection was that 2004 Consolidated Adjusted OIBDA,
excluding termination and settlement revenue, will be consistent with 2003.
"As a result of slightly higher than expected network expenses from the ICG and
Allegiance transactions, as well as the additional expenses associated with the
KMC transaction that was completed during the quarter, and an acceleration of
the timing of all three integrations, we expect Communications Adjusted OIBDA
margins for the full year 2004 to be in the mid-20 percent range, a reduction
versus our previously issued projections of high-20 percent range."
"While these managed modem transactions put short-term pressure on our
communications margins, the longer-term benefits of improved cash flow, network
reliability and customer service that will result from the migration of this
traffic onto the Level 3 network are significant," Crowe said. "In addition,
since the technology we utilize to provide modem service is also VoIP capable,
we expect this investment to benefit our VoIP services."
Free Cash Flow
Primarily as a result of higher network expenses as outlined above, as well as
an increase in projected capital spending to accommodate growth in the transport
and infrastructure and IP businesses, the company is updating its projections
for 2004 Consolidated Free Cash Flow.
"We expect full year Consolidated Free Cash Flow to be negative $200 million to
$250 million versus negative $180 million to $200 million," said Crowe. "As a
result of various VoIP and data contracts we are pursuing or have won, we expect
to fund additional capital expenditures this year. In addition, as previously
mentioned, we are incurring additional network expense and capital expenditures
associated with the migration of Allegiance, KMC, and ICG traffic to our
network. Both of these actions described above are expected to yield cash flow
benefits in future years."
Third Quarter 2004
Metric Third Quarter
($ in millions) Projections
Communications Revenue $400-$420
Consolidated Adjusted OIBDA $100-$120
Capital Expenditures $85
6
"We expect communications revenue to increase in the third quarter primarily as
a result of a smaller than expected decline in managed modem revenue and an
increase in reciprocal compensation and settlement and termination revenue,"
said Patel.
Consolidated Adjusted OIBDA is expected to increase to $100 million to $120
million in the third quarter primarily as a result of higher communications
revenue from reciprocal compensation and termination and settlement revenue. In
addition, network expenses associated with the ICG acquisition and the
integration of Allegiance and KMC are expected to decline in the third quarter.
Communications Adjusted OIBDA margin for the third quarter is expected to be in
the mid-20 percent range, as previously projected.
Capital expenditures are expected to increase to approximately $85 million in
the third quarter as the company continues investing in previously announced
service initiatives and network build-out related to previously awarded
contracts.
Summary
"Our market share gains during the second quarter in our service offerings and
our initial successes with our new services give me confidence that our
competitive advantages are being recognized by our customers and within the
industry," said Crowe.
Conference Call Information
Level 3 will hold a conference call to discuss the company's second quarter
results at 10:00 a.m. Eastern Time today. To join the call, please dial
612-326-1012. A live broadcast of the call can also be heard on Level 3's Web
site at www.level3.com. An audio replay of the call will be accessible on the
company's Web site or by dialing 320-365-3844; access code 736357.
About Level 3 Communications
Level 3 (Nasdaq:LVLT) is an international communications and information
services company. The company operates one of the largest Internet backbones in
the world, is one of the largest providers of wholesale dial-up service to ISPs
in North America and is the primary provider of Internet connectivity for
millions of broadband subscribers, through its cable and DSL partners. The
company offers a wide range of communications services over its 23,000-mile
broadband fiber optic network including Internet Protocol (IP) services,
broadband transport and infrastructure services, colocation services, and
patented Softswitch managed modem and voice services. Its Web address is
www.Level3.com.
The company offers information services through its subsidiaries, Software
Spectrum and (i)Structure. For additional information, visit their respective
Web sites at www.softwarespectrum.com and www.i-structure.com.
The Level 3 logo, (3)Link Metro Wavelength and (3)Link Metro Ethernet are
registered service marks and (3)VoIP Enhanced Local Service and HomeTone are
service marks of Level 3 Communications, Inc. in the United States and/or other
countries.
7
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, the
challenges of integration, 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.
8
(1) Non-GAAP Metrics
Pursuant to Regulation G, the company is hereby providing a reconciliation of
non-GAAP financial metrics to the most directly comparable GAAP measure.
The company provides projections that include non-GAAP metrics that the company
deems relevant to management and investors. These non-GAAP metrics are
Consolidated Adjusted OIBDA, communications gross margin, Communications
Adjusted OIBDA margin, unlevered cash flow and consolidated free cash flow. The
following reconciliation of these non-GAAP financial metrics to GAAP includes
forward-looking statements with respect to the information identified as a
projection. Level 3 has made a number of assumptions in preparing our
projections, including assumptions as to the components of financial metrics.
These assumptions, including dollar amounts of the various components that
comprise a financial metric, may or may not prove to be correct. We caution you
that these forward-looking statements are only predictions, which are subject to
risks and uncertainties including technological uncertainty, financial
variations, changes in the regulatory environment, industry growth and trend
predictions. Please see the company's Annual Report on Form 10-K for a
description of these risks and uncertainties.
In order to provide projections with respect to non-GAAP measures, we are
required to indicate a range for GAAP measures that are components of the
reconciliation of the non-GAAP metric. The provision of these ranges is in no
way meant to indicate that the company is explicitly or implicitly providing
projections on those GAAP components of the reconciliation. In order to
reconcile the non-GAAP financial metric to GAAP, the company has to use ranges
for the GAAP components that arithmetically add up to the non-GAAP financial
metric. While the company feels reasonably comfortable about the projections 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 projections
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.
Communications Gross Margin ($) is defined as communications revenue less
communications cost of revenue from the consolidated condensed statements of
operations.
Cost of Revenue for the communications business includes leased capacity,
right-of-way costs, access charges and other third party circuit costs directly
attributable to the network, as well as costs of assets sold pursuant to
sales-type leases. Communications Gross Margin (%) is defined as communications
gross margin ($) divided by communications revenue. Management believes that
communications gross margin is a relevant metric to provide to investors, as it
is a metric that management uses to measure the margin available to the company
after it pays third party network services costs; in essence, a measure of the
efficiency of the company's network.
COMMUNICATIONS GROSS MARGIN ($ in millions)
Q104 Q204
Communications Revenue $389 $391
Communications Cost of Revenue $81 $119
Communications Gross Margin ($) $308 $272
Communications Gross Margin (%) 79% 70%
9
Consolidated Adjusted OIBDA is defined as operating income from the consolidated
condensed statements of operations, plus depreciation and amortization plus
non-cash impairment charges plus non-cash stock compensation expense.
Communications Adjusted OIBDA Margin is defined as Communications Adjusted OIBDA
divided by communications revenue.
Management believes that Consolidated Adjusted OIBDA and Communications Adjusted
OIBDA Margins are relevant and useful metrics to provide to investors, as they
are an important part of the company's internal reporting and are indicators of
profitability and operating performance, especially in a capital-intensive
industry such as telecommunications. Management also uses Consolidated Adjusted
OIBDA and Communications Adjusted OIBDA Margins to compare the company's
performance to that of its competitors. Consolidated Adjusted OIBDA excludes
non-cash impairment charges and non-cash stock compensation expense due to the
company's adoption of the expense recognition provisions of SFAS No. 123.
Additionally, Consolidated Adjusted OIBDA excludes interest expense and income
tax expense and other gains/losses not included in operating income. Excluding
these items eliminates the expenses associated with the company's capitalization
and tax structures. Consolidated Adjusted OIBDA excludes depreciation and
amortization expense in order to eliminate the impact of capital investments
which management believes should be evaluated through consolidated free cash
flow.
There are limitations to using non-GAAP financial measures, 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 depreciation and amortization, interest expense and non-cash impairment
charges. Consolidated Adjusted OIBDA and Communications Adjusted OIBDA Margin
should not be considered a substitute for other measures of financial
performance reported in accordance with GAAP.
Consolidated Adjusted OIBDA
Three Months Ended June 30, 2004 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($66) $1 $2 ($63)
Income Tax (Benefit)/Expense -- $1 -- $1
Plus Other (Income)/Expense ($33) $1 $1 ($31)
Operating Income/(Loss) ($99) $3 $3 ($93)
Plus Depreciation and Amortization Expense $169 $7 $1 $177
Plus Non-Cash Stock Compensation Expense $9 $1 -- $10
Consolidated Adjusted OIBDA $79 $11 $4 $94
10
Consolidated Adjusted OIBDA
Three Months Ended March 31, 2004 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($175) $5 $23 ($147)
Income Tax (Benefit)/Expense -- -- $1 $1
Plus Other (Income)/Expense $111 ($1) ($24) $86
Operating Income/(Loss) ($64) $4 -- ($60)
Plus Depreciation and Amortization Expense $171 $7 $1 $179
Plus Non-Cash Stock Compensation Expense $9 -- -- $9
Consolidated Adjusted OIBDA $116 $11 $1 $128
Communications Adjusted OIBDA Margin
($ in millions) Q104 Q204
Communications Revenue $389 $391
Communications Adjusted OIBDA $116 $79
Communications Adjusted OIBDA Margin 30% 20%
Consolidated
Projected Consolidated Adjusted OIBDA Range
Three Months Ended September 30, 2004
($ in millions)
Low High
Net Earnings/(Loss) ($200) ($180)
Plus Other (Income)/Expense $120 $110
Operating Income/(Loss) ($80) ($70)
Plus Depreciation and Amortization Expense $170 $180
Plus Non-Cash Stock Compensation Expense $10 $10
Consolidated Adjusted OIBDA $100 $120
Unlevered Cash Flow is defined as net cash provided by (used in) operating
activities less capital expenditures offset by release of capital expenditure
accruals, and adding back cash interest paid, less interest income all as
disclosed in the consolidated statements of cash flows or the consolidated
condensed 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 growth pattern of the
business.
There are material limitations to using unlevered cash flow to measure the
company against some of its competitors as it excludes certain material items
such as cash spent on merger and acquisition activity and interest expense.
Level 3 does not currently pay 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
11
quarter as a result of the timing of payments related to accounts receivable and
accounts payable. Unlevered cash flow should not be used as a substitute for net
change in cash and cash equivalents on the consolidated statements of cash
flows.
Consolidated Free Cash Flow is defined as net cash provided by (used in)
operating activities less capital expenditures offset by release of capital
expenditure accruals as disclosed in the consolidated statements of cash flows.
Management believes that consolidated 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. Consolidated Free Cash Flow excludes cash used for
acquisitions or principal repayments.
There are material limitations to using consolidated free cash flow to measure
the company against some of its competitors as Level 3 does not currently pay
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. This
financial measure 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 CONSOLIDATED FREE CASH FLOW
Three Months Ended June 30, 2004 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Used In Continuing Operations ($45) ($45)
Gross Capital Expenditures ($66) ($66)
Release of Capital Expenditure Accruals $2 $2
Cash Interest Paid $127 N/A
Interest Income ($3) N/A
Total $15 ($109)
UNLEVERED CASH FLOW AND CONSOLIDATED FREE CASH FLOW
Three Months Ended March 31, 2004 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Provided by Continuing Operations $8 $8
Gross Capital Expenditures ($52) ($52)
Release of Capital Expenditure Accruals $4 $4
Cash Interest Paid $87 N/A
Interest Income ($3) N/A
Total $44 ($40)
12
Consolidated
PROJECTED CONSOLIDATED FREE CASH FLOW Range
Twelve Months Ended December 31, 2004
($ in millions)
Low High
Net Cash Provided by Continuing Operations $18 $38
Gross Capital Expenditures ($274) ($244)
Release of Capital Accruals $6 $6
Total ($250) ($200)
13
Attachment #1
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
Three Months Ended
June 30, March 31,
(dollars in millions) 2004 2004
Revenue:
Communications $ 391 $ 389
Information Services 503 494
Other 24 16
-- --
Total Revenue 918 899
Costs and Expenses:
Cost of Revenue 591 543
Depreciation and Amortization 177 179
Selling, General and Administrative, including non-cash
compensation of $10 and $9, respectively 243 235
Restructuring Charges, including noncash impairment
charges of $-, and $-, respectively - 2
- - --- ---
Total Costs and Expenses 1,011 959
----- ---
Operating Income (Loss) (93) (60)
Other Income (Loss), net
Interest Income 3 3
Interest Expense (118) (127)
Other Income 146 38
--- --
Other Income (Loss) 31 (86)
-- ---
Loss Before Income Taxes (62) (146)
Income Tax Expense (1) (1)
-- --
Net Loss $ (63) $ (147)
===== ======
Basic Loss per Share:
Net Loss $ (0.09) $ (0.22)
======= =======
Weighted Average Shares Outstanding (in thousands)
Basic 682,629 679,991
======= =======
Attachment #2
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(unaudited)
June 30, March 31,
(dollars in millions) 2004 2004
Assets
Current Assets:
Cash and cash equivalents $ 547 $ 1,161
Marketable securities 221 -
Restricted securities 52 47
Accounts receivable, less allowances of $26 and $26, respectively 476 429
Other 122 110
--- ---
Total Current Assets 1,418 1,747
Property, Plant and Equipment, net 5,466 5,598
Marketable Securities 189
Restricted Securities 62 63
Intangibles, net and Goodwill 463 445
Other Assets, net 90 99
-- --
$ 7,688 $ 7,952
======= =======
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 549 $ 510
Current portion of long-term debt 141 103
Accrued payroll and employee benefits 90 94
Accrued interest 87 118
Deferred revenue 164 154
Other 243 220
--- ---
Total Current Liabilities 1,274 1,199
Long-Term Debt, less current portion 5,008 5,276
Deferred Revenue 963 970
Other Liabilities 457 476
Stockholders' Equity (Deficit) (14) 31
--- --
$ 7,688 $ 7,952
======= =======
Attachment #3
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
June 30, March 31,
(dollars in millions) 2004 2004
Cash Flows from Operating Activities:
Net Loss $ (63) $ (147)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 177 179
Gain on sale of property, plant and equipment, and other assets (2) (32)
Gain on debt extinguishments, net (147) -
Non-cash compensation expense attributable to stock awards 10 9
Deferred revenue 1 (16)
Amortization of debt issuance costs 4 4
Accreted interest on discount debt 18 18
Accrued interest on long-term debt (31) 18
Changes in working capital items net of amounts acquired:
Receivables (46) 121
Other current assets (8) 30
Payables 52 (136)
Other liabilities (8) (35)
Other (2) (5)
-- --
Net Cash Provided by (Used in) Operating Activities (45) 8
Cash flows from Investing Activities:
Decrease (increase) in restricted cash and securities, net (4) 25
Capital expenditures (66) (52)
Release of capital expenditure accruals 2 4
Proceeds from sale of property, plant and equipment 7 9
Purchases of marketable securities (410) -
ICG acquisition (25) -
Proceeds from sale of Commonwealth Telephone - 41
--- ---
Net Cash Provided by (Used in) Investing Activities (496) 27
Cash Flows from Financing Activities:
Payments on long-term debt, including current portion (75) (1)
--- --
Net Cash Used in Financing Activities (75) (1)
Effect of Exchange Rates on Cash 2 (2)
-- --
Net Change in Cash and Cash Equivalents (614) 32
Cash and Cash Equivalents at Beginning of Period 1,161 1,129
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Cash and Cash Equivalents at End of Period $ 547 $ 1,161
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Supplemental Disclosure of Cash Flow Information:
Cash interest paid $ 127 $ 87