Exhibit 99.1
[Logo]
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
Josh.Howell@Level3.com Robin.Grey@Level3.com
Level 3 Reports First Quarter Results
Tuesday, April 26, 2005
Financial Highlights
o Consolidated Revenue of $1.01 billion and $510 million of Communications
Revenue
o Net Loss of $77 million, or $0.11 per share
o Consolidated Adjusted OIBDA of $209 million
o Total Capital Expenditures of $61 million
o Consolidated Free Cash Flow of negative $127 million
Business Highlights
o Voice revenue grows 8 percent, quarter over quarter
o 25 percent quarter over quarter growth in IP traffic; now running over 2.7
petabytes of traffic per day
o Managed modem revenue flat as acquired revenue offsets declines
BROOMFIELD, Colo., April 26, 2005 - Level 3 Communications, Inc. (Nasdaq:LVLT)
reported consolidated revenue of $1.01 billion for the first quarter 2005
compared to $1.05 billion for the fourth quarter 2004. Communications revenue
was $510 million in the first quarter versus $482 million for the previous
quarter, and information services revenue was $483 million compared to $547
million for the seasonally high previous quarter.
The net loss for the first quarter 2005 was $77 million, or $0.11 per share,
consistent with the previous quarter. Included in the net loss for the first
quarter 2005 is a $15 million cash restructuring charge associated with the
previously announced reduction in workforce during the
quarter. Included in the fourth quarter 2004 net loss was a $50 million gain
associated with the extinguishment of debt related to the company's tender
offer, a $14 million lease impairment charge, and a $9 million gain associated
with the sale of certain investment securities. Consolidated Adjusted OIBDA(1)
was $209 million in the first quarter 2005 compared to previously provided
projections of $90 million to $110 million and compares to $174 million for the
previous quarter.
"I am pleased that we were able to exceed our projections for communications
revenue and Consolidated Adjusted OIBDA this quarter," said James Q. Crowe, CEO
of Level 3. "We experienced another quarter of strong IP traffic growth on our
network, with average traffic per day increasing approximately 25 percent over
the prior quarter."
First Quarter Financial Results
Metric First Quarter Actuals First Quarter
($ in millions) Projections (1)
Communications Services Revenue (2) (excluding termination $353
and settlement revenue)
Reciprocal Compensation $28
Termination and Settlement Revenue $129
Communications Revenue $510 $400-$420
Information Services Revenue $483
Other Revenue $17
Consolidated Revenue $1,010
Consolidated Adjusted OIBDA (3)(4) $209 $90-$110
Capital Expenditures $61
Unlevered Cash Flow (4) ($53)
Free Cash Flow (4) ($127)
Communications Gross Margin (4) 77%
(1) Projections issued February 8, 2005
(2) Communications Services Revenue is GAAP communications revenue minus
reciprocal compensation revenue
(3) Consolidated Adjusted OIBDA excludes $11 million in stock-based
compensation expense
(4) See schedule of non-GAAP metrics for definition and reconciliation to GAAP
measures
Communications Business
Revenue
Communications revenue for the first quarter 2005 was $510 million versus $482
million for the previous quarter. Total communications revenue for the first
quarter included $482 million of communications services revenue and $28 million
of reciprocal compensation revenue compared to $459 million and $23 million in
the fourth quarter.
Included in communications services revenue was $129 million and $103 million of
termination revenue for the first and fourth quarters, respectively. The
increase in termination revenue was
2
due to previously announced dark fiber lease agreement terminations with France
Telecom and 360networks.
Communications services revenue excluding termination revenue decreased by $3
million quarter over quarter primarily due to a decrease in dark fiber
amortization as a result of the termination of the two customer dark fiber lease
agreements during the quarter, partially offset by an increase in voice and DSL
aggregation revenue.
Quarter ended March Quarter ended Percent
Communications Revenue ($ in millions) 31, 2005 December 31, 2004 Change
Transport and Infrastructure $119 $122 (2%)
Voice $26 $24 8%
Managed Modem $107 $106 1%
IP & Data Services (excluding DSL) $64 $68 (6%)
DSL $37 $36 3%
Communications Services Revenue $353 $356 (1%)
Reciprocal Compensation $28 $23 22%
Termination Revenue $129 $103 25%
Communications Revenue $510 $482 6%
The communications deferred revenue balance decreased by $147 million during the
quarter primarily as a result of the recognition of $126 million of non-cash
termination revenue from deferred revenue associated with the previously
announced termination of two customer dark fiber lease agreements.
Cost of Revenue
Communications cost of revenue for the first quarter 2005 was $116 million
versus $120 million for the previous quarter. Communications gross margin(1) was
77 percent for the first quarter compared to 75 percent in the fourth quarter.
The improvement in communications gross margin is primarily attributable to the
increase in termination revenue and improvements in cost of revenue.
Selling, General and Administrative Expenses (SG&A)
Communications SG&A expenses were $188 million for the first quarter 2005 versus
$208 million for the previous quarter. SG&A expenses improved in the first
quarter primarily due to both lower employee-related costs and marketing costs.
SG&A expenses for the first quarter include $10 million of non-cash stock
compensation expense. Fourth quarter SG&A expenses included a $2 million
reduction associated with property taxes and $15 million of non-cash stock
compensation expense.
Adjusted Operating Income Before Depreciation and Amortization (OIBDA)
Adjusted OIBDA(1) for the communications business increased to $201 million for
the first quarter 2005 from $155 million for the previous quarter as a result of
an increase in termination revenue, and improvements in the cost of revenue and
operating expenses. Included in Adjusted OIBDA in the first quarter is $15
million of cash severance costs associated with the reduction in workforce in
the first quarter 2005. Fourth quarter Adjusted OIBDA included $14 million in
lease termination costs.
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Communications Adjusted OIBDA margin(1) was 39 percent for the first quarter
2005 versus 32 percent in the previous quarter. Communications Adjusted OIBDA
excludes non-cash stock compensation expense of $10 million in the first quarter
and $15 million in the fourth quarter.
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 $483 million for the first quarter 2005. This
compares to revenue of $547 million for the seasonally higher previous quarter
and $494 million for the same period last year. Adjusted OIBDA(1) for the
information services business was $7 million for the first quarter, which
excludes $1 million in non-cash stock compensation expense, compared to Adjusted
OIBDA of $14 million in the previous quarter, excluding $2 million in non-cash
stock compensation expense. For the same period last year, Adjusted OIBDA was
$11 million, which included $2 million in restructuring charges and $4 million
in termination revenue.
"Our information services business continued its steady financial performance
during the first quarter," said Charles C. Miller, vice chairman of Level 3.
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 $17 million and $1
million, respectively, in the first quarter 2005, compared to $26 million and $5
million for the previous quarter.
Consolidated Cash Flow and Liquidity
During the first quarter 2005, Unlevered Cash Flow(1) was negative $53 million
versus positive $20 million during the fourth quarter. Consolidated Free Cash
Flow for the first quarter was negative $127 million, versus negative $97
million for the previous quarter.
"The company's negative Consolidated Free Cash Flow increased in the first
quarter primarily from an increase in working capital needs associated with the
expected seasonality of our information services business and certain prepaid
expenses," said Sunit Patel, CFO of Level 3.
As of March 31, 2005, the company had cash and marketable securities of $626
million compared to $782 million at December 31, 2004. Pro forma for Level 3's
recently completed offering of $880 million aggregate principal amount of 10%
Convertible Senior Notes due 2011, the company had approximately $1.5 billion in
cash and marketable securities at March 31, 2005.
New Customers and Service Offering Update
During the quarter, Level 3 announced new customer contracts to provide VoIP
services to AOL and Adelphia and saw strong contract activity from a number of
its target customers, particularly from cable operators, wireless companies and
PTTs.
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"We continue to see strong traffic growth on our network primarily driven by
continued growth from our IP solutions and voice services," said Kevin O'Hara,
president and COO of Level 3. "We were pleased to see traffic on our IP backbone
increase 25 percent this quarter, and we now carry an average of 2.7 petabytes
of traffic per day on our network. This is equivalent to transmitting the entire
print collection of the U.S. Library of Congress over 270 times each day."
Business Outlook
"The competitive environment continues to remain challenging; however, we
continue to see positive signs for the industry including consolidation that
should prove beneficial to us in the long term," said Crowe. "We continue to be
focused on growing our business in a profitable manner rather than simply
pursuing volume. We have increased our scrutiny on competitive market behavior,
and while still early, we continue to believe that price compression will
moderate for some of these services over the next few quarters.
"We still expect revenue from our mature services, DSL aggregation and managed
modem, to decline this year as DSL contracts expire and consumers continue their
migration to broadband. We expect that partially offsetting these declines will
be increased revenue from other services, particularly our growth services such
as voice and IP VPN. We are currently seeing growth in wholesale voice revenue
from our voice termination, local inbound and toll-free services. We saw early
growth in the number of consumer-oriented voice subscribers during the quarter,
which we expect to continue to increase throughout 2005. As we have said
previously, the timing and trend of growth is largely dependent upon market
acceptance of VoIP and the success of our customers in the marketplace."
Full Year 2005 Projections
o Company Reiterates Full Year Projections for Communications Revenue and
Communications Adjusted OIBDA Margin.
o Consolidated Free Cash Flow is projected to be negative $300 million to
$360 million to reflect additional net cash interest expense of
approximately $40 million from the completed offering of $880 million
aggregate principle amount of 10% Convertible Senior Notes due 2011.
Second Quarter 2005
o Communications revenue is projected to be $350 million to $370 million,
decreasing due to reductions in termination revenue and revenue from the
company's mature services, managed modem and DSL aggregation.
o Consolidated Adjusted OIBDA is expected to be $75 million to $95 million.
Metric Second Quarter Full Year 2005 Projections
($ in millions) Projections
Communications Revenue $350 to $370 Low to high single digit
percent decline
Consolidated Adjusted OIBDA $75 to $95 NA
Communications Adjusted OIBDA Margin NA Mid-20 percent range
Negative Consolidated Free Cash Flow NA $300 to $360
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Summary
"I believe Level 3 is uniquely positioned to benefit from significant trends in
the communications industry including the ongoing convergence of legacy networks
and applications to the IP layer," Crowe said. "We remain focused on investing
in growth areas of our business where we see market opportunities and
appropriate returns."
Conference Call Information
Level 3 will hold a conference call to discuss the company's first quarter
results at 10:00 a.m. Eastern Time today. To join the call, please dial
612-332-0530. 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 777502.
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 is a registered service mark of Level 3 Communications, Inc. in
the United States and/or other countries. Level 3 services are offered by wholly
owned subsidiaries of Level 3 Communications, Inc.
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: developing new products and services that meet
customer demands and generate acceptable margins; increasing the volume of
traffic on Level 3's network; overcoming the softness in the economy given its
disproportionate effect on the telecommunications industry; integrating
strategic acquisitions; attracting and retaining qualified management and other
personnel; successfully completing commercial testing of new technology and
information systems to support new products and services, including voice
transmission services; ability to meet all of the terms and conditions of our
debt obligations; overcoming Software Spectrum's reliance on financial
incentives, volume discounts and marketing funds from software publishers;
reducing downward pressure of Software Spectrum's margins as a result of the use
of volume licensing and maintenance agreements; and reducing rate of price
compression on certain of the Company's existing transport and IP services.
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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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 reconciliations of these non-GAAP financial metrics to GAAP include
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)
Q404 Q105
Communications Revenue $482 $510
Communications Cost of Revenue $120 $116
Communications Gross Margin ($) $362 $394
Communications Gross Margin (%) 75% 77%
7
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 March 31, 2005 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($79) $1 $1 ($77)
Income Tax (Benefit)/Expense -- -- -- --
Plus Other (Income)/Expense $105 -- ($1) $104
Operating Income/(Loss) $26 $1 -- $27
Plus Depreciation and Amortization Expense $165 $5 $1 $171
Plus Non-Cash Stock Compensation Expense $10 $1 -- $11
Consolidated Adjusted OIBDA $201 $7 $1 $209
8
Consolidated Adjusted OIBDA
Three Months Ended December 31, 2004 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($87) $10 -- ($77)
Income Tax (Benefit)/Expense -- $4 -- $4
Plus Other (Income)/Expense $65 ($7) $3 $61
Operating Income/(Loss) ($22) $7 $3 ($12)
Plus Depreciation and Amortization Expense $162 $5 $2 $169
Plus Non-Cash Stock Compensation Expense $15 $2 -- $17
Consolidated Adjusted OIBDA $155 $14 $5 $174
Consolidated Adjusted OIBDA
Three Months Ended March 31, 2004 Communications Information Con-
($ 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) Q404 Q105
Communications Revenue $482 $510
Communications Adjusted OIBDA $155 $201
Communications Adjusted OIBDA Margin 32% 39%
Projected Consolidated Adjusted OIBDA
Three Months Ended June 30, 2005 Consolidated
($ in millions) Range
Low High
Net Earnings/(Loss) ($230) ($215)
Plus Other (Income)/Expense $125 $130
Operating Income/(Loss) ($105) ($85)
Plus Depreciation and Amortization Expense $170 $170
Plus Non-Cash Stock Compensation Expense $10 $10
Consolidated Adjusted OIBDA $75 $95
9
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 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. 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 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. 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 March 31, 2005 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Used In Operating Activities ($66) ($66)
Gross Capital Expenditures ($61) ($61)
Release of Capital Expenditure Accruals -- --
Cash Interest Paid $78 N/A
Interest Income ($4) N/A
Total ($53) ($127)
10
UNLEVERED CASH FLOW AND CONSOLIDATED FREE CASH FLOW
Three Months Ended December 31, 2004 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Used In Continuing Operations ($11) ($11)
Gross Capital Expenditures ($86) ($86)
Release of Capital Expenditure Accruals -- --
Cash Interest Paid $121 N/A
Interest Income ($4) N/A
Total $20 ($97)
PROJECTED CONSOLIDATED FREE CASH FLOW Consolidated
Twelve Months Ended December 31, 2005 Range
($ in millions)
Low High
Net Cash (Used In)/Provided By Operating Activities ($110) ($15)
Gross Capital Expenditures ($250) ($285)
Release of Capital Accruals -- --
Total ($360) ($300)
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
Three Months Ended
March 31, December 31, March 31,
(dollars in millions, except per share data) 2005 2004 2004
Revenue:
Communications $ 510 $ 482 $ 389
Information Services 483 547 494
Other 17 26 16
-- -- --
Total Revenue 1,010 1,055 899
Costs and Expenses:
Cost of Revenue 571 640 543
Depreciation and Amortization 171 169 179
Selling, General and Administrative, including non-cash
compensation of $11, $17 and $9, respectively 226 244 235
Restructuring Charges, including noncash impairment
charges of $-, $-, and $-, respectively 15 14 2
- - - -- -- -
Total Costs and Expenses 983 1,067 959
--- ----- ---
Operating Income (Loss) 27 (12) (60)
Other Income (Loss), net:
Interest Income 4 4 3
Interest Expense (114) (120) (127
Other Income 6 55 38
- -- --
Other Income (Loss) (104) (61) (86)
---- --- ---
Loss Before Income Taxes (77) (73) (146)
Income Tax Expense - (4) (1)
-- -- --
Net Loss $ (77) $ (77) $ (147)
===== ===== ======
Basic Loss per Share:
Net Loss $ (0.11) $ (0.11) $ (0.22)
======= ======= =======
Weighted Average Shares Outstanding (in thousands):
Basic 690,214 687,651 679,991
======= ======= =======
(c)2005 by Level 3 Communications, Inc. All rights reserved.
12
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(unaudited)
March 31, December 31,
(dollars in millions) 2005 2004
Assets
Current Assets:
Cash and cash equivalents $ 336 $ 443
Marketable securities 290 225
Restricted securities 42 48
Accounts receivable, less allowances of $23 and $23, respectively 437 545
Other 117 141
--- ---
Total Current Assets 1,222 1,402
Property, Plant and Equipment, net 5,277 5,408
Marketable Securities - 114
Restricted Securities 70 67
Intangibles, net and Goodwill 438 457
Other Assets, net 92 96
-- --
$ 7,099 $ 7,544
======= =======
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 481 $ 614
Current portion of long-term debt 119 144
Accrued payroll and employee benefits 67 82
Accrued interest 88 73
Deferred revenue 187 255
Other 116 134
--- ---
Total Current Liabilities 1,058 1,302
Long-Term Debt, less current portion 5,073 5,067
Deferred Revenue 728 840
Other Liabilities 477 492
Stockholders' Deficit (237) (157)
---- ----
$ 7,099 $ 7,544
======= =======
(c) 2005 by Level 3 Communications, Inc. All rights reserved.
13
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31, December 31, March 31,
(dollars in millions) 2005 2004 2004
Cash Flows from Operating Activities:
Net loss $ (77) $ (77) $ (147)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 171 169 179
Gain on sale of property, plant and equipment, and other assets (1) (7) (32)
Gain on debt extinguishments, net - (50) -
Non-cash compensation expense attributable to stock awards 11 17 9
Deferred revenue (175) (65) (16)
Amortization of debt issuance costs 4 4 4
Accreted interest on discount debt 17 20 18
Accrued interest on long-term debt 15 (25) 18
Changes in working capital items net of amounts acquired:
Receivables 100 (149) 121
Other current assets 22 (17) 30
Payables (127) 166 (136)
Other current liabilities (23) 4 (35)
Other (3) (1) (5)
-- -- --
Net Cash Provided by (Used in) Operating Activities (66) (11) 8
Cash Flows from Investing Activities:
Capital expenditures (61) (86) (48)
Proceeds from sale of property, plant and equipment 1 2 9
Proceeds from sale and maturity of marketable securities 50 60 41
Decrease (increase) in restricted cash and securities, net (1) - 25
ICG acquisition - (5) -
Sprint acquisition - (34) -
-- --- --
Net Cash Provided by (Used in) Investing Activities (11) (63) 27
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs - 985 -
Purchases and payments on long-term debt, including current portion (25) (950) (1)
--- ---- --
Net Cash Provided by (Used in) Financing Activities (25) 35 (1)
Effect of Exchange Rates on Cash (5) 15 (2)
-- -- --
Net Change in Cash and Cash Equivalents (107) (24) 32
Cash and Cash Equivalents at Beginning of Period 443 467 1,129
--- --- -----
Cash and Cash Equivalents at End of Period $ 336 $ 443 $ 1,161
===== ===== =======
Supplemental Disclosure of Cash Flow Information:
Cash interest paid $ 78 $ 121 $ 87
Total Cash, Current Marketable Securities and Noncurrent Marketable Securities $ 626 $ 782 $ 1,161
(c) 2005 by Level 3 Communications, Inc. All rights reserved.
14