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
Josh.Howell@Level3.com Robin.Grey@Level3.com
Level 3 Reports Second Quarter Results
Thursday, July 21, 2005
Financial Highlights
o Consolidated Revenue of $910 million and $371 million of Communications
Revenue
o Net Loss of $188 million, or $.27 per share
o Consolidated Adjusted OIBDA of $115 million
o Total Capital Expenditures of $85 million
o Consolidated Free Cash Flow of negative $96 million
Business Highlights
o IP backbone growth continues; traffic exceeds 3.0 petabytes per day
o DSL migration substantially complete
o FCC decision regarding E-911 creates new demand for Level 3's VoIP solution
o Price declines moderating across Level 3's transport and IP business;
quarter-over-quarter revenue growth
o Software Spectrum selected by EDS for U.S. Navy Contract
BROOMFIELD, Colo., July 21, 2005 - Level 3 Communications, Inc. (Nasdaq:LVLT)
reported consolidated revenue of $910 million for the second quarter 2005
compared to $1.01 billion for the first quarter 2005. Communications revenue was
$371 million in the second quarter versus $510 million for the previous quarter,
which included $129 million in termination revenue. Information services revenue
was $520 million compared to $483 million for the previous quarter.
The net loss for the second quarter 2005 was $188 million, or $0.27 per share,
compared to $77 million or $0.11 per share the previous quarter. Included in the
first quarter 2005 net loss was a $15 million cash restructuring charge
associated with the reduction in workforce completed during the first quarter.
Consolidated Adjusted OIBDA(1) was $115 million in the second quarter 2005
compared to previously provided projections of $75 million to $95 million and
compares to $209 million for the previous quarter.
"We exceeded our revenue projections this quarter primarily as a result of
growth in our core transport and IP businesses and higher reciprocal
compensation," said James Q. Crowe, CEO of Level 3. "The growth in our core
services came primarily from continued customer demand as well as our continued
focus on pricing discipline, which is proving beneficial to us."
Second Quarter Financial Results
Metric Second Quarter Actuals Second Quarter
($ in millions) Projections (1)
Communications Services Revenue (2) (excluding termination $340
revenue)
Reciprocal Compensation $29
Termination Revenue $2
Communications Revenue $371 $350-$370
Information Services Revenue $520
Other Revenue $19
Consolidated Revenue $910
Consolidated Adjusted OIBDA (3)(4) $115 $75-$95
Capital Expenditures (5) $85
Unlevered Cash Flow (4) $3
Free Cash Flow (4) ($96)
Communications Gross Margin (4) 70%
(1) Projections issued April 26, 2005
(2) Communications Services Revenue is GAAP communications revenue minus
reciprocal compensation revenue
(3) Consolidated Adjusted OIBDA excludes $10 million in stock-based
compensation expense and $4 million of non-cash impairment charges
(4) See schedule of non-GAAP metrics for definition and reconciliation to GAAP
measures
(5) Gross capital expenditures were $88 million for the quarter and accrual
reversals were $3 million
Communications Business
Revenue
Communications revenue for the second quarter 2005 was $371 million versus $510
million for the previous quarter. Total communications revenue for the second
quarter included $342 million of communications services revenue and $29 million
of reciprocal compensation revenue compared to $482 million and $28 million in
the first quarter.
Included in communications services revenue was $2 million and $129 million of
termination revenue for the second and first quarters, respectively.
2
Communications services revenue excluding termination revenue decreased by $13
million quarter over quarter primarily due to expected declines in DSL
aggregation revenue and managed modem revenue. Additionally, revenue from the
company's wholesale voice business declined as a result of one customer's
decision to reduce voice termination traffic. These declines in revenue were
partially offset by an increase in revenue from the company's transport,
wholesale IP, and other wholesale and consumer voice services.
Quarter ended June Quarter ended March Dollar
Communications Revenue ($ in millions) 30, 2005 31, 2005 Change
Transport and Infrastructure $122 $119 $3
IP & Data Services (excluding DSL) $66 $64 $2
Voice $25 $26 ($1)
Managed Modem $103 $107 ($4)
DSL $24 $37 ($13)
Communications Services Revenue $340 $353 ($13)
Reciprocal Compensation $29 $28 $1
Termination Revenue $2 $129 ($127)
Communications Revenue $371 $510 ($139)
The communications deferred revenue balance was $879 million in the second
quarter compared to $881 million in the first quarter.
Cost of Revenue
Communications cost of revenue for the second quarter 2005 was $110 million
versus $116 million for the previous quarter. Communications gross margin(1) was
70 percent for the second quarter compared to 77 percent in the first quarter.
The decline in communications gross margin is primarily attributable to the
decrease in termination revenue offset partially by improvements in cost of
revenue.
Selling, General and Administrative Expenses (SG&A)
Communications SG&A expenses were $182 million for the second quarter 2005
versus $188 million for the previous quarter. SG&A expenses improved in the
second quarter primarily due to lower employee-related costs. SG&A expenses for
the second quarter include a $2 million property tax benefit and $9 million of
non-cash stock compensation expense. First quarter SG&A expenses included $10
million of non-cash stock compensation expense.
Adjusted Operating Income Before Depreciation and Amortization (OIBDA)
Adjusted OIBDA(1) for the communications business decreased to $88 million for
the second quarter 2005 from $201 million for the previous quarter as a result
of a decrease in termination and communications services revenue, partially
offset by reductions in the cost of revenue and operating expenses. First
quarter Adjusted OIBDA included $15 million of cash severance costs associated
with the reduction in workforce completed in the first quarter 2005.
Communications Adjusted OIBDA margin(1) was 24 percent for the second quarter
2005 versus 39 percent in the previous quarter. Communications Adjusted OIBDA
excludes a $4 million non-cash asset impairment charge and non-cash stock
compensation expense of $9 million in the second quarter and $10 million in the
first quarter.
3
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 $520 million for the second quarter 2005. This
compares to revenue of $483 million for the previous quarter and $503 million
for the same period last year. Adjusted OIBDA(1) for the information services
business was $15 million for the second quarter, which excludes $1 million in
non-cash stock compensation expense, compared to Adjusted OIBDA of $7 million in
the previous quarter, excluding $1 million in non-cash stock compensation
expense. For the same period last year, Adjusted OIBDA was $11 million,
excluding $1 million in non-cash stock compensation expense.
Software Spectrum Selected by EDS for U.S. Navy Contract
In early July, Software Spectrum was selected by EDS to supply software and
licensing to the U.S. Navy. The agreement, expected to close in the third
quarter, is a one-year contract valued at approximately $40 million with
additional one-year renewal options.
"We are pleased with the performance of our information services business in the
second quarter and in particular, the award of this significant contract," said
Charles C. Miller, vice chairman of Level 3. "Given the large size of the
contract and associated working capital requirements, the company expects this
agreement to be a use of working capital in 2005 and a source thereafter."
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 $19 million and $12
million, respectively, in the second quarter 2005, compared to $17 million and
$1 million for the previous quarter. Included in Adjusted OIBDA in the second
quarter is an $11 million benefit related to favorable resolution of certain
coal production tax issues, favorable settlement of an obligation to provide
insurance for employees of the company's former packaging business and the
receipt of insurance proceeds reimbursing the company for payments made to
settle environmental litigation.
Consolidated Cash Flow and Liquidity
During the second quarter 2005, Unlevered Cash Flow(1) was positive $3 million
versus negative $53 million during the first quarter. Consolidated Free Cash
Flow for the second quarter was negative $96 million, versus negative $127
million for the previous quarter.
"The company's negative Consolidated Free Cash Flow improved in the second
quarter primarily as a result of expected lower working capital needs in the
information services business and a decrease in cash used in operations," said
Sunit Patel, CFO of Level 3.
As of June 30, 2005, the company had cash and marketable securities of
approximately $1.3 billion compared to approximately $1.5 billion at March 31,
2005 pro forma for Level 3's
4
offering of $880 million aggregate principal amount of 10% Convertible Senior
Notes due 2011 completed in April 2005.
As part of an anticipated refinancing, at the end of the second quarter, the
company repaid at maturity the outstanding balance on its headquarters mortgage
in the amount of $116 million. Level 3 is continuing to evaluate the potential
refinancing of part of this debt, which will be subject to receipt of favorable
terms and conditions.
Operations Update
During the quarter, Level 3's core transport and IP services continued to see
growth and demand primarily from cable operators, content providers, wireless
providers and other key customer segments. Average traffic volume on Level 3's
Internet backbone now exceeds 3.0 petabytes per day. The company also continued
to see growth in subscribers for its consumer and enterprise oriented VoIP
services.
"Growth in demand for our core transport and IP businesses is coming from
customers looking for reliable, high-performance and complex network solutions,"
said Kevin O'Hara, president and COO of Level 3. "We are seeing strong demand
for nationwide solutions in our transport, infrastructure and wholesale Internet
access businesses. As a result, we continue to make ongoing investments in our
network and business processes that will further improve our low cost position
and enable us to continue serving as an integral part of our customers' business
operations."
Demand for E-911 solutions increased during the quarter as a result of the FCC's
recent decision requiring VoIP providers to offer E-911 functionality to end
users. As previously announced, Level 3's consumer voice offerings are E-911
enabled and the company plans to introduce an E-911 network solution for other
voice providers to build into their offerings. In addition, the company plans to
expand its E-911 coverage to over 70 percent of U.S. households by the end of
2005, from approximately 66 percent today.
"We made significant efforts over the last eighteen months to deploy a robust
E-911 platform serving most of the country," said O'Hara. "As a result of that
investment, Level 3 enjoys the leadership position as a provider of E-911
network services for Voice-over-IP service providers across the U.S."
Business Outlook
"We believe our customers continue to value the solutions we offer in the
marketplace," said Crowe. "Our strategic decision earlier this year to increase
our focus on pricing discipline is beginning to show positive results for us.
"For the latter half of 2005 we expect to see continued growth in our core
transport and wholesale IP services. We expect our voice business to grow based
on consumer and business VoIP adoption and continued market launches. Our DSL
aggregation contract with Verizon has expired, and we expect the migration to be
complete during the third quarter resulting in little to no DSL aggregation
revenue beyond the third quarter."
5
Full Year 2005 Projections
o Company narrows range for Communications Revenue full year projection from
a low to high single-digit percent decline to a 4 percent to 7 percent
decline
o Reiterates full year projection for Communications Adjusted OIBDA Margin
o Company updates Consolidated Free Cash Flow projection to a range of
negative $350 million to $380 million from the previously issued projection
of negative $300 million to $360 million. The company is narrowing the
range by $30 million as well as increasing its expected use of cash in 2005
by approximately $20 million for additional anticipated working capital
needed to support Software Spectrum's recently won EDS contract for the
U.S. Navy.
Third Quarter 2005
o Communications revenue is projected to be $345 million to $365 million,
with decreases in DSL aggregation and managed modem partially offset by
growth in core and growth services.
o Consolidated Adjusted OIBDA is expected to be $75 million to $95 million.
Metric Third Quarter Full Year 2005 Projections
($ in millions) Projections
Communications Revenue $345 to $365 4 percent to 7 percent
decline
Consolidated Adjusted OIBDA $75 to $95 N/A
Communications Adjusted OIBDA Margin N/A Mid-20 percent range
Negative Consolidated Free Cash Flow N/A $350 to $380
Summary
"Level 3 continues to invest for growth to support our customers' needs and to
further improve our low-cost position. We continue to upgrade our network, drive
further process efficiencies, deploy new technologies and expand the reach of
our capabilities," Crowe said. "We believe that our strong cash balance and
liquidity position give us the flexibility to take advantage of opportunities as
they arise."
Conference Call and Web site 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
612-288-0329. 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 786218. An archived
webcast of the second quarter conference call together with the press release,
financial statements, historical financial supplement and non-GAAP
reconciliations may also be accessed at www.level3.com.
6
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.
7
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)
Q105 Q205
Communications Revenue $510 $371
Communications Cost of Revenue $116 $110
Communications Gross Margin ($) $394 $261
Communications Gross Margin (%) 77% 70%
8
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, 2005 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($205) $8 $9 ($188)
Income Tax (Benefit)/Expense -- $1 $2 $3
Plus Other (Income)/Expense $119 $1 -- $120
Operating Income/(Loss) ($86) $10 $11 ($65)
Plus Non-Cash Impairment Charge $4 -- -- $4
Plus Depreciation and Amortization Expense $161 $4 $1 $166
Plus Non-Cash Stock Compensation Expense $9 $1 -- $10
Consolidated Adjusted OIBDA $88 $15 $12 $115
9
Consolidated Adjusted OIBDA
Three Months Ended March 31, 2005 Communications Information Con-
($ 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 $209
Consolidated Adjusted OIBDA
Three Months Ended June 30, 2004 Communications Information Con-
($ 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 $94
Communications Adjusted OIBDA Margin
($ in millions) Q105 Q205
Communications Revenue $510 $371
Communications Adjusted OIBDA $201 $88
Communications Adjusted OIBDA Margin 39% 24%
Projected Consolidated Adjusted OIBDA
Three Months Ended September 30, 2005 Consolidated
($ in millions) Range
Low High
Net Earnings/(Loss) ($225) ($210)
Plus Other (Income)/Expense $125 $130
Operating Income/(Loss) ($100) ($80)
Plus Depreciation and Amortization Expense $165 $165
Plus Non-Cash Stock Compensation Expense $10 $10
Consolidated Adjusted OIBDA $75 $95
10
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 June 30, 2005 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Used In Continuing Operations ($11) ($11)
Gross Capital Expenditures ($88) ($88)
Release of Capital Expenditure Accruals $3 $3
Cash Interest Paid $109 N/A
Interest Income ($10) N/A
Total $3 ($96)
11
UNLEVERED CASH FLOW AND CONSOLIDATED FREE CASH FLOW
Three Months Ended March 31, 2005 Consolidated Free
($ 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) ($127)
PROJECTED CONSOLIDATED FREE CASH FLOW Consolidated
Twelve Months Ended December 31, 2005 Range
($ in millions)
Low High
Net Cash (Used In)/Provided By Operating Activities ($120) ($65)
Capital Expenditures, net ($260) ($285)
Total ($380) ($350)
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
Three Months Ended
June 30, March 31, June 30,
(dollars in millions, except per share data) 2005 2005 2004
Revenue:
Communications $ 371 $ 510 $ 391
Information Services 520 483 503
Other 19 17 24
-- -- --
Total Revenue 910 1,010 918
Costs and Expenses:
Cost of Revenue 588 571 591
Depreciation and Amortization 166 171 177
Selling, General and Administrative, including non-cash
compensation of $10, $11 and $10, respectively 217 226 243
Restructuring Charges, including non-cash impairment
charges of $4, $- and $-, respectively 4 15 -
- -- -
Total Costs and Expenses 975 983 1,011
--- --- -----
Operating Income (Loss) (65) 27 (93)
Other Income (Loss), net:
Interest Income 10 4 3
Interest Expense (139) (114) (118)
Other Income 9 6 146
- - ---
Other Income (Loss) (120) (104) 31
---- ---- --
Loss Before Income Taxes (185) (77) (62)
Income Tax Expense (3) - (1)
-- - --
Net Loss $ (188) $ (77) $ (63)
====== ===== =====
Basic Loss per Share:
Net Loss $ (0.27) $ (0.11) $ (0.09)
======= ======= =======
Weighted Average Shares Outstanding (in thousands):
Basic 695,533 690,214 682,629
======= ======= =======
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(unaudited)
June 30, March 31, December 31,
(dollars in millions) 2005 2005 2004
Assets
Current Assets:
Cash and cash equivalents $ 448 $ 336 $ 443
Marketable securities 329 290 225
Restricted securities 27 42 48
Accounts receivable, less allowances of $22, $23 and $23, respectively 544 437 545
Other 132 117 141
--- --- ---
Total Current Assets 1,480 1,222 1,402
Property, Plant and Equipment, net 5,158 5,277 5,408
Marketable Securities 506 - 114
Restricted Securities 70 70 67
Intangibles, net and Goodwill 421 438 457
Other Assets, net 98 92 96
-- -- --
$ 7,733 $ 7,099 $ 7,544
======= ======= =======
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 578 $ 481 $ 614
Current portion of long-term debt 1 119 144
Accrued payroll and employee benefits 57 67 82
Accrued interest 107 88 73
Deferred revenue 182 184 255
Other 115 116 134
--- --- ---
Total Current Liabilities 1,040 1,055 1,302
Long-Term Debt, less current portion 5,945 5,073 5,067
Deferred Revenue 731 731 840
Other Liabilities 461 477 492
Stockholders' Deficit (444) (237) (157)
---- ---- ----
$ 7,733 $ 7,099 $ 7,544
======= ======= =======
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
June 30, March 31, June 30,
(dollars in millions) 2005 2005 2004
Cash Flows from Operating Activities:
Net loss $ (188) $ (77) $ (63)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 166 171 177
Non-cash impairment expenses 4 - -
Gain on sale of property, plant and equipment, and other assets (1) (1) (2)
Gain on debt extinguishments, net - - (147)
Non-cash compensation expense attributable to stock awards 10 11 10
Deferred revenue 5 (174) 1
Amortization of debt issuance costs 4 4 4
Accreted interest on discount debt 6 17 18
Accrued interest on long-term debt 20 15 (31)
Changes in working capital items net of amounts acquired:
Receivables (114) 100 (46)
Other current assets (11) 22 (8)
Payables 102 (127) 52
Other current liabilities (2) (24) (8)
Other (12) (3) (2)
--- -- --
Net Cash Used in Operating Activities (11) (66) (45)
Cash Flows from Investing Activities:
Capital expenditures (85) (61) (64)
Proceeds from sale of property, plant and equipment 3 1 7
Proceeds from sale and maturity of marketable securities 100 50 -
Purchase of marketable securities (648) - (410)
Decrease (increase) in restricted cash and securities, net 2 (1) (4)
ICG acquisition - - (25)
Investments (10) - -
--- -- --
Net Cash Used in Investing Activities (638) (11) (496)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs 877 - -
Purchases and payments on long-term debt, including current portion (105) (25) (75)
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Net Cash Provided by (Used in) Financing Activities 772 (25) (75)
Effect of Exchange Rates on Cash (11) (5) 2
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Net Change in Cash and Cash Equivalents 112 (107) (614)
Cash and Cash Equivalents at Beginning of Period 336 443 1,161
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Cash and Cash Equivalents at End of Period $ 448 $ 336 $ 547
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Supplemental Disclosure of Cash Flow Information:
Cash interest paid $ 109 $ 78 $ 127
Total Cash, Current Marketable Securities and Noncurrent Marketable Securities $ 1,283 $ 626 $ 957
15