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 Third Quarter Results
Thursday, October 20, 2005
Financial Highlights
o Consolidated Revenue of $799 million and $364 million of Communications
Revenue
o Net Loss of $204 million, or $0.29 per share
o Consolidated Adjusted OIBDA of $95 million
o Total Capital Expenditures of $95 million
o Consolidated Free Cash Flow of negative $48 million
Business Highlights
o Company upgrades its network infrastructure
o Transport, IP and VoIP combined revenue increases by 8 percent, versus
second quarter 2005
o Company's price compression continues to moderate
o IP backbone growth continues; traffic exceeds 3.2 petabytes per day
BROOMFIELD, Colo., October 20, 2005 - Level 3 Communications, Inc. (Nasdaq:LVLT)
reported consolidated revenue of $799 million for the third quarter 2005,
compared to $910 million for the second quarter 2005. Communications revenue was
$364 million in the third quarter, versus $371 million for the previous quarter.
Information services revenue was $415 million, compared to $520 million for the
previous quarter.
The net loss for the third quarter 2005 was $204 million, or $0.29 per share,
compared to a net loss of $188 million or $0.27 per share for the previous
quarter. Consolidated Adjusted OIBDA(1)
was $95 million in the third quarter 2005, compared to previously provided
projections of $75 million to $95 million and $115 million for the previous
quarter.
"Level 3's third quarter performance reflects several positive industry dynamics
including continuing strong demand for wholesale communications services and the
continuing moderation of price compression," said James Q. Crowe, CEO of Level
3. "We are pleased with the growth in our transport, IP and Voice over IP
services during the quarter, and we believe our results point to the improving
fundamentals of our business."
Third Quarter Financial Results
Metric Third Quarter Actuals Third Quarter
($ in millions) Projections (1)
Communications Services Revenue (2) (excluding termination $344
revenue)
Reciprocal Compensation $19
Termination Revenue $1
Communications Revenue $364 $345-$365
Information Services Revenue $415
Other Revenue $20
Consolidated Revenue $799
Consolidated Adjusted OIBDA (3)(4) $95 $75-$95
Capital Expenditures $95
Unlevered Cash Flow (4) $47
Free Cash Flow (4) ($48)
Communications Gross Margin (4) 69%
(1) Projections issued July 21, 2005
(2) Communications Services Revenue is GAAP communications revenue minus
reciprocal compensation revenue
(3) Consolidated Adjusted OIBDA excludes $14 million in stock-based
compensation expense and $2 million of non-cash impairment charges
(4) See schedule of non-GAAP metrics for definition and reconciliation to GAAP
measures
Communications Business
Revenue
Communications revenue for the third quarter 2005 was $364 million, versus $371
million for the previous quarter. Communications revenue for the third quarter
included $345 million of communications services revenue and $19 million of
reciprocal compensation revenue, compared to $342 million and $29 million,
respectively, in the second quarter.
"While third quarter reciprocal compensation revenue was below our year-to-date
quarterly average, this is the result of normal fluctuations caused by a variety
of factors," said Sunit Patel, CFO of Level 3. "We expect to see reciprocal
compensation in the fourth quarter 2005 increase to more closely approximate our
2005 quarterly average."
2
Included in communications services revenue was $1 million and $2 million of
termination revenue for the third and second quarters, respectively.
Communications services revenue excluding termination revenue increased by $4
million, versus the second quarter, primarily due to increases in transport and
infrastructure revenue and voice revenue, offset partially by expected declines
in managed modem, DSL aggregation and legacy low-speed IP managed services.
Excluding managed modem and DSL aggregation, communications revenue increased 8
percent, versus the second quarter.
Quarter ended Quarter ended June Dollar
Communications Revenue ($ in millions) September 30, 30, 2005 Change
2005
Transport and Infrastructure $132 $122 $10
IP & Data Services (excluding DSL) $67 $66 $1
Voice $31 $25 $6
Managed Modem $97 $103 ($6)
DSL $17 $24 ($7)
Communications Services Revenue $344 $340 $4
Reciprocal Compensation $19 $29 ($10)
Termination Revenue $1 $2 ($1)
Communications Revenue $364 $371 $(7)
The communications deferred revenue balance was $880 million in the third
quarter, compared to $879 million in the second quarter.
Cost of Revenue
Communications cost of revenue for the third quarter 2005 was $112 million,
versus $110 million in the previous quarter. Communications gross margin(1) was
69 percent for the third quarter, compared to 70 percent in the second quarter.
The decline in communications gross margin is primarily attributable to a
decrease in reciprocal compensation revenue.
Selling, General and Administrative Expenses (SG&A)
Communications SG&A expenses were $178 million for the third quarter 2005,
versus $182 million for the previous quarter. SG&A expenses for the third
quarter include a $5 million property tax benefit and $13 million of non-cash
stock compensation expense. Second quarter SG&A expenses included a $2 million
property tax benefit and $9 million of non-cash stock compensation expense.
Adjusted Operating Income Before Depreciation and Amortization (OIBDA)
Adjusted OIBDA(1) for the communications business was $84 million for the third
quarter 2005, compared to $88 million for the previous quarter, primarily as a
result of a decrease in reciprocal compensation revenue, partially offset by a
reduction in operating expenses.
Communications Adjusted OIBDA margin(1) was 23 percent for the third quarter
2005, versus 24 percent in the previous quarter. Communications Adjusted OIBDA
includes a $3 million cash lease termination charge, excludes a $2 million
non-cash asset impairment charge, and excludes non-cash stock compensation
expense of $13 million in the third quarter. Second quarter
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Communications Adjusted OIBDA excludes a $4 million non-cash asset impairment
charge and non-cash stock compensation of $9 million in the 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 $415 million for the third quarter 2005. This
compares to revenue of $520 million for the previous quarter and $392 million
for the same period last year. Adjusted OIBDA(1) for the information services
business was $11 million for the third quarter, which excludes $1 million in
non-cash stock compensation expense, compared to Adjusted OIBDA of $15 million
in the previous quarter, excluding $1 million in non-cash stock compensation
expense. For the same period last year, Adjusted OIBDA was $9 million.
"Our information services group continues to perform well, including solid
revenue growth and profitability," said Charles C. Miller, vice chairman of
Level 3. "The Software Spectrum business continues to show double digit profit
growth from last year, in part as a result of our recent focus on sales to
middle market enterprise customers. In addition, our (i)Structure subsidiary
signed three contracts with a value of $76 million in the quarter. Normal
seasonality accounts for the decrease in revenue and Adjusted OIBDA in the third
quarter, as compared to the second 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 $20 million and zero,
respectively, in the third quarter 2005, compared to $19 million and $12 million
for the previous quarter. Adjusted OIBDA for the third quarter included
approximately $2 million in one-time expenses. Second quarter Adjusted OIBDA
included 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 third quarter 2005, Unlevered Cash Flow(1) was positive $47 million,
versus positive $3 million during the second quarter. Consolidated Free Cash
Flow for the third quarter was negative $48 million, versus negative $96 million
for the previous quarter.
"The company's negative Consolidated Free Cash Flow improved in the third
quarter primarily as a result of working capital improvements in the
communications business, partially offset by higher capital expenditures," said
Patel.
As of September 30, 2005, the company had cash and marketable securities of
approximately $1.3 billion, which approximated the balance at the end of last
quarter.
Corporate Transactions
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During the quarter, the refinancing of the mortgage on the company's corporate
headquarters was completed in the principal amount of $70 million with a 6.86
percent fixed interest rate and an initial maturity date of September, 2010.
Customer and Operations Update
"Demand for transport, IP and VoIP services remains strong," said Kevin O'Hara,
president and chief operating officer of Level 3. "We believe our customers
value Level 3's ability to provide a unique combination of transport, IP and
VoIP solutions. Additionally, we continue to see improvements in the pricing
environment."
The company currently estimates its cost of recovery from Hurricane Katrina at
less than $5 million. Any payments received under the company's insurance
coverage will reduce the cost of recovery estimate.
Network Upgrades and Improved Cost Efficiencies
During the quarter, Level 3 completed a substantial portion of its optical
transport network upgrade. The company is installing a new generation of
equipment that employs photonic integrated circuits. The company is also making
technical upgrades to its core Internet Protocol network. Both deployments are
expected to be completed by year-end in North America and by mid-2006 in Europe.
These network upgrades are expected to significantly improve the operational and
economic efficiencies of the company's network.
Business Outlook
"We remain focused on providing our customers value through our ability to offer
scaleable transport, IP and VoIP solutions," said Crowe. "Given improvements in
both market demand and pricing that we believe are becoming apparent, we have
increased funding for capital expenditures by approximately $45 million versus
beginning of the year projections. The resulting network upgrades are expected
to lead to substantial improvements in unit capital cost and operating
efficiencies. Additionally, we are increasing capacity on our network to support
expected growth from signed contracts and anticipated contracts."
Full Year 2005 Projections
o Company narrows range for Communications Revenue full year projection from
a range of 4 to 7 percent decline to a range of 4 to 6 percent decline.
o Company reiterates previously issued Communications Adjusted OIBDA margin
projection.
o Consolidated Free Cash Flow is expected to be negative $370 million to
negative $395 million. This is an increase of $15 million to $20 million,
versus previously issued projections as a result of an increase in the
company's accelerated and increased capital expenditures planned in 2005.
Fourth Quarter 2005
o Communications revenue is projected to be $340 million to $360 million,
with expected decreases in DSL aggregation, managed modem and legacy
low-speed IP managed services partially offset by anticipated growth in
transport, IP and VoIP services.
o Consolidated Adjusted OIBDA is expected to be $85 million to $105 million.
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Metric Fourth Quarter Full Year 2005 Projections
($ in millions) Projections
Communications Revenue $340 to $360 4 percent to 6 percent
decline
Consolidated Adjusted OIBDA $85 to $105 N/A
Communications Adjusted OIBDA Margin N/A Mid-20 percent range
Negative Consolidated Free Cash Flow N/A $370 to $395
Summary
"We are pleased with the results of our continued disciplined approach to
pricing and our decision to further invest in our business. Our network
investments enable us to comprehensively meet high bandwidth customers' growing
needs and maintain our low-cost position," Crowe said. "In addition, our strong
liquidity position gives us the flexibility to support ongoing customer demand
and seek opportunities to further grow our business."
Conference Call and Web site Information
Level 3 will hold a conference call to discuss the company's third quarter
results at 10:00 a.m. Eastern Time today. To join the call, please dial
612-288-0318. 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 797035 An archived
webcast of the third 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.
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
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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)
Q205 Q305
Communications Revenue $371 $364
Communications Cost of Revenue $110 $112
Communications Gross Margin ($) $261 $252
Communications Gross Margin (%) 70% 69%
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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 September 30, 2005 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($211) $3 $4 ($204)
Income Tax (Benefit)/Expense $1 $-- $-- $1
Plus Other (Income)/Expense $123 $2 ($6) $119
Operating Income/(Loss) ($87) $5 $(2) ($84)
Plus Non-Cash Impairment Charge $2 $-- $-- $2
Plus Depreciation and Amortization Expense $156 $5 $2 $163
Plus Non-Cash Stock Compensation Expense $13 $1 $-- $14
Consolidated Adjusted OIBDA $84 $11 $-- $95
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Consolidated Adjusted OIBDA
Three Months Ended June 30, 2005 Communications Information Con-
($ 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 $115
Consolidated Adjusted OIBDA
Three Months Ended September 30, 2004 Communications Information Con-
($ in millions) Services Other solidated
Net Earnings/(Loss) ($181) $4 $6 ($171)
Income Tax (Benefit)/Expense $-- $-- $-- $--
Plus Other (Income)/Expense $121 $-- ($1) $120
Operating Income/(Loss) ($60) $4 $5 ($51)
Plus Depreciation and Amortization Expense $163 $5 $2 $170
Plus Non-Cash Stock Compensation Expense $10 $-- $-- $10
Consolidated Adjusted OIBDA $113 $9 $7 $129
Communications Adjusted OIBDA Margin
($ in millions) Q205 Q305
Communications Revenue $371 $364
Communications Adjusted OIBDA $88 $84
Communications Adjusted OIBDA Margin 24% 23%
Projected Consolidated Adjusted OIBDA
Three Months Ended December 31, 2005 Consolidated
($ in millions) Range
Low High
Net Earnings/(Loss) ($215) ($200)
Plus Other (Income)/Expense $125 $130
Operating Income/(Loss) ($90) ($70)
Plus Depreciation and Amortization Expense $160 $160
Plus Non-Cash Stock Compensation Expense $15 $15
Consolidated Adjusted OIBDA $85 $105
Unlevered Cash Flow is defined as net cash provided by (used in) operating
activities less net capital expenditures, 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
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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 net capital expenditures 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 debt
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 September 30, 2005 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Provided By Operating Activities $47 $47
Capital Expenditures, net ($95) ($95)
Cash Interest Paid $106 N/A
Interest Income ($11) N/A
Total $47 ($48)
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UNLEVERED CASH FLOW AND CONSOLIDATED FREE CASH FLOW
Three Months Ended June 30, 2005 Consolidated Free
($ in millions) Unlevered Cash Flow Cash Flow
Net Cash Used In Operating Activities ($11) ($11)
Capital Expenditures, net ($85) ($85)
Cash Interest Paid $109 N/A
Interest Income ($10) N/A
Total $3 ($96)
PROJECTED CONSOLIDATED FREE CASH FLOW Consolidated
Twelve Months Ended December 31, 2005 Range
($ in millions)
Low High
Net Cash Used In Operating Activities ($85) ($50)
Capital Expenditures, net ($310) ($320)
Total ($395) ($370)
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(unaudited)
Three Months Ended
September 30, June 30, September 30,
(dollars in millions, except per share data) 2005 2005 2004
Revenue:
Communications $ 364 $ 371 $ 423
Information Services 415 520 392
Other 20 19 25
-- -- --
Total Revenue 799 910 840
Costs and Expenses:
Cost of Revenue 495 588 487
Depreciation and Amortization 163 166 170
Selling, General and Administrative, including non-cash
compensation of $14, $10 and $10, respectively 220 217 234
Restructuring Charges, including non-cash impairment
charges of $2, $4 and $-, respectively 5 4 -
- - -
Total Costs and Expenses 883 975 891
Operating Loss (84) (65) (51)
Other Income (Loss), net:
Interest Income 11 10 3
Interest Expense (138) (139) (120)
Other Income 8 9 (3)
- - --
Other Income (Loss) (119) (120) (120)
---- ---- ----
Loss Before Income Taxes (203) (185) (171)
Income Tax Expense (1) (3) -
-- -- -
Net Loss $ (204) $ (188) $ (171)
====== ====== ======
Basic Loss per Share:
Net Loss $ (0.29) $ (0.27) $ (0.25)
======= ======= =======
Weighted Average Shares Outstanding (in thousands):
Basic 699,332 695,533 685,074
======= ======= =======
(c) 2005 by Level 3 Communications, Inc. All rights reserved.
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(unaudited)
September 30, June 30, December 31,
(dollars in millions) 2005 2005 2004
Assets
Current Assets:
Cash and cash equivalents $ 490 $ 448 $ 443
Marketable securities 403 329 225
Restricted securities 38 27 48
Accounts receivable, less allowances of $21, $22 and $23, respectively 407 544 545
Other 162 132 141
--- --- ---
Total Current Assets 1,500 1,480 1,402
Property, Plant and Equipment, net 5,101 5,158 5,408
Marketable Securities 408 506 114
Restricted Securities 71 70 67
Intangibles, net and Goodwill 401 421 457
Other Assets, net 99 98 96
-- -- --
$ 7,580 $ 7,733 $ 7,544
======= ======= =======
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 492 $ 578 $ 614
Current portion of long-term debt - 1 144
Accrued payroll and employee benefits 66 57 82
Accrued interest 130 107 73
Deferred revenue 208 182 255
Other 102 115 134
--- --- ---
Total Current Liabilities 998 1,040 1,302
Long-Term Debt, less current portion 6,020 5,945 5,067
Deferred Revenue 734 731 840
Other Liabilities 460 461 492
Stockholders' Deficit (632) (444) (157)
---- ---- ----
$ 7,580 $ 7,733 $ 7,544
======= ======= =======
(c) 2005 by Level 3 Communications, Inc. All rights reserved.
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LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
September 30, June 30, September 30,
(dollars in millions) 2005 2005 2004
Cash Flows from Operating Activities:
Net loss $ (204) $ (188) $ (171)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 163 166 170
Non-cash impairment expenses 2 4 -
Gain (loss) on sale of property, plant and equipment, and other assets (7) (1) 2
Non-cash compensation expense attributable to stock awards 14 10 10
Deferred revenue 29 5 15
Amortization of debt issuance costs 4 4 4
Accreted interest on discount debt 5 6 19
Accrued interest on long-term debt 23 20 10
Changes in working capital items net of amounts acquired:
Receivables 137 (114) 101
Other current assets (30) (11) 9
Payables (86) 102 (120)
Other current liabilities 1 (2) (69)
Other (4) (12) 4
-- --- -
Net Cash Provided by (Used in) Operating Activities 47 (11) (16)
Cash Flows from Investing Activities:
Capital expenditures, net (95) (85) (82)
Proceeds from sale of property, plant and equipment 7 3 3
Proceeds from sale and maturity of marketable securities 29 100 20
Purchase of marketable securities - (648) -
Decrease (increase) in restricted cash and securities, net (9) 2 (1)
ICG acquisition - - (5)
Investments - (10) -
--- --- --
Net Cash Used in Investing Activities (68) (638) (65)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs 67 877 -
Purchases and payments on long-term debt, including current portion (1) (105) (1)
-- ---- --
Net Cash Provided by (Used in) Financing Activities 66 772 (1)
Effect of Exchange Rates on Cash (3) (11) 2
-- --- -
Net Change in Cash and Cash Equivalents 42 112 (80)
Cash and Cash Equivalents at Beginning of Period 448 336 547
--- --- ---
Cash and Cash Equivalents at End of Period $ 490 $ 448 $ 467
===== ===== =====
Supplemental Disclosure of Cash Flow Information:
Cash interest paid $ 106 $ 109 $ 87
Total Cash, Current Marketable Securities and Noncurrent Marketable Securities $ 1,301 $ 1,283 $ 856
(c) 2005 by Level 3 Communications, Inc. All rights reserved.
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