LEVEL 3 PARENT LLC BROOMFIELD, Colo., Feb. 4, 2016 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the quarter and full year ending December 31, 2015.
"Our 2015 results demonstrate Level 3's solid execution and performance," said Jeff Storey, president and CEO of Level 3. "Demand for bandwidth remains strong and the proliferation of connected devices continues. These demand drivers are creating an enterprise networking opportunity that is well suited for the depth, scale and reach of Level 3's global network and capabilities. We believe we are well positioned to continue to take enterprise market share."
Total revenue was $2.053 billion for the fourth quarter 2015, compared to $2.052 billion for the fourth quarter 2014 and $8.229 billion for the full year 2015 compared to $8.123 billion for the full year 2014. The full year 2015 and the full year 2014 results include nine months and twelve months of results from the company's Venezuelan subsidiary's operations, respectively. The full year 2014 results are presented on a pro forma basis assuming the tw telecom acquisition took place on January 1, 2014.
In the fourth quarter 2015, the company generated net income of $3.323 billion and basic earnings per share of $9.33. This includes a non-cash benefit to the fourth quarter Income Tax Expense of approximately $3.3 billion related to the release of the company's valuation allowance against U.S. federal and state deferred tax assets, an expense of $151 million for the provision for income taxes after the release of the valuation allowance and a charge of $55 million on the modification and extinguishment of debt. Excluding all of these items, basic earnings per share were $0.53 for the fourth quarter 2015. Net loss per share was $0.24 for the fourth quarter 2014 on a pro forma basis.
Financial Results
Fourth Quarter 2014 Pro Full Year 2015(3) Full Year 2014 Pro
Forma(1)(2) Forma(1)(2)
Metric Fourth Quarter 2015
($ in millions)
--------------
Core Network
Services Revenue(4) $1,943 $1,918 $7,757 $7,552
-------------------- ------ ------ ------ ------
Wholesale Voice
Services and Other
Revenue $110 $134 $472 $571
------------------- ---- ---- ---- ----
Total Revenue $2,053 $2,052 $8,229 $8,123
------------- ------ ------ ------ ------
Network Access Costs $708 $732 $2,833 $2,894
-------------------- ---- ---- ------ ------
Network Access
Margin 65.5% 64.3% 65.6% 64.4%
-------------- ---- ---- ---- ----
Network Related
Expenses (NRE) (5) $337 $364 $1,403 $1,432
------------------- ---- ---- ------ ------
Selling, General and
Administrative
Expenses (SG&A)(5) $323 $332 $1,323 $1,355
-------------------- ---- ---- ------ ------
Non-cash
Compensation
Expense $49 $93 $141 $168
------------- --- --- ---- ----
Adjusted
EBITDA(6)(7) $681 $469 $2,638 $2,271
------------- ---- ---- ------ ------
Adjusted EBITDA
Margin(6)(7) 33.2% 22.9% 32.1% 28.0%
--------------- ---- ---- ---- ----
Capital Expenditures $330 $346 $1,229 $1,255
-------------------- ---- ---- ------ ------
Unlevered Cash
Flow(7) $399 $213 $1,293 $911
-------------- ---- ---- ------ ----
Free Cash Flow(7)(8) $226 ($9) $626 $183
------------------- ---- --- ---- ----
Net Income (Loss) $3,323 ($80) $3,433 $149
---------------- ------ ---- ------ ----
Net Income (Loss)
per Common Share-
Basic $9.33 ($0.24) $9.71 $0.44
------------------ ----- ------ ----- -----
(1) References to "pro forma" figures
assume the tw telecom acquisition
took place on January 1, 2014.
(2) The reported fourth quarter 2014 and
full year 2014 results include the
company's Venezuelan subsidiary's
operations.
(3) The reported full year 2015 results
include nine months of results from
the company's Venezuelan
subsidiary's operations.
(4) The reported fourth quarter 2014 and
full year 2014 results have been
adjusted to reflect changes made to
customer assignments between the
wholesale and enterprise channels as
of the beginning of 2015.
(5) Excludes non-cash compensation
expense and integration-related
expenses.
(6) Includes tw telecom acquisition
related expenses of $4 million for
the fourth quarter 2015, $32 million
for the full year 2015, $156 million
for the fourth quarter 2014 and $172
million for the full year 2014.
(7) See schedule of non-GAAP metrics
for definitions and reconciliation
to GAAP measures.
(8) Includes accelerated cash interest
payments of $32 million related to
the capital markets transaction
completed in the fourth quarter
2015.
Revenue
Fourth Quarter 2014 Pro Percent Full Full Year 2014 Pro
Forma(1)(2) Forma(1)(4) Percent
Year
Change, 2015 Pro Forma(1)(3) Change,
Core Network Services
(CNS) Revenue Fourth Quarter 2015 Constant Currency Constant Currency
($ in millions)
--------------
North America $1,571 $1,505 5% $6,208 $5,867 6%
------------- ------ ------ --- ------ ------ ---
Wholesale $425 $425 -% $1,734 $1,706 2%
--------- ---- ---- --- ------ ------ ---
Enterprise $1,146 $1,080 6% $4,474 $4,161 8%
---------- ------ ------ --- ------ ------ ---
EMEA $212 $221 1% $835 $902 -%
---- ---- ---- --- ---- ---- ---
Wholesale $69 $75 -% $275 $326 (7%)
--------- --- --- --- ---- ---- ---
Enterprise $118 $118 3% $457 $461 6%
---------- ---- ---- --- ---- ---- ---
UK Government $25 $28 (8%) $103 $115 (4%)
------------- --- --- --- ---- ---- ---
Latin America $160 $171 8% $642 $696 7%
------------- ---- ---- --- ---- ---- ---
Wholesale $35 $37 4% $139 $147 7%
--------- --- --- --- ---- ---- ---
Enterprise $125 $134 10% $503 $549 7%
---------- ---- ---- --- ---- ---- ---
Total CNS Revenue $1,943 $1,897 4% $7,685 $7,465 5%
----------------- ------ ------ --- ------ ------ ---
Wholesale $529 $537 -% $2,148 $2,179 1%
--------- ---- ---- --- ------ ------ ---
Enterprise $1,414 $1,360 6% $5,537 $5,286 7%
---------- ------ ------ --- ------ ------ ---
(1) References to "pro forma" figures assume
the tw telecom acquisition and the
deconsolidation of the company's
Venezuelan subsidiary's operations took
place on January 1, 2014.
(2) Excludes total revenue from the
company's Venezuelan subsidiary's
operations of $21 million for the
fourth quarter 2014.
(3) Excludes total revenue from the
company's Venezuelan subsidiary's
operations of $25 million for the third
quarter 2015, $24 million for the
second quarter 2015, and $23 million
for the first quarter 2015.
(4) Excludes total revenue from the
company's Venezuelan subsidiary's
operations of $87 million for the full
year 2014.
CNS Revenue
CNS Revenue was $1.943 billion in the fourth quarter 2015, increasing 4.4 percent year-over-year on a pro forma and constant currency basis compared to the fourth quarter 2014. For the full year 2015, CNS Revenue was $7.685 billion, which grew 5.3 percent on a pro forma and constant currency basis compared to the full year 2014.
Deferred Revenue
The deferred revenue balance was $1.244 billion at the end of the fourth quarter 2015, compared to $1.208 billion at the end of the fourth quarter 2014.
Adjusted EBITDA
For the fourth quarter 2015, Adjusted EBITDA was $681 million, including integration-related expenses of $4 million. For the fourth quarter 2014, Adjusted EBITDA on a pro forma basis was $469 million, which included tw telecom transaction and integration-related expenses of $156 million.
For the full year 2015, Adjusted EBITDA was $2.638 billion, including integration-related expenses of $32 million, an increase of 16 percent from the starting point of $2.271 billion for the full year 2014, on a pro forma basis, which includes $172 million of transaction and integration-related expenses.
Capital Market Transactions and Liquidity
On December 13, 2015, the company redeemed $900 million aggregate principal amount of Level 3 Financing, Inc.'s 8.625% Senior Notes due 2020. To fund the redemption of these notes, Level 3 Financing used the net proceeds, along with cash on hand, from the issuance of its 5.375% Senior Notes due 2024.
The loss on extinguishment and modification of debt as a result of this transaction and related redemption was $55 million.
As of December 31, 2015, the company had cash and cash equivalents of $854 million.
Release of Deferred Tax Valuation Allowance
With the continued expectation of generating income before taxes in the U.S., the company released a significant portion of its valuation allowance against its net U.S. and state deferred tax asset position in the fourth quarter 2015. The release of the valuation allowance in the fourth quarter benefitted Income Tax Expense and Net Income by approximately $3.3 billion.
The company's estimated Federal net operating loss carryforward (NOL) position was $9.9 billion as of December 31, 2015.
2016 Business Outlook
"In 2015, we met or exceeded our key outlook measures for the year," said Sunit Patel, executive vice president and CFO of Level 3. "Even with the tw telecom integration, global currency pressures driven by macroeconomic headwinds and the deconsolidation of our Venezuelan subsidiary last quarter, we had good momentum which drove revenue growth and strong profit performance for the year. We also refinanced $4.9 billion of our debt during 2015, resulting in over $110 million of annualized cash interest expense savings, positioning us well for 2016 and beyond.
"As we look to 2016, from a revenue perspective, we expect both total revenue and Core Network Services revenue growth, excluding UK Government revenue, to be stronger in 2016 compared to 2015, on a constant currency basis.
"We expect full year 2016 Adjusted EBITDA to grow 9 to 12 percent from a starting point of $2.592 billion, which excludes the three quarters of Adjusted EBITDA results from our Venezuelan subsidiary's operations. For the full year 2016, we expect to generate Free Cash Flow of $1.0 to $1.1 billion."
Metrics 2015 2016
------- ---- ----
Outlook Results Outlook
------- ------- -------
Adjusted
EBITDA YoY growth of 15% - 17%(1) 16% YoY growth of 9% - 12%(2)
-------- ------------------------- --- ------------------------
Free
Cash
Flow $600 - $650 million $658 million $1.0 - $1.1 billion
---- ------------------- ------------ -------------------
(1) From a starting point of $2.271
billion, which represents pro
forma 2014 Adjusted EBITDA,
including tw telecom
acquisition-related expenses
(2) From a starting point of $2.592
billion, which is adjusted to
exclude Adjusted EBITDA from
the company's Venezuela
subsidiary.
For the full year 2016, the company also expects:
-- GAAP interest expense of approximately $570 million
-- Net cash interest expense of approximately $520 million
-- Capital expenditures of approximately 15 percent of total revenue
-- Depreciation and amortization of approximately $1.230 billion
-- Full year income tax rate of approximately 30 percent
-- Cash income tax expense of approximately $40 million
-- Non-cash compensation expense of approximately $130 million
Conference Call and Web Site Information
Level 3 will hold a conference call to discuss the company's Fourth Quarter and Full Year 2015 Results today at 10 a.m. ET. The call will be broadcast live on Level 3's Investor Relations website at http://investors.level3.com. Additional information regarding Fourth Quarter and Full Year 2015 Results, including the presentation management will review on the conference call, will be available on Level 3's Investor Relations website. If you are unable to join the call via the Web, the call can be accessed live at +1 877-283-5145 (U.S. Domestic) or +1 312-281-1200 (International). Questions should be sent to investor.relations@level3.com.
For additional information, please call +1 720-888-2518.
About Level 3 Communications
Level 3 Communications, Inc. (NYSE: LVLT) is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries across a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities. For more information, please visit www.level3.com or get to know us on Twitter, Facebook and LinkedIn.
© Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications, Level (3) and the Level 3 Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and elsewhere. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners. Level 3 services are provided by subsidiaries of Level 3 Communications, Inc.
Forward-Looking Statement
Some statements made in this press release are forward-looking in nature and are based on management's current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ materially from those expressed or implied by the statements. Important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the company's ability to: successfully integrate the tw telecom acquisition; manage risks associated with continued uncertainty in the global economy; increase revenue from its services to realize its targets for financial and operating performance; maintain and increase traffic on its network; develop and maintain effective business support systems; manage system and network failures or disruptions; avert the breach of its network and computer system security measures; develop new services that meet customer demands and generate acceptable margins; manage the future expansion or adaptation of its network to remain competitive; defend intellectual property and proprietary rights; manage continued or accelerated decreases in market pricing for communications services; obtain capacity for its network from other providers and interconnect its network with other networks on favorable terms; attract and retain qualified management and other personnel; successfully integrate future acquisitions; effectively manage political, legal, regulatory, foreign currency and other risks it is exposed to due to its substantial international operations; mitigate its exposure to contingent liabilities; and meet all of the terms and conditions of its debt obligations. 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 press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Contact Information
Media: Investors:
D. Nikki Wheeler Mark Stoutenberg
+1 720-888-0560 +1 720-888-2518
Nikki.Wheeler@Level3.com Mark.Stoutenberg@Level3.com
Level 3 Communications:
Non-GAAP Metrics
Pursuant to Regulation G, the company is hereby providing definitions of non-GAAP financial metrics and reconciliations to the most directly comparable GAAP measures.
The following describes and reconciles those financial measures as reported under accounting principles generally accepted in the United States (GAAP) with those financial measures as adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis.
In addition, measures referred to in the accompanying news release as being calculated "on a constant currency basis" or "in constant currency terms" are non-GAAP metrics intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such metrics are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.
Consolidated Revenue is defined as total revenue from the Consolidated Statements of Operations.
Core Network Services Revenue includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).
Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder lease costs and other third party costs directly attributable to providing access to customer locations from the Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access Costs do not include any employee expenses or impairment expenses; these expenses are allocated to Network Related Expenses or Selling, General and Administrative Expenses.
Network Related Expenses includes certain expenses associated with the delivery of services to customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities, maintenance and other costs, each related to the operation of its communications network, as well as salaries, wages and related benefits (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of its communications network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.
Network Access Margin ($) is defined as total Revenue less Network Access Costs from the Consolidated Statements of Operations, and excludes Network Related Expenses.
Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue. Management believes that network access 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.
Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Operations before income tax (expense) benefit, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.
Adjusted EBITDA Metric
Q4 2015 (as reported)
--------------------
(in millions)
------------
Net Income $3,323
Income Tax Benefit (3,189)
Total Other Expense 204
Depreciation and Amortization 294
Non-Cash Stock Compensation 49
---
Adjusted EBITDA $681
Total Revenue $2,053
======
Adjusted EBITDA Margin 33.2%
Adjusted EBITDA Metric
Q4 2014 (Pro Forma) (1)
----------------------
(in millions)
------------
Net Loss $(80)
Income Tax Benefit (105)
Total Other Expense 279
Depreciation and Amortization 281
Non-Cash Stock Compensation 93
Non-Cash Impairment 1
---
Adjusted EBITDA $469
Total Revenue $2,052
======
Adjusted EBITDA Margin 22.9%
(1) Fourth quarter of
2014 Pro Forma Adjusted
EBITDA reflects a full
three months of both
Level 3's and tw
telecom's results.
Adjusted EBITDA Metric
Q4 2014 (as reported)
--------------------
(in millions)
------------
Net Income $66
Income Tax Benefit (103)
Total Other Expense 268
Depreciation and Amortization 250
Non-Cash Stock Compensation 25
Non-Cash Impairment 1
---
Adjusted EBITDA $507
Total Revenue $1,914
======
Adjusted EBITDA Margin 26.5%
Adjusted EBITDA Metric
Year Ended December 31, 2015 (as reported)
-----------------------------------------
(in millions)
------------
Net Income $3,433
Income Tax Benefit (3,150)
Total Other Expense 1,048
Depreciation and Amortization 1,166
Non-Cash Stock Compensation 141
---
Adjusted EBITDA $2,638
Total Revenue $8,229
======
Adjusted EBITDA Margin 32.1%
Adjusted EBITDA Metric
Year Ended December 31, 2014 (as reported)
-----------------------------------------
(in millions)
------------
Net Income $314
Income Tax Benefit (76)
Total Other Expense 775
Depreciation and Amortization 808
Non-Cash Stock Compensation 73
Non-Cash Impairment 1
---
Adjusted EBITDA $1,895
Total Revenue $6,777
======
Adjusted EBITDA Margin 28.0%
Adjusted EBITDA Metric
Year Ended December 31, 2014 (Pro Forma) (1)
-------------------------------------------
(in millions)
------------
Net Income $149
Income Tax Benefit (70)
Total Other Expense 905
Depreciation and Amortization 1,118
Non-Cash Stock Compensation 168
Non-Cash Impairment 1
---
Adjusted EBITDA $2,271
Total Revenue $8,123
======
Adjusted EBITDA Margin 28.0%
(1) Full year 2014 Pro
Forma Adjusted EBITDA
reflects a full year of
both Level 3's and tw
telecom's results.
Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are relevant and useful metrics to provide to investors, as they are an important part of the company's internal reporting and are key measures used by Management to evaluate profitability and operating performance of the company and to make resource allocation decisions. Management believes such measures are especially important in a capital-intensive industry such as telecommunications. Management also uses Adjusted EBITDA and Adjusted EBITDA Margin to compare the company's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses. Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income taxes because these items are associated with the company's capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash impacts of capital expenditures made in recent periods, which may be evaluated through cash flow measures. Adjusted EBITDA excludes the gain (or loss) on extinguishment and modification of debt and other, net because these items are not related to the primary operations of the company.
There are limitations to using Adjusted EBITDA as a financial measure, 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 interest income, interest expense, income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, the gain (or loss) on extinguishment and modification of debt and net other income (expense). Adjusted EBITDA and Adjusted EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.
Unlevered Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures, plus cash interest paid and less interest income all as disclosed in the Consolidated Statements of Cash Flows or the Consolidated 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 underlying business' growth pattern and ability to generate cash. Unlevered Cash Flow excludes cash used for acquisitions and debt service and the impact of exchange rate changes on cash and cash equivalents balances.
There are material limitations to using Unlevered Cash Flow to measure the company's cash performance as it excludes certain material items such as payments on and repurchases of long-term debt, interest income, cash interest expense and cash used to fund acquisitions. Comparisons of Level 3's Unlevered Cash Flow to that of some of its competitors may be of limited usefulness since 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 and capital expenditures. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents in the Consolidated Statements of Cash Flows.
Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the Consolidated Statements of Cash Flows. Management believes that 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. Free Cash Flow excludes cash used for acquisitions, principal repayments and the impact of exchange rate changes on cash and cash equivalents balances.
There are material limitations to using Free Cash Flow to measure the company's performance as it excludes certain material items such as principal payments on and repurchases of long-term debt and cash used to fund acquisitions. Comparisons of Level 3's Free Cash Flow to that of some of its competitors may be of limited usefulness since 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 interest expense, accounts receivable and accounts payable and capital expenditures. Free Cash Flow 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 Free Cash
Flow
Three Months
Ended December
31, 2015 (as
reported) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $556 $556
Capital
Expenditures (330) (330)
Cash Interest
Paid 173 N/A
Interest Income - N/A
--- ---
Total $399 $226
==== ====
Unlevered Cash Flow and Free Cash
Flow
Three Months
Ended December
31, 2014 (Pro
Forma) (1) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $337 $337
Capital
Expenditures (346) (346)
Cash Interest
Paid 222 N/A
Interest Income - N/A
Total $213 $(9)
==== ===
(1) Fourth quarter of 2014 Pro Forma Cash Flows reflects a full three months of both Level 3's and tw
telecom's results.
Unlevered Cash Flow and Free Cash
Flow
Three Months
Ended December
31, 2014 (as
reported) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $396 $396
Capital
Expenditures (302) (302)
Cash Interest
Paid 190 N/A
Interest Income - N/A
Total $284 $94
==== ===
Unlevered Cash Flow and Free Cash
Flow
Year Ended
December 31,
2015 (as
reported) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $1,855 $1,855
Capital
Expenditures (1,229) (1,229)
Cash Interest
Paid 668 N/A
Interest Income (1) N/A
---
Total $1,293 $626
====== ====
Unlevered Cash Flow and Free Cash
Flow
Year Ended
December 31,
2014 (as
reported) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $1,161 $1,161
Capital
Expenditures (910) (910)
Cash Interest
Paid 598 N/A
Interest Income (1) N/A
Total $848 $251
==== ====
Unlevered Cash Flow and Free Cash
Flow
Year Ended
December 31,
2014 (Pro Forma)
(1) Unlevered
($ in millions) Cash Flow Free Cash Flow
-------------- --------- --------------
Net Cash Provided
by Operating
Activities $1,438 $1,438
Capital
Expenditures (1,255) (1,255)
Cash Interest
Paid 729 N/A
Interest Income (1) N/A
Total $911 $183
==== ====
(1) Full year 2014 Pro
Forma Cash Flows
reflects a full year of
both Level 3's and tw
telecom's results.
4Q14 Pro Forma Combined Company Results
($ in millions) Historical Level Add: Nov and Standalone Level Intercompany Pro Forma
3 Dec 3 Eliminations Adjustments
Intercompany (1)
Transactions Standalone tw* Total
----------------
Core Network Services
(CNS) Revenue
North America $1,083 $5 $1,088 $433 $(15) $(1) $1,505
Wholesale $359 $5 $364 $94 $(15) $(18) $425
Enterprise $724 $ - $724 $339 $ - $17 $1,080
EMEA $218 $ - $218 $ - $ - $3 $221
Wholesale $75 $ - $75 $ - $ - $ - $75
Enterprise $143 $ - $143 $ - $ - $3 $146
Latin America $191 $ - $191 $ - $ - $1 $192
Wholesale $41 $ - $41 $ - $ - $ - $41
Enterprise $150 $ - $150 $ - $ - $1 $151
---- --- --- ---- --- --- --- --- --- ----
Total CNS Revenue $1,492 $5 $1,497 $433 $(15) $3 $1,918
Wholesale Voice
Services and Other 137 - 137 - - (3) 134
Total Revenue $1,629 $5 $1,634 $433 $(15) $ - $2,052
------ --- ------ ---- ---- --- --- ------
Network Access Costs $(616) $(4) $(620) $(123) $11 $ - $(732)
Network Related
Expenses (303) (1) (304) (77) 3 - (378)
Selling, General and
Administrative
Expenses (333) - (333) (234) - - (567)
Add back: Non-Cash
Compensation Expenses 24 - 24 69 - - 93
Add back: Non-Cash
Impairment 1 - 1 - - - 1
--- --- --- --- --- --- ---
Adjusted EBITDA
Including
Acquisition-Related
Expenses $402 $ - $402 $68 $(1) $ - $469
Transaction Costs $15 $ - $15 $85 $ - $ - $100
Integration Costs 53 - 53 3 - - 56
--- --- --- ---
Total Acquisition
Related Costs $68 $ - $68 $88 $ - $ - $156
Adjusted EBITDA
Excluding
Acquisition-Related
Expenses $470 $ - $470 $156 $(1) $ - $625
Capital Expenditures $239 $ - $239 $107 $ - $ - $346
Colocation and
Datacenter Services $142 $ - $142 $14 $(1) $(1) $154
Transport and Fiber 521 4 525 72 (12) 3 588
IP and Data Services 594 1 595 280 (2) (1) 872
Voice Services (Local
and Enterprise) 235 - 235 67 - 2 304
--- --- --- --- --- --- ---
Total Core Network
Services $1,492 $5 $1,497 $433 $(15) $3 $1,918
Wholesale Voice
Services and Other 137 - 137 - - (3) 134
Total Revenue $1,629 $5 $1,634 $433 $(15) $ - $2,052
====== === ====== ==== ==== === === ======
* Certain reclassifications have been
made to the historical presentation of
tw telecom's historical results to
conform to the presentation used by
Level 3, primarily related to network
access costs, network related
expenses, depreciation and
amortization and selling, general and
administrative expenses.
(1) The 2014 quarterly results
have been adjusted to reflect
changes made to customer
assignments between the
wholesale and enterprise
channels as of the beginning of
2015.
FY14 Pro Forma Combined Company Results
Historical Level Add: Nov and Standalone Level Intercompany Pro Forma
3 Dec 3 Eliminations Adjustments
Intercompany (1)
Transactions Standalone tw* Total
----------------
Core Network Services
(CNS) Revenue
North America $4,240 $5 $4,245 $1,685 $(58) $(5) $5,867
Wholesale $1,462 $5 $1,467 $362 $(58) $(65) $1,706
Enterprise $2,778 $ - $2,778 $1,323 $ - $60 $4,161
EMEA $891 $ - $891 $ - $ - $11 $902
Wholesale $328 $ - $328 $ - $ - $(2) $326
Enterprise $563 $ - $563 $ - $ - $13 $576
Latin America $779 $ - $779 $ - $ - $4 $783
Wholesale $165 $ - $165 $ - $ - $(1) $164
Enterprise $614 $ - $614 $ - $ - $5 $619
---- --- --- ---- --- --- --- --- --- ----
Total CNS Revenue $5,910 $5 $5,915 $1,685 $(58) $10 $7,552
Wholesale Voice
Services and Other 582 - 582 - - (11) 571
Total Revenue $6,492 $5 $6,497 $1,685 $(58) $(1) $8,123
------ --- ------ ------ ---- --- ------
Network Access Costs $(2,450) $(4) $(2,454) $(486) $46 $ - $(2,894)
Network Related
Expenses (1,204) (1) (1,205) (262) 11 - (1,456)
Selling, General and
Administrative
Expenses (1,121) - (1,121) (550) - - (1,671)
Add back: Non-Cash
Compensation Expenses 72 - 72 96 - - 168
Add back: Non-Cash
Impairment 1 - 1 - - - 1
--- --- --- --- --- --- ---
Adjusted EBITDA
Including
Acquisition-Related
Expenses $1,790 $ - $1,790 $483 $(1) $(1) $2,271
Transaction Costs $22 $ - $22 $90 $ - $ - $112
Integration Costs 57 - 57 3 - - 60
--- --- --- ---
Total Acquisition
Related Costs $79 $ - $79 $93 $ - $ - $172
Adjusted EBITDA
Excluding
Acquisition-Related
Expenses $1,869 $ - $1,869 $576 $(1) $(1) $2,443
Capital Expenditures $847 $ - $847 $408 $ - $ - $1,255
Colocation and
Datacenter Services $581 $ - $581 $49 $(4) $(1) $625
Transport and Fiber 2,041 4 2,045 299 (48) 9 2,305
IP and Data Services 2,345 1 2,346 1,069 (6) (4) 3,405
Voice Services (Local
and Enterprise) 943 - 943 268 - 6 1,217
--- --- --- --- --- --- -----
Total Core Network
Services $5,910 $5 $5,915 $1,685 $(58) $10 $7,552
Wholesale Voice
Services and Other 582 - 582 - - (11) 571
--- --- --- --- --- --- ---
Total Revenue $6,492 $5 $6,497 $1,685 $(58) $(1) $8,123
====== === ====== ====== ==== === ======
* Certain reclassifications have been
made to the historical presentation of
tw telecom's historical results to
conform to the presentation used by
Level 3, primarily related to network
access costs, network related
expenses, depreciation and
amortization and selling, general and
administrative expenses.
(1) The FY14 results have been
adjusted to reflect changes
made to customer assignments
between the wholesale and
enterprise channels as of the
beginning of 2015.
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
Three Months Ended Year Ended
------------------ ----------
(dollars in millions,
except per share data) December 31, September 30, December 31, December 31, December 31,
2015 2015 2014 2015 2014
--- ---- ---- ---- ---- ----
Revenue $2,053 $2,062 $1,914 $8,229 $6,777
Costs and Expenses
Network access costs 708 706 695 2,833 2,529
Network related
expenses 344 369 345 1,432 1,246
Depreciation and
amortization 294 296 250 1,166 808
Selling, general and
administrative
expenses 369 364 393 1,467 1,181
Total costs and
expenses 1,715 1,735 1,683 6,898 5,764
----- ----- ----- ----- -----
Operating Income 338 327 231 1,331 1,013
Other Income (Expense):
Interest income - - - 1 1
Interest expense (152) (145) (195) (642) (654)
Loss on modification
and extinguishment of
debt (55) - (53) (218) (53)
Venezuela
deconsolidation charge - (171) - (171) -
Other, net 3 6 (20) (18) (69)
Total other expense (204) (310) (268) (1,048) (775)
---- ---- ---- ------ ----
Income (Loss) Before
Income Taxes 134 17 (37) 283 238
Income Tax (Expense)
Benefit 3,189 (16) 103 3,150 76
----- --- --- ----- ---
Net Income $3,323 $1 $66 $3,433 $314
====== === === ====== ====
Basic Earnings per Common Share:
Net Income per Share $9.33 $ - $0.22 $9.71 $1.23
Weighted-Average
Shares Outstanding (in
thousands) 356,274 355,791 305,842 353,385 254,428
Diluted Earnings per Common Share:
Net Income per Share $9.24 $ - $0.21 $9.58 $1.21
Weighted-Average
Shares Outstanding (in
thousands) 359,712 358,714 309,597 358,593 258,483
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
December 31, September 30, December 31,
(dollars in
millions) 2015 2015 2014
----------- ---- ---- ----
Assets
Current Assets:
Cash and cash
equivalents $854 $691 $580
Restricted cash and
securities 8 7 7
Receivables, less
allowances for
doubtful accounts 757 810 737
Other 130 149 157
--- --- ---
Total Current Assets 1,749 1,657 1,481
Property, Plant and
Equipment, net 9,878 9,812 9,860
Restricted Cash and
Securities 42 44 20
Goodwill 7,749 7,753 7,689
Other Intangibles,
net 1,127 1,182 1,414
Deferred Tax Assets 3,441 276 300
Other Assets 159 159 183
Total Assets $24,145 $20,883 $20,947
======= ======= =======
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $629 $630 $664
Current portion of
long-term debt 15 16 349
Accrued payroll and
employee benefits 218 230 273
Accrued interest 108 137 174
Current portion of
deferred revenue 267 273 287
Other 179 182 159
--- --- ---
Total Current
Liabilities 1,416 1,468 1,906
Long-Term Debt,
less current
portion 10,994 10,997 10,984
Deferred Revenue,
less current
portion 977 942 921
Other Liabilities 632 696 773
--- --- ---
Total Liabilities 14,019 14,103 14,584
Stockholders' Equity 10,126 6,780 6,363
------ ----- -----
Total Liabilities
and Stockholders'
Equity $24,145 $20,883 $20,947
======= ======= =======
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
------------------
December 31, September 30, December 31,
(dollars in millions) 2015 2015 2014
-------------------- ---- ---- ----
Cash Flows from Operating Activities:
Net income $3,323 $1 $66
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and
amortization 294 296 250
Loss on impairment - 18
Non-cash compensation
expense attributable to
stock awards 49 34 25
Loss on modification and
extinguishment of debt 55 - 53
Venezuela deconsolidation
charge - 171 -
Accretion of debt discount
and amortization of debt
issuance costs 6 5 9
Accrued interest on long-
term debt (29) 12 (12)
Non-cash tax adjustments - - 2
Deferred income taxes (3,207) 15 (118)
Gain (loss) on sale of
property, plant and
equipment and other assets - - -
Other, net 3 2 25
Changes in working capital items:
Receivables 43 (98) 34
Other current assets 10 15 33
Payables 5 21 (56)
Deferred revenue 29 63 35
Other current liabilities (25) 38 32
--- --- ---
Net Cash Provided by
Operating Activities 556 575 396
Cash Flows from Investing Activities:
Capital expenditures (330) (328) (302)
Cash related to
deconsolidated Venezuela
operations - (83) -
Change in restricted cash
and securities, net 2 - -
Investment in tw telecom,
net of cash acquired - - (167)
Proceeds from sale of
property, plant and
equipment and other assets 1 1 -
Other - (14) -
Net Cash Used in Investing
Activities (327) (424) (469)
Cash Flows from Financing Activities:
Long-term debt borrowings,
net of issuance costs 885 (1) 590
Payments on and repurchases
of long-term debt and
capital leases (949) (4) (663)
Net Cash Used in Financing
Activities (64) (5) (73)
Effect of Exchange Rates on
Cash and Cash Equivalents (2) (4) (3)
--- --- ---
Net Change in Cash and Cash
Equivalents 163 142 (149)
Cash and Cash Equivalents
at Beginning of Period 691 549 729
--- --- ---
Cash and Cash Equivalents
at End of Period $854 $691 $580
==== ==== ====
Supplemental Disclosure of Cash Flow Information:
Cash interest paid $173 $129 $190
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SOURCE Level 3 Communications, Inc.
