LEVEL 3 PARENT LLC BROOMFIELD, Colo., Aug. 2, 2017 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the quarter ended June 30, 2017.
"Level 3 continues to focus on delivering profitable growth and expanding margins," said Jeff Storey, president and CEO of Level 3. "With the CenturyLink team, we have gained good traction on integration planning. I am excited to become part of the combined company management team when the transaction closes, as I believe the combination with CenturyLink will enable us to deliver significant value to our stockholders, customers and employees."
Total revenue was $2.061 billion for the second quarter 2017, compared to $2.056 billion for the second quarter 2016. In the second quarter 2017, the company generated net income of $154 million and basic earnings per share of $0.42.
Financial Results
Second Second
Quarter Quarter
Metric 2017 2016(1)
($ in millions)
--------------
Core Network Services Revenue $1,965 $1,956
----------------------------- ------ ------
Wholesale Voice Services Revenue $96 $100
-------------------------------- --- ----
Total Revenue $2,061 $2,056
------------- ------ ------
Network Access Costs $675 $676
-------------------- ---- ----
Network Access Margin 67.2% 67.1%
--------------------- ---- ----
Network Related Expenses (NRE)(2) $331 $335
-------------------------------- ---- ----
Selling, General and Administrative
Expenses (SG&A)(2) $333 $330
----------------------------------- ---- ----
Non-cash Compensation Expense $39 $31
----------------------------- --- ---
Adjusted EBITDA(3) $722 $715
----------------- ---- ----
Adjusted EBITDA, excluding
acquisition-related expenses(3)(4) $744 $715
----------------------------------- ---- ----
Adjusted EBITDA Margin(3) 35.0% 34.8%
------------------------ ---- ----
Adjusted EBITDA Margin, excluding
acquisition-related expenses(3)(4) 36.1% 34.8%
----------------------------------- ---- ----
Cash Flows from Operating
Activities(3)(5) $564 $631
------------------------- ---- ----
Capital Expenditures $328 $367
-------------------- ---- ----
Capital Expenditures, excluding
acquisition-related capital
expenditures(6) $322 $367
------------------------------- ---- ----
Unlevered Cash Flow(3) $359 $396
--------------------- ---- ----
Unlevered Cash Flow, excluding
acquisition-related expenses(3)(5) $362 $396
----------------------------------- ---- ----
Free Cash Flow(3) $233 $264
---------------- ---- ----
Free Cash Flow, excluding
acquisition-related expenses(3)(5) $236 $264
----------------------------------- ---- ----
Net Income(7) $154 $156
------------ ---- ----
Net Income per Common Share-Basic(7) $0.42 $0.44
----------------------------------- ----- -----
Weighted Average Shares Outstanding
(in thousands)-Basic 362,385 357,924
----------------------------------- ------- -------
(1) The reported second quarter 2016
results have been adjusted to reflect
changes made to customer assignments
between the wholesale and enterprise
channels as of the beginning of 2017.
(2) Excludes non-cash compensation
expense.
(3) See schedule of non-GAAP metrics for
definitions and reconciliation to
GAAP measures.
(4) In the second quarter 2017,
acquisition-related expenses were
$22 million.
(5) In the second quarter 2017, cash paid
for acquisition-related expenses
was $3 million.
(6) In the second quarter 2017,
acquisition-related capital
expenditures were $6 million.
(7) Results for the second quarter 2016
have been adjusted to reflect the
Company's adoption of Account
Standards Update 2016-09,
Improvements to Employee Share-Based
Payment Accounting.
Second Quarter 2017 Revenue Results
Second 2Q17/2Q16 2Q17/2Q16
Quarter Percent Percent
2016(1) Change Change,
Core Network Second Constant
Services (CNS) Currency
Revenue Quarter
2017
($ in millions)
--------------
North America $1,607 $1,605 -% -%
------------- ------ ------ --- ---
Wholesale $415 $443 (6%) (6%)
--------- ---- ---- --- ---
Enterprise $1,192 $1,162 3% 3%
---------- ------ ------ --- ---
EMEA $176 $191 (8%) (3%)
---- ---- ---- --- ---
Wholesale $55 $61 (10%) (6%)
--------- --- --- ---- ---
Enterprise $107 $112 (4%) -%
---------- ---- ---- --- ---
UK Government $14 $18 (22%) (9%)
------------- --- --- ---- ---
Latin America $182 $160 14% 11%
------------- ---- ---- --- ---
Wholesale $36 $37 (3%) (3%)
--------- --- --- --- ---
Enterprise $146 $123 19% 16%
---------- ---- ---- --- ---
Total CNS Revenue $1,965 $1,956 -% 1%
----------------- ------ ------ --- ---
Wholesale $506 $541 (6%) (6%)
--------- ---- ---- --- ---
Enterprise $1,459 $1,415 3% 3%
---------- ------ ------ --- ---
(1) The reported second quarter 2016
results have been adjusted to
reflect changes made to customer
assignments between the wholesale
and enterprise channels as of the
beginning of 2017.
Liquidity
As of June 30, 2017, the company had cash, cash equivalents and marketable securities of $2.2 billion.
2017 Business Outlook
"We remain confident in and are reiterating our outlook for Adjusted EBITDA and Free Cash Flow," said Sunit Patel, executive vice president and CFO of Level 3. "For the full year 2017, we continue to expect Adjusted EBITDA of $2.94 to $3.00 billion and Free Cash Flow of $1.10 to $1.16 billion, excluding CenturyLink acquisition-related expenses. All other outlook measures also remain unchanged."
Metrics(1) 2017 Outlook
--------- ------------
Adjusted EBITDA $2.94 to $3.00 billion
--------------- ----------------------
Free Cash Flow $1.10 to $1.16 billion
-------------- ----------------------
GAAP Interest Expense $540 million
--------------------- ------------
Cash Interest Expense $520 million
--------------------- ------------
Capital Expenditures 16% of Total Revenue
-------------------- --------------------
Depreciation and Amortization $1.35 billion
----------------------------- -------------
Cash Income Tax $40 million
--------------- -----------
Non-cash Compensation Expense $170 million
----------------------------- ------------
Full Year Income Tax Rate ~38%
------------------------- ---
(1) All outlook measures exclude
CenturyLink acquisition-
related expenses.
Conference Call and Website Information
Level 3 will broadcast a live conference call on its Investor Relations website, http://investors.level3.com at 3:30 p.m. MT/5:30 p.m. ET. Additional information regarding the second quarter 2017 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).
The call will be archived and available as an audio replay on Level 3's Investor Relations website starting at 7 p.m. ET August 3 until 6 p.m. ET October 31, 2017. The replay can be accessed by dialing +1 800-633-8284 (U.S. Domestic) or +1 402-977-9140 (International), reservation code 21854939.
For additional information, please call +1 720-888-2518.
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
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 Statements
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: increase revenue from its services to realize its targets for financial and operating performance; 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 risks associated with continued uncertainty in the global economy; 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; 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.
Except for the historical and factual information contained herein, the matters set forth in this communication, including statements regarding the expected timing and benefits of the proposed transaction, such as efficiencies, cost savings, enhanced revenues, growth potential, market profile and financial strength, and the competitive ability and position of the combined company, and other statements identified by words such as "will," "estimates," "anticipates," "believes," "expects," "projects," "plans," "intends," "may," "should," "could," "seeks" and similar expressions, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond our control. These forward-looking statements, and the assumptions upon which they are based, (i) are not guarantees of future results, (ii) are inherently speculative and (iii) are subject to a number of risks and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied in those statements if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the ability of the parties to timely and successfully receive the required approvals for the combination from regulatory agencies free of conditions materially adverse to the parties and from their respective shareholders; the possibility that the anticipated benefits from the proposed transaction cannot be fully realized or may take longer to realize than expected; the possibility that costs, difficulties or disruptions related to the integration of Level 3's operations with those of CenturyLink will be greater than expected; the ability of the combined company to retain and hire key personnel; the effects of competition from a wide variety of competitive providers, including lower demand for CenturyLink's legacy offerings; the effects of new, emerging or competing technologies, including those that could make the combined company's products less desirable or obsolete; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, interconnection obligations, access charges, universal service, broadband deployment, data protection and net neutrality; adverse changes in CenturyLink's or the combined company's access to credit markets on favorable terms, whether caused by changes in its financial position, lower debt credit ratings, unstable markets or otherwise; the combined company's ability to effectively adjust to changes in the communications industry, and changes in the composition of its markets and product mix; possible changes in the demand for, or pricing of, the combined company's products and services, including the combined company's ability to effectively respond to increased demand for high-speed broadband service; changes in the operating plans, capital allocation plans or corporate strategies of the combined company, whether based on changes in market conditions, changes in the cash flows or financial position of the combined company, or otherwise; the combined company's ability to successfully maintain the quality and profitability of its existing product and service offerings and to introduce new offerings on a timely and cost-effective basis; the adverse impact on the combined company's business and network from possible equipment failures, service outages, security breaches or similar events impacting its network; the combined company's ability to maintain favorable relations with key business partners, suppliers, vendors, landlords and financial institutions; the ability of the combined company to utilize net operating losses in amounts projected; changes in the future cash requirements of the combined company; and other risk factors and cautionary statements as detailed from time to time in each of CenturyLink's and Level 3's reports filed with the U.S. Securities and Exchange Commission (the "SEC"). Due to these risks and uncertainties, there can be no assurance that the proposed combination or any other transaction described above will in fact be completed in the manner described or at all. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on the proposed combination or the combined company. You should not place undue reliance on these forward?looking statements, which speak only as of the date of this communication. Unless legally required, CenturyLink and Level 3 undertake no obligation and each expressly disclaim any such obligation, to update publicly any forward-looking statements, whether as a result of new information, future events, changed events or otherwise.
Additional Information
In connection with the proposed combination, CenturyLink filed a registration statement on Form S-4 with the SEC (Registration Statement No. 333-215121), which was declared effective by the SEC on February 13, 2017. CenturyLink and Level 3 have filed a joint proxy statement/prospectus and will file other relevant documents concerning the proposed transaction with the SEC. CenturyLink and Level 3 began mailing the definitive joint proxy statement/prospectus to their respective security holders on or about February 13, 2017. The definitive joint proxy statement/prospectus, dated as of February 13, 2017, contains important information about CenturyLink, Level 3, the proposed combination and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED COMBINATION OR INCORPORATED BY REFERENCE IN THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain the definitive joint proxy statement/prospectus and the filings that are incorporated by reference in the definitive joint proxy statement/prospectus, as well as other filings containing information about CenturyLink and Level 3, free of charge, at the website maintained by the SEC at www.sec.gov. Investors and security holders may also obtain these documents free of charge by directing a request to CenturyLink, 100 CenturyLink Drive, Monroe, Louisiana 71203, Attention: Corporate Secretary, or to Level 3, 1025 Eldorado Boulevard, Broomfield, Colorado 80021, Attention: Investor Relations.
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.
Level 3 Communications, Inc. and Consolidated Subsidiaries
Quarterly Constant Currency
2Q16 FX 1Q17 FX 2Q16 FX 1Q17 FX
CNS Revenue ($ in
millions) 2Q17 2Q17 2Q17 2Q16(2) 1Q17 2Q17/ 2Q17 2Q17/1Q17 2Q17
Constant Constant 2Q16 Constant %Change Constant
Currency Currency %Change Currency/ Currency/
2Q16 1Q17
%Change(3) %Change(3)
--- --------- ---------
North America $1,607 $1,607 $1,607 $1,605 $1,594 0.1% 0.1% 0.8% 0.8%
Wholesale $415 $415 $415 $443 $403 (6.3)% (6.3)% 3.0% 3.0%
Enterprise $1,192 $1,192 $1,192 $1,162 $1,191 2.6% 2.6% 0.1% 0.1%
EMEA $176 $186 $172 $191 $175 (7.9)% (2.5)% 0.6% (1.7)%
Wholesale $55 $58 $54 $61 $55 (9.8)% (6.0)% - % (2.0)%
Enterprise $107 $112 $105 $112 $106 (4.5)% 0.4% 0.9% (1.3)%
UK Govt $14 $16 $13 $18 $14 (22.2)% (9.0)% - % (3.3)%
Latin America $182 $178 $183 $160 $177 13.8% 11.3% 2.8% 3.4%
Wholesale $36 $35 $36 $37 $36 (2.7)% (3.0)% - % 1.7%
Enterprise $146 $143 $147 $123 $141 18.7% 15.5% 3.5% 3.8%
Total CNS Revenue $1,965 $1,971 $1,962 $1,956 $1,946 0.5% 0.8% 1.0% 0.8%
Wholesale $506 $508 $505 $541 $494 (6.5)% (6.0)% 2.4% 2.1%
Enterprise(1) $1,459 $1,463 $1,457 $1,415 $1,452 3.1% 3.4% 0.5% 0.3%
Total CNS Revenue $1,965 $1,971 $1,962 $1,956 $1,946 0.5% 0.8% 1.0% 0.8%
Wholesale Voice
Services 96 96 96 100 102 (4.0)% (3.7)% (5.9)% (5.1)%
---
Total Revenue $2,061 $2,067 $2,058 $2,056 $2,048 0.2% 0.6% 0.6% 0.5%
====== ====== ====== ====== ======
(1) Includes UK
Government
(2) The 2016 results have
been adjusted to reflect
changes made to customer
assignments between the
wholesale and enterprise
channels as of the
beginning of 2017.
(3) Percentages are
calculated using whole
numbers. Minor
differences may exist
due to rounding.
Consolidated Revenue is defined as total revenue from the Consolidated Statements of Income.
Core Network Services Revenue includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).
Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder lease costs and other third party costs directly attributable to providing access to customer locations from the Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access Costs do not include any employee expenses or impairment expenses; these expenses are allocated to Network Related Expenses or Selling, General and Administrative Expenses.
Network Related Expenses includes certain expenses associated with the delivery of services to customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities, maintenance and other costs, each related to the operation of its communications network, as well as salaries, wages and related benefits (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of its communications network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.
Network Access Margin ($) is defined as total Revenue less Network Access Costs from the Consolidated Statements of Income, and excludes Network Related Expenses.
Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue. Management believes that network access margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to the company after it pays third party network services costs; in essence, a measure of the efficiency of the company's network.
Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Income before income tax (expense) benefit, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.
Adjusted EBITDA Metric
($ in millions) 2Q17 2Q16
-------------- ---- ----
Net Income $154 $156
Income Tax Expense 69 34
Total Other Expense 130 184
Depreciation and Amortization 330 310
Non-Cash Stock Compensation 39 31
Adjusted EBITDA $722 $715
Add back: Acquisition-Related
Expenses 22 -
Adjusted EBITDA Excluding
Acquisition-Related Expenses $744 $715
==== ====
Total Revenue $2,061 $2,056
====== ======
Adjusted EBITDA Margin 35.0% 34.8%
Adjusted EBITDA Excluding
Acquisition-Related Expenses Margin 36.1% 34.8%
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 Income. 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 loss carryforwards, 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 loss carryforwards, 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
($ in millions) 2Q17 2Q16
-------------- ---- ----
Net Cash Provided by
Operating
Activities $561 $631
Capital Expenditures (328) (367)
Free Cash Flow $233 $264
Cash Interest Paid 129 133
Interest Income (3) (1)
--- ---
Unlevered Cash Flow $359 $396
==== ====
Free Cash Flow $233 $264
Add back: Cash
Acquisition-
Related Expenses 3 -
--- ---
Free Cash Flow
Excluding Cash
Acquisition-
Related Expenses $236 $264
==== ====
Unlevered Cash Flow $359 $396
Add back: Cash
Acquisition-
Related Expenses 3 -
--- ---
Unlevered Cash Flow
Excluding Cash
Acquisition-
Related Expenses $362 $396
==== ====
Debt is defined as total gross debt, including capital leases from the Footnotes to the Consolidated Financial Statements.
Net Debt to Last Twelve Months (LTM) Adjusted EBITDA Ratio is defined as Debt, reduced by cash and cash equivalents and marketable securities and divided by LTM Adjusted EBITDA Excluding Acquisition-Related Expenses.
Level 3 Communications, Inc. and Consolidated Subsidiaries
LTM Adjusted EBITDA
($ in millions) 3Q16 4Q16 1Q17 2Q17 Total:
LTM
--- ---
Total Revenue $2,033 $2,032 $2,048 $2,061 $8,174
Network Access Costs (675) (680) (691) (675) (2,721)
Network Related
Expenses (337) (332) (336) (337) (1,342)
Selling, General and
Administrative
Expenses (348) (346) (364) (366) (1,424)
Add back: Non-Cash
Compensation Expenses 43 35 48 39 165
Adjusted EBITDA $716 $709 $705 $722 $2,852
==== ==== ==== ==== ======
Add back: Acquisition-
Related Expenses - 15 20 22 57
--- --- --- --- ---
Adjusted EBITDA
Excluding
Acquisition-Related
Expenses $716 $724 $725 $744 $2,909
==== ==== ==== ==== ======
Level 3 Communications, Inc. and Consolidated Subsidiaries
Net Debt to LTM Adjusted EBITDA ratio as of June 30, 2017
---------------------------------------------------------
($ in millions)
Debt $11,007
Cash and Cash Equivalents (1,056)
Marketable Securities (1,127)
------
Net Debt $8,824
======
LTM Adjusted EBITDA Excluding
Acquisition-Related Expenses $2,909
======
Net Debt to LTM Adjusted
EBITDA Ratio 3.0
===
Outlook
In order to provide our outlook with respect to non-GAAP metrics, we are required to indicate a range for GAAP measures that are components of the reconciliation of the non-GAAP metric. The provision of these ranges is in no way meant to indicate that the company is explicitly or implicitly providing an outlook on those GAAP components of the reconciliation. In order to reconcile the non-GAAP financial metric to GAAP, the company has to use ranges for the GAAP components that arithmetically add up to the non-GAAP financial metric. While the company feels reasonably comfortable about the outlook for its non-GAAP financial metrics, it fully expects that the ranges used for the GAAP components will vary from actual results. We will consider our outlook of non-GAAP financial metrics to be accurate if the specific non-GAAP metric is met or exceeded, even if the GAAP components of the reconciliation are different from those provided in an earlier reconciliation.
Level 3 Communications, Inc. and Consolidated Subsidiaries
Outlook
Adjusted EBITDA Outlook
Twelve Months Ended December 31, 2017
Range
($ in
millions) Low High
---------- --- ----
Net Income $500 $590
Income Tax
Expense 330 360
Total Other
Expense 570 550
Depreciation
and
Amortization
Expense 1,360 1,340
Non-Cash
Compensation
Expense 180 160
Adjusted
EBITDA $2,940 $3,000
====== ======
Free Cash Flow Outlook
Twelve Months Ended December 31, 2017
Range
($ in
millions) Low High
---------- --- ----
Net Cash
Provided by
Operating
Activities $2,420 $2,520
Capital
Expenditures (1,320) (1,360)
Free Cash
Flow $1,100 $1,160
====== ======
Attachment #1
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
Three Months Ended
------------------
(dollars in millions,
except per share data) June 30, 2017 March 31, 2017 June 30, 2016
----------------------- ------------- -------------- -------------
Revenue $2,061 $2,048 $2,056
Costs and Expenses
Network access costs 675 691 676
Network related
expenses 337 336 339
Depreciation and
amortization 330 320 310
Selling, general and
administrative
expenses 366 364 357
--- --- ---
Total Costs and
Expenses 1,708 1,711 1,682
----- ----- -----
Operating Income 353 337 374
Other Income (Expense):
Interest income 3 2 1
Interest expense (132) (134) (140)
Loss on modification
and extinguishment of
debt - (44) (40)
Other, net (1) 4 (5)
--- --- ---
Total Other Expense (130) (172) (184)
---- ---- ----
Income Before Income
Taxes 223 165 190
Income Tax Expense (69) (70) (34)
--- --- ---
Net Income $154 $95 $156
==== === ====
Basic Earnings per Common Share:
Net Income per Share $0.42 $0.26 $0.44
Weighted-Average
Shares Outstanding (in
thousands) 362,385 361,461 357,924
Diluted Earnings per Common Share:
Net Income per Share $0.42 $0.26 $0.43
Weighted-Average
Shares Outstanding (in
thousands) 365,002 364,121 361,250
Attachment #2
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
June 30, March 31, June 30,
(dollars in millions) 2017 2017 2016
-------------------- ---- ---- ----
Assets
Current Assets:
Cash and cash equivalents $1,056 $1,947 $1,291
Marketable securities 1,127 - -
Restricted cash and
securities 5 7 8
Receivables, less
allowances for doubtful
accounts 707 712 839
Other 141 141 140
--- --- ---
Total Current Assets 3,036 2,807 2,278
Property, Plant and
Equipment, net 10,392 10,285 10,073
Restricted Cash and
Securities 29 31 31
Goodwill 7,737 7,731 7,739
Other Intangibles, net 809 861 1,020
Deferred Tax Assets 3,235 3,305 3,395
Other Assets 49 51 50
--- --- ---
Total Assets $25,287 $25,071 $24,586
======= ======= =======
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $693 $750 $762
Current portion of long-
term debt 306 307 7
Accrued payroll and
employee benefits 178 148 160
Accrued interest 97 101 131
Current portion of deferred
revenue 262 275 268
Other 162 153 170
--- --- ---
Total Current Liabilities 1,698 1,734 1,498
Long-Term Debt, less
current portion 10,584 10,581 10,871
Deferred Revenue, less
current portion 1,058 1,044 1,027
Other Liabilities 632 631 637
--- --- ---
Total Liabilities 13,972 13,990 14,033
Stockholders' Equity 11,315 11,081 10,553
------ ------ ------
Total Liabilities and
Stockholders' Equity $25,287 $25,071 $24,586
======= ======= =======
Attachment #3
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
------------------
June 30, March 31, June 30,
(dollars in millions) 2017 2017 2016
-------------------- ---- ---- ----
Cash Flows from Operating Activities:
Net income $154 $95 $156
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and
amortization 330 320 310
Non-cash compensation
expense attributable to
stock awards 39 48 31
Loss on modification and
extinguishment of debt - 44 40
Accretion of debt discount
and amortization of debt
issuance costs 4 5 5
Accrued interest on long-
term debt, net (4) (28) -
Deferred income taxes 57 62 20
Gain on sale of property,
plant and equipment and
other assets - - (1)
Other, net (3) (5) 6
Changes in working capital items:
Receivables 10 6 (25)
Other current assets (4) (32) (5)
Payables (59) 42 84
Deferred revenue - 50 (4)
Other current liabilities 37 (68) 14
--- --- ---
Net Cash Provided by
Operating Activities 561 539 631
Cash Flows from Investing Activities:
Capital expenditures (328) (368) (367)
Change in restricted cash
and securities, net 4 - 839
Purchases of marketable
securities (1,127) - -
Proceeds from sale of
property, plant and
equipment and other assets - - 1
Net Cash (Used in) Provided
by Investing Activities (1,451) (368) 473
Cash Flows from Financing Activities:
Long-term debt borrowings,
net of issuance costs - 4,569 (1)
Payments on and repurchases
of long-term debt and
capital leases (2) (4,613) (815)
--- ------ ----
Net Cash Used in Financing
Activities (2) (44) (816)
Effect of Exchange Rates on
Cash and Cash Equivalents 1 1 (1)
--- --- ---
Net Change in Cash and Cash
Equivalents (891) 128 287
Cash and Cash Equivalents
at Beginning of Period 1,947 1,819 1,004
----- ----- -----
Cash and Cash Equivalents
at End of Period $1,056 $1,947 $1,291
====== ====== ======
Supplemental Disclosure of Cash Flow Information:
Cash interest paid $129 $153 $133
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SOURCE Level 3 Communications, Inc.
