Telecomunicazioni
Level 3 Reports Third Quarter 2012 Results
- Core Network Services revenue increased 1.1 percent sequentially on a constant currency basis
- Adjusted EBITDA grew to $372 million , up 5 percent sequentially and 12 percent year over year on a pro forma basis
- Net loss of $0.26 per share for the third quarter of 2012, compared to a net loss of $0.29 per share for the second quarter of 2012, excluding losses related to interest rate swap agreements and debt extinguishment in the third quarter of 2012
- Company remains on track to achieve $300 million of projected total run-rate Adjusted EBITDA synergies and $40 million of capital expense synergies from the Global Crossing acquisition
- Company reaffirms 2012 Adjusted EBITDA and Free Cash Flow guidance
BROOMFIELD, Colorado , Oct. 24, 2012 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) reported total revenue of $1.590 billion for the third quarter 2012, compared to $1.586 billion for the second quarter 2012.
The net loss for the third quarter 2012 was $166 million , or $57 million excluding losses of $60 million related to interest rate swap agreements and $49 million related to the extinguishment of debt. This compared to a net loss of $62 million in the second quarter 2012. On a per share basis, for the third quarter 2012, the net loss was $0.76 , or $0.26 excluding the losses related to the interest rate swap agreements and the extinguishment of debt, compared to $0.29 for the second quarter 2012.
Consolidated Adjusted EBITDA increased to $372 million in the third quarter 2012, compared to $353 million in the second quarter 2012.
"We continue to see strong demand from enterprise customers," said James Crowe , CEO of Level 3. "Our local to global network reach and broad portfolio of services position us for continued growth."
CNS revenue grew sequentially to $1.395 billion in the third quarter 2012, increasing approximately 1.1 percent on a constant currency basis.
"Strong growth in Latin America CNS revenue and continued growth in our enterprise business led to improved overall revenue performance this quarter," said Sunit Patel , executive vice president and CFO of Level 3. "On a constant currency basis, total CNS revenue grew 1.1 percent compared to 0.7 percent in the second quarter."
The deferred revenue balance was $1.101 billion at the end of the third quarter 2012, compared to
$1.118 billion at the end of the second quarter 2012.
Cost of revenue decreased to $642 million in the third quarter 2012, compared to
$648 million in the second quarter 2012.
Gross margin improved to 59.6 percent for the third quarter 2012, compared to 59.1 percent in the second quarter 2012.
Excluding non-cash compensation expense, SG&A was $576 million in the third quarter 2012, compared to
$585 million in the second quarter 2012. Utility costs were seasonally higher during the third quarter 2012 compared to the second quarter 2012. SG&A included
$18 million of integration costs in the third quarter 2012, compared to
$17 million of integration costs in the second quarter 2012.
SG&A, including non-cash compensation expense, was $625 million for the third quarter 2012, compared to $614 million for the second quarter 2012. Non-cash compensation expense was higher in the third quarter 2012 at $49 million , compared to $29 million in the second quarter 2012.
Adjusted EBITDA grew 5 percent sequentially to $372 million for the third quarter 2012, compared to
$353 million for the second quarter 2012, including integration expenses in both periods. Pro forma Adjusted EBITDA for the third quarter 2011, assuming the Global Crossing acquisition was completed on
January 1, 2011 , was $331 million . The year over year growth rate of pro forma Adjusted EBITDA was 12 percent.
Adjusted EBITDA margin increased to 23.4 percent for the third quarter 2012, compared to 22.3 percent for the second quarter 2012.
During the third quarter 2012, Unlevered Cash Flow was $77 million , compared to
$112 million in the second quarter 2012.
Free Cash Flow was negative $157 million for the third quarter 2012, compared to positive $3 million in the second quarter 2012. "Net Cash Interest expense was approximately $120 million higher in the third quarter 2012, compared to the second quarter 2012, and working capital was a use of cash during the quarter," said Patel. "In the fourth quarter, we expect Net Cash Interest expense to decline by approximately $110 million ."
The company and its wholly owned subsidiary, Level 3 Financing, Inc., completed the following transactions during the quarter:
After the close of the quarter, on Oct. 4, 2012 , Level 3 Financing refinanced its existing $650 million Tranche B II and $550 million Tranche B III Term Loans, maturing in 2018, through the creation of a new Tranche B II Term Loan of $1.2 billion , maturing in 2019.
The company recognized a loss on extinguishment of debt of
$49 million during the third quarter 2012 and expects to recognize a loss of approximately
$50 million in the fourth quarter 2012 as a result of these transactions.
The company has reduced the average interest rate on its outstanding maturities to 7.5 percent, from 7.9 percent at the end of the second quarter 2012, including the change in the accounting treatment associated with the interest rate swap agreements.
As of Sept. 30, 2012 , the company had cash and cash equivalents of approximately $793 million .
"Looking back over the year since closing the Global Crossing acquisition, we are pleased with the progress we have made integrating the two companies," said
Jeff Storey , president and COO of Level 3. "We continue to rationalize our product portfolio, while also augmenting our capabilities, such as the broad range of managed security services we announced earlier this month."
"Our efforts to closely monitor all customer touch points have proven effective, and we believe our customers continue to be pleased with the consistently high level of service they receive from us," said Storey.
"We are reiterating the guidance we provided earlier this year," said Patel. "We expect CNS revenue to continue to grow in the fourth quarter 2012, and we remain confident in our expectations for 20 to 25 percent Adjusted EBITDA growth for the full year 2012, from the starting point of $1.216 billion of pro forma Adjusted EBITDA for 2011. We continue to expect capital expenditures for the full year 2012 to be approximately 12 percent of total revenue, and we continue to expect, in the aggregate, to generate positive Free Cash Flow for the second through fourth quarters of 2012.
"Given the capital markets transactions we completed in the third quarter and at the beginning of the fourth quarter, we are updating our interest expense guidance for the full year 2012, and now expect GAAP interest expense of $740 million and net cash interest expense of approximately $695 million ."
Level 3 will hold a conference call to discuss the company's third quarter 2012 results today at
10:30 a.m. ET . The conference call will be broadcast live on Level 3's Investor Relations website at http://lvlt.client.shareholder.com/events.cfm. Additional information regarding the third quarter 2012 results, including the presentation that 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 can also be sent to Investor.Relations@Level3.com.
The call will be archived and available on Level 3's Investor Relations website or can be accessed as an audio replay starting at 2 p.m. ET on Oct. 24 until noon ET on Dec. 24 . The replay can be accessed by dialing +1-800-633-8284 (U.S. Domestic) or +1-402-977-9140 (International), conference code 21605016.
For additional information, please call +1-720-888-2502.
Level 3 Communications, Inc. (NYSE: LVLT) 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 450 markets in 45 countries over 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
© Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications, Level (3), Think Ahead, the Level 3 Logo and the Level 3 Think Ahead 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/or other countries. 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.
Level 3 maintains a corporate website at www.level3.com, and you can find additional information about the company through the Investors pages on that website at http://lvlt.client.shareholder.com/. Level 3 uses its website as a channel of distribution of important information about the company. Level 3 routinely posts financial and other important information regarding the company and its business, financial condition and operations on the Investor Relations web pages.
Visitors to the Investors Relations web pages can view and print copies of Level 3's SEC filings, including periodic and current reports on Forms 10-K, 10-Q, 8-K, as soon as reasonably practicable after those filings are made with the SEC.
Copies of the charters for each of the Audit, Compensation and Nominating and Governance committees of Level 3's Board of Directors, its Corporate Governance Guidelines, Code of Ethics, press releases and analysts and investor conference presentations are all available through the Investor Relations web pages.
Please note that the information contained on any of Level 3's web sites is not incorporated by reference in, or considered to be a part of, any document unless expressly incorporated by reference in that document.
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.
is defined as total revenue from the Consolidated Statements of Operations.
includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).
is defined as total revenue less cost of revenue from the Consolidated Statements of Operations.
is defined as gross margin ($) divided by total revenue. Management believes that 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.
is defined as net income (loss) from the Consolidated Statements of Operations before income taxes, total other income (expense), non-cash impairment charges, depreciation and amortization, non-cash stock compensation expense, and discontinued operations.
is defined as Adjusted EBITDA divided by total revenue.
* Includes Level 3 Communications results prior to the acquisition of Global Crossing on October 4, 2011 .
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 of debt and other, net because these items are not related to the primary operations of the company.
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 interest income, interest expense, income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, the gain (or loss) on extinguishment 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.
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's 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 including related cash transaction and integration costs. 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.
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.
Schedule has been updated for the removal of Discontinued Operations.
The following tables reflect the pro forma combined company results of Level 3 and Global Crossing for the three months ended September 30, 2011 . The tables begin with the pre-acquisition historical results in the columns labeled "Level 3" and "Global Crossing." The column labeled "Intercompany Eliminations," includes adjustments to remove transactions between Level 3 and Global Crossing. The column "Pro Forma Adjustments," includes adjustments as a result of purchase price accounting and changes in debt structure as a result of the acquisition.
is defined as total debt gross debt, including capital leases from the consolidated balance sheet adjusted for the refinancing of the $650 million Tranche B II and $550 million Tranche B III Term Loans.
is defined as total cash and cash equivalents adjusted for the refinancing of the $650 million Tranche B II and $550 million Tranche B III Term Loans.
is defined as pro forma debt, reduced by pro forma cash and cash equivalents and divided by Annualized Adjusted EBITDA.