Telecomunicazioni
Level 3 Reports Second Quarter 2012 Results
- Core Network Services revenue increased 0.7 percent sequentially on a constant currency basis
- Adjusted EBITDA grew to $353 million , up 8 percent sequentially and 12 percent year over year
- Net loss of $0.29 per share for the second quarter of 2012, compared to a net loss of $0.37 per share for the first quarter of 2012, excluding losses on debt extinguishment in the first quarter 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 growth rate of 20 to 25 percent
BROOMFIELD, Colorado , July 25, 2012 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) reported total revenue of $1.586 billion for the second quarter 2012, in line with $1.586 billion for the first quarter 2012.
The net loss for the second quarter 2012 was $62 million compared to a net loss of $138 million in the first quarter 2012. On a per share basis, the net loss was $0.29 for the second quarter 2012 and $0.37 for the first quarter 2012. The net loss per share for the first quarter 2012 excludes a loss of $0.29 per share on the extinguishment of debt.
Consolidated Adjusted EBITDA increased to $353 million in the second quarter 2012, compared to $327 million in the first quarter 2012.
"We continue to see steady market demand for our services," said James Crowe , CEO of Level 3. "We saw double digit sequential growth in Core Network Services sales orders in the second quarter, and as a result, we expect stronger sequential performance for the second half of the year. Additionally, we remain on track to realize projected synergies, and integration is proceeding as planned."
Core Network Services revenue grew sequentially to $1.386 billion in the second quarter 2012, an increase of approximately 0.7 percent on a constant currency basis.
"We continue to see strong CNS revenue growth from our enterprise customers," said Sunit Patel , executive vice president and CFO of Level 3. "Excluding U.K. government revenue, our global enterprise CNS revenue grew 2.1 percent sequentially on a constant currency basis."
"Our North America and Latin America businesses performed well this quarter, with CNS revenue growth of 1.1 percent and 2.3 percent on a constant currency basis, respectively. Our EMEA business performance was weaker, primarily due to the expected declines in U.K. government revenue.
"Across the business, we saw strong pickup in orders during the second quarter, which should increase the CNS revenue growth rate in the second half of the year."
The deferred revenue balance was $1.118 billion at the end of the second quarter 2012, compared to $1.143 billion at the end of the first quarter 2012.
Cost of revenue decreased to $648 million in the second quarter 2012, compared to $657 million in the first quarter 2012.
Gross margin improved to 59.1 percent for the second quarter 2012, compared to 58.6 percent in the first quarter 2012.
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Excluding non-cash compensation expense, SG&A was $585 million in the second quarter 2012, compared to $602 million in the first quarter 2012. SG&A included $17 million of integration costs in the second quarter 2012, compared to $15 million of integration costs in the first quarter 2012.
SG&A, including non-cash compensation expense, was $614 million for the second quarter 2012, compared to $626 million for the first quarter 2012. Non-cash compensation expense was $29 million and $24 million for the second quarter 2012 and first quarter 2012, respectively.
Adjusted EBITDA grew 8 percent sequentially to $353 million for the second quarter 2012, compared to $327 million for the first quarter 2012, including integration expenses in both periods. Pro forma Adjusted EBITDA for the second quarter 2011 was $316 million . The year over year growth rate of pro forma Adjusted EBITDA was 12 percent.
Adjusted EBITDA margin increased to 22.3 percent for the second quarter 2012, compared to 20.6 percent for the first quarter 2012.
During the second quarter 2012, Unlevered Cash Flow was $112 million , compared to $166 million on a pro forma basis in the second quarter 2011.
Free Cash Flow was positive $3 million for the second quarter 2012, compared to positive $19 million on a pro forma basis in the second quarter 2011.
On July 18, 2012 , the company announced that it was offering $300 million of its 8.875% Senior Notes due 2019 in a private offering. These notes were priced to investors at 100 percent of their principal amount. The transaction is expected to close on Aug. 1, 2012 , subject to customary closing conditions.
As of June 30, 2012 , the company had cash of approximately $733 million , or $1.026 billion on a pro forma basis for the offering of the 8.875% Senior Notes.
"Integration is proceeding as planned," said Jeff Storey , president and COO of Level 3. "We continue to make progress integrating our networks, processes and systems. We have consolidated service management ticketing systems for North America and EMEA, have transitioned to a single customer care model in each region, and simplified the contract process for the company. These accomplishments are among the many initiatives underway to further improve the customer experience. Additionally, we have consolidated our North America and EMEA Enterprise Resource Planning (ERP) systems, and have begun working on the integration of the Latin America ERP system."
"We are reiterating the guidance we provided earlier this year," said Patel. "We expect to see CNS growth performance improve in the second half of 2012 given the strong CNS sales we saw in the second quarter, 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."
"With the capital markets transaction we announced last week, we now expect GAAP interest expense of $745 million and net cash interest expense of approximately $685 million for the full year 2012. We continue to expect capital expenditures for the full year 2012 to be approximately 12 percent of total revenue, and we continue to expect to generate positive Free Cash Flow for the second through fourth quarters of 2012, in the aggregate."
Level 3 will hold a conference call to discuss the company's second quarter 2012 results today at 9 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 second 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 noon ET on July 25 until noon ET on Aug. 25 . The replay can be accessed by dialing 1 800-633-8284 (U.S. Domestic) or 1 402-977-9140 (International), conference code 21597807.
For additional information, please call 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:// 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 June 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 gross debt, including capital leases from the consolidated balance sheet adjusted for the closing of the $300 million 8.875% Senior Notes due 2019.
is defined as total cash and cash equivalents adjusted for the closing of the $300 million 8.875% Senior Notes due 2019.
is defined as pro forma debt, reduced by pro forma cash and cash equivalents and divided by Annualized Adjusted EBITDA.