Actionable news
0
All posts from Actionable news
Actionable news in LVLT: LEVEL 3 COMMUNICATIONS INC,

Level 3 Reports First Quarter 2016 Results

The following excerpt is from the company's SEC filing.

First Quarter 2016 Highlights

Grew Core Network Services revenue by 3.6 percent year-over-year, on a pro forma and constant currency basis

Grew Enterprise Core Network Services revenue by 5.7 percent year-over-year, or 6.2 percent year-over-year, excluding UK Government revenue, both on a pro forma and constant currency basis

Grew North America Enterprise Core Network Services revenue by approximately two percent sequentially, on a pro forma and constant currency basis

Delivered strong Adjusted EBITDA growth of 15 percent on a pro forma basis to $710 million and expanded Adjusted EBITDA margins to 34.6 percent

Generated strong Free Cash Flow of $213 million

BROOMFIELD, Colo., April 28, 2016

Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the first quarter 2016.

Level 3s first quarter results demonstrate the benefit of our emphasis on profitable growth, as evident in our expanding margins and strong Free Cash Flow during the quarter, said Jeff Storey, president and CEO of Level 3. The continued evolution of our products and service capabilities matches the changing and complex needs of enterprises, positioning the company to become the premier provider of global communications services.

Total revenue was $2.051 billion for the first quarter 2016, compared to $2.030 billion on a pro forma basis, for the first quarter 2015, excluding the results from the companys Venezuelan subsidiarys operations that was deconsolidated as of September 30, 2015.

In the first quarter 2016, the company generated net income of $124 million, basic earnings per share of $0.35 and diluted earnings per share of $0.34. Included in basic and diluted earnings per share was Income Tax Expense of $94 million, $85 million of which was non-cash, primarily due to utilization of the companys U.S. federal net operating losses. For the first quarter 2015, net income was $122 million and basic and diluted earnings per share were $0.35.

Financial

Results

Metric

($ in millions)

2015 Pro

Forma(1)(2)

Core Network Services Revenue

Wholesale Voice Services Revenue

Total Revenue

Network Access Costs

Network Access Margin

Network Related Expenses (NRE) (3)

Selling, General and Administrative Expenses (SG&A)(3)

Non-cash Compensation Expense

Adjusted EBITDA(4)

Adjusted EBITDA Margin(4)

Capital Expenditures

Unlevered Cash Flow(4)

Free Cash Flow(4)

Net Income

Net Income per Common Share-Basic

Weighted Average Shares Outstanding (in thousands)- Basic

356,785

346,874

References to pro forma figures represent the results adjusted to exclude the companys

Venezuelan subsidiarys operations except for Net Income, Net Income per Common Share-Basic and Weighted Average Shares Outstanding (in thousands)- Basic.

The reported first quarter 2015 results have been adjusted to reflect changes made to customer assignments between the wholesale and enterprise channels as of the beginning of 2016.

Excludes non-cash compensation expense.

See schedule of non-GAAP metrics for definitions and reconciliation to GAAP measures.

Core Network Services (CNS) Revenue

Percent

Change,

Constant

Currency

Latin America

Total CNS Revenue

References to pro forma figures represent the results adjusted to exclude the companys Venezuelan subsidiarys operations.

CNS Revenue

CNS Revenue was $1.947 billion in the first quarter 2016, increasing 3.6 percent year-over-year on a pro forma and constant currency basis.

For the first quarter 2016, Adjusted EBITDA was $710 million. For the first quarter 2015, Adjusted EBITDA on a pro forma basis was $620 million, which excluded the results from the operations of the companys Venezuelan subsidiary.

Adjusted EBITDA margins expanded to 34.6 percent in the first quarter 2016 from 30.5 percent on a pro forma basis in the first quarter 2015.

Capital Market Transactions and Liquidity

After the close of the quarter, on April 21, 2016, the company fully redeemed $775 million aggregate principal amount of Level 3 Financing, Inc.s 7% Senior Notes due 2020. To fund the redemption of these notes, Level 3 Financing used the net proceeds from the issuance of its 5.25% Senior Notes due 2026, along with cash on hand, to pay for principal, accrued interest, applicable premiums and transaction fees and expenses.

The company will incur a loss on extinguishment and modification of debt before taxes as a result of this transaction and related redemption of $40 million, or approximately $0.11 in basic earnings per share in the second quarter 2016.

As of March 31, 2016, the company had cash and cash equivalents of $1.004 billion.

Business Outlook

With our continued focus on profitable revenue growth and strong Adjusted EBITDA results in the first quarter 2016, we are increasing our outlook for full year 2016 Adjusted EBITDA growth, said Sunit Patel, executive vice president and CFO of Level 3.

We now expect full year 2016 Adjusted EBITDA growth of 10 to 12 percent, compared to our previous outlook of 9 to 12 percent. In addition, we continue to expect to generate Free Cash Flow of $1.0 to $1.1 billion.

The company has also updated full year 2016 outlook measures for interest expense and non-cash compensation expense.

Metrics

Old Outlook

New Outlook

Adjusted EBITDA(1)

YoY growth of 9% to 12%

YoY growth of 10% to 12%

Free Cash Flow

No Change

GAAP Interest Expense

$570 million

$555 million

Cash Interest Expense

$520 million

$510 million

Capital Expenditures

15% of Total Revenue

Depreciation and amortization

$1.230 billion

Cash Income Tax

Non-cash Compensation Expense

$130 million

$170 million

Full Year Income Tax Rate

(1) From a starting point of $2.592 billion, which is adjusted to exclude Adjusted EBITDA from the companys Venezuela subsidiary.

Conference Call and Website Information

Level 3 will hold a conference call to discuss the companys First Quarter Results today at 10 a.m. ET. The call will be broadcast live on Level 3s Investor Relations website at http://investors.level3.com. Additional information regarding First Quarter Results, including the presentation management will review on the conference call, will be available on Level 3s 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 3s 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 managements 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 3s 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 companys 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 3s 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

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.

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.

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 companys network.

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

Q1 2016 (as reported)

(in millions)

Total Other Expense

Depreciation and Amortization

Non-Cash Stock Compensation

Adjusted EBITDA Margin

Q1 2015 (pro forma)(1)

Net Income

(1)Represents the consolidated results pro forma to exclude the Companys Venezuelan subsidiarys operations that was deconsolidated as of September 30, 2015.

Q1 2015 (as reported)

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 companys 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 companys 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 companys 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 companys 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.

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 companys 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 3s 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 companys 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 companys 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 3s 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 March 31, 2016 (as reported)

($ in millions)

Cash Flow

Free Cash Flow

Net Cash Provided by Operating Activities

Cash Interest Paid

Interest Income

Three Months Ended March 31, 2015 (pro forma)(1)

Three Months Ended March 31, 2015 (as reported)

LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(unaudited)

Three Months Ended

(dollars in millions, except per share data)

March 31, 2016

December 31, 2015

March 31, 2015

Costs and Expenses

Network access costs

Network related expenses

Selling, general and administrative expenses

Total costs and expenses

Operating Income

Other Income (Expense):

Interest income

Interest expense

Loss on modification and extinguishment of debt

Other, net

Total other expense

Income Before Income Taxes

Income Tax (Expense) Benefit

Net Income

Basic Earnings per Common Share:

Net Income per Share

Weighted-Average Shares Outstanding (in thousands)

356,274

Diluted Earnings per Common Share:

360,339

359,712

350,832

Consolidated Balance Sheets

(dollars in millions)

Assets

Current Assets:

Cash and cash equivalents

Restricted cash and securities

Receivables, less allowances for doubtful accounts

Total Current Assets

Property, Plant and Equipment, net

Restricted Cash and Securities

Goodwill

Other Intangibles, net

Deferred Tax Assets

Other Assets

Total Assets

25,039

24,017

21,155

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable

Current portion of long-term debt

Accrued payroll and employee benefits

Accrued interest

Current portion of deferred revenue

Total Current Liabilities

Long-Term Debt, less current portion

10,870

10,866

10,849

Deferred Revenue, less current portion

Other Liabilities

Total Liabilities

14,697

13,891

14,438

10,342

10,126

Total Liabilities and Stockholders' Equity

Cash Flows from Operating Activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Non-cash compensation expense attributable to stock awards

Loss on modification and extinguishment of debt

Accretion of debt discount and amortization of debt issuance costs

Accrued interest on long-term debt, net

Deferred income taxes

(3,207

Gain on sale of property, plant and equipment and other assets

Other, net

Changes in working capital items:

Other current assets

Payables

Deferred revenue

Other current liabilities

Cash Flows from Investing Activities:

Capital expenditures

Change in restricted cash and securities, net

Proceeds from sale of property, plant and equipment and other assets

Net Cash Used in Investing Activities

(1,125

Cash Flows from Financing Activities:

Long-term debt borrowings, net of issuance costs

Payments on and repurchases of long-term debt and capital leases

Net Cash Provided by (Used in) Financing Activities

Effect of Exchange Rates on Cash and Cash Equivalents

Net Change in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Period

Cash and Cash Equivalents at End of Period

Supplemental Disclosure of Cash Flow Information:

Cash interest paid

The above information was disclosed in a filing to the SEC. To see the filing, click here.

To receive a free e-mail notification whenever Level 3 Communications makes a similar move, sign up!

Other recent filings from the company include the following:

Level 3 Communications just filed a prospectus, suggesting it plans to soon issue some securities - April 27, 2016
Level 3 Communications Just Received a Notice of Effectiveness - April 26, 2016
Registration of securities, business combinations - April 22, 2016
Level 3: Form, Schedule Or Registration Statement No Filing Party: Date Filed: - April 20, 2016