News Releases

News Releases
Level 3 Reports Fourth Quarter and Full Year 2014 Results
Fourth Quarter and Full Year 2014 Highlights

 

 

BROOMFIELD, Colo.Feb. 4, 2015 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the quarter and full year ending December 31, 2014.

"Level 3 had a solid 2014, delivering strong financial and operational results and completing the acquisition of tw telecom," said Jeff Storey, president and CEO of Level 3. "In 2015, we continue to focus on executing against our integration plans while investing to grow the business well into the future."

The reported results on a consolidated basis include two months of tw telecom's financial performance, as the company closed the tw telecom acquisition on Oct. 31, 2014.

Consolidated total revenue was $1.914 billion for the fourth quarter 2014, compared to $1.602 billion for the fourth quarter 2013 and $6.777 billion for the full year 2014 compared to $6.313 billion for the full year 2013.

On a consolidated basis, net income per share was $0.35 per share excluding adjustments for unusual items in the fourth quarter 2014; including those adjustments, the net income per share was $0.22 per share. The fourth quarter adjustments were comprised of a charge of $70 million or $0.23 per share of acquisition-related expenses for the tw telecom transaction, a charge of $53 million or $0.17 per share on the extinguishment of debt, a non-cash charge of $17 million or $0.06 per share for the impairment of an intangible asset and a non-cash income tax benefit in EMEA of approximately $100 million or $0.33 per share. This compared to net income per share of $0.06 for the fourth quarter 2013.

Level 3 Communications Standalone Results
The following tables provide Level 3 results on a standalone basis and exclude acquisition-related expenses, intercompany eliminations and acquisition accounting adjustments associated with the acquisition of tw telecom in 2014.

 

 

Metric

($ in millions)

 

 

Fourth

Quarter 2014

Fourth

Quarter 2013

Full Year 2014

Full Year 2013

Core Network Services Revenue(1)

$1,497

$1,443

$5,915

$5,591

Wholesale Voice Services and Other Revenue(1)

$137

$159

$582

$722

Total Revenue(1)

$1,634

$1,602

$6,497

$6,313

Adjusted EBITDA(2)(3)(4)

$470

$448

$1,869

$1,565

Capital Expenditures

$239

$189

$847

$760

Unlevered Cash Flow(2)

$317

$358

$886

$627

Free Cash Flow(2)

$163

$197

$325

($47)

Network Access Margin(2)

62.0%

61.4%

62.2%

60.9%

Adjusted EBITDA Margin(2)(3)(4)

28.8%

28.0%

28.8%

24.8%

Net Income (Loss)

$45

$14

$293

($109)

   

(1)

Excludes the effects of intercompany eliminations of revenue from tw telecom that reduced Core Network Services Revenue as reported by $5 million for both the fourth quarter 2014 and full year 2014.

(2)

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

(3)

In 2013, the company accrued 60 percent of its annual employee bonus compensation expense in the form of equity and 40 percent in cash, compared to 100 percent cash in 2014. The amount of the bonus accrued as equity-based compensation in the fourth quarter of 2013 was $18 million and was $59 million for the full year 2013. Adjusted EBITDA and Adjusted EBITDA margin in the fourth quarter and the full year of 2013 have been adjusted on a pro forma basis to include the $18 million and $59 million, respectively, to present the results on a consistent basis with the accrual of bonus compensation expense in 2014 as 100 percent cash.

(4)

Excludes tw telecom acquisition-related expenses of $68 million for the fourth quarter 2014, $7 million for the third quarter 2014, $4 million for the second quarter 2014 and $79 million for the full year 2014.

Revenue

 

 

Core Network Services (CNS) Revenue

($ in millions)

 

 

Fourth Quarter 2014

Fourth Quarter 2013

Percent

Change,

Constant Currency

Full
 Year
 2014

Full
 Year
 2013

Percent

Change,

Constant Currency

North America

$1,088

$1,025

6%

$4,245

$3,949

7%

Wholesale

$364

$374

(3%)

$1,467

$1,478

(1%)

Enterprise

$724

$651

11%

$2,778

$2,471

12%

             

EMEA

$218

$223

1%

$891

$888

(2%)

Wholesale

$75

$89

(12%)

$328

$354

(9%)

Enterprise(1)

$143

$134

9%

$563

$534

2%

             

Latin America

$191

$195

4%

$779

$754

9%

Wholesale

$41

$41

8%

$165

$160

8%

Enterprise

$150

$154

3%

$614

$594

9%

             

Total CNS Revenue

$1,497

$1,443

5%

$5,915

$5,591

6%

Wholesale

$480

$504

(3%)

$1,960

$1,992

(1%)

Enterprise(1)

$1,017

$939

10%

$3,955

$3,599

10%

   

(1)

Fourth Quarter 2014, Fourth Quarter 2013, Full Year 2014 and Full Year 2013 EMEA CNS Enterprise and Total Enterprise CNS revenue include UK Government revenue of $28 million, $29 million, $115 million and $132 million, respectively.

Deferred Revenue
The deferred revenue balance was $1.148 billion at the end of the fourth quarter 2014, compared to $1.159 billion at the end of the fourth quarter 2013.

Network Access Costs
Network Access Costs, excluding acquisition-related expenses, were $619 million in the fourth quarter 2014, compared to $618 million in the fourth quarter 2013. For the full year 2014, Network Access Costs, excluding acquisition-related expenses, decreased to $2.453 billion, compared to $2.471 billion for the full year 2013.

Network Related Expenses 
Excluding non-cash compensation expense, Network Related Expenses were $301 million in the fourth quarter 2014. This compared to $296 million for the fourth quarter 2013, on a pro forma basis, which includes $9 million in bonus-related non-cash compensation expense.

For the full year 2014, excluding non-cash compensation expense, Network Related Expenses were $1.196 billion. This compared to $1.205 billion for the full year 2013, on a pro forma basis, which includes $27 million in bonus-related non-cash compensation expense.

Selling, General and Administrative Expenses (SG&A)
Excluding non-cash compensation expense and acquisition-related expenses, SG&A expenses were $245 million in the fourth quarter 2014. This compared to $247 million for the fourth quarter 2013, on a pro forma basis, which includes $9 million in bonus-related non-cash compensation.

For the full year 2014, excluding non-cash compensation expense and acquisition-related expenses, SG&A expenses were $980 million. This compared to $1.079 billion for the full year 2013, on a pro forma basis, which includes $32 million in bonus-related non-cash compensation.

Non-cash Compensation Expense
Non-cash compensation expense was $24 million for the fourth quarter 2014. For the fourth quarter 2013, non-cash compensation was $36 million. Excluding $18 million in bonus-related non-cash compensation expense, fourth quarter 2013 non-cash compensation expense was $18 million.

Adjusted EBITDA 
For the fourth quarter 2014, Adjusted EBITDA was $470 million, excluding acquisition-related expenses, compared to $448 million for the fourth quarter 2013, on a pro forma basis, which includes $18 million in bonus-related non-cash compensation expense recognized in that quarter.

For the full year 2014, Adjusted EBITDA was $1.869 billion, excluding acquisition-related expenses, an increase of 19 percent from the starting point of $1.565 billion for the full year 2013, on a pro forma basis, which includes $59 million in bonus-related non-cash compensation expense recognized in that year.

Cash Flow and Liquidity
Free Cash Flow was $325 million for the full year 2014, compared to negative $47 million for the full year 2013.  

For the full year 2014, capital expenditures were 13 percent of total revenue.

tw telecom Standalone Results 
To enable investors to track tw telecom's results, the company is providing selected, unaudited tw telecom financial and operating metrics. The following tables reflect the pro forma results of tw telecom for the fourth quarter 2014 and full year 2014. These results are based on tw telecom's definitions for these metrics and exclude acquisition-related expenses, intercompany eliminations and acquisition accounting adjustments associated with the acquisition of tw telecom by Level 3 in 2014.

 

Metric

($ in millions)

Fourth

Quarter

2014

Fourth

Quarter

2013

Full
  Year

2014

Full
  Year

2013

Revenue

       

     Data and Internet services

$271

$235

$1,029

$893

     Voice services

$78

$77

$310

$307

     Network services

$53

$60

$223

$251

     Taxes and fees

$26

$21

$99

$83

     Intercarrier compensation

$5

$7

$24

$30

Total Revenue

$433

$400

$1,685

$1,564

Modified EBITDA(1)(2) 

$156

$141

$579

$553

Capital Expenditures

$114

$208

$416

$502

Levered Free Cash Flow(1)(3)

$27

($90)

$78

($34)

M-EBITDA Margin Normalized(1)(2)

36.1%

35.2%

34.4%

35.3%

   

(1)

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

(2)

Adjusted to exclude $88 million and $93 million of acquisition-related expenses in the fourth quarter 2014 and the full year 2014, respectively.

(3)

Net interest expense in the fourth quarter of 2014 benefited from the extinguishment of tw telecom's long-term debt obligations.

Pro Forma Combined Company Results 
The following tables provide selected financial metrics on an unaudited pro forma basis for the combined company, using Level 3's definitions for all metrics shown.

Metric

(As reported, $ in millions)

Fourth

Quarter

2014(3)

Fourth

Quarter

2013(3)

Full
  Year

2014(4)

Core Network Services Revenue

$1,915

$1,828

$7,541

Wholesale Voice Services and Other

$137

$159

$582

Total Revenue

$2,052

$1,987

$8,123

Adjusted EBITDA Excluding Acquisition-Related Expenses(1)(2)

$625

$587

$2,443

Adjusted EBITDA Including Acquisition-Related Expenses(1)(2)

$469

$587

$2,271

Adjusted EBITDA Margin Excluding Acquisition-Related Expenses(1)

30.5%

29.5%

30.1%

Adjusted EBITDA Margin Including Acquisition-Related Expenses(1)

22.9%

29.5%

28.0%

Capital Expenditures

$346

$397

$1,255

Capital Expenditures as percent of Total Revenue

17%

20%

15%

   

(1)

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

(2)

See details of the expenses in the Acquisition-related Expenses section of the release.

(3)

Fourth Quarter 2013 and Fourth Quarter 2014 Pro Forma Combined Company results reflect a full three months of both Level 3's and tw telecom's results.

(4)

Full year 2014 Pro Forma Combined Company results reflect a full year of both Level 3's and tw telecom's results.

 

 

 

Core Network Services (CNS) Revenue

($ in millions)

Fourth

Quarter

2014(1)

Fourth

Quarter

2013(1)

Full
  Year

2014(2)

North America

$1,506

$1,410

$5,871

Wholesale

$443

$438

$1,770

Enterprise

$1,063

$972

$4,101

       

EMEA

$218

$223

$891

Wholesale

$75

$89

$328

Enterprise

$143

$134

$563

       

Latin America

$191

$195

$779

Wholesale

$41

$41

$165

Enterprise

$150

$154

$614

       

Total CNS Revenue

$1,915

$1,828

$7,541

Wholesale

$559

$568

$2,263

Enterprise

$1,356

$1,260

$5,278

   

(1)

Fourth Quarter 2013 and Fourth Quarter 2014 Pro Forma Combined Company results reflect a full three months of both Level 3's and tw telecom's results.

(2)

Full year 2014 Pro Forma Combined Company results reflect a full year of both Level 3's and tw telecom's results.

Acquisition-related Expenses
The following table provides a breakdown of the total acquisition-related expenses incurred by both Level 3 and tw telecom.  

 

Fourth Quarter 2014

Full Year 2014

Acquisition-related Expenses

($ in millions)

Level 3

tw telecom

Total

Level 3

tw telecom

Total

Transaction Expenses

$15

$85

$100

$22

$90

$112

Integration Expenses

$53

$3

$56

$57

$3

$60

Total Acquisition-related Expenses

$68

$88

$156

$79

$93

$172

Capital Market Transactions
During the quarter, Level 3 Communications, Inc. issued $600 million aggregate principal amount of its 5.75% Senior Notes due 2022. The net proceeds from the offering of the notes, together with cash on hand, were used to redeem the $605.2 million aggregate principal amount outstanding of Level 3 Communications, Inc.'s 11.875% Senior Notes due 2019.  The company recognized a debt extinguishment loss of $53 million, or $0.17 per share, associated with this transaction during the fourth quarter 2014, that was recognized in Other Expense.

After the close of the quarter, on Jan. 29, 2015, Level 3 Financing, Inc., issued $500 million aggregate principal amount of its 5.625% Senior Notes due 2023 to refinance Level 3 Financing's outstanding $500 million aggregate principal amount of its 9.375% Senior Notes due 2019. In the second quarter 2015, the company expects to recognize a loss of approximately $40 million on the extinguishment of debt associated with this transaction that will be recognized in Other Expense.

As of Dec. 31, 2014, on a consolidated basis, the company had cash and cash equivalents of approximately $580 million.

2015 Business Outlook 
"From a Free Cash Flow perspective, 2014 was a transformational year for Level 3," said Sunit Patel, executive vice president and CFO of Level 3. "The company is well-positioned to generate sustainable Free Cash Flow going forward."

"As we enter 2015, we are focused on driving profitable growth to position the company to deliver long-term stockholder value," Patel continued. "In 2015, we expect to grow Adjusted EBITDA 12 to 16 percent from a starting point of $2.271 billion, which represents the combined company's full year Adjusted EBITDA including acquisition-related expenses. Additionally, we expect to generate Free Cash Flow of $550-$600 million for the full year 2015."

For the full year 2015, the company also expects:

  • GAAP interest expense of approximately $680 million
  • Net cash interest expense of approximately $640 million
  • Capital expenditures of approximately 15 percent of total revenue
  • Depreciation and Amortization of approximately $1.160 billion
  • GAAP and cash income tax expense of approximately $60 million
  • Non-cash compensation expense of approximately $120 million

Conference Call and Web Site Information 
Level 3 will hold a conference call to discuss the company's fourth quarter 2014 and full year 2014 results today at 10 a.m. ET. The call will be broadcast live on Level 3's Investor Relations website at http://investors.level3.com. Additional information regarding fourth quarter 2014 and full year 2014 results, including the presentation management will review on the conference call, will be available on Level 3's Investor Relations website. If you are unable to join the call via the Web, the call can be accessed live at +1 877-283-5145 (U.S. Domestic) or +1 312-281-1200 (International). Questions should be sent to investor.relations@level3.com.

For additional information, please call +1 720-888-2518.

About Level 3 Communications
Level 3 Communications, Inc. (NYSE: LVLT) is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries across a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities. For more information, please visit www.level3.com or get to know us on TwitterFacebook and LinkedIn.

© Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications, Level (3) and the Level 3 Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and elsewhere. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners. Level 3 services are provided by subsidiaries of Level 3 Communications, Inc.

Forward-Looking Statement  
Some statements made in this press release are forward-looking in nature and are based on management's current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ materially from those expressed or implied by the statements. Important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the company's ability to: successfully integrate the tw telecom acquisition; manage risks associated with continued uncertainty in the global economy; increase revenue from its services to realize its targets for financial and operating performance; maintain and increase traffic on its network; develop and maintain effective business support systems; manage system and network failures or disruptions; avert the breach of its network and computer system security measures; develop new services that meet customer demands and generate acceptable margins; manage the future expansion or adaptation of its network to remain competitive; defend intellectual property and proprietary rights; manage continued or accelerated decreases in market pricing for communications services; obtain capacity for its network from other providers and interconnect its network with other networks on favorable terms; attract and retain qualified management and other personnel; successfully integrate future acquisitions; effectively manage political, legal, regulatory, foreign currency and other risks it is exposed to due to its substantial international operations; mitigate its exposure to contingent liabilities; and meet all of the terms and conditions of its debt obligations. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Contact Information

 
   

Media:                          

Investors:

Ashley Pritchard             

Mark Stoutenberg

+1 720-888-5950              

+1 720-888-2518

ashley.pritchard@level3.com           

mark.stoutenberg@level3.com

 

Level 3 Communications:

Non-GAAP Metrics

Pursuant to Regulation G, the company is hereby providing definitions of non-GAAP financial metrics and reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under accounting principles generally accepted in the United States (GAAP) with those financial measures as adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis.

In addition, measures referred to in the accompanying news release as being calculated "on a constant currency basis" or "in constant currency terms" are non-GAAP metrics intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such metrics are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.

Consolidated Revenue is defined as total revenue from the Consolidated Statements of Operations.

Core Network Services Revenue includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).

Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder lease costs and other third party costs directly attributable to providing access to customer locations from the Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access Costs do not include any employee expenses or impairment expenses; these expenses are allocated to Network Related Expenses or Selling, General and Administrative Expenses.

Network Related Expenses includes certain expenses associated with the delivery of services to customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities, maintenance and other costs, each related to the operation of its communications network, as well as salaries, wages and related benefits (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of its communications network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.

Network Access Margin ($) is defined as total Revenue less Network Access Costs from the Consolidated Statements of Operations, and excludes Network Related Expenses.

Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue. Management believes that network access margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to the company after it pays third party network services costs; in essence, a measure of the efficiency of the company's network.

Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Operations before income taxes, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.

Adjusted EBITDA Metric

Q4 2014

(in millions)

     

Net Income

$

66

 

Income Tax Benefit

(103)

 

Total Other Expense

268

 

Depreciation and Amortization

250

 

Non-Cash Stock Compensation

25

 

Non-Cash Impairment

1

 

Adjusted EBITDA

$

507

 
     

Total Revenue

$

1,914

 

Adjusted EBITDA Margin

26.5

%

 

Adjusted EBITDA Metric

Level 3 Standalone

Q4 2014

(in millions)

     

Net Income

$

45

 

Income Tax Benefit

(105)

 

Total Other Expense

250

 

Depreciation and Amortization

187

 

Non-Cash Stock Compensation

24

 

Non-Cash Impairment

1

 

Acquisition-Related Expenses

68

 

Adjusted EBITDA

$

470

 
     

Total Revenue

$

1,634

 

Adjusted EBITDA Margin

28.8

%

 

Adjusted EBITDA Metric

Q4 2013

(in millions)

     

Net Income

$

14

 

Income Tax Benefit

(1)

 

Total Other Expense

206

 

Depreciation and Amortization

204

 

Non-Cash Stock Compensation

36

 

Non- Cash Impairment

$

7

 

Adjusted EBITDA

$

466

 

Non-Cash Stock-Based Bonus

(18)

 

Adjusted EBITDA less non-cash stock based bonus

$

448

 
     

Total Revenue

$

1,602

 

Adjusted EBITDA Margin

28.0

%

 

Adjusted EBITDA Metric

Year Ended December 31, 2014

(in millions)

     

Net Income

$

314

 

Income Tax Benefit

(76)

 

Total Other Expense

775

 

Depreciation and Amortization

808

 

Non-Cash Stock Compensation

73

 

Non-Cash Impairment

1

 

Adjusted EBITDA

$

1,895

 
     

Total Revenue

$

6,777

 

Adjusted EBITDA Margin

28.0

%

 

Adjusted EBITDA Metric

Level 3 Standalone

Year Ended December 31, 2014

(in millions)

     

Net Income

$

293

 

Income Tax Benefit

(78)

 

Total Other Expense

757

 

Depreciation and Amortization

745

 

Non-Cash Stock Compensation

72

 

Non-Cash Impairment

1

 

Acquisition-Related Expenses

79

 

Adjusted EBITDA

$

1,869

 
     

Total Revenue

$

6,497

 

Adjusted EBITDA Margin

28.8

%

 

Adjusted EBITDA Metric

Year Ended December 31, 2013

(in millions)

     

Net Loss

$

(109)

 

Income Tax Expense

38

 

Total Other Expense

737

 

Depreciation and Amortization

800

 

Non-Cash Stock Compensation

151

 

Non- Cash Impairment

$

7

 

Adjusted EBITDA

$

1,624

 

Non-Cash Stock-Based Bonus

(59)

 

Adjusted EBITDA less non-cash stock based bonus

$

1,565

 
     

Total Revenue

$

6,313

 

Adjusted EBITDA Margin

24.8

%

 

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 Operations. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of the company and, measured over time, provides management and investors with a sense of the underlying business' growth pattern and ability to generate cash.  Unlevered Cash Flow excludes cash used for acquisitions and debt service and the impact of exchange rate changes on cash and cash equivalents balances.

There are material limitations to using Unlevered Cash Flow to measure the company's cash performance as it excludes certain material items such as payments on and repurchases of long-term debt, interest income, cash interest expense and cash used to fund acquisitions. Comparisons of Level 3's Unlevered Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and capital expenditures. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents in the Consolidated Statements of Cash Flows.

Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the Consolidated Statements of Cash Flows. Management believes that Free Cash Flow is a relevant metric to provide to investors, as it is an indicator of the company's ability to generate cash to service its debt. Free Cash Flow excludes cash used for acquisitions, principal repayments and the impact of exchange rate changes on cash and cash equivalents balances.

There are material limitations to using Free Cash Flow to measure the company's performance as it excludes certain material items such as principal payments on and repurchases of long-term debt and cash used to fund acquisitions. Comparisons of Level 3's Free Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to interest expense, accounts receivable and accounts payable and capital expenditures. Free Cash Flow should not be used as a substitute for net change in cash and cash equivalents on the Consolidated Statements of Cash Flows.

Unlevered Cash Flow and Free Cash Flow

         

Three Months Ended December 31, 2014

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

396

   

396

 

Capital Expenditures

(302)

   

(302)

 

Cash Interest Paid

$

190

   

N/A

 

Interest Income

   

N/A

 

Cash Interest/Acquisition-Related Expenditures

25

   

61

 

Total

$

309

   

$

155

 
               

 

Level 3 Stand Alone

         

Unlevered Cash Flow and Free Cash Flow

         

Three Months Ended December 31, 2014

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

$

343

   

$

343

 

Capital Expenditures

(239)

   

(239)

 

Cash Interest Paid

190

   

N/A

 

Interest Income

   

N/A

 

Cash Interest/Acquisition-Related Expenditures

23

   

59

 

Total

$

317

   

$

163

 

 

Unlevered Cash Flow and Free Cash Flow

         

Three Months Ended December 31, 2013

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

$

386

   

$

386

 

Capital Expenditures

(189)

   

(189)

 

Cash Interest Paid

161

   

N/A

 

Interest Income

   

N/A

 

Total

$

358

   

$

197

 

 

Unlevered Cash Flow and Free Cash Flow

         

Year Ended December 31, 2014

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

$

1,161

   

$

1,161

 

Capital Expenditures

(910)

   

(910)

 

Cash Interest Paid

598

   

N/A

 

Interest Income

(1)

   

N/A

 

Cash Interest/Acquisition-Related Expenditures

30

   

66

 

Total

$

878

   

$

317

 

 

Level 3 Stand Alone

         

Unlevered Cash Flow and Free Cash Flow

         

Year Ended December 31, 2014

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

$

1,108

   

$

1,108

 

Capital Expenditures

(847)

   

(847)

 

Cash Interest Paid

598

   

N/A

 

Interest Income

(1)

   

N/A

 

Cash Interest/Acquisition-Related Expenditures

28

   

64

 

Total

$

886

   

$

325

 

 

Unlevered Cash Flow and Free Cash Flow

         

Year Ended December 31, 2013

Unlevered

     

($ in millions)

Cash Flow

 

Free Cash Flow

           

Net Cash Provided by Operating Activities

$

713

   

$

713

 

Capital Expenditures

(760)

   

(760)

 

Cash Interest Paid

674

   

N/A

 

Interest Income

   

N/A

 

Total

$

627

   

$

(47)

 

 

4Q14 Pro Forma Combined Company Results

 

($ in millions)

 

Legacy  Level 3

Add: Nov and Dec Intercompany Transactions

Standalone Level 3

Standalone tw

Intercompany Eliminations

Acquisition Accounting

Total

Core Network Services (CNS) Revenue

                             

North America

 

$

1,083

 

$

5

 

$

1,088

 

$

433

 

$

(15)

 

$

 

$

1,506

 

Wholesale

 

$

359

 

$

5

 

$

364

 

$

94

 

$

(15)

 

$

 

$

443

 

Enterprise

 

$

724

 

$

 

$

724

 

$

339

 

$

 

$

 

$

1,063

 
                               

EMEA

 

$

218

 

$

 

$

218

 

$

 

$

 

$

 

$

218

 

Wholesale

 

$

75

 

$

 

$

75

 

$

 

$

 

$

 

$

75

 

Enterprise

 

$

143

 

$

 

$

143

 

$

 

$

 

$

 

$

143

 
                               

Latin America

 

$

191

 

$

 

$

191

 

$

 

$

 

$

 

$

191

 

Wholesale

 

$

41

 

$

 

$

41

 

$

 

$

 

$

 

$

41

 

Enterprise

 

$

150

 

$

 

$

150

 

$

 

$

 

$

 

$

150

 
                               

Total CNS Revenue

 

$

1,492

 

$

5

 

$

1,497

 

$

433

 

$

(15)

 

$

 

$

1,915

 

Wholesale Voice Services and Other

 

137

 

 

137

 

 

     

137

 

Total Revenue

 

$

1,629

 

$

5

 

$

1,634

 

$

433

 

$

(15)

 

$

 

$

2,052

 
                               

Network Access Costs

 

(616)

 

(4)

 

(620)

 

(123)

 

11

 

 

(732)

 

Network Related Expenses

 

(303)

 

(1)

 

(304)

 

(77)

 

3

 

 

(378)

 

Selling, General and Administrative Expenses

 

(333)

 

 

(333)

 

(234)

 

 

 

(567)

 

Add back: Non-Cash Compensation Expenses

 

24

 

 

24

 

69

 

 

 

93

 

Add back: Non-Cash Impairment

 

1

 

 

1

 

 

 

 

1

 

Adjusted EBITDA Including Acquisition-Related Expenses

 

$

402

 

$

 

$

402

 

$

68

 

$

(1)

 

$

 

$

469

 
                               

Transaction Costs

 

$

15

 

$

 

$

15

 

$

85

 

$

 

$

 

$

100

 

Integration Costs

 

53

 

 

53

 

3

 

 

 

56

 

Total Acquisition-Related Expenses

 

$

68

 

$

 

$

68

 

$

88

 

$

 

$

 

$

156

 
                               

Adjusted EBITDA Excluding Acquisition-Related Expenses

 

$

470

 

$

 

$

470

 

$

156

 

$

(1)

 

$

 

$

625

 
                               

Capital Expenditures

 

$

239

 

$

 

$

239

 

$

107

 

$

 

$

 

$

346

 
                               

 

 

4Q13 Pro Forma Combined Company Results

 

($ in millions)

 

Legacy  Level 3

Add: Intercompany Transactions

Standalone Level 3

Standalone tw

Intercompany Eliminations

Acquisition Accounting

Total

Core Network Services (CNS) Revenue

                             

North America

 

$

1,025

 

$

 

$

1,025

 

$

400

 

$

(15)

 

$

 

$

1,410

 

Wholesale

 

$

374

 

$

 

$

374

 

$

79

 

$

(15)

 

$

 

$

438

 

Enterprise

 

$

651

 

$

 

$

651

 

$

321

 

$

 

$

 

$

972

 
                               

EMEA

 

$

223

 

$

 

$

223

 

$

 

$

 

$

 

$

223

 

Wholesale

 

$

89

 

$

 

$

89

 

$

 

$

 

$

 

$

89

 

Enterprise

 

$

134

 

$

 

$

134

 

$

 

$

 

$

 

$

134

 
                               

Latin America

 

$

195

 

$

 

$

195

 

$

 

$

 

$

 

$

195

 

Wholesale

 

$

41

 

$

 

$

41

 

$

 

$

 

$

 

$

41

 

Enterprise

 

$

154

 

$

 

$

154

 

$

 

$

 

$

 

$

154

 
                               

Total CNS Revenue

 

$

1,443

 

$

 

$

1,443

 

$

400

 

$

(15)

 

$

 

$

1,828

 

Wholesale Voice Services and Other

 

159

 

 

159

 

 

 

 

159

 

Total Revenue

 

$

1,602

 

$

 

$

1,602

 

$

400

 

$

(15)

 

$

 

$

1,987

 
                               

Network Access Costs

 

(618)

 

 

(618)

 

(115)

 

11

 

 

(722)

 

Network Related Expenses

 

(298)

 

 

(298)

 

(58)

 

3

 

 

(353)

 

Selling, General and Administrative Expenses

 

(263)

 

 

(263)

 

(95)

 

 

 

(358)

 

Add back: Non-Cash Compensation Expenses

 

36

 

 

36

 

8

 

 

 

44

 

Add back: Non-Cash Impairment

 

7

 

 

7

 

 

 

 

7

 

Subtract: Non-Cash Stock-Based Bonus

 

(18)

 

 

(18)

 

 

 

 

(18)

 

Adjusted EBITDA Including Acquisition-Related Expenses

 

$

448

 

$

 

$

448

 

$

140

 

$

(1)

 

$

 

$

587

 
                               

Transaction Costs

 

 

 

 

 

 

 

 

Integration Costs

 

 

 

 

 

 

 

 

Total Acquisition-Related Expenses

 

 

 

 

 

 

 

 
                               

Adjusted EBITDA Excluding Acquisition-Related Expenses

 

$

448

 

$

 

$

448

 

$

140

 

$

(1)

 

$

 

$

587

 
                               

Capital Expenditures

 

$

189

 

$

 

$

189

 

$

208

 

$

 

$

 

$

397

 
                               
                                             

 

FY2014 Pro Forma Combined Company Results

 

($ in millions)

 

Legacy  Level 3

Add: Nov and Dec Intercompany Transactions

Standalone Level 3

Standalone tw

Intercompany Eliminations

Acquisition Accounting

Total

Core Network Services (CNS) Revenue

                             

North America

 

$

4,240

 

$

5

 

$

4,245

 

$

1,685

 

$

(58)

 

$

(1)

 

$

5,871

 

Wholesale

 

$

1,462

 

$

5

 

$

1,467

 

$

362

 

$

(58)

 

$

(1)

 

$

1,770

 

Enterprise

 

$

2,778

 

$

 

$

2,778

 

$

1,323

 

$

 

$

 

$

4,101

 
                               

EMEA

 

$

891

 

$

 

$

891

 

$

 

$

 

$

 

$

891

 

Wholesale

 

$

328

 

$

 

$

328

 

$

 

$

 

$

 

$

328

 

Enterprise

 

$

563

 

$

 

$

563

 

$

 

$

 

$

 

$

563

 
                               

Latin America

 

$

779

 

$

 

$

779

 

$

 

$

 

$

 

$

779

 

Wholesale

 

$

165

 

$

 

$

165

 

$

 

$

 

$

 

$

165

 

Enterprise

 

$

614

 

$

 

$

614

 

$

 

$

 

$

 

$

614

 
                               

Core Network Services

 

$

5,910

 

$

5

 

$

5,915

 

$

1,685

 

$

(58)

 

$

(1)

 

$

7,541

 

Wholesale Voice Services and Other

 

582

 

 

582

 

 

     

582

 

Total Revenue

 

$

6,492

 

$

5

 

$

6,497

 

$

1,685

 

$

(58)

 

$

(1)

 

$

8,123

 
                               

Network Access Costs

 

(2,450)

 

(4)

 

(2,454)

 

(486)

 

46

 

 

(2,894)

 

Network Related Expenses

 

(1,204)

 

(1)

 

(1,205)

 

(262)

 

11

 

 

(1,456)

 

Selling, General and Administrative Expenses

 

(1,121)

 

 

(1,121)

 

(550)

 

 

 

(1,671)

 

Add back: Non-Cash Compensation Expenses

 

72

 

 

72

 

96

 

 

 

168

 

Add back: Non-Cash Impairment

 

1

 

 

1

 

 

 

 

1

 

Adjusted EBITDA Including Acquisition-Related Expenses

 

$

1,790

 

$

 

$

1,790

 

$

483

 

$

(1)

 

$

(1)

 

$

2,271

 
                               

Transaction Costs

 

$

22

 

$

 

$

22

 

$

90

 

$

 

$

 

$

112

 

Integration Costs

 

57

 

 

57

 

3

 

 

 

60

 

Total Acquisition-Related Expenses

 

$

79

 

$

 

$

79

 

$

93

 

$

 

$

 

$

172

 
                               

Adjusted EBITDA Excluding Acquisition-Related Expenses

 

$

1,869

 

$

 

$

1,869

 

$

576

 

$

(1)

 

$

(1)

 

$

2,443

 
                               
                               

Capital Expenditures

 

$

847

 

$

 

$

847

 

$

408

 

$

 

$

 

$

1,255

 
                               
                               
                               

 

Debt is defined as total gross debt, including capital leases from the Consolidated Balance Sheet.

Net Debt to Last Twelve Months (LTM) Pro Forma Adjusted EBITDA Ratio is defined as debt, reduced by cash and cash equivalents and divided by LTM Adjusted EBITDA Pro Forma to include tw telecom results excluding acquisition-related expenses.

Level 3 Communications, Inc. and Consolidated Subsidiaries

Net Debt to Pro Forma LTM Adjusted EBITDA Ratio as of December 31, 2014

($ in millions)

     

Debt

$

11,366

 

Cash and Cash Equivalents

(580)

 

Net Debt

$

10,786

 

Pro Forma LTM Adjusted EBITDA

$

2,443

 

Net Debt to Pro Forma LTM Adjusted EBITDA Ratio

4.4

 

 

tw telecom

Pursuant to Regulation G, the Company is hereby providing definitions of tw telecom's non-GAAP financial metrics and reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under 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.

Management provides financial measures of tw telecom using U.S. generally accepted accounting principles ("GAAP") as well as adjustments to GAAP measures to describe its business trends, including Modified EBITDA. Management believes that its definition of Modified EBITDA is a standard measure of operating performance and liquidity that is commonly reported and widely used by analysts, investors, and other interested parties in the telecommunications industry because it eliminates many differences in financial, capitalization, and tax structures, as well as non-cash and non-operating income or charges to earnings. Modified EBITDA is not intended to replace operating income (loss), net income (loss), cash flow, and other measures of financial performance and liquidity reported in accordance with GAAP. Management uses Modified EBITDA internally to assess on-going operations and it is the basis for various financial covenants contained in the Company's debt agreements and for operating performance and liquidity. Modified EBITDA is reconciled to Net Income (Loss), the most comparable GAAP measure for operating performance within the Consolidated Operations Highlights.

In addition, management uses unlevered and levered free cash flow, which measure the ability of M-EBITDA to cover capital expenditures. The Company uses these cash flow definitions to eliminate certain non-cash costs. Levered and unlevered free cash flow are reconciled to Net Cash provided by operating activities.

Modified EBITDA (or "M-EBITDA") is defined as net income or loss before depreciation, amortization, accretion, impairment charges and other income and losses, interest expense, debt extinguishment costs, interest income, income tax expense or benefit, cumulative effect of change in accounting principle, and non-cash stock-based compensation expense.  The Company defines Modified EBITDA margin as M-EBITDA divided by total revenue.

Modified EBITDA Metric

Q4 2014

(in millions)

     

Net Loss

$

(60)

 

Income Tax Benefit

(49)

 

Interest Expenses, net of Interest Income

15

 

Non-Cash Interest Expense and Deferred Debt Costs

 

Non-Cash Stock Compensation

69

 

Depreciation, Amortization, Accretion

93

 

M-EBITDA

$

68

 

Acquisition-related expenses

88

 

M-EBITDA excluding acquisition-related expenses

$

156

 

Total Revenue

$

433

 

M-EBITDA Margin, Normalized for acquisition-related expenses

36.1

%

 

Modified EBITDA Metric

Q4 2013

(in millions)

     

Net Income

$

15

 

Income Tax Expense

13

 

Interest Expenses, net of Interest Income

23

 

Non-Cash Interest Expense and Deferred Debt Costs

2

 

Non-Cash Stock Compensation

8

 

Depreciation, Amortization, Accretion

80

 

M-EBITDA

$

141

 

Acquisition-related expenses

 

M-EBITDA excluding acquisition-related expenses

$

141

 

Total Revenue

$

400

 

M-EBITDA Margin, Normalized for acquisition-related expenses

35.2

%

 

Modified EBITDA Metric

Year Ended December 31, 2014

(in millions)

     

Net Loss

$

(26)

 

Income Tax Benefit

(20)

 

Interest Expenses, net of Interest Income

85

 

Non-Cash Interest Expense and Deferred Debt Costs

5

 

Debt Extinguishment Costs

1

 

Non-Cash Stock Compensation

96

 

Depreciation, Amortization, Accretion

345

 

M-EBITDA

$

486

 

Acquisition-related expenses

93

 

M-EBITDA excluding acquisition-related expenses

$

579

 

Total Revenue

$

1,685

 
     

M-EBITDA Margin, Normalized for acquisition-related expenses

 

34.4

%

 

Modified EBITDA Metric

Year Ended December 31, 2013

(in millions)

     

Net Income

$

36

 

Income Tax Expense

34

 

Interest Expenses, net of Interest Income

85

 

Non-Cash Interest Expense and Deferred Debt Costs

11

 

Debt Extinguishment Costs

39

 

Non-Cash Stock Compensation

39

 

Depreciation, Amortization, Accretion

309

 

M-EBITDA

$

553

 

Acquisition-related expenses

 

M-EBITDA excluding acquisition-related expenses

$

553

 

Total Revenue

$

1,564

 
     

M-EBITDA Margin, Normalized for acquisition-related expenses

35.3

%

 

Unlevered free cash flow is defined as Modified EBITDA less capital expenditures, which is reconciled to Net Cash provided by (used in) operating activities.

Levered free cash flow is defined as Modified EBITDA less capital expenditures and net interest expense from operations (excluding debt extinguishment costs, non-cash interest expense and deferred debt costs), which is reconciled to Net Cash provided by (used in) operating activities.

 

Unlevered Cash Flow and Levered Free Cash Flow

   

Three Months Ended December 31, 2014

   

($ in millions)

   
     

Modified EBITDA

$

68

 

Less Capital Expenditures

(114)

 

Unlevered Free Cash Flow

(46)

 

Less Net Interest Expense

(15)

 

Levered Free Cash Flow

$

(61)

 

Acquisition-Related Expenses

88

 

Levered Free Cash Flow, before acquisition-related expenses

$

27

 
     

Levered Free Cash Flow, before acquisition-related expenses

$

27

 

Capital Expenditures

 

114

 

Income Tax Benefit

 

49

 

Deferred Income Taxes

 

(49)

 

Changes in Operating Assets and Liabilities

 

(18)

 

Acquisition-Related Expenses

 

(88)

 

Net Cash Provided by Operating Activities

$

35

 
           

 

Unlevered Cash Flow and Levered Free Cash Flow

   

Three Months Ended December 31, 2013

   

($ in millions)

   
     

Modified EBITDA

$

141

 

Less Capital Expenditures

(208)

 

Unlevered Free Cash Flow

(67)

 

Less Net Interest Expense

(23)

 

Levered Free Cash Flow

$

(90)

 

Acquisition-Related Expenses

 

Levered Free Cash Flow, before acquisition-related expenses

$

(90)

 
       

Levered Free Cash Flow, before acquisition-related expenses

$

(90)

 

Capital Expenditures

 

208

 

Income Tax Expense

 

(13)

 

Deferred Income Taxes

 

11

 

Changes in Operating Assets and Liabilities

 

(8)

 

Acquisition-Related Expenses

 

-

 

Net Cash Provided by Operating Activities

$

108

 
           

 

Unlevered Cash Flow and Levered Free Cash Flow

   

Year Ended December 31, 2014

   

($ in millions)

   
     

Modified EBITDA

$

486

 

Less Capital Expenditures

(416)

 

Unlevered Free Cash Flow

70

 

Less Net Interest Expense

(85)

 

Levered Free Cash Flow

$

(15)

 

Acquisition-Related Expenses

93

 

Levered Free Cash Flow, before acquisition-related expenses

$

78

 
       

Levered Free Cash Flow, before acquisition-related expenses

$

78

 

Capital Expenditures

 

416

 

Income Tax Benefit

 

20

 

Deferred Income Taxes

 

(22)

 

Changes in Operating Assets and Liabilities

 

(17)

 

Acquisition-Related Expenses

 

(93)

 

Net Cash Provided by Operating Activities

$

382

 
           

 

Unlevered Cash Flow and Levered Free Cash Flow

   

Year Ended December 31, 2013

   

($ in millions)

   
     

Modified EBITDA

$

553

 

Less Capital Expenditures

(502)

 

Unlevered Free Cash Flow

51

 

Less Net Interest Expense

(85)

 

Levered Free Cash Flow

$

(34)

 

Acquisition-Related Expenses

 

Levered Free Cash Flow, before acquisition-related expenses

$

(34)

 
       

Levered Free Cash Flow, before acquisition-related expenses

$

(34)

 

Capital Expenditures

 

502

 

Income Tax Expense

 

(34)

 

Deferred Income Taxes

 

31

 

Changes in Operating Assets and Liabilities

 

(26)

 

Acquisition-Related Expenses

 

-

 

Net Cash Provided by Operating Activities

$

439

 
           

 

LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

             
 

Three Months Ended

 

Year Ended

 

(dollars in millions, except per share data)

December 31,

September 30,

December 31,

 

December 31,

December 31,

2014

2014

2013

 

2014

2013

             

Revenue

$         1,914

$    1,629

$         1,602

 

$         6,777

$         6,313

             

Costs and Expenses

           

Network Access Costs

695

607

618

 

2,529

2,471

Network Related Expenses

345

307

298

 

1,246

1,214

Depreciation and Amortization

250

187

204

 

808

800

Selling, General and Administrative Expenses

393

266

263

 

1,181

1,162

  Total Costs and Expenses

1,683

1,367

1,383

 

5,764

5,647

             

Operating Income

231

262

219

 

1,013

666

             

Other Income (Expense):

           

Interest income

1

 

1

Interest expense

(195)

(159)

(148)

 

(654)

(649)

Loss on modification and extinguishment of debt, net

(53)

(67)

 

(53)

(84)

Other, net

(20)

(11)

9

 

(69)

(4)

  Total Other Expense

(268)

(169)

(206)

 

(775)

(737)

             

Income (Loss) Before Income Taxes

(37)

93

13

 

238

(71)

             

Income Tax (Expense) Benefit

103

(8)

1

 

76

(38)

             

Net Income (Loss)

$             66

$         85

$             14

 

$            314

$           (109)

             

Basic Earnings per Common Share:

           

Net Income (Loss) per Share

$          0.22

$     0.36

$          0.06

 

$          1.23

$          (0.49)

Weighted-Average Shares Outstanding (in thousands)

305,842

238,265

225,840

 

254,428

221,198

             

Diluted Earnings per Common Share:

           

Net Income (Loss) per Share

$          0.21

$     0.35

$          0.06

 

$          1.21

$          (0.49)

Weighted-Average Shares Outstanding (in thousands)

309,597

242,464

228,827

 

258,483

221,198

 

LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(unaudited)

       
 

December 31,

September  30,

December 31,

(dollars in millions)

2014

2014

2013

       

Assets

     
       

Current Assets:

     

Cash and cash equivalents

$      580

$       729

$      631

Restricted cash and securities

7

1,020

7

Receivables, less allowances for doubtful accounts

737

678

673

Other

165

173

143

Total Current Assets

1,489

2,600

1,454

       

Property, Plant and Equipment, net

9,881

8,268

8,240

Restricted Cash and Securities

20

21

23

Goodwill

7,668

2,570

2,577

Other Intangibles, net

1,414

154

205

Other Assets

475

370

375

Total Assets

$ 20,947

$  13,983

$ 12,874

       

Liabilities and Stockholders' Equity

     
       

Current Liabilities:

     

Accounts payable

$      664

$       607

$      625

Current portion of long-term debt

349

502

31

Accrued payroll and employee benefits

273

165

209

Accrued interest

174

184

160

Current portion of deferred revenue

287

244

253

Other

167

151

168

Total Current Liabilities

1,914

1,853

1,446

       

Long-Term Debt, less current portion

10,984

8,856

8,331

Deferred Revenue, less current portion

921

877

906

Other Liabilities

765

749

780

Total Liabilities

14,584

12,335

11,463

       

Stockholders' Equity

6,363

1,648

1,411

Total Liabilities and Stockholders' Equity

$ 20,947

$  13,983

$ 12,874

 

LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

       
 

Three Months Ended

 

December 31,

September 30,

December 31,

(dollars in millions)

2014

2014

2013

       

Cash Flows from Operating Activities:

     

Net income 

$             66

$              85

$             14

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

     

Depreciation and amortization

250

187

204

Loss on impairment

18

7

Non-cash compensation expense attributable to stock awards

25

22

36

Loss on modification and extinguishment of debt, net

53

67

Accretion of debt discount and amortization of debt issuance costs

9

10

9

Accrued interest on long-term debt

(12)

18

(10)

Non-cash tax adjustments

2

(5)

(37)

Deferred income taxes

(118)

(12)

(34)

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

(2)

(1)

Other, net

25

(19)

(7)

Changes in working capital items:

     

Receivables

34

24

64

Other current assets

33

(1)

37

Payables

(56)

(17)

(10)

Deferred revenue

35

(7)

46

Other current liabilities

32

38

1

Net Cash Provided by Operating Activities

396

321

386

       

Cash Flows from Investing Activities:

     

Capital expenditures

(302)

(204)

(189)

Change in restricted cash and securities, net

(12)

(1)

Investment in tw telecom, net of cash acquired

(167)

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

2

1

Other

(1)

Net Cash Used in Investing Activities

(469)

(215)

(189)

       

Cash Flows from Financing Activities:

     

Long-term debt borrowings, net of issuance costs

590

(1)

912

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

(663)

(2)

(986)

Net Cash Used in Financing Activities

(73)

(3)

(74)

       

Effect of Exchange Rates on Cash and Cash Equivalents

(3)

(11)

1

       

Net Change in Cash and Cash Equivalents

(149)

92

124

       

Cash and Cash Equivalents at Beginning of Period

729

637

507

       

Cash and Cash Equivalents at End of Period

$            580

$             729

$            631

       

Supplemental Disclosure of Cash Flow Information:

     

Cash interest paid

$            190

$             131

$            161

 

Level 3 Communications.

Logo - http://photos.prnewswire.com/prnh/20140908/144115

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/level-3-reports-fourth-quarter-and-full-year-2014-results-300030624.html

SOURCE Level 3 Communications, Inc.