Broomfield, Colo. (ots-PRNewswire) - Level 3 Communications, Inc.
(Nasdaq: LVLT) today announced its third quarter 2000 results.
Consolidated revenue for the quarter was $341 million. The net loss
for the quarter was $351 million, or $.96 per share.
Included in the company's results is a gain of $22 million
relating to sale of the company's 50 percent interest in Walnut Creek
Mining Company. Excluding this non-operating gain, the net loss for
the quarter was $373 million, or $1.02 per share.
The results for the quarter also include a $61 million non-cash
charge, primarily related to the company's Outperform Stock Option
Program. Excluding this charge and the gain on sale of non-core
assets, the net loss for the quarter was $.85 per share.
"I am pleased that we have experienced another solid quarter,"
said James Q. Crowe, CEO of Level 3. "The strong revenue growth is
evidence of the continuing demand for our services, and I am
particularly pleased with the quality and breadth of our customer
Third Quarter Financial Highlights
Communications and Information Services Revenue: Communications
and information services revenue for third quarter 2000 was $285
million, a 313 percent increase over 1999 third quarter revenue of
$69 million. The year-over-year increase was a result of significant
growth in the communications business.
Total communications revenue was $255 million for the quarter, a
608 percent increase over 1999 third quarter communications revenue
of $36 million, and a 67 percent increase over second quarter 2000
communications revenue of $153 million.
Included in total communications revenue was $101 million of
non-recurring revenue from dark fiber sales. Also included in total
communications revenue for the quarter was $18 million attributable
to reciprocal compensation.
Level 3's customer base continues to increase rapidly. At the end
of the quarter, the company had approximately 2,400 customers -- a 20
percent increase in the number of customers since the end of the
second quarter 2000. Over 75 percent of the customer base currently
purchases more than one Level 3 service.
Communications Services Currently Offered in 47 U.S., European and
Asian Markets: At the end of the quarter, the company offered
communications services in 41 U.S., five European markets and one
Level 3 announced the launch of two new Global IP Services during
the quarter. (3)CrossRoads(TM) is a service offered in North America,
Europe, and Asia for customers that are located in a Level 3 Gateway.
This Internet access and transport service can lower bandwidth costs
for customers by as much as 50 percent using Destination Sensitive
Billing, the industry's first pricing based on the destination of
Internet traffic, rather than traditional flat rate pricing. For
customers not located in a Level 3 Gateway, Level 3 launched
(3)CrossRoads EPOP(TM) (Ethernet Point of Presence), a service
offered in North America and Europe that gives customers high-speed
Ethernet Internet access with economic benefits similar to
Other Revenue: Other revenue of $56 million for the third quarter
included $50 million from coal mining, versus third quarter 1999 coal
mining revenue of $60 million. Full year 2000 coal revenue is
expected to be approximately 10 percent less than full year 1999 coal
revenue due to reduced shipments under long-term coal contracts in
2000 and the sale of the company's 50 percent interest in Walnut
Creek Mining Company during the third quarter.
Cost of Revenue: The cost of revenue for third quarter 2000 was
$199 million, representing a 99 percent increase over third quarter
1999 cost of revenue of $100 million. The year-over-year increase in
the cost of revenue was primarily a result of an increase in leased
network costs and costs associated with dark fiber sales.
Consolidated gross margin was 42 percent for the quarter, up from
34 percent in the second quarter. Gross margin for the communications
business was 38 percent for the quarter, up from 25 percent in the
second quarter. Communications gross margin was significantly higher
than previous quarters as a result of one time contracts. "As
previously announced, we expect full year gross margin for the
communications business to be 25 percent in 2000," said Sureel
Choksi, Chief Financial Officer of Level 3.
Selling, General and Administrative Expenses (SG&A): SG&A expenses
for the quarter were $237 million, a 71 percent increase over third
quarter 1999 SG&A expenses of $139 million. This increase primarily
results from the company's addition of over 2,200 employees during
the past 12 months. The company added approximately 900 employees to
the communications business during the third quarter, bringing the
total number of Level 3 employees to approximately 5,900.
Stock-Based Compensation Expense: The company recognized $61
million in stock-based compensation expense during the quarter. The
Outperform Stock Option (OSO) Program represents the principal
component of the company's stock-based compensation. This expense is
accounted for in accordance with SFAS No. 123, "Accounting For
Stock-Based Compensation." Level 3 expenses the value of OSOs and
its other stock-based compensation over the respective vesting
period. This approach is in contrast to the current practice of most
corporations under which conventional stock options are not accounted
for as an expense on the income statement.
Under Level 3's plan, OSOs are issued quarterly to all employees,
with the exercise price indexed to the performance of the company's
common stock relative to the performance of the Standard & Poor's 500
(S&P 500) Index. The company believes that this program aligns Level
3 employees' and stockholders' interests by basing stock option value
on the company's ability to outperform the S&P 500.
Depreciation and Amortization: Depreciation and amortization
expenses for the quarter were $164 million, a 160 percent increase
from the third quarter 1999 depreciation and amortization expenses of
$63 million. These charges reflect the significant increase in
capital spending to support the growth of the communications
Capital Expenditures: Capital expenditures for property, plant and
equipment were $1.4 billion for the quarter and $4.5 billion year to
date. The majority of the spending was for construction of the U.S.
and European intercity networks, certain local networks in the U.S.
and Europe, and the transatlantic cable network. Total capital
expenditures for 2000 are expected to be approximately $6.3 billion
as previously announced.
Network Development Highlights for the Quarter
U.S. and European Intercity Network Construction Ahead of
Conduit installation is now complete on 96 percent of the total
planned U.S. intercity network, bringing total miles of conduit
construction completed to 15,198. As previously announced, Level 3
advanced the construction completion date of this portion of the
network by more than three months, and now expects construction of
the U.S. intercity multi-conduit network to be substantially
completed by the end of fourth quarter 2000. The company also
installed an additional 4,100 miles of fiber optic cable during the
quarter, bringing the total intercity route miles with fiber
installed to approximately 13,300 miles.
Conduit installation is now complete on 100 percent on Ring 1 and
Ring 2 of the European intercity network, bringing total miles of
conduit construction completed to approximately 3,600. Ring 1 of the
European intercity network connects London, Amsterdam, Frankfurt,
Paris and Brussels. Ring 2 connects Frankfurt, Dusseldorf, Hamburg,
Berlin and Munich.
Second Cable To Be Pulled Through Network: As a result of
continued strong demand for services, Level 3 announced during the
third quarter the deployment of a new generation of fiber in the
second conduit of its U.S. intercity network. Level 3 plans to begin
installing this fiber in the first quarter of 2001 and expects to be
substantially complete by the end of 2001.
Ring 1 of European Intercity Network Lit and Carrying Customer
Traffic: Ring 1 of the European intercity network is 100 percent lit
and is currently carrying customer traffic. During the third quarter,
Level 3 lit 375 miles on its U.S. intercity network, bringing the
total network miles lit to approximately 2,875. A fiber network is
considered to be "lit" when electronics are installed, thereby
enabling the network to carry customer traffic.
New Gateways and Local Fiber Networks in Service: At the end of
the third quarter, Level 3 had operational Gateways in 41 U.S.
markets, five European markets and one Asian market. The four markets
added during the quarter were Hong Kong, Memphis, Salt Lake City and
El Paso. To date, the company has secured approximately 5.5 million
square feet of data center space around the world and has pre-funded
the acquisition of another 1.0 million square feet.
At the end of the third quarter, markets with Level 3 local fiber
networks totaled 31 -- 26 in the U.S. and five in Europe.
Construction of Transatlantic Cable System Complete: The
previously announced 1.28 terabit cable system is construction
complete. The company expects to begin offering service over this
facility during the fourth quarter.
"Overall, it was another strong quarter for us," said James Q.
Crowe. "We remain ahead of schedule on the construction of our
network, which we expect to substantially complete in the fourth
quarter. And, we continue to initiate service in new markets in the
U.S., Europe and Asia."
About Level 3 Communications
Level 3 (Nasdaq: LVLT) is a global communications and information
services company offering a wide selection of IP-based services
including broadband transport, colocation services, submarine
transmission services and the industry's first Softswitch based
services. Level 3 offers services primarily to IP intensive
companies, which deliver their services over the Level 3 Network. Its
Web address is www.Level3.com
Some of the statements made by Level 3 in this press release are
forward-looking in nature. Actual results may differ materially from
those projected in forward-looking statements. Level 3 believes that
its primary risk factors include, but are not limited to: substantial
capital requirements; development of effective internal processes and
systems; the ability to attract and retain high quality employees;
changes in the overall economy; technology; the number and size of
competitors in its markets; law and regulatory policy; and the mix of
products and services offered in the company's target markets.
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 release should be evaluated
in light of these important factors.
LEVEL 3 COMMUNICATIONS, INC.
Consolidated Condensed Statements of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
(dollars in millions) 2000 1999 2000 1999
Information Services $285 $69 $589 $168
Other 56 65 163 174
Total Revenue 341 134 752 342
Costs and Expenses:
Cost of Revenue 199 100 483 243
Amortization 164 63 391 155
and Administrative 237 139 625 374
Compensation 61 39 158 86
Total Costs and
Expenses 661 341 1,657 858
Loss from Operations (320) (207) (905) (516)
Other (Expense) Income,
net (41) (13) (28) 77
Loss before Income Taxes (361) (220) (933) (439)
Income Tax Benefit 10 73 30 143
Net Loss $(351) $(147) $(903) $(296)
Loss per Share:
Basic and Diluted $(0.96) $(0.43) $(2.50) $(0.89)
Basic and Diluted 366,788 340,298 360,956 332,039
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
September 30, December 31,
(dollars in millions) 2000 1999
Cash and cash equivalents $1,158 $1,214
Marketable securities 3,879 2,227
Restricted securities 55 51
less allowances of $23
and $9, respectively 375 148
Income taxes receivable 23 241
Other 131 55
Total Current Assets 5,621 3,936
Property, Plant and Equipment, net 8,175 4,287
Investments 225 300
Other Assets, net 447 381
Liabilities and Stockholders' Equity
Accounts payable $1,094 $830
Current portion of long-term debt 14 6
Accrued payroll and employee benefits 99 43
Accrued interest 94 47
Deferred revenue 159 74
Other 98 88
Total Current Liabilities 1,558 1,088
Long-Term Debt, less current portion 7,140 3,989
Deferred Revenue 352 37
Accrued Reclamation Costs 94 99
Other Liabilities 339 286
Stockholders' Equity 4,985 3,405
Performance Metrics - Third Quarter 2000
In order to monitor the progress of its broadband infrastructure
development, Level 3 has developed several operating and construction
metrics. These benchmarks will be reported every quarter to help
Level 3 stockholders and the investment community track the company's
performance and future progress.
This set of benchmarks is for Phases 1 through 4 of the Level 3
business plan, which includes 56 U.S. city networks, an approximately
16,000 mile U.S. intercity network, 14 European and Asian city
networks, and 3,500 miles of the European intercity network. The
European intercity network includes 1,600 miles built by COLT Telecom
Group plc as part of a joint construction agreement.
Level 3 is currently substantially prefunded for all 6 phases of
its business plan. The total Level 3 network includes 56 U.S. city
networks; 21 European and Asian city networks; 6.5 million square
feet of technical space; an approximately 16,000 mile U.S. intercity
network; a 4,750 mile European intercity network; and transatlantic,
transpacific and Northern Asian undersea networks.
-- Markets in Service -- the number of local markets where Level 3
operational Gateway facility and offers services over leased or
-- Markets with Fiber Networks -- the number of local markets
3 offers services over owned networks.
-- Intercity Rights-of-Way Miles -- the number of intercity miles
rights-of-way agreements are secured. Rights-of-way agreements
required before Level 3 can build the intercity network.
-- Intercity Route Miles Under Construction and Completed -- the
intercity miles completed plus the number of miles under
A segment is considered to be "under construction" when the
-- Intercity Route Miles Completed -- the number of intercity
with multiple conduits installed.
Construction Rollout Schedule For U.S. Network - Phases 1 through
Metric 3rd Q 4th Q 1st Q 2nd Q 3rd Q 4th Q
Actual Actual Actual Actual Actual Actual
Service 10 17 17 21 26 27
Fiber Networks 0 0 7 11 17 22
Of-Way Miles 10,500 14,400 15,200 15,920 16,000 16,000
Completed 175 1,234 4,054 9,270 13,313 15,528
Miles Completed 0 410 1,355 2,495 5,954 9,334
Metric 1st Q 2nd Q 3rd Q 4th Q 1st
Actual Actual Actual Est. Half
In Service 30 38 41 49 56
Fiber Networks 23 26 26 26 26
Of-Way Miles 16,000 16,000 15,889* 15,889* 15,889*
(16,000) (16,000) (16,000)
Completed 15,896 15,926 15,889* 15,889* 15,889*
(16,000) (16,000) (16,000)
Miles Completed 11,800 14,231 15,198 15,889* 15,889*
(14,500) (16,000) (16,000)
Construction Rollout Schedule For International Network - Phases
1 through 4
Metric 1st Q 2nd Q 3rd Q 4th Q
Actual Actual Actual Actual
Service 1 4 4 4
Markets With Fiber
Networks 0 0 1 3
Intercity Route Miles
Under Construction +
Completed** 0 0 1,200 3,400
Intercity Route Miles
Completed** 0 0 904 2,139
Metric 1st Q 2nd Q 3rd Q 4th Q 1st Half
Actual Actual Actual Est. Est.
Service 5 5 6 9 13
Fiber Networks 3 5 5 6 10
Completed** 3,500 3,591 3,591 3,591 3,591
Completed** 3,219 3,559 3,591 3,591 3,591
Numbers in parenthesis ( ) represent the previously announced
* Has been reduced from 16,000 as a result of final adjustments
network buildout plan
** Includes Ring 1, Ring 2 (being built by COLT), and Project
Executive Officer Intended Transfers of Company Securities
The company has a policy that generally requires certain
individuals to pre-announce their intention to make transfers of the
company's securities in the permitted period following each earnings
release, which policy the company reviews annually. After this
review, the company has determined to apply the policy to the
company's board of directors and members of senior management that
are "executive officers" for purposes of the SEC's Section 16 rules.
The company has also determined to only require pre-announcement of
an intent to transfer shares not previously announced, and to not
require the pre-announcement of certain transfers for estate planning
The following schedule shows the individuals that have expressed a
current intent to transfer, during the period, the maximum number of
shares they propose to transfer and the percentage of their holdings,
that the intended transfer amount represents.
None of the individuals are required to dispose of shares and the
listed individuals may choose to sell fewer, or none, of the shares
described, but will not, when combined with shares previously
pre-announced but not yet transferred, sell more during the period.
An individual's ultimate decision to transfer shares of common stock
will be made in compliance with applicable federal securities laws.
Name and Title No. of Shares Percentage (1)
David C. McCourt 50,000 41%
(1) The percentage is derived by dividing (a) the number of
the individual may transfer by (b) the individual's total shares
company's common stock held and all other shares that may be
the future through the exercise of vested options, including
stock options, that are currently exercisable.
ots Original Text Service: Level 3 Communications, Inc.
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investors, Robin Miller,
all of Level 3 Communications, Inc.
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