Level 3 Communications reported quarterly revenue of $1.25 billion, up from $945 million in Q4 2002, primarily due to settlement revenue recognized in the quarter and the inclusion of results generated from the acquisition of Genuity. Net income for the quarter was $119 million, or $0.26 basic earnings per share and $0.22 diluted earnings per share, versus previously announced projections of a net loss of $0.65 basic loss per share. Included in net income was $326 million of revenue associated with customer terminations and settlements, of which $294 million relates to a non-cash settlement with XO Communications and a $70 million gain on the sale of the company’s interest in its toll road operations. These two items contributed a net gain of $396 million, or $0.88 basic earnings per share. Some additional points:
- Level 3 generated positive operating cash flow for the first time.
The company noted progress in the integration of Genuity’s operations, saying it had begun to close duplicative network capacity and facilities, combine network operating centers, and migrate customer traffic onto the Level 3 network. The Level 3 transport network will remain in place, augmented by 4,000 route fiber miles from Genuity. All of Genuity’s IP traffic will be migrated onto the Level 3 backbone; major Genuity POPs will be reduced from 70 to 10; a substantial percentage of Genuity’s modem ports will be mapped to the Level 3 softswitch platform; Genuity data centers will be reduced from 8 to 2; redundant metro access links will be eliminated as traffic moves onto local Level 3 fiber. Level 3 anticipates integration costs of $75 to $100 million, but anticipates significant costs saving once the network is integration is complete.
Level 3 has hired 1,400 Genuity employees, but will continue to evaluate its staffing needs.
CAPEX for property, plant and equipment was $25 million for Q1, including $3 million for information services and other businesses.
Based on current sales trends, the company said it is cautiously optimistic that it hit bottom in mid-year 2002.
http://www.level3.com
