how excellent and concise a compendium. how do you keep abreast of all this and still have time for lunch?
Lunch is easy, it's the zzzzzzs that get short-changed.
Now, here's some good news from Level3:
interactive.wsj.com@2.cgi?mfmuse/text/autowire/data/BT-CO-20010126-004204.djml/&d2hconverter=display-d2h&NVP=&template=atlas-srch-searchrecent-nf.tmpl&form=atlas-srch-searchrecent-nf.html&from-and=AND&to-and=AND&sort=Article-Doc-Date+desc&qand=&bool_query=fiber+optics&dbname=%26name1%3Ddbname%26name2%3Ddbname%26name3%3Ddbname%26period%3D%3A720&location=article&HI=
January 26, 2001
Level 3 CEO Says Co Beat Expectations In Every Metric
By TOM LOCKE
Of DOW JONES NEWSWIRES
DENVER -- Level 3 Communications Inc. (LVLT) Chief Executive James Crowe told Dow Jones Newswires Friday that the most important aspect of the company's fourth-quarter and full-year results was the revenue growth it displayed and the fact that it "equaled or exceeded expectations in actually every measurement applied to us." That included measurements for construction, operations, and finance, he said.
In an interview following an analysts' conference call and the release of fourth-quarter results, Crowe stressed that 2000 revenue in communications and information services grew almost $700 million, to $973 million from $289 million, and he said Level 3's growth is outstripping that of its competitors.
Communications revenue for 2000 was $858 million, versus Level 3's previously announced estimate of $825 million. And Crowe pointed out that the gross margin for the year was 27%, compared with previous company guidance in early 2000 that it expected to average 25% for the year.
Level 3 shares were recently down 88 cents, or 1.9%, at $45.38 on volume of 3.7 million shares compared with average daily volume of 5.1 million shares. Crowe declined comment on the share drop Friday, noting that he is concerned with long-term movement of share price rather than day-to-day fluctuations.
Crowe declined to give any forward guidance in the conference call since Level 3 intends to provide that guidance in detail at a meeting for analysts and investors in New York on Monday.
The Broomfield, Colo., telecommunications company, which also has some coal operations, reported fourth-quarter consolidated revenue of $433 million, 150% higher than the $173 million reported in the year-ago quarter. The net loss for the quarter was $552 million, or $1.50 a share, compared with a loss of $191 million, or 56 cents a share, a year ago.
Excluding a one-time restructuring charge tied to Commonwealth Telephone Enterprises Inc. (CTCO), in which Level 3 owns 46%, and a non-cash charge mainly related to stock options, Level 3 reported a loss of $1.20 a share. That was a smaller loss than the First Call/Thomson Financial consensus estimate of $1.53 per share.
Fourth-quarter communications and information services revenue rose to $384 million, a 217% rise from a year ago.
Level 3's fourth-quarter results were "a continuation of the strong record that they've been building up for the last couple of years," said Morningstar stock analyst Michael Hodel.
Particularly important, he said, was the progress made in "lighting" the dark fiber in the company's North American fiber optic communications network.
"Lighting" fiber-optic cable means installing the electronics that enable the cable to carry customer traffic. And Level 3 almost quadrupled its North American lit miles in the fourth quarter to 10,000 from 2,875 at the end of the third quarter, Hodel said.
That's important for Level 3 because its costs are considerably less on its own network than on the leased lines it has been using.
CEO Crowe said in a conference call in October that he expected gross margin to average 50% in 2001, a considerable improvement over the 27% the company posted for its communications business in 2000. Driving that improving gross margin will be the use of its own network, according to Hodel.
Another important aspect of the fourth quarter was the positive adjusted earnings before, interest, taxes, depreciation and amortization numbers that Level 3 reported for the fourth quarter and year, Hodel said.
"Adjusted" EBITDA includes changes in cash-deferred revenue and excludes cost of goods sold tied to certain IRU (indefeasible right of user) sales for transoceanic cable and dark fiber.
Adjusted EBITDA enables Level 3 to show the cash received up front for sales of dark fiber. Accounting rules prevent Level 3 from showing all that cash as revenue in the quarter it receives the cash. Instead it must book that cash as revenue over the life of the contract for any contract signed after June 30, 1999.
Level 3 Chief Financial Officer Sureel Choksi said in the Friday press release that adjusted EBITDA is expected to grow rapidly and represent an important source of funding for Level 3's capital expenditures.
Level 3's stock hit a 52-week high of $132.25 on March 10, a 52-week low of $25 on Nov. 30, and was recently trading at $46.17.
Hodel said there is considerable volatility in the stock because the company may continue to grow a lot. Mature telecommunications companies might have $1 in annual revenue for every $1 in assets, he said, but Level 3 has about $15 billion in assets and a little less than $1 billion in annual revenue. The stock fluctuates because of differing opinions about earnings and revenue growth in the future.
"There's a lot of potential in this stock, but it is going to be very volatile," Hodel said.
He thinks Level 3's competitive position is strong. "They're setting themselves up to be the low-cost producer in the industry," he said.
The company's strategy is based in part on placing a number of conduits in the ground so that it can pull new fiber through as higher-capacity fiber develops. But the strategy still needs time to prove itself.
"In my opinion, they stand a good chance of being one of the dominant players," Hodel said.
Choksi said in the Friday conference call that full-year results for 2000 "exceeded expectations on all key financial metrics."
Annualized communications revenue per customer is now $550,000, versus $300,000 at the end of 1999, Choksi said, partly due to more customers buying more Level 3 products.
"About 75% of our customers now take more than one of our products," Crowe said.
"We continue to be optimistic about the future," Crowe added. "I'd say we're excited about the position we're in."
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