Level 3 Communications, Inc. on Tuesday beat consensus estimates for its fiscal fourth quarter, while recording a large net loss.
The Broomfield, Colo., builder of fiber-optic networks, with operations in 57 North American markets and nine European markets, recorded a net loss of $3.3 billion, or $8.54 per share, due in part to one-time charges of $3.2 billion relating to layoffs and the sale of assets.
“Consistent with the difficult environment in which we are operating, we have taken what we believe is an appropriate approach to estimating the future cash flows associated with certain assets and, as a result, we have taken a charge against those assets,” said Level 3 Chief Financial Officer Sureel Choksi, in a prepared statement.
Revenue for the quarter declined sequentially, dropping to $326 million in the fourth quarter from $375 million in the third. Year-over-year revenue was up, rising to $1.5 billion from $1.2 billion one year ago.
In December, Level 3 sold its Asian business to Reach Ltd. In October, Level 3 laid off 750 non-sales employees, and has cut its workforce from 6,000 at the beginning of 2001 to approximately 3,700. In a conference call on Tuesday, Level 3s Kevin OHara, President and Chief Operating Officer, said 100 more employees have yet to be laid off as part of previously announced reductions.
Excluding the charges mentioned, which are considered normal business expenses under generally accepted accounting principles (GAAP), Level 3 reported a loss of $1.24 per share. Analysts surveyed by Thomson Financial/First Call were expecting a loss of $1.68 per share.
Level 3 has scaled back its business this year to focus on more established companies. The company reported that it reduced the number of its customers this quarter by approximately 100, to 2,000. About 77 percent of its customers purchase more than one Level 3 service.
Level 3 said it expects to lose $1.10 per share in the first fiscal quarter of 2002, but report positive earnings before interest, taxes, depreciation and amortization (EBITDA) of $10 million on a consolidated basis.
In other news, Level 3 announced on Tuesday that it has reached 3-year agreement, valued at approximately $100 million, to provide dial-up Internet access services to SBC Internet Services, a subsidiary of SBC Communications, Inc.
SBC Internet Services is buying dial-up port capacity from Level 3 to serve its dial-up and roaming DSL Internet customers. The new agreement was enabled by Level 3s acquisition of McLeodUSA Incorporateds wholesale dial-up access business assets, formerly known as Splitrock Services. (See related story.)
Kevin OHara noted in the conference call that SBC Communications will become one of Level 3s top ten customers starting in the first quarter of this year. OHara also noted that Level 3 no longer recognizes on its balance sheet any revenue from the troubled Enron Corp., formerly a top customer.
