Level 3 Communications Inc
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LEVEL 3 COMMUNICATIONS INC FORM 10-K (Annual Report) Filed 02/26/13 for the Period Ending 12/31/12 Address 1025 ELDORADO BOULEVARD BLDG 2000 BROOMFIELD, CO 80021 Telephone 7208881000 CIK 0000794323 Symbol LVLT SIC Code 4813 - Telephone Communications, Except Radiotelephone Industry Communications Services Sector Services Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2013, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to Commission file number 0-15658 LEVEL 3 COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware 47-0210602 (State of Incorporation) (I.R.S. Employer Identification No.) 1025 Eldorado Blvd., Broomfield, CO 80021-8869 (Address of principal executive offices) (Zip Code) (720) 888-1000 (Registrant’s telephone number, including area code) Securities registered pursuant to section 12(b) of the Act: Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to section 12(g) of the Act None Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes No Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2012, the aggregate market value of common stock held by non-affiliates of the registrant approximated $2.415 billion based upon the closing price of the common stock as reported on the New York Stock Exchange as of the close of business on that date. Shares of common stock held by each executive officer and director and by each entity that owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Title Outstanding Common Stock, par value $.01 per share 218,852,225 as of February 21, 2013 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) and (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980.) Portions of the Company's Definitive Proxy Statement for the 2013 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. Table of Contents LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES Table of Contents Page No. Part I Item 1 Business 4 Item 1A Risk Factors 34 Item 1B Unresolved Staff Comments 54 Item 2 Properties 55 Item 3 Legal Proceedings 55 Item 4 Mining and Safety Disclosures 55 Part II Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 56 Item 6 Selected Financial Data 60 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A Quantitative and Qualitative Disclosures About Market Risk 86 Item 8 Financial Statements and Supplementary Data 88 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 88 Item 9A Controls and Procedures 88 Item 9B Other Information 89 Part III Item 10 Directors, Executive Officers, and Corporate Governance 89 Item 11 Executive Compensation 89 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 89 Item 13 Certain Relationships and Related Transactions, and Director Independence 89 Item 14 Principal Accounting Fees and Services 89 Part IV Item 15 Exhibits, Financial Statements Schedules 89 Index to Consolidated Financial Statements F-1 2 Table of Contents Unless the context otherwise requires or expressly stated herein, when we use the words “Level 3,” “we,” “us,” or “our company” in this annual report on Form 10-K, we are referring to Level 3 Communications, Inc., a Delaware corporation, and its subsidiaries,. Throughout this Form 10-K, we use various industry terms and abbreviations, which we have defined in the Glossary of Terms at the end of Item 1, “Business.” The Level 3 logo and Level 3 are registered service marks of our wholly owned subsidiary, Level 3 Communications, LLC, in the United States and other countries. All rights are reserved. This Form 10-K refers to trade names and trademarks of other companies. The mention of these trade names and trademarks in this Form 10-K is made with due recognition of the rights of these companies and without any intent to misappropriate those names or marks. All other trade names and trademarks appearing in this Form 10-K are the property of their respective owners. Cautionary Factors That May Affect Future Results (Cautionary Statements Under the Private Securities Litigation Reform Act of 1995) This Form 10-K contains forward -looking statements and information that are based on the beliefs of our management as well as assumptions made by and information currently available to us. When we use the words “anticipate”, “believe”, “plan”, “estimate” and “expect” and similar expressions in Form 10-K, as they relate to us or our management, we are intending to identify forward -looking statements. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those described in this document. These forward -looking statements include, among others, statements concerning: • our communications business, its advantages and our strategy for continuing to pursue our business; • our integration with the operations of Global Crossing Limited (“Global Crossing”), which we acquired in October 2011, and anticipated benefits and synergies in connection with such acquisition; • anticipated development and launch of new services in our business; • anticipated dates on which we will begin providing certain services or reach specific milestones; • growth of the communications industry; • expectations as to our future revenue, margins, expenses, cash flows and capital requirements; and • other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These forward -looking statements are subject to risks and uncertainties, including financial, regulatory, environmental, industry growth and trend projections, that could cause actual events or results to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to, the effects on our business and our customers of general economic and financial market conditions as well as our failure to: • successfully integrate the operations of Global Crossing or otherwise realize any of the anticipated benefits of that acquisition; • increase and maintain the traffic on our network and the resulting revenue; • successfully use new technology and information systems to support new and existing services; 3 Table of Contents • prevent process and system failures that significantly disrupt the availability and quality of the services that we provide; • prevent our security measures from being breached, or our services from being degraded as a result of security breaches; • provide services that do not infringe the intellectual property and proprietary rights of others; • develop new services that meet customer demands and generate acceptable margins; • attract and retain qualified management and other personnel; and • meet all of the terms and conditions of our debt obligations.