IIEX news letter

I’ve started a quarterly newsletter shared publicly although some files are only available to site supporters. Hope some find some of the information useful. The newsletter can be viewed by clicking here.

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Will The Acquisition Of TW Telecom By Level 3 Communications Accelerate Cash Growth?


  • Both firms have the same focus; enterprise customers.
  • Small network overlap bodes well for increasing existing customer sales in addition to new customer sales.
  • Free cash flow per share is accretive after 2015; total free cash flow dollars increase substantially.

On June 16, 2014 Level 3 Communications (LVLT) and tw telecom (TWTC) announced Level 3 will acquire tw telecom in a stock-and-cash transaction valued at $41.92 per share at the time of this writing. Under the terms of the agreement tw telecom stockholders will receive $10 cash and 0.7 shares of Level 3 common stock for each share of tw telecom common stock at closing. The deal is expected to close in the fourth quarter.

Is this a good deal for the Level 3 shareholder? The deal must be accretive to FCF (free cash flow). The announcement noted the transaction is expected to be accretive to Free Cash Flow per share after the first year following transaction close but the magnitude of the gains are not defined. This article attempts to define these gains. We’ll also highlight EPS and EBITDA effects but the focus is FCF.


We’ve discussed in past articles that when Level 3 made a leadership change they also shifted their focus on Enterprise customers. Level 3′s growth driver is Enterprise and has been gaining traction over the last year as shown below:
…Click here to continue to the full article…

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Level 3 Communications A Long-Term Gem In The Making

I’ve been bullish through the last few articles and that view was just reinforced with the latest earnings report. Previous articles highlighted Level 3 Communications (LVLT) new focus and management change that marked a turning point toward profitability. The company moved from being primarily a wholesale provider to a company focused on serving the day-to-day business needs of enterprise customers spearheaded by a new CEO. These changes are driving growth in both earnings and FCF.

Level 3 announced first quarter results and raised guidance on April 30, 2014. Ongoing trends based on management’s record and short term guidance will be a strong indicator of management’s longer term success for growing profits and more importantly becoming a cash generating machine. This article discusses the following:

  • Revenue defined
  • Trends
  • Valuation
  • Risks
  • Final thoughts


It’s important to understand how Level 3 reports revenue and their focus on enterprise is their future. Focusing on all revenue in the short term will mask the underlying growth momentum being generated by the enterprise business, although with each earnings announcement the veil is being lifted as enterprise comprises a larger piece of the revenue pie.

The company’s revenues are reported in two groups, CNS (Core Network Services) and lower margin “Wholesale Voice Services & Other” revenue.

Wholesale Voice Services and Other revenue represent sales of long distance voice services, revenue from managed modem and its related intercarrier compensation services and revenue from the “SBC Master Services Agreement,” which was obtained through an acquisition in 2005.  …Click here to continue reading the complete article

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Terrafugia STEM Presentation

Carl Dietrich, CEO/CTO, and Anna Dietrich, COO, were honored to assist Governor Deval Patick in promoting the science initiative in public schools as keynote speakers at the 10th annual Massachusetts STEM Summit. Video below:

For more in depth reporting on the company click here for IIEX articles on Terrafugia


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How Safe Is Windstream’s Dividend?

Our first article on Windstream (WIN) concluded:

Waiting to see how the second half develops may be the prudent path before allocating new or additional cash toward this investment.

The day the article was published Windstream closed at 11.27. While dividends have been sustainable there are dark clouds putting downward pressure on the stock price which included the uncertainty of future cash taxes, revenue growth not as robust as investors hoped and a high leverage ratio. Our last article which brought us through the first half of 2013 concluded:

Management can sustain the dividend for several years given the current revenue and customer trends provided management can accept a high FCF payout and leverage ratios. In the meantime the challenge is to reverse the overall revenue trend which will pull the ratios toward more acceptable levels.

Question is has anything changed for better or worse now that we have 2014 guidance and additional insight on future cash taxes?

This article examines:

  • Revenue trends based on results and guidance; both used to project financials, more importantly free cash flow on.
  • Risks
  • Final thoughts


Windstream recently released fourth quarter and full year results providing the 2014 outlook and cash tax guidance through 2015. The trends through the first half of 2013 are shown with the recent trends to get an idea whether they are improving or not.
…Click Here To Continue To The Full Article…

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Has Frontier Communications Turned The Corner?

The key for Frontier Communications (FTR) turning the corner is to show improvements in revenue trends which ripple through the financials affecting free cash flow and by default the safety of the dividend.  Let’s face it investors in Frontier are not investing for growth but the high yield. Frontier recently released fourth quarter and full year results and announced the acquisition of AT&T’s (T) Connecticut assets in December.  So what might the future hold based on these events? 

This article examines:

  • Revenue trends based on results and guidance used to project financials, more importantly free cash flow on a standalone basis.
  • Overlaying projections and guidance for AT&T’s Connecticut assets to the financials on a standalone basis to complete the picture.
  • Risks
  • Final thoughts


Business Revenue: Business trends are based on comments by the CEO – Maggie Wilderotter on the Q3 conference call:

This quarter, we achieved stability in small business revenues for the first time since 2010. Carrier excluding wireless backhaul and small, medium and enterprise, improved over second quarter results. The one remaining headwind is our wireless backhaul revenue decline, but that was anticipated. Once we fully work through the transition in wireless backhaul during the first half of 2014, we expect the business segment to be well positioned to deliver sustainable sequential revenue growth. After three solid quarters of revenue improvement, we believe we have turned the corner in successfully mitigating revenue decline and in moving closer to our objective of growing revenue.

…Click Here to Continue reading the full article…

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Is Level 3 Communications Taking Advantage Of The Opportunity Laid Before It? – Part 2

Our November 2013 article, “Can Level 3 Communications Take Advantage Of The Opportunity Laid Before It?”,  we examined past and future growth of the internet and how this could be a catalyst Level 3 Communications (LVLT) was built for.  Some topics discussed were:

  • Company background
  • Catalysts fueling future demand
  • Data from several internet studies
  • Valuation and risk

Instead of repeating the above topics which would make this article exorbitantly long it’s recommended you read it for a better understanding, although not mandatory for this article.  This article is a follow up examining level 3’s results and guidance to see if there is evidence Level 3 is capitalizing on the growing need for bandwidth.

Level 3 announced fourth quarter results and issued 2015 guidance on February 5, 2014. Ongoing trends based on management’s record and guidance will be a strong indicator of management’s success (or lack thereof) of converting opportunity into growing profits and cash generation.  This article discusses the following:

  • Revenue and focus
  • Trends
  • Valuation revisited
  • Risks
  • Final thoughts


It’s important to understand how Level 3 reports revenue and their revised focus aimed directly at the opportunities ahead. This also will make clear why some missed the underlying growth momentum buried among other revenue categories; becoming more obvious with each earnings announcement leading some analysts to dramatically boost price targets.
…Click Here To Continue To The Full Article…

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