Level 3 Working On Debt Free Cash Flow LVLT

Level 3 Communications, Inc. (NASDAQ: LVLT) has just reported earnings and there is enough to challenge the bulls and bears alike. The wholesale dataline carrier posted earnings at -$0.08 EPS on a net loss basis and revenues on a consolidated basis were $1.07 billion. First Call had estimates at -$0.09 EPS and $1.07 billion in revenues.

The carrier also noted that its consolidated adjusted EBITDA was $255 million, with communications adjusted EBITDA of $257 million and communications adjusted EBITDA margin rose to 24.4% from 20.6% in the year earlier quarter.

Communications deferred revenue was listed as $910 million at the end of the third quarter 2008, down from $939 million at the end of the third quarter 2007 and down from the second quarter 2008 at $932 million.

The company's consolidated free cash flow was -$4 million. It reduced its outstanding debt by $179 million in September and October, and it had approximately $587 million of unrestricted cash and marketable securities at the end of the quarter. On a pro forma basis after giving effect to these exchange transactions, the company had approximately $6.66 billion of debt outstanding at September 30, 2008.

The company is not signaling any immunity from telecom spending nor from a slower economy. It noted longer sales cycles in wholesale and business markets, and has said it has seen a decrease in the content market sales.

Level 3 narrowed and adjusted previous guidance ranges for 2008 with Core Communications Services revenue to grow approximately 7.5% from 2007 and it narrowed its range for 2008 Consolidated Adjusted EBITDA guidance to $980 million to $1.0 billion (within previously issued guidance of $950 million to $1.1 billion). It see continued growth in both Core Communications Services revenue and Consolidated Adjusted EBITDA, as well as positive free cash flow performance.

Level 3 said that it still expects to be free cash flow positive for the second half of 2008 and for the full year 2009.

Shares have been hit really hard in the last market drop and during the credit crunch. Its shares closed at $1.23 yesterday and its 52-week trading range is now $1.18 to $4.48. So far we are seeing a 7% gain pre-market to $1.32 on more than 130,000 shares.

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Level 3 Working On Debt Free Cash Flow LVLT