http://www.morningstar.com/earnings/18613105-level-3-communications-inc-lvlt-q3-2010.aspx

Level 3 Communications Inc LVLT
Q3 2010 Earnings Call Transcript

Transcript Call Date 10/28/2010

Operator: Good day and welcome to the Level 3 Communications Incorporated Third Quarter 2010 Earnings Conference Call. Today's call is being recorded.

At this time, I'd like to turn the conference over Valerie Finberg, Vice President of Investor Relations. Please go ahead.

Valerie Finberg - IR: Thank you, Jessica. Good morning everyone and thank you for joining us for the Level 3 Communications Third Quarter 2010 Earnings Call. With us on the call today are Jim Crowe, Chief Executive Officer; Jeff Storey, President and Chief Operating Officer; Sunit Patel, Executive Vice President and Chief Financial Officer; and Buddy Miller, Vice Chairman.

Before we get started, as a reminder our press release, supplementary information and the presentation slides that accompany this call are all available on the Level 3 website at www.level3.com under the Quarterly Financial section in the Investor Relation section of the website.

I also need to cover our Safe Harbor statement, which can be found on page two of our 3Q '10 earnings presentation and that says that information on this call and in the presentation contains financial estimates and other forward-looking statements that are subject to risk and uncertainties. Actual results may vary significantly from those statements. Our discussion of factors that may affect future results is contained in Level 3 filings with the Securities and Exchange Commission.

Finally, please note that on today's call we will be referring to certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the most comparable GAAP financial measures are available in the press release, which is posted on our website at www.level3.com.

I will now turn the call over to Jim. Jim?

James Q. Crowe - CEO: Yes, good morning. I've got a respiratory ailment, which may result in intermittent laryngitis. If it hits me during the call, Sunit and Jeff will pick up, but don't be surprised if that occurs. In accordance with our normal practice, Sunit will discuss financial results for the quarter and an outlook. Jeff will discuss operational matters, including segment results.

I will provide some context and a summary, and we'll then open it up for questions. Sunit?

Sunit Patel - EVP and CFO: Thank you Jim and good morning, everyone. I'll start with a few quick comments on the quarter. These third quarter highlights are on slide three of our presentation.

Core Network Services revenue grew 1% sequentially and 2% year-over-year on a constant currency basis. Total Communications revenue also grew sequentially. That growth along with our richer revenue margin mix declines in cost of revenue and expense reductions drove gross margins and adjusted EBITDA margin improvement.

Consolidated adjusted EBITDA increased, compared to both the prior and year earlier quarter. I am pleased with the year-to-date adjusted EBITDA increases we have been able to realize. The benefit of increases in CNS revenue together with our high operating leverage is evidenced by the approximately $18 million improvement in annualized Communications adjusted EBITDA from the first quarter of 2010 to the third quarter of 2010, excluding the $7 million asset sale in the first quarter of this year.

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