Level 3 Communications, a Broomfield-based phone-network operator, posted its first quarterly profit since 2003 after cost cuts helped offset declining sales.
Fourth-quarter net income was $44 million, compared with a $91 million loss a year earlier, Level 3 said Wednesday in a statement. Sales fell 4.6 percent, to $1.05 billion, missing the $1.08 billion average estimate of analysts surveyed by Bloomberg.
On a per-share basis, the company said it had a loss of 3 cents in the fourth quarter.
Analysts noted that Level 3 is generating good cash flow and is better positioned to pay its debt obligations but faces economy-related business declines this year.
“Similar to other large carriers, the company is clearly seeing stress in its business and wholesale segments that is likely to continue,” UBS analyst John Hodulik said in a report Wednesday.
Mike McCormack, an analyst with J.P. Morgan, said Level 3’s results “fell short of our expectations. However, investors are likely to welcome the strong free cash flow and improved liquidity outlook.”
The company cut more than 1,400 jobs last year, a fifth of the total, as customers put off telephone and Web-service expansions amid the U.S. recession. Costs fell 14 percent last quarter, and Level 3 said it will reduce capital spending “significantly” this year to cope with the slowing demand.
“We prefer to reduce costs now and find we’ve been too pessimistic, rather than the reverse,” chief executive James Crowe said on a conference call.
Level 3 announced its latest job cuts in December, eliminating about 450 positions in North America. The company also reduced spending on stock grants and other non-cash compensation by about two-thirds last quarter.
Level 3 fell 15 cents, or 15 percent, to 85 cents Wednesday. The shares have lost 70 percent in the past year.
Level 3 ended the quarter with $768 million in cash and marketable securities, up from less than $600 million the previous quarter. The company reiterated it will be able to pay off its almost $700 million in debt coming due through 2010.
Denver Post staff writer Steve Raabe contributed to this report.
