BROOMFIELD, Colo., April 28, 2016 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) today reported results for the first quarter 2016.

"Level 3's first quarter results demonstrate the benefit of our emphasis on profitable growth, as evident in our expanding margins and strong Free Cash Flow during the quarter," said Jeff Storey, president and CEO of Level 3. "The continued evolution of our products and service capabilities matches the changing and complex needs of enterprises, positioning the company to become the premier provider of global communications services."

Total revenue was $2.051 billion for the first quarter 2016, compared to $2.030 billion on a pro forma basis, for the first quarter 2015, excluding the results from the company's Venezuelan subsidiary's operations that was deconsolidated as of September 30, 2015.

In the first quarter 2016, the company generated net income of $124 million, basic earnings per share of $0.35 and diluted earnings per share of $0.34. Included in basic and diluted earnings per share was Income Tax Expense of $94 million, $85 million of which was non-cash, primarily due to utilization of the company's U.S. federal net operating losses. For the first quarter 2015, net income was $122 million and basic and diluted earnings per share were $0.35.

Financial Results



                                                      First
                                                    Quarter
                                                   2015 Pro
                                                Forma(1)(2)
    Metric                                First
                                        Quarter
    ($ in millions)                        2016
    --------------                         ----

    Core Network Services Revenue        $1,947       $1,904
    -----------------------------        ------       ------

    Wholesale Voice Services Revenue       $104         $126
    --------------------------------       ----         ----

    Total Revenue                        $2,051       $2,030
    -------------                        ------       ------

    Network Access Costs                   $694         $720
    --------------------                   ----         ----

    Network Access Margin                 66.2%       64.5%
    ---------------------                  ----         ----

    Network Related Expenses (NRE) (3)     $331         $349
    ---------------------------------      ----         ----

    Selling, General and Administrative
     Expenses (SG&A)(3)                    $316         $341
    -----------------------------------    ----         ----

    Non-cash Compensation Expense           $47          $31
    -----------------------------           ---          ---

    Adjusted EBITDA(4)                     $710         $620
    -----------------                      ----         ----

    Adjusted EBITDA Margin(4)             34.6%       30.5%
    ------------------------               ----         ----

    Capital Expenditures                   $297         $251
    --------------------                   ----         ----

    Unlevered Cash Flow(4)                 $324         $188
    ---------------------                  ----         ----

    Free Cash Flow(4)                      $213          $42
    ----------------                       ----          ---

    Net Income                             $124         $122
    ----------                             ----         ----

    Net Income per Common Share-Basic     $0.35        $0.35
    ---------------------------------     -----        -----

    Weighted Average Shares Outstanding
     (in thousands)-Basic               356,785      346,874
    ----------------------------------- -------      -------


    (1)               References to "pro forma" figures
                      represent the results adjusted to
                      exclude the company's Venezuelan
                      subsidiary's operations except for
                      Net Income, Net Income per Common
                      Share-Basic and Weighted Average
                      Shares Outstanding (in thousands)-
                      Basic.

    (2)               The reported first quarter 2015
                      results have been adjusted to
                      reflect changes made to customer
                      assignments between the wholesale
                      and enterprise channels as of the
                      beginning of 2016.

    (3)               Excludes non-cash compensation
                      expense.

    (4)               See schedule of non-GAAP metrics
                      for definitions and reconciliation
                      to GAAP measures.

Revenue



                                                      First   Percent
                                                    Quarter
                                                   2015 Pro   Change,
                                                Forma(1)(2)
    Core Network Services (CNS) Revenue   First              Constant
                                        Quarter              Currency
    ($ in millions)                        2016
    --------------                         ----

    North America                        $1,601       $1,534         4%
    -------------                        ------       ------        ---

    Wholesale                              $434         $438       (1%)
    ---------                              ----         ----        ---

    Enterprise                           $1,167       $1,096         6%
    ----------                           ------       ------        ---


    EMEA                                   $191         $207       (5%)
    ----                                   ----         ----        ---

    Wholesale                               $65          $71       (5%)
    ---------                               ---          ---        ---

    Enterprise                             $107         $110         -%
    ----------                             ----         ----        ---

    UK Government                           $19          $26      (22%)
    -------------                           ---          ---       ----


    Latin America                          $155         $163         8%
    -------------                          ----         ----        ---

    Wholesale                               $39          $44         -%
    ---------                               ---          ---        ---

    Enterprise                             $116         $119        10%
    ----------                             ----         ----        ---


    Total CNS Revenue                    $1,947       $1,904         4%
    -----------------                    ------       ------        ---

    Wholesale                              $538         $553       (1%)
    ---------                              ----         ----        ---

    Enterprise                           $1,409       $1,351         6%
    ----------                           ------       ------        ---


    (1)               References to "pro forma" figures
                      represent the results adjusted to
                      exclude the company's Venezuelan
                      subsidiary's operations.

    (2)               The reported first quarter 2015
                      results have been adjusted to
                      reflect changes made to customer
                      assignments between the wholesale
                      and enterprise channels as of the
                      beginning of 2016.

CNS Revenue

CNS Revenue was $1.947 billion in the first quarter 2016, increasing 3.6 percent year-over-year on a pro forma and constant currency basis.

Adjusted EBITDA

For the first quarter 2016, Adjusted EBITDA was $710 million. For the first quarter 2015, Adjusted EBITDA on a pro forma basis was $620 million, which excluded the results from the operations of the company's Venezuelan subsidiary.

Adjusted EBITDA margins expanded to 34.6 percent in the first quarter 2016 from 30.5 percent on a pro forma basis in the first quarter 2015.

Capital Market Transactions and Liquidity

After the close of the quarter, on April 21, 2016, the company fully redeemed $775 million aggregate principal amount of Level 3 Financing, Inc.'s 7% Senior Notes due 2020. To fund the redemption of these notes, Level 3 Financing used the net proceeds from the issuance of its 5.25% Senior Notes due 2026, along with cash on hand, to pay for principal, accrued interest, applicable premiums and transaction fees and expenses.

The company will incur a loss on extinguishment and modification of debt before taxes as a result of this transaction and related redemption of $40 million, or approximately $0.11 in basic earnings per share in the second quarter 2016.

As of March 31, 2016, the company had cash and cash equivalents of $1.004 billion.

2016 Business Outlook

"With our continued focus on profitable revenue growth and strong Adjusted EBITDA results in the first quarter 2016, we are increasing our outlook for full year 2016 Adjusted EBITDA growth," said Sunit Patel, executive vice president and CFO of Level 3.

"We now expect full year 2016 Adjusted EBITDA growth of 10 to 12 percent, compared to our previous outlook of 9 to 12 percent. In addition, we continue to expect to generate Free Cash Flow of $1.0 to $1.1 billion."

The company has also updated full year 2016 outlook measures for interest expense and non-cash compensation expense.



                  Metrics               Old Outlook           New Outlook
                  -------               -----------           -----------

    Adjusted EBITDA(1)            YoY growth of 9% to 12% YoY growth of 10% to
                                                                            12%
    ------------------             ---------------------- ---------------------

    Free Cash Flow                   $1.0 to $1.1 billion      No Change
    --------------                   --------------------      ---------

    GAAP Interest Expense                    $570 million          $555 million
    ---------------------                    ------------          ------------

    Cash Interest Expense                    $520 million          $510 million
    ---------------------                    ------------          ------------

    Capital Expenditures           15% of Total Revenue        No Change
    --------------------           --------------------        ---------

    Depreciation and amortization          $1.230 billion      No Change
    -----------------------------          --------------      ---------

    Cash Income Tax                           $40 million      No Change
    ---------------                           -----------      ---------

    Non-cash Compensation Expense            $130 million          $170 million
    -----------------------------            ------------          ------------

    Full Year Income Tax Rate                        ~30%     No Change
    -------------------------                         ---      ---------


    (1)               From a starting point of
                      $2.592 billion, which is
                      adjusted to exclude
                      Adjusted EBITDA from the
                      company's Venezuela
                      subsidiary.

Conference Call and Website Information

Level 3 will hold a conference call to discuss the company's First Quarter Results today at 10 a.m. ET. The call will be broadcast live on Level 3's Investor Relations website at http://investors.level3.com. Additional information regarding First Quarter Results, including the presentation management will review on the conference call, will be available on Level 3's Investor Relations website. If you are unable to join the call via the Web, the call can be accessed live at +1 877-283-5145 (U.S. Domestic) or +1 312-281-1200 (International). Questions should be sent to investor.relations@level3.com.

For additional information, please call +1 720-888-2518.

About Level 3 Communications
Level 3 Communications, Inc. (NYSE: LVLT) is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries across a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities. For more information, please visit www.level3.com or get to know us on Twitter, Facebook and LinkedIn.

© Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications, Level (3) and the Level 3 Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and elsewhere. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners. Level 3 services are provided by subsidiaries of Level 3 Communications, Inc.

Forward-Looking Statement
Some statements made in this press release are forward-looking in nature and are based on management's current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ materially from those expressed or implied by the statements. Important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the company's ability to: successfully integrate the tw telecom acquisition; manage risks associated with continued uncertainty in the global economy; increase revenue from its services to realize its targets for financial and operating performance; maintain and increase traffic on its network; develop and maintain effective business support systems; manage system and network failures or disruptions; avert the breach of its network and computer system security measures; develop new services that meet customer demands and generate acceptable margins; manage the future expansion or adaptation of its network to remain competitive; defend intellectual property and proprietary rights; manage continued or accelerated decreases in market pricing for communications services; obtain capacity for its network from other providers and interconnect its network with other networks on favorable terms; attract and retain qualified management and other personnel; successfully integrate future acquisitions; effectively manage political, legal, regulatory, foreign currency and other risks it is exposed to due to its substantial international operations; mitigate its exposure to contingent liabilities; and meet all of the terms and conditions of its debt obligations. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Contact Information



    Media:                   Investors:

    D. Nikki Wheeler         Mark Stoutenberg

    +1 720-888-0560          +1 720-888-2518

    Nikki.Wheeler@Level3.com Mark.Stoutenberg@Level3.com

Level 3 Communications:

Non-GAAP Metrics

Pursuant to Regulation G, the company is hereby providing definitions of non-GAAP financial metrics and reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under accounting principles generally accepted in the United States (GAAP) with those financial measures as adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis.

In addition, measures referred to in the accompanying news release as being calculated "on a constant currency basis" or "in constant currency terms" are non-GAAP metrics intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such metrics are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.

Core Network Services Revenue includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).

Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder lease costs and other third party costs directly attributable to providing access to customer locations from the Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access Costs do not include any employee expenses or impairment expenses; these expenses are allocated to Network Related Expenses or Selling, General and Administrative Expenses.

Network Related Expenses includes certain expenses associated with the delivery of services to customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities, maintenance and other costs, each related to the operation of its communications network, as well as salaries, wages and related benefits (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of its communications network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.

Network Access Margin ($) is defined as total Revenue less Network Access Costs from the Consolidated Statements of Operations, and excludes Network Related Expenses.

Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue. Management believes that network access margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to the company after it pays third party network services costs; in essence, a measure of the efficiency of the company's network.

Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Operations before income tax (expense) benefit, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.



                      Adjusted EBITDA Metric

                      Q1 2016 (as reported)
                       --------------------

                          (in millions)
                           ------------


    Net Income                                            $124

    Income Tax Expense                            94

    Total Other Expense                          144

    Depreciation and Amortization                301

    Non-Cash Stock Compensation                   47
                                                 ---

    Adjusted EBITDA                                       $710


    Total Revenue                                       $2,051
                                                        ======

    Adjusted EBITDA Margin                     34.6%



                      Adjusted EBITDA Metric

                      Q1 2015 (pro forma)(1)
                      ---------------------

                          (in millions)
                           ------------


    Net Income                                            $109

    Income Tax Expense                             5

    Total Other Expense                          189

    Depreciation and Amortization                286

    Non-Cash Stock Compensation                   31
                                                 ---

    Adjusted EBITDA                                       $620


    Total Revenue                                       $2,030
                                                        ======

    Adjusted EBITDA Margin                     30.5%


    (1)Represents the consolidated
     results pro forma to exclude the
     Company's Venezuelan subsidiary's
     operations that was deconsolidated
     as of September 30, 2015.



                      Adjusted EBITDA Metric

                      Q1 2015 (as reported)
                       --------------------

                          (in millions)
                           ------------


    Net Income                                            $122

    Income Tax Expense                             5

    Total Other Expense                          189

    Depreciation and Amortization                288

    Non-Cash Stock Compensation                   31
                                                 ---

    Adjusted EBITDA                                       $635


    Total Revenue                                       $2,053
                                                        ======

    Adjusted EBITDA Margin                     30.9%

Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are relevant and useful metrics to provide to investors, as they are an important part of the company's internal reporting and are key measures used by Management to evaluate profitability and operating performance of the company and to make resource allocation decisions. Management believes such measures are especially important in a capital-intensive industry such as telecommunications. Management also uses Adjusted EBITDA and Adjusted EBITDA Margin to compare the company's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses. Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income taxes because these items are associated with the company's capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash impacts of capital expenditures made in recent periods, which may be evaluated through cash flow measures. Adjusted EBITDA excludes the gain (or loss) on extinguishment and modification of debt and other, net because these items are not related to the primary operations of the company.

There are limitations to using Adjusted EBITDA as a financial measure, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from the company's calculations. Additionally, this financial measure does not include certain significant items such as interest income, interest expense, income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, the gain (or loss) on extinguishment and modification of debt and net other income (expense). Adjusted EBITDA and Adjusted EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Unlevered Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures, plus cash interest paid and less interest income all as disclosed in the Consolidated Statements of Cash Flows or the Consolidated Statements of Operations. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of the company and, measured over time, provides management and investors with a sense of the underlying business' growth pattern and ability to generate cash. Unlevered Cash Flow excludes cash used for acquisitions and debt service and the impact of exchange rate changes on cash and cash equivalents balances.

There are material limitations to using Unlevered Cash Flow to measure the company's cash performance as it excludes certain material items such as payments on and repurchases of long-term debt, interest income, cash interest expense and cash used to fund acquisitions. Comparisons of Level 3's Unlevered Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable and capital expenditures. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents in the Consolidated Statements of Cash Flows.

Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the Consolidated Statements of Cash Flows. Management believes that Free Cash Flow is a relevant metric to provide to investors, as it is an indicator of the company's ability to generate cash to service its debt. Free Cash Flow excludes cash used for acquisitions, principal repayments and the impact of exchange rate changes on cash and cash equivalents balances.

There are material limitations to using Free Cash Flow to measure the company's performance as it excludes certain material items such as principal payments on and repurchases of long-term debt and cash used to fund acquisitions. Comparisons of Level 3's Free Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to interest expense, accounts receivable and accounts payable and capital expenditures. Free Cash Flow should not be used as a substitute for net change in cash and cash equivalents on the Consolidated Statements of Cash Flows.



    Unlevered Cash Flow and Free
     Cash Flow

    Three Months Ended March 31,
     2016 (as reported)            Unlevered

    ($ in millions)                Cash Flow       Free Cash Flow
    --------------                 ---------       --------------


    Net Cash Provided by Operating
     Activities                               $510                       $510

    Capital Expenditures                (297)                     (297)

    Cash Interest Paid                    112                        N/A

    Interest Income                       (1)                       N/A
                                          ---                        ---

    Total                                     $324                       $213
                                              ====                       ====



    Unlevered Cash Flow and Free
     Cash Flow

    Three Months Ended March 31,
     2015 (pro forma)(1)           Unlevered

    ($ in millions)                Cash Flow       Free Cash Flow
    --------------                 ---------       --------------


    Net Cash Provided by Operating
     Activities                               $293                       $293

    Capital Expenditures                (251)                     (251)

    Cash Interest Paid                    147                        N/A

    Interest Income                       (1)                       N/A
                                          ---

    Total                                     $188                        $42
                                              ====                        ===


    (1)Represents the consolidated
     results pro forma to exclude the
     Company's Venezuelan subsidiary's
     operations that was deconsolidated
     as of September 30, 2015.



    Unlevered Cash Flow and Free
     Cash Flow

    Three Months Ended March 31,
     2015 (as reported)            Unlevered

    ($ in millions)                Cash Flow       Free Cash Flow
    --------------                 ---------       --------------


    Net Cash Provided by Operating
     Activities                               $305                       $305

    Capital Expenditures                (254)                     (254)

    Cash Interest Paid                    147                        N/A

    Interest Income                       (1)                       N/A

    Total                                     $197                        $51
                                              ====                        ===




                                              LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

                                                    Consolidated Statements of Income

                                                               (unaudited)



                                       Three Months Ended
                                       ------------------

    (dollars in millions,
     except per share
     data)                               March 31, 2016                          December 31, 2015         March 31, 2015
    ---------------------                --------------                          -----------------         --------------


    Revenue                                                $2,051                                   $2,053                 $2,053


    Costs and Expenses

    Network access costs                                      694                                      708                    723

    Network related
     expenses                                                 338                                      344                    356

    Depreciation and
     amortization                                             301                                      294                    288

    Selling, general and
     administrative
     expenses                                                 356                                      369                    370

      Total costs and
       expenses                                             1,689                                    1,715                  1,737
                                                            -----                                    -----                  -----


    Operating Income                                          362                                      338                    316


    Other Income (Expense):

    Interest income                                             1                                        -                     1

    Interest expense                                        (135)                                   (152)                 (180)

    Loss on modification
     and extinguishment of
     debt                                                       -                                    (55)                     -

    Other, net                                               (10)                                       3                   (10)

      Total other expense                                   (144)                                   (204)                 (189)
                                                             ----                                     ----                   ----


    Income Before Income
     Taxes                                                    218                                      134                    127


    Income Tax (Expense)
     Benefit                                                 (94)                                   3,189                    (5)
                                                              ---                                    -----                    ---


    Net Income                                               $124                                   $3,323                   $122
                                                             ====                                   ======                   ====


    Basic Earnings per Common Share:

    Net Income per Share                                    $0.35                                    $9.33                  $0.35

    Weighted-Average
     Shares Outstanding
     (in thousands)                                       356,785                                  356,274                346,874


    Diluted Earnings per Common Share:

    Net Income per Share                                    $0.34                                    $9.24                  $0.35

    Weighted-Average
     Shares Outstanding
     (in thousands)                                       360,339                                  359,712                350,832




                                         LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

                                                  Consolidated Balance Sheets

                                                          (unaudited)


                                                 March 31,                    December 31,         March 31,

    (dollars in
     millions)                                               2016                             2015              2015
    -----------                                              ----                             ----              ----


    Assets


    Current Assets:

    Cash and cash
     equivalents                                           $1,004                             $854            $1,114

    Restricted cash and
     securities                                               837                                8                 7

    Receivables, less
     allowances for
     doubtful accounts                                        807                              757               743

    Other                                                     141                              111               151
                                                              ---                              ---               ---

    Total Current Assets                                    2,789                            1,730             2,015


    Property, Plant and
     Equipment, net                                         9,974                            9,878             9,744

    Restricted Cash and
     Securities                                                41                               42                19

    Goodwill                                                7,746                            7,749             7,740

    Other Intangibles,
     net                                                    1,074                            1,127             1,298

    Deferred Tax Assets                                     3,365                            3,441               284

    Other Assets                                               50                               50                55

    Total Assets                                          $25,039                          $24,017           $21,155
                                                          =======                          =======           =======


    Liabilities and Stockholders' Equity


    Current Liabilities:

    Accounts payable                                         $680                             $629              $629

    Current portion of
     long-term debt                                           781                               15               503

    Accrued payroll and
     employee benefits                                        146                              218               177

    Accrued interest                                          131                              108               187

    Current portion of
     deferred revenue                                         283                              267               300

    Other                                                     166                              179               148
                                                              ---                              ---               ---

    Total Current
     Liabilities                                            2,187                            1,416             1,944


    Long-Term Debt,
     less current
     portion                                               10,870                           10,866            10,849

    Deferred Revenue,
     less current
     portion                                                1,012                              977               895

    Other Liabilities                                         628                              632               750
                                                              ---                              ---               ---

    Total Liabilities                                      14,697                           13,891            14,438


    Stockholders' Equity                                   10,342                           10,126             6,717
                                                           ------                           ------             -----

    Total Liabilities
     and Stockholders'
     Equity                                               $25,039                          $24,017           $21,155
                                                          =======                          =======           =======




                                                 LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES

                                                     Consolidated Statements of Cash Flows

                                                                  (unaudited)


                                                    Three Months Ended
                                                    ------------------

                                                         March 31,                      December 31,         March 31,

    (dollars in millions)                                             2016                              2015              2015
    --------------------                                              ----                              ----              ----


    Cash Flows from Operating Activities:

      Net income                                                      $124                            $3,323              $122

      Adjustments to reconcile net income to net cash
       provided by operating activities:

      Depreciation and
       amortization                                                    301                               294               288

      Non-cash compensation
       expense attributable to
       stock awards                                                     47                                49                31

      Loss on modification and
       extinguishment of debt                                            -                               55                 -

      Accretion of debt
       discount and
       amortization of debt
       issuance costs                                                    5                                 6                 7

      Accrued interest on long-
       term debt, net                                                   23                              (29)               22

      Deferred income taxes                                             85                           (3,207)             (10)

      Gain on sale of property,
       plant and equipment and
       other assets                                                      -                                -              (1)

      Other, net                                                       (9)                                3                21

      Changes in working capital items:

      Receivables                                                     (44)                               43              (23)

      Other current assets                                            (35)                               10              (19)

      Payables                                                          48                                 5              (24)

      Deferred revenue                                                  46                                29                 8

      Other current liabilities                                       (81)                             (25)            (117)
                                                                       ---                               ---              ----

    Net Cash Provided by
     Operating Activities                                              510                               556               305


    Cash Flows from Investing Activities:

      Capital expenditures                                           (297)                            (330)            (254)

      Change in restricted cash
       and securities, net                                           (828)                                2                 1

      Proceeds from sale of
       property, plant and
       equipment and other
       assets                                                            -                                1                 1

    Net Cash Used in
     Investing Activities                                          (1,125)                            (327)            (252)


    Cash Flows from Financing Activities:

      Long-term debt
       borrowings, net of
       issuance costs                                                  765                               885               492

      Payments on and
       repurchases of long-
       term debt and capital
       leases                                                          (1)                            (949)              (2)

    Net Cash Provided by
     (Used in) Financing
     Activities                                                        764                              (64)              490


    Effect of Exchange Rates
     on Cash and Cash
     Equivalents                                                         1                               (2)              (9)
                                                                       ---                               ---               ---


    Net Change in Cash and
     Cash Equivalents                                                  150                               163               534


    Cash and Cash Equivalents
     at Beginning of Period                                            854                               691               580
                                                                       ---                               ---               ---


    Cash and Cash Equivalents
     at End of Period                                               $1,004                              $854            $1,114
                                                                    ======                              ====            ======


    Supplemental Disclosure of Cash Flow Information:

      Cash interest paid                                              $112                              $173              $147

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SOURCE Level 3 Communications, Inc.