(LVLT) - Level 3 Communications Message Board

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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

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Nov 1 5:00 PM EST

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To: flint who wrote (3048)	8/9/2001 8:02:24 PM
From: Freedom Fighter	Read Replies (2) of 3873

Flint, >>LVLT debt is about 5.3 times the market cap. If there is dilution lets deal with reality no more than $500 million in debt will be diluted away.<< There is some evidence that either Scott or Buffett may already own a big chunck of debt (1B). I believe they have no intention of diluting right now anyway because they will get to late 2003 without any sweat at all on the current finances. That gives them a lot of time to prove the business model even if they still do need some cash to get to break even FCF. Scott may also simply put more equity in like he did at RCN. >>Back when LVLT was building the network its loses were about $1.25 per share. now with the network built its about $7.25 per lose. The cost of operations is the great expense - not the build out.<< EPS is not the number to look at for this company (at this stage) when analyzing the staying power. For one, they expense stock options (one of the only companies in America to report reality) which is economically correct but not a cash outlay (that's $1.00 per share). Second, the annual depreciation charges are huge (well over a billion - more than $3.00 per share - but the CAP EX to replace the stuff is almost non-existent at present because the useful life is many years. Because of certain GAAP accounting standards vs. cash standards, LVLT brings in a lot more in revenues than they report GAAP (and earnings too) . So on cash EPS they are doing way better that they report. You have to look at "REQUIRED" cash in and cash out over the next several years and not GAAP earnings. That way you can see the minimum cash burn rate if things don't go well. By that standard they get to the middle of 2003 easy - even if things don't go well because of the control over cash burn resulting from SUCCESS BASED cap ex. and the items mentioned above. Ultimately GAAP EPS will matter, but not now. >>I for one am all for LVLT liquidating their costly European operations and using that cash to shore up debt. Last I heard they have refused to do that.<< That idea has been discussed, but I don't see it happening. It would be a huge blow to their competitive position. Over time, their huge advantage is the ability to upgrade a "GLOBAL" network that is all IP based and drive down unit costs. Everyone else is either a patchwork of networks (some IP some not), totally left in the dust, not as easy to updrade etc... They need Europe to crush everyone 5-10 years from now. Wayne

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