Level 3 Communications (NYSE:LVLT) (-10%; -0.6%), the global fiber and integrated communications network company, was the Fund’s primary detractor in the third quarter. In spite of disappointing flat revenue growth, our appraisal increased with the company’s reported higher free cash flow coupon. In local currencies, the company’s Enterprise business grew across regions, with a particularly strong 10% rate in Latin America. Currency translations, however, created a significant drag in the quarter, turning Latin American and Europe, Middle East, Africa (EMEA) reported top line results negative. More importantly, total EBITDA in the quarter, as well as projections for the remainder of 2016, were exactly in line with expectations. The company’s growing cash position after over $260 million of free cash flow (FCF) in the quarter took net leverage to 3.5X EBITDA. We remain confident that CEO Jeff Storey and his team will continue to execute and will ultimately close the gap between the stock price and corporate value.
Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.
