Level 3

(LVLT)

posted a third-quarter loss Thursday on a sharp decline in revenue.

For the quarter ended Sept. 30, the Broomfield, Colo., network services provider posted a loss of $247 million, or 38 cents a share. A year ago the company lost $299 million, or 73 cents a share. Sales fell 16% from a year earlier to $874 million, leaving the company at the low end of its earlier projections.

But citing strong cost control, Level 3 said it swung into the black on a cash-flow basis, posting $40 million in cash flow against a year-ago $34 million outflow.

"Of significance this quarter is that the company achieved positive consolidated free cash flow for the first time," financial chief Sunit Patel said. "The improvement in our cash flow during the quarter is a result of our ongoing efforts to manage expenses and capital expenditures, as well as better than expected working capital performance. While we expect some quarter over quarter volatility in cash flow as a result of working capital changes and the timing of cash interest payments, we expect the positive trend seen over the past several quarters to continue."

Level 3 dropped 8 cents in early action Thursday after closing at $5.19 Wednesday.