NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
References in the Notes to “Level 3 Communications, Inc.,” "Level 3," “we,” “us,” "its," the “Company” and “our”, unless the context otherwise requires, refer to Level 3 Parent, LLC and its consolidated subsidiaries.
(1) Background
General
We are an international facilities-based communications provider of a broad range of integrated communications services. We designed our network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.
Effective November 1, 2017, we were acquired by CenturyLink in a cash and stock transaction, including the assumption of our debt (the "CenturyLink Merger").
Basis of Presentation
Our consolidated balance sheet as of December 31, 2018, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first nine months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2018.
The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. Due to exchange restrictions and other conditions, effective at the end of the third quarter of 2015, we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the third quarter of 2019.
We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenue for three and nine months ended September 30, 2019 and 2018.
Segments
Our operations are integrated into and reported as part of CenturyLink. CenturyLink's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment.
Recently Adopted Accounting Pronouncements
We adopted Accounting Standards Update ("ASU") 2016-02, "Leases (ASC 842)", as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842, and we will not make the new required lease disclosures for comparative periods beginning before January 1, 2019. Instead, we have recognized ASC 842's cumulative effect transition adjustment (discussed below) as of January 1, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things (i) allowed us to carry forward the historical lease classification; (ii) did not require us to reassess whether any expired or existing contracts are or contain leases under the new definition of a lease; and (iii) did not require us to reassess whether previously capitalized initial direct costs for any existing leases would qualify for capitalization under ASC 842. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We did not elect the hindsight practical expedient regarding the likelihood of exercising a lessee purchase option or assessing any impairment of right-of-use assets for existing leases.
On March 5, 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-01, "Leases (ASC 842): Codification Improvements", effective for public companies for fiscal years beginning after December 15, 2019. The new ASU aligns the guidance in ASC 842 for determining fair value of the underlying asset by lessors that are not manufacturers or dealers, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in ASC 820, "Fair Value Measurement") should be applied. More importantly, the ASU also exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. Early adoption permits public companies to adopt concurrent with the transition to ASC 842 on leases. We adopted ASU 2019-01 as of January 1, 2019.
Adoption of the new standards resulted in the recording of operating lease assets and operating lease liabilities of approximately $1.3 billion and $1.4 billion, respectively, as of January 1, 2019. The standards did not materially impact our consolidated net earnings and had no impact on cash flows. Our financial position for reporting periods beginning on or after January 1, 2019 is presented under the new guidance, as discussed above, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.
Recently Issued Accounting Pronouncements
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments". The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are evaluating the potential impact ASU 2016-13 will have on our financial assets measured at amortized cost including, but not limited to, customer receivables and contract asset balances.
Over the fourth quarter we will complete our evaluation of the impact to our accounting and internal controls over financial reporting as a result of ASU 2016-13. We expect to adopt ASU 2016-13 on January 1, 2020 and recognize the impacts through a cumulative adjustment to accumulated deficit as of the date of adoption.
Subsequent Event
As of the date of this report, $250 million of distributions were declared and $225 million were paid to our parent in the fourth quarter of 2019.
(2) Goodwill, Customer Relationships and Other Intangible Assets
Goodwill, customer relationships and other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
(Dollars in millions)
|
|
Goodwill
|
$
|
7,389
|
|
|
11,119
|
|
|
Customer relationships, less accumulated amortization of $1,355 and $833
|
$
|
7,026
|
|
|
7,567
|
|
|
Other intangible assets subject to amortization:
|
|
|
|
|
Trade names, less accumulated amortization of $50 and $30
|
80
|
|
|
100
|
|
|
Developed technology, less accumulated amortization of $121 and $67
|
378
|
|
|
310
|
|
|
Total other intangible assets, net
|
$
|
458
|
|
|
410
|
|
Our goodwill was derived from CenturyLink's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.
We are required to perform an impairment test related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs. The decline in CenturyLink's stock price triggered impairment testing in the first quarter of 2019. Due to this impairment indicator, we evaluated our goodwill as of March 31, 2019. There was not an additional triggering event during the third quarter of 2019.
When we performed our October 31, 2018 annual impairment test, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method. The market approach method includes the use of multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value, which represents the expected normalized cash flows beyond the cash flows from the discrete projection period. Because CenturyLink's low stock price was a trigger for impairment testing, we estimated the fair value of our operations using only the market approach in the quarter ended March 31, 2019. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which have historically supported a range of fair values of annualized revenue and EBITDA multiples between 2.1x and 4.9x and 4.9x and 9.8x, respectively. We selected a revenue and EBITDA multiple within this range. For the three months ended March 31, 2019, based on our assessments performed as described above, we concluded that the estimated fair value was less than our carrying value of equity as of the date of our triggering event during the first quarter. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge aggregating to $3.7 billion in the first quarter of 2019.
The market multiples approach that we used incorporates significant estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of other cost synergies. In developing the market multiple, we also considered observed trends of our industry participants. Our failure to attain these forecasted results or changes in trends could result in future impairments. Our assessment included many qualitative factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments. Continued declines in our profitability or cash flows or the continued sustained low trading prices of CenturyLink's common stock may result in further impairment.
Total amortization expense for intangible assets for the three months ended September 30, 2019 and 2018, was $206 million and $204 million, respectively, and for the nine months ended September 30, 2019 and 2018, was $604 million and $595 million, respectively. As of September 30, 2019, the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $16.4 billion.
We estimate that total amortization expense for intangible assets for the years ending December 31, 2019 through 2023 will be as follows:
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2019 (remaining three months)
|
$
|
205
|
|
|
2020
|
825
|
|
|
2021
|
825
|
|
|
2022
|
764
|
|
|
2023
|
743
|
|
The following table shows the rollforward of goodwill from December 31, 2018 through September 30, 2019:
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
As of December 31, 2018
|
$
|
11,119
|
|
|
Effect of foreign currency rate change and other
|
(22
|
)
|
|
Impairment
|
(3,708
|
)
|
|
As of September 30, 2019
|
$
|
7,389
|
|
(3) Revenue Recognition
Refer to the Revenue Recognition section of Note 1—Background and Summary of Significant Accounting Policies and Note 4—Revenue Recognition in our annual report on Form 10-K for the year ended December 31, 2018 for further information regarding our application of ASC 606, “Revenue from Contracts with Customers”, including practical expedients and judgments applied in determining the amounts and timing of revenue from contracts with customers.
Reconciliation of Total Revenue to Revenue from Contracts with Customers
The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
Total revenue
|
$
|
2,064
|
|
|
2,010
|
|
|
6,124
|
|
|
6,149
|
|
|
Adjustments for non-ASC 606 revenue (1)
|
(94
|
)
|
|
(72
|
)
|
|
(288
|
)
|
|
(221
|
)
|
|
Total revenue from contracts with customers
|
$
|
1,970
|
|
|
1,938
|
|
|
5,836
|
|
|
5,928
|
|
_____________________________________________________________________
|
|
|
|
(1)
|
Includes sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606.
|
Customer Receivables and Contract Balances
The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
(Dollars in millions)
|
|
Customer receivables (1)
|
$
|
737
|
|
|
712
|
|
|
Contract assets
|
31
|
|
|
19
|
|
|
Contract liabilities
|
412
|
|
|
393
|
|
|
|
|
|
(1)
|
Gross customer receivables of $751 million and $723 million, net of allowance for doubtful accounts of $14 million and $11 million, at September 30, 2019 and December 31, 2018, respectively.
|
Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from one to seven years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets.
The following table provides information about revenue recognized for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
Revenue recognized in the period from:
|
|
|
|
|
|
|
|
|
Amounts included in contract liability at the beginning of the period (January 1, 2019 and 2018, respectively)
|
$
|
27
|
|
|
22
|
|
|
146
|
|
|
135
|
|
|
Performance obligations satisfied in previous periods
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Performance Obligations
As of September 30, 2019, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts (including affiliates) that are unsatisfied (or partially satisfied) is approximately $5.2 billion. We expect to recognize approximately 69% of this revenue through 2021, with the balance recognized thereafter.
We do not disclose the value of unsatisfied performance obligations for contracts for which we are contractually entitled to bill pre-determined amounts for future services (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), or contracts that are classified as leasing arrangements that are not subject to ASC 606.
Contract Costs
The following tables provide changes in our contract acquisition costs and fulfillment costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
|
Acquisition Costs
|
|
Fulfillment Costs
|
|
Acquisition Costs
|
|
Fulfillment Costs
|
|
Beginning of period balance
|
$
|
73
|
|
|
106
|
|
|
34
|
|
|
52
|
|
|
Costs incurred
|
13
|
|
|
26
|
|
|
16
|
|
|
22
|
|
|
Amortization
|
(12
|
)
|
|
(17
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
End of period balance
|
$
|
74
|
|
|
115
|
|
|
45
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
|
Acquisition Costs
|
|
Fulfillment Costs
|
|
Acquisition Costs
|
|
Fulfillment Costs
|
|
Beginning of period balance
|
$
|
64
|
|
|
84
|
|
|
13
|
|
|
14
|
|
|
Costs incurred
|
42
|
|
|
77
|
|
|
42
|
|
|
69
|
|
|
Amortization
|
(32
|
)
|
|
(46
|
)
|
|
(10
|
)
|
|
(17
|
)
|
|
End of period balance
|
$
|
74
|
|
|
115
|
|
|
45
|
|
|
66
|
|
Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of telecommunications services to customers, including labor and materials consumed for these activities.
Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over an expected contract term between 12 and 60 months for our business customers and amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are expected to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next twelve months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.
(4) Leases
Financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance, as discussed in Note 1—Background and Summary of Significant Accounting Policies.
We primarily lease various office facilities, switching and colocation facilities, equipment and dark fiber. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.
Some of our lease arrangements contain lease components (including fixed payments, such as, rent, real estate taxes and insurance costs) and non-lease components (including common-area maintenance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component.
Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Lease expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
|
|
(Dollars in millions)
|
|
Operating and short-term lease cost
|
$
|
92
|
|
|
288
|
|
|
Finance lease cost:
|
|
|
|
|
Amortization of right-of-use assets
|
3
|
|
|
10
|
|
|
Interest on lease liability
|
2
|
|
|
8
|
|
|
Total finance lease cost
|
5
|
|
|
18
|
|
|
Total lease cost
|
$
|
97
|
|
|
306
|
|
Supplemental unaudited consolidated balance sheet information and other information related to leases:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
Leases (millions)
|
Classification on the Balance Sheet
|
2019
|
|
Assets
|
|
|
|
Operating lease assets
|
Operating lease assets
|
$
|
1,102
|
|
|
Finance lease assets
|
Property, plant and equipment, net of accumulated depreciation
|
147
|
|
|
Total leased assets
|
|
$
|
1,249
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Current
|
|
|
|
Operating
|
Current operating lease liabilities
|
$
|
244
|
|
|
Finance
|
Current portion of long-term debt
|
7
|
|
|
Noncurrent
|
|
|
|
Operating
|
Noncurrent operating lease liabilities
|
900
|
|
|
Finance
|
Long-term debt
|
153
|
|
|
Total lease liabilities
|
|
$
|
1,304
|
|
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
|
Operating leases
|
|
11.1
|
|
|
Finance leases
|
|
13.4
|
|
|
Weighted-average discount rate
|
|
|
|
Operating leases
|
|
6.59
|
%
|
|
Finance leases
|
|
5.68
|
%
|
Supplemental unaudited consolidated cash flow statement information related to leases:
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
(Dollars in millions)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows from operating leases
|
296
|
|
|
Operating cash flows from finance leases
|
8
|
|
|
Financing cash flows from finance leases
|
3
|
|
As of September 30, 2019, maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
|
(Dollars in millions)
|
|
2019 (remaining three months)
|
$
|
75
|
|
|
6
|
|
|
2020
|
277
|
|
|
15
|
|
|
2021
|
231
|
|
|
16
|
|
|
2022
|
199
|
|
|
16
|
|
|
2023
|
169
|
|
|
16
|
|
|
Thereafter
|
701
|
|
|
165
|
|
|
Total lease payments
|
1,652
|
|
|
234
|
|
|
Less: interest
|
(508
|
)
|
|
(74
|
)
|
|
Total
|
1,144
|
|
|
160
|
|
|
Less: current portion
|
(244
|
)
|
|
(7
|
)
|
|
Long-term portion
|
$
|
900
|
|
|
153
|
|
As of September 30, 2019, we had no material operating or finance leases that had not yet commenced.
Operating Lease Income
We lease various IRUs, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations.
For the three and nine months ended September 30, 2019, our gross rental income was $52 million and $153 million, respectively, which represents 2.5% of our operating revenue for both periods. For the three and nine months ended September 30, 2018, our gross rental income was $47 million and $143 million, respectively, which represents 2.3% of our operating revenue for both periods.
Disclosures under ASC 840
We adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption.
The future annual minimum payments under capital lease agreements as of December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
|
Future Minimum Payments
|
|
|
(Dollars in millions)
|
|
Capital lease obligations:
|
|
|
2019
|
$
|
16
|
|
|
2020
|
15
|
|
|
2021
|
16
|
|
|
2022
|
16
|
|
|
2023
|
17
|
|
|
2024 and thereafter
|
164
|
|
|
Total minimum payments
|
244
|
|
|
Less: amount representing interest and executory costs
|
(81
|
)
|
|
Present value of minimum payments
|
163
|
|
|
Less: current portion
|
(6
|
)
|
|
Long-term portion
|
$
|
157
|
|
At December 31, 2018, our future rental commitments for operating leases were as follows:
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
|
(Dollars in millions)
|
|
2019
|
$
|
396
|
|
|
2020
|
259
|
|
|
2021
|
219
|
|
|
2022
|
164
|
|
|
2023
|
137
|
|
|
2024 and thereafter
|
613
|
|
|
Total future minimum payments (1)
|
$
|
1,788
|
|
_______________________________________________________________________________
|
|
|
|
(1)
|
Minimum payments have not been reduced by minimum sublease rentals of $29 million due in the future under non-cancelable subleases.
|
(5) Long-Term Debt
The following table summarizes our long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rates
|
|
Maturities
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Level 3 Parent, LLC
|
|
|
|
|
|
|
|
|
Senior notes (1)
|
5.750%
|
|
2022
|
|
$
|
600
|
|
|
600
|
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Level 3 Financing, Inc.
|
|
|
|
|
|
|
|
|
Senior notes (2)
|
4.625%-6.125%
|
|
2021 - 2027
|
|
5,915
|
|
|
5,315
|
|
|
Term loan (3)
|
LIBOR + 2.25%
|
|
2024
|
|
4,611
|
|
|
4,611
|
|
|
Finance leases
|
Various
|
|
Various
|
|
160
|
|
|
163
|
|
|
Total long-term debt, excluding unamortized premiums
|
|
|
|
|
11,286
|
|
|
10,689
|
|
|
Unamortized premiums, net
|
|
|
|
|
129
|
|
|
155
|
|
|
Unamortized debt issuance costs
|
|
|
|
|
(13
|
)
|
|
—
|
|
|
Total long-term debt
|
|
|
|
|
11,402
|
|
|
10,844
|
|
|
Less current maturities
|
|
|
|
|
(407
|
)
|
|
(6
|
)
|
|
Long-term debt, excluding current maturities
|
|
|
|
|
$
|
10,995
|
|
|
10,838
|
|
(1) The notes are not guaranteed by any of Level 3 Parent, LLC's subsidiaries. See "Additional Information" within this Note for redemption
details.
(2) The notes are fully and unconditionally guaranteed on an unsubordinated unsecured basis by Level 3 Parent, LLC and Level 3
Communications, LLC. See "Subsequent Events" within this Note for redemption details.
(3) The Tranche B 2024 Term Loan is a secured obligation and is guaranteed by Level 3 Parent, LLC and certain of its subsidiaries. The Tranche
B 2024 Term Loan had an interest rate of 4.294% as of September 30, 2019 and 4.754% as of December 31, 2018. The interest rate on the
Tranche B 2024 Term Loan is set with a minimum London Interbank Offered Rate ("LIBOR") of zero percent.
Aggregate Maturities of Long-Term Debt
Set forth below is the aggregate principal amount of our long-term debt and finance leases (excluding unamortized premiums) maturing during the following years as of September 30, 2019:
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2019 (remaining three months)
|
$
|
403
|
|
|
2020
|
6
|
|
|
2021
|
7
|
|
|
2022
|
1,449
|
|
|
2023
|
1,210
|
|
|
2024 and thereafter
|
8,211
|
|
|
Total long-term debt
|
$
|
11,286
|
|
Repayments
During the nine months ended September 30, 2019, Level 3 Financing, Inc. repurchased approximately $400 million of its 6.125% Senior Notes due 2021.
New Issuance
On September 25, 2019, Level 3 Financing, Inc. issued $1.0 billion of 4.625% Senior Notes due 2027. The proceeds from the offering together with cash on hand will be used for general corporate purposes, including, without limitation, to redeem all of Level 3 Financing, Inc.'s $240 million outstanding principal amount of 6.125% Senior Notes due 2021, all of Level 3 Parent, LLC's $600 million outstanding principal amount of 5.75% Senior Notes due 2022 and $160 million of Level 3 Financing, Inc.'s $1 billion in outstanding principal amount of 5.375% Senior Notes due 2022. See "Subsequent Event" below.
Covenants
The term loan and senior notes of Level 3 Parent, LLC and Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with their affiliates including CenturyLink and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, Level 3 Parent, LLC, as well as Level 3 Financing, Inc., will be required to offer to purchase certain of its long-term debt securities under certain circumstances in connection with a "change of control" of Level 3 Parent, LLC.
Certain of CenturyLink's and our debt instruments contain cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.
Compliance
As of September 30, 2019, Level 3 Parent, LLC (as successor in interest to Level 3 Communications, Inc.) believes it and its subsidiaries were in compliance with the provisions and financial covenants in their respective material debt agreements in all material respects.
Additional Information
For additional information on our long-term debt, see Note 5—Long-Term Debt to our consolidated financial statements in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2018.
Subsequent Event
On October 25, 2019, Level 3 Financing, Inc. redeemed all of the $240 million outstanding aggregate principal amount of its 6.125% Senior Notes due 2021 and $160 million of the $1.0 billion outstanding principal amount of its 5.375% Senior Notes due 2022.
On October 17, 2019, Level 3 Parent, LLC. issued a notice of redemption on all $600 million outstanding principal amount of Level 3 Parent, LLC's 5.75% Senior Notes due 2022 on December 1, 2019.
(6) Severance and Leased Real Estate
Periodically, we reduce our workforce and accrue liabilities for the related severance costs. These workforce reductions result primarily from the progression or completion of improvement and transformation initiatives, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workload demands due to the loss of customers purchasing certain services.
We have recognized liabilities to reflect our estimates of the fair values of the existing lease obligations for real estate which we have ceased using, net of estimated sublease rentals. In accordance with transitional guidance under the new lease standard (ASC 842), the existing lease obligation of $47 million as of January 1, 2019 has been netted against the operating lease right of use assets at adoption. For additional information, see Note 4—Leases to our consolidated financial statements in Item 1 of Part I of this report.
Changes in our accrued liabilities for severance expenses were as follows:
|
|
|
|
|
|
|
|
|
Severance
|
|
|
(Dollars in millions)
|
|
Balance at January 1, 2019
|
$
|
19
|
|
|
Accrued to expense
|
(1
|
)
|
|
Payments, net
|
(10
|
)
|
|
Balance at September 30, 2019
|
$
|
8
|
|
(7) Products and Services Revenue
We categorize our products, services and revenue among the following five categories:
|
|
|
|
•
|
IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our CDN services and Vyvx broadcast services) and other ancillary services;
|
|
|
|
|
•
|
Transport and Infrastructure, which includes private line (including business data services), wavelength, colocation and data center services, including cloud, hosting and application management solutions, professional services, network security services, dark fiber services and other ancillary services;
|
|
|
|
|
•
|
Voice and Collaboration, which includes primarily TDM voice services, VOIP and other ancillary services;
|
|
|
|
|
•
|
Other, which includes sublease rental income and information technology services and managed services, which may be purchased in conjunction with our other network services; and
|
|
|
|
|
•
|
Affiliate Services, we provide our non-consolidated affiliates with telecommunication services that we also provide to external customers.
|
From time to time, we may change the categorization of our products and services.
Our operating revenue for our products and services consisted of the following categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
IP and Data Services
|
$
|
972
|
|
|
970
|
|
|
2,917
|
|
|
2,961
|
|
|
Transport and Infrastructure
|
668
|
|
|
664
|
|
|
1,981
|
|
|
2,013
|
|
|
Voice and Collaboration
|
379
|
|
|
349
|
|
|
1,085
|
|
|
1,094
|
|
|
Other
|
4
|
|
|
1
|
|
|
7
|
|
|
3
|
|
|
Affiliate Services
|
41
|
|
|
26
|
|
|
134
|
|
|
78
|
|
|
Total operating revenue
|
$
|
2,064
|
|
|
2,010
|
|
|
6,124
|
|
|
6,149
|
|
We recognize revenue in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. These USF surcharges, where we record revenue and transaction taxes, are assigned to the products and services categories based on the underlying revenue. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent.
The following table provides the amount of USF surcharges and transaction taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Dollars in millions)
|
|
USF surcharges and transaction taxes
|
$
|
116
|
|
|
96
|
|
|
326
|
|
|
301
|
|
(8) Fair Value of Financial Instruments
The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Input Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Input Level 2 refers to fair values estimated using significant other observable inputs and Input Level 3 includes fair values estimated using significant unobservable inputs.
The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance leases, as well as the input level used to determine the fair values indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Input Level
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
|
|
|
(Dollars in millions)
|
|
Liabilities-Long-term debt, excluding finance lease
|
2
|
|
$
|
11,242
|
|
|
11,225
|
|
|
10,681
|
|
|
10,089
|
|
(9) Commitments, Contingencies and Other Items
We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities.
Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously-established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation contingencies at September 30, 2019 aggregated to approximately $66 million and are included in “Other” current liabilities and “Other Liabilities” in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows.
In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter.
Peruvian Tax Litigation
In 2005, the Peruvian tax authorities ("SUNAT") issued tax assessments against one of our Peruvian subsidiaries asserting $26 million of additional income tax withholding and value-added taxes ("VAT"), penalties and interest for calendar years 2001 and 2002 on the basis that the Peruvian subsidiary incorrectly documented its importations. After taking into account the developments described below, as well as the accrued interest and foreign exchange effects, we believe the total amount of exposure was $8 million at September 30, 2019.
We challenged the assessments via administrative and then judicial review processes. In October 2011, the highest administrative review tribunal (the "Tribunal") decided the central issue underlying the 2002 assessments in SUNAT's favor. We appealed the Tribunal's decision to the first judicial level, which decided the central issue in favor of Level 3. SUNAT and we filed cross-appeals with the court of appeal. In May 2017, the court of appeal issued a decision reversing the first judicial level. In June 2017, we filed an appeal of the decision to the Supreme Court of Justice, the final judicial level. Oral argument was held before the Supreme Court of Justice in October 2018. A decision on this case is pending.
In October 2013, the Tribunal decided the central issue underlying the 2001 assessments in SUNAT’s favor. We appealed that decision to the first judicial level in Peru, which decided the central issue in favor of SUNAT. In June 2017, we filed an appeal with the court of appeal. In November 2017, the court of appeals issued a decision affirming the first judicial level and we filed an appeal of the decision to the Supreme Court of Justice. Oral argument was held before the Supreme Court of Justice in June 2019. A decision on this case is pending.
Brazilian Tax Claims
In December 2004, March 2009, April 2009 and July 2014, the São Paulo state tax authorities issued tax assessments against one of our Brazilian subsidiaries for the Tax on Distribution of Goods and Services (“ICMS”) with respect to revenue from leasing certain assets (in the case of the December 2004, March 2009 and July 2014 assessments) and revenue from the provision of Internet access services (in the case of the April 2009 and July 2014 assessments), by treating such activities as the provision of communications services, to which the ICMS tax applies. In September 2002, July 2009 and May 2012, the Rio de Janeiro state tax authorities issued tax assessments to the same Brazilian subsidiary on similar issues.
We have filed objections to these assessments, arguing that the lease of assets and the provision of Internet access are not communication services subject to ICMS. The objections to the September 2002, December 2004 and March 2009 assessments were rejected by the respective state administrative courts, and we have appealed those decisions to the judicial courts. In October 2012 and June 2014, we received favorable rulings from the lower court on the December 2004 and March 2009 assessments regarding equipment leasing, but those rulings are subject to appeal by the state. No ruling has been obtained with respect to the September 2002 assessment. The objections to the April and July 2009 and May 2012 assessments are still pending final administrative decisions. The July 2014 assessment was confirmed during the fourth quarter of 2014 at the first administrative level, and we appealed this decision to the second administrative level.
We are vigorously contesting all such assessments in both states and, in particular, view the assessment of ICMS on revenue from equipment leasing to be without merit. These assessments, if upheld, could result in a loss of up to $37 million at September 30, 2019 in excess of the accruals established for these matters.
Qui Tam Action
We were notified in late 2017 of a qui tam action pending against Level 3 Communications, Inc. and others in the United States District Court for the Eastern District of Virginia, captioned United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al. The original qui tam complaint was filed under seal on November 26, 2013, and an amended complaint was filed under seal on June 16, 2014. The court unsealed the complaints on October 26, 2017.
The amended complaint alleges that we, principally through two former employees, submitted false claims and made false statements to the government in connection with two government contracts. The relator seeks damages in this lawsuit of approximately $50 million, subject to trebling, plus statutory penalties, pre-and-post judgment interest, and attorney’s fees. The case is currently stayed.
We are evaluating our defenses to the claims. At this time, we do not believe it is probable we will incur a material loss. If, contrary to our expectations, the plaintiff prevails in this matter and proves damages at or near $50 million, and is successful in having those damages trebled, the outcome could have a material adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.
Several people, including two former Level 3 employees, were indicted in the United States District Court for the Eastern District of Virginia on October 3, 2017, and charged with, among other things, accepting kickbacks from a subcontractor, who was also indicted, for work to be performed under a prime government contract. Of the two former employees, one entered a plea agreement, and the other is deceased. We are fully cooperating in the government’s investigations in this matter.
Letters of Credit
It is customary for us to use various financial instruments in the normal course of business. These instruments include letters of credit which are conditional commitments issued on our behalf in accordance with specified terms and conditions. As of both September 30, 2019 and December 31, 2018, we had outstanding letters of credit or other similar obligations of approximately $24 million and $30 million, respectively, of which $18 million and $24 million are collateralized by cash that is reflected on the consolidated balance sheets as restricted cash and securities.
Other Proceedings, Disputes and Contingencies
From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings or proceedings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions.
We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial in the coming 24 months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities.
We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none individually is reasonably expected to exceed $100,000 in fines and penalties.
The outcome of these other proceedings is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us.
The matters listed above in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note 16 - Commitments, Contingencies and Other Items to the financial statements included in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2018. The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us.
(10) Accumulated Other Comprehensive Loss
The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
Foreign Currency Translation Adjustment and Other
|
|
Total
|
|
|
(Dollars in millions)
|
|
Balance at December 31, 2018
|
$
|
5
|
|
|
(176
|
)
|
|
(171
|
)
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
(115
|
)
|
|
(115
|
)
|
|
Net other comprehensive loss
|
—
|
|
|
(115
|
)
|
|
(115
|
)
|
|
Balance at September 30, 2019
|
$
|
5
|
|
|
(291
|
)
|
|
(286
|
)
|
The table below summarizes changes in accumulated other comprehensive income recorded on our consolidated balance sheets by component for the nine months ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustment and Other
|
|
Total
|
|
|
(Dollars in millions)
|
|
Balance at December 31, 2017
|
$
|
18
|
|
|
18
|
|
|
Other comprehensive loss before reclassifications, net of tax
|
(164
|
)
|
|
(164
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss
|
6
|
|
|
6
|
|
|
Net other comprehensive loss
|
(158
|
)
|
|
(158
|
)
|
|
Balance at September 30, 2018
|
$
|
(140
|
)
|
|
(140
|
)
|
(11) Condensed Consolidating Financial Information
Level 3 Financing, Inc., a wholly owned subsidiary, has issued Senior Notes that are unsecured obligations of Level 3 Financing, Inc.; however, they are fully and unconditionally and jointly and severally guaranteed on an unsecured senior basis by Level 3 Parent, LLC and Level 3 Communications, LLC.
In conjunction with the registration of certain of the Level 3 Financing, Inc. Senior Notes, we have presented below the accompanying condensed consolidating financial information pursuant to SEC Regulation S-X Rule 3-10 "Financial statements of guarantors and affiliates whose securities collateralize an issue registered or being registered."
The operating activities of the separate legal entities included in our consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the statements of comprehensive income (loss), balance sheets and statements of cash flows of each legal entity and, on an aggregate basis, our other non-guarantor subsidiaries based on amounts incurred by such entities and is not intended to present the operating results of those legal entities on a stand-alone basis. Level 3 Communications, LLC leases equipment and certain facilities from other wholly owned subsidiaries of Level 3 Parent, LLC. These transactions are eliminated in our consolidated results.
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
$
|
—
|
|
|
—
|
|
|
995
|
|
|
1,028
|
|
|
—
|
|
|
2,023
|
|
|
Operating revenue - affiliates
|
—
|
|
|
—
|
|
|
61
|
|
|
179
|
|
|
(199
|
)
|
|
41
|
|
|
Total operating revenue
|
—
|
|
|
—
|
|
|
1,056
|
|
|
1,207
|
|
|
(199
|
)
|
|
2,064
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
—
|
|
|
—
|
|
|
516
|
|
|
444
|
|
|
—
|
|
|
960
|
|
|
Selling, general and administrative
|
(25
|
)
|
|
2
|
|
|
322
|
|
|
189
|
|
|
(199
|
)
|
|
289
|
|
|
Operating expenses - affiliates
|
—
|
|
|
—
|
|
|
54
|
|
|
22
|
|
|
—
|
|
|
76
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
169
|
|
|
261
|
|
|
—
|
|
|
430
|
|
|
Total operating expenses
|
(25
|
)
|
|
2
|
|
|
1,061
|
|
|
916
|
|
|
(199
|
)
|
|
1,755
|
|
|
OPERATING INCOME (LOSS)
|
25
|
|
|
(2
|
)
|
|
(5
|
)
|
|
291
|
|
|
—
|
|
|
309
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - affiliate
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
Interest (expense) income
|
(8
|
)
|
|
(115
|
)
|
|
4
|
|
|
(4
|
)
|
|
—
|
|
|
(123
|
)
|
|
Interest income (expense) - intercompany, net
|
963
|
|
|
161
|
|
|
(1,125
|
)
|
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
Equity in net (losses) earnings of subsidiaries
|
(860
|
)
|
|
(934
|
)
|
|
188
|
|
|
—
|
|
|
1,606
|
|
|
—
|
|
|
Other (expense) income, net
|
(17
|
)
|
|
4
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
(13
|
)
|
|
Total other income (expense), net
|
93
|
|
|
(884
|
)
|
|
(931
|
)
|
|
(4
|
)
|
|
1,605
|
|
|
(121
|
)
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
118
|
|
|
(886
|
)
|
|
(936
|
)
|
|
287
|
|
|
1,605
|
|
|
188
|
|
|
Income tax expense (benefit)
|
4
|
|
|
(26
|
)
|
|
2
|
|
|
94
|
|
|
—
|
|
|
74
|
|
|
NET INCOME (LOSS)
|
114
|
|
|
(860
|
)
|
|
(938
|
)
|
|
193
|
|
|
1,605
|
|
|
114
|
|
|
Other comprehensive (loss), net of income taxes
|
(110
|
)
|
|
—
|
|
|
—
|
|
|
(110
|
)
|
|
110
|
|
|
(110
|
)
|
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
4
|
|
|
(860
|
)
|
|
(938
|
)
|
|
83
|
|
|
1,715
|
|
|
4
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
$
|
—
|
|
|
—
|
|
|
951
|
|
|
1,033
|
|
|
—
|
|
|
1,984
|
|
|
Operating revenue - affiliates
|
—
|
|
|
—
|
|
|
50
|
|
|
47
|
|
|
(71
|
)
|
|
26
|
|
|
Total operating revenue
|
—
|
|
|
—
|
|
|
1,001
|
|
|
1,080
|
|
|
(71
|
)
|
|
2,010
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
—
|
|
|
—
|
|
|
538
|
|
|
438
|
|
|
—
|
|
|
976
|
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
333
|
|
|
49
|
|
|
(71
|
)
|
|
311
|
|
|
Operating expenses - affiliates
|
—
|
|
|
—
|
|
|
50
|
|
|
15
|
|
|
—
|
|
|
65
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
176
|
|
|
255
|
|
|
—
|
|
|
431
|
|
|
Total operating expenses
|
—
|
|
|
—
|
|
|
1,097
|
|
|
757
|
|
|
(71
|
)
|
|
1,783
|
|
|
OPERATING (LOSS) INCOME
|
—
|
|
|
—
|
|
|
(96
|
)
|
|
323
|
|
|
—
|
|
|
227
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - affiliate
|
16
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
18
|
|
|
Interest expense
|
(8
|
)
|
|
(118
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(137
|
)
|
|
Interest income (expense) - intercompany, net
|
771
|
|
|
234
|
|
|
(997
|
)
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
Equity in net (losses) earnings of subsidiaries
|
(690
|
)
|
|
(834
|
)
|
|
452
|
|
|
—
|
|
|
1,072
|
|
|
—
|
|
|
Other income (expense), net
|
(3
|
)
|
|
—
|
|
|
(1
|
)
|
|
21
|
|
|
1
|
|
|
18
|
|
|
Total other income (expense), net
|
86
|
|
|
(718
|
)
|
|
(548
|
)
|
|
7
|
|
|
1,072
|
|
|
(101
|
)
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
86
|
|
|
(718
|
)
|
|
(644
|
)
|
|
330
|
|
|
1,072
|
|
|
126
|
|
|
Income tax (benefit) expense
|
(2
|
)
|
|
(28
|
)
|
|
(18
|
)
|
|
86
|
|
|
—
|
|
|
38
|
|
|
NET INCOME (LOSS)
|
88
|
|
|
(690
|
)
|
|
(626
|
)
|
|
244
|
|
|
1,072
|
|
|
88
|
|
|
Other comprehensive loss, net of income taxes
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
(1
|
)
|
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
87
|
|
|
(690
|
)
|
|
(626
|
)
|
|
243
|
|
|
1,073
|
|
|
87
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
$
|
—
|
|
|
—
|
|
|
2,903
|
|
|
3,087
|
|
|
—
|
|
|
5,990
|
|
|
Operating revenue - affiliates
|
—
|
|
|
—
|
|
|
170
|
|
|
596
|
|
|
(632
|
)
|
|
134
|
|
|
Total operating revenue
|
—
|
|
|
—
|
|
|
3,073
|
|
|
3,683
|
|
|
(632
|
)
|
|
6,124
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
—
|
|
|
—
|
|
|
1,484
|
|
|
1,362
|
|
|
—
|
|
|
2,846
|
|
|
Selling, general and administrative
|
(25
|
)
|
|
5
|
|
|
1,084
|
|
|
532
|
|
|
(632
|
)
|
|
964
|
|
|
Operating expenses - affiliates
|
—
|
|
|
—
|
|
|
141
|
|
|
68
|
|
|
—
|
|
|
209
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
477
|
|
|
732
|
|
|
—
|
|
|
1,209
|
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
1,369
|
|
|
2,339
|
|
|
—
|
|
|
3,708
|
|
|
Total operating expenses
|
(25
|
)
|
|
5
|
|
|
4,555
|
|
|
5,033
|
|
|
(632
|
)
|
|
8,936
|
|
|
OPERATING INCOME (LOSS)
|
25
|
|
|
(5
|
)
|
|
(1,482
|
)
|
|
(1,350
|
)
|
|
—
|
|
|
(2,812
|
)
|
|
OTHER (EXPENSE) INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - affiliate
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
Interest (expense) income
|
(24
|
)
|
|
(354
|
)
|
|
7
|
|
|
(13
|
)
|
|
—
|
|
|
(384
|
)
|
|
Interest income (expense) - intercompany, net
|
2,844
|
|
|
487
|
|
|
(4,671
|
)
|
|
1,340
|
|
|
—
|
|
|
—
|
|
|
Equity in net losses of subsidiaries
|
(6,227
|
)
|
|
(6,445
|
)
|
|
(1,048
|
)
|
|
—
|
|
|
13,720
|
|
|
—
|
|
|
Other (expense) income, net
|
(19
|
)
|
|
4
|
|
|
10
|
|
|
7
|
|
|
—
|
|
|
2
|
|
|
Total other (expense) income, net
|
(3,379
|
)
|
|
(6,308
|
)
|
|
(5,702
|
)
|
|
1,334
|
|
|
13,720
|
|
|
(335
|
)
|
|
(LOSS) INCOME BEFORE INCOME TAXES
|
(3,354
|
)
|
|
(6,313
|
)
|
|
(7,184
|
)
|
|
(16
|
)
|
|
13,720
|
|
|
(3,147
|
)
|
|
Income tax expense (benefit)
|
7
|
|
|
(86
|
)
|
|
2
|
|
|
291
|
|
|
—
|
|
|
214
|
|
|
NET (LOSS) INCOME
|
(3,361
|
)
|
|
(6,227
|
)
|
|
(7,186
|
)
|
|
(307
|
)
|
|
13,720
|
|
|
(3,361
|
)
|
|
Other comprehensive (loss), net of income taxes
|
(115
|
)
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
|
115
|
|
|
(115
|
)
|
|
COMPREHENSIVE LOSS
|
$
|
(3,476
|
)
|
|
(6,227
|
)
|
|
(7,186
|
)
|
|
(422
|
)
|
|
13,835
|
|
|
(3,476
|
)
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
$
|
—
|
|
|
—
|
|
|
2,884
|
|
|
3,187
|
|
|
—
|
|
|
6,071
|
|
|
Operating revenue - affiliates
|
—
|
|
|
—
|
|
|
81
|
|
|
151
|
|
|
(154
|
)
|
|
78
|
|
|
Total operating revenue
|
—
|
|
|
—
|
|
|
2,965
|
|
|
3,338
|
|
|
(154
|
)
|
|
6,149
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
—
|
|
|
—
|
|
|
1,727
|
|
|
1,227
|
|
|
—
|
|
|
2,954
|
|
|
Selling, general and administrative
|
—
|
|
|
3
|
|
|
878
|
|
|
234
|
|
|
(72
|
)
|
|
1,043
|
|
|
Operating expenses - affiliates
|
—
|
|
|
—
|
|
|
140
|
|
|
115
|
|
|
(82
|
)
|
|
173
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
520
|
|
|
775
|
|
|
—
|
|
|
1,295
|
|
|
Total operating expenses
|
—
|
|
|
3
|
|
|
3,265
|
|
|
2,351
|
|
|
(154
|
)
|
|
5,465
|
|
|
OPERATING (LOSS) INCOME
|
—
|
|
|
(3
|
)
|
|
(300
|
)
|
|
987
|
|
|
—
|
|
|
684
|
|
|
OTHER (EXPENSE) INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - affiliate
|
48
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
50
|
|
|
Interest expense
|
(24
|
)
|
|
(339
|
)
|
|
(3
|
)
|
|
(15
|
)
|
|
—
|
|
|
(381
|
)
|
|
Interest income (expense) - intercompany, net
|
1,474
|
|
|
1,446
|
|
|
(2,756
|
)
|
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
Equity in net (losses) earnings of subsidiaries
|
(1,321
|
)
|
|
(2,505
|
)
|
|
451
|
|
|
—
|
|
|
3,375
|
|
|
—
|
|
|
Other income (expense), net
|
(3
|
)
|
|
—
|
|
|
3
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
Total other income (expense), net
|
174
|
|
|
(1,398
|
)
|
|
(2,305
|
)
|
|
(156
|
)
|
|
3,375
|
|
|
(310
|
)
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
174
|
|
|
(1,401
|
)
|
|
(2,605
|
)
|
|
831
|
|
|
3,375
|
|
|
374
|
|
|
Income tax (benefit) expense
|
(16
|
)
|
|
(80
|
)
|
|
16
|
|
|
264
|
|
|
—
|
|
|
184
|
|
|
NET INCOME (LOSS)
|
190
|
|
|
(1,321
|
)
|
|
(2,621
|
)
|
|
567
|
|
|
3,375
|
|
|
190
|
|
|
Other comprehensive loss, net of income taxes
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|
164
|
|
|
(164
|
)
|
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
26
|
|
|
(1,321
|
)
|
|
(2,621
|
)
|
|
403
|
|
|
3,539
|
|
|
26
|
|
Condensed Consolidating Balance Sheets
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
3
|
|
|
—
|
|
|
1,156
|
|
|
65
|
|
|
—
|
|
|
1,224
|
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
Accounts receivable
|
—
|
|
|
—
|
|
|
69
|
|
|
649
|
|
|
—
|
|
|
718
|
|
|
Intercompany advances
|
19,145
|
|
|
24,656
|
|
|
7,542
|
|
|
3,030
|
|
|
(54,373
|
)
|
|
—
|
|
|
Note receivable - affiliate
|
1,590
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,590
|
|
|
Other
|
—
|
|
|
—
|
|
|
131
|
|
|
178
|
|
|
(15
|
)
|
|
294
|
|
|
Total current assets
|
20,738
|
|
|
24,656
|
|
|
8,898
|
|
|
3,925
|
|
|
(54,388
|
)
|
|
3,829
|
|
|
Property, plant, and equipment, net
|
—
|
|
|
—
|
|
|
3,574
|
|
|
6,145
|
|
|
—
|
|
|
9,719
|
|
|
GOODWILL AND OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
382
|
|
|
7,007
|
|
|
—
|
|
|
7,389
|
|
|
Operating lease assets
|
—
|
|
|
—
|
|
|
1,213
|
|
|
378
|
|
|
(489
|
)
|
|
1,102
|
|
|
Restricted cash
|
12
|
|
|
—
|
|
|
5
|
|
|
2
|
|
|
—
|
|
|
19
|
|
|
Customer relationships, net
|
—
|
|
|
—
|
|
|
3,465
|
|
|
3,561
|
|
|
—
|
|
|
7,026
|
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
434
|
|
|
24
|
|
|
—
|
|
|
458
|
|
|
Investment in subsidiaries
|
9,314
|
|
|
11,471
|
|
|
2,813
|
|
|
—
|
|
|
(23,598
|
)
|
|
—
|
|
|
Other, net
|
268
|
|
|
1,508
|
|
|
86
|
|
|
200
|
|
|
(1,512
|
)
|
|
550
|
|
|
Total goodwill and other assets
|
9,594
|
|
|
12,979
|
|
|
8,398
|
|
|
11,172
|
|
|
(25,599
|
)
|
|
16,544
|
|
|
TOTAL ASSETS
|
$
|
30,332
|
|
|
37,635
|
|
|
20,870
|
|
|
21,242
|
|
|
(79,987
|
)
|
|
30,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
—
|
|
|
400
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
407
|
|
|
Accounts payable
|
—
|
|
|
2
|
|
|
420
|
|
|
331
|
|
|
—
|
|
|
753
|
|
|
Accounts payable - affiliates
|
80
|
|
|
16
|
|
|
471
|
|
|
—
|
|
|
(15
|
)
|
|
552
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
|
—
|
|
|
174
|
|
|
42
|
|
|
—
|
|
|
216
|
|
|
Income and other taxes
|
—
|
|
|
7
|
|
|
67
|
|
|
39
|
|
|
—
|
|
|
113
|
|
|
Current operating lease liabilities
|
—
|
|
|
—
|
|
|
252
|
|
|
89
|
|
|
(97
|
)
|
|
244
|
|
|
Interest
|
3
|
|
|
71
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
50,785
|
|
|
3,588
|
|
|
(54,373
|
)
|
|
—
|
|
|
Other
|
1
|
|
|
1
|
|
|
8
|
|
|
61
|
|
|
—
|
|
|
71
|
|
|
Current portion of deferred revenue
|
—
|
|
|
—
|
|
|
159
|
|
|
137
|
|
|
—
|
|
|
296
|
|
|
Total current liabilities
|
84
|
|
|
497
|
|
|
52,337
|
|
|
4,297
|
|
|
(54,485
|
)
|
|
2,730
|
|
|
LONG-TERM DEBT
|
611
|
|
|
10,231
|
|
|
6
|
|
|
147
|
|
|
—
|
|
|
10,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED REVENUE AND OTHER LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
—
|
|
|
—
|
|
|
1,055
|
|
|
209
|
|
|
—
|
|
|
1,264
|
|
|
Deferred income taxes, net
|
56
|
|
|
—
|
|
|
781
|
|
|
900
|
|
|
(1,512
|
)
|
|
225
|
|
|
Noncurrent operating lease liabilities
|
—
|
|
|
—
|
|
|
989
|
|
|
303
|
|
|
(392
|
)
|
|
900
|
|
|
Other
|
—
|
|
|
—
|
|
|
141
|
|
|
145
|
|
|
—
|
|
|
286
|
|
|
Total deferred revenue and other liabilities
|
56
|
|
|
—
|
|
|
2,966
|
|
|
1,557
|
|
|
(1,904
|
)
|
|
2,675
|
|
|
MEMBER'S EQUITY (DEFICIT)
|
29,581
|
|
|
26,907
|
|
|
(34,439
|
)
|
|
15,241
|
|
|
(23,598
|
)
|
|
13,692
|
|
|
TOTAL LIABILITIES AND MEMBER'S EQUITY
|
$
|
30,332
|
|
|
37,635
|
|
|
20,870
|
|
|
21,242
|
|
|
(79,987
|
)
|
|
30,092
|
|
Condensed Consolidating Balance Sheets
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
2
|
|
|
—
|
|
|
164
|
|
|
77
|
|
|
—
|
|
|
243
|
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
Accounts receivable
|
—
|
|
|
—
|
|
|
70
|
|
|
642
|
|
|
—
|
|
|
712
|
|
|
Intercompany advances
|
16,852
|
|
|
23,957
|
|
|
7,744
|
|
|
2,707
|
|
|
(51,260
|
)
|
|
—
|
|
|
Note receivable - affiliate
|
1,825
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,825
|
|
|
Other
|
1
|
|
|
3
|
|
|
97
|
|
|
133
|
|
|
—
|
|
|
234
|
|
|
Total current assets
|
18,680
|
|
|
23,960
|
|
|
8,075
|
|
|
3,563
|
|
|
(51,260
|
)
|
|
3,018
|
|
|
Property, plant, and equipment, net
|
—
|
|
|
—
|
|
|
3,136
|
|
|
6,317
|
|
|
—
|
|
|
9,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL AND OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
1,665
|
|
|
9,454
|
|
|
—
|
|
|
11,119
|
|
|
Restricted cash
|
15
|
|
|
—
|
|
|
9
|
|
|
1
|
|
|
—
|
|
|
25
|
|
|
Customer relationships, net
|
—
|
|
|
—
|
|
|
3,823
|
|
|
3,744
|
|
|
—
|
|
|
7,567
|
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
409
|
|
|
1
|
|
|
—
|
|
|
410
|
|
|
Investment in subsidiaries
|
15,541
|
|
|
17,915
|
|
|
3,861
|
|
|
—
|
|
|
(37,317
|
)
|
|
—
|
|
|
Other, net
|
275
|
|
|
1,421
|
|
|
110
|
|
|
225
|
|
|
(1,332
|
)
|
|
699
|
|
|
Total goodwill and other assets
|
15,831
|
|
|
19,336
|
|
|
9,877
|
|
|
13,425
|
|
|
(38,649
|
)
|
|
19,820
|
|
|
TOTAL ASSETS
|
$
|
34,511
|
|
|
43,296
|
|
|
21,088
|
|
|
23,305
|
|
|
(89,909
|
)
|
|
32,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
—
|
|
|
—
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
6
|
|
|
Accounts payable
|
—
|
|
|
—
|
|
|
380
|
|
|
346
|
|
|
—
|
|
|
726
|
|
|
Accounts payable - affiliates
|
62
|
|
|
11
|
|
|
162
|
|
|
11
|
|
|
—
|
|
|
246
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
|
—
|
|
|
189
|
|
|
44
|
|
|
—
|
|
|
233
|
|
|
Income and other taxes
|
—
|
|
|
4
|
|
|
72
|
|
|
54
|
|
|
—
|
|
|
130
|
|
|
Interest
|
11
|
|
|
78
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
95
|
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
45,347
|
|
|
5,913
|
|
|
(51,260
|
)
|
|
—
|
|
|
Other
|
3
|
|
|
1
|
|
|
8
|
|
|
66
|
|
|
—
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of deferred revenue
|
—
|
|
|
—
|
|
|
168
|
|
|
142
|
|
|
—
|
|
|
310
|
|
|
Total current liabilities
|
76
|
|
|
94
|
|
|
46,328
|
|
|
6,586
|
|
|
(51,260
|
)
|
|
1,824
|
|
|
LONG-TERM DEBT
|
613
|
|
|
10,068
|
|
|
7
|
|
|
150
|
|
|
—
|
|
|
10,838
|
|
|
DEFERRED REVENUE AND OTHER LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
—
|
|
|
—
|
|
|
971
|
|
|
210
|
|
|
—
|
|
|
1,181
|
|
|
Deferred income taxes, net
|
56
|
|
|
—
|
|
|
841
|
|
|
637
|
|
|
(1,332
|
)
|
|
202
|
|
|
Other
|
—
|
|
|
—
|
|
|
197
|
|
|
172
|
|
|
—
|
|
|
369
|
|
|
Total deferred revenue and other liabilities
|
56
|
|
|
—
|
|
|
2,009
|
|
|
1,019
|
|
|
(1,332
|
)
|
|
1,752
|
|
|
MEMBER'S EQUITY (DEFICIT)
|
33,766
|
|
|
33,134
|
|
|
(27,256
|
)
|
|
15,550
|
|
|
(37,317
|
)
|
|
17,877
|
|
|
TOTAL LIABILITIES AND MEMBER'S EQUITY
|
$
|
34,511
|
|
|
43,296
|
|
|
21,088
|
|
|
23,305
|
|
|
(89,909
|
)
|
|
32,291
|
|
Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
(262
|
)
|
|
—
|
|
|
1,692
|
|
|
414
|
|
|
—
|
|
|
1,844
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(558
|
)
|
|
(424
|
)
|
|
—
|
|
|
(982
|
)
|
|
Payments of notes receivable - affiliates
|
235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
235
|
|
|
Proceeds from sale of property, plant and equipment and other assets
|
25
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
27
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
Net cash provided by (used in) investing activities
|
260
|
|
|
—
|
|
|
(582
|
)
|
|
(423
|
)
|
|
—
|
|
|
(745
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of long-term debt
|
—
|
|
|
—
|
|
|
988
|
|
|
—
|
|
|
—
|
|
|
988
|
|
|
Payments of long-term debt
|
—
|
|
|
—
|
|
|
(401
|
)
|
|
(3
|
)
|
|
—
|
|
|
(404
|
)
|
|
Distributions
|
(709
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(709
|
)
|
|
Increase (decrease) due from affiliate, net
|
709
|
|
|
—
|
|
|
(709
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net cash used in financing activities
|
—
|
|
|
—
|
|
|
(122
|
)
|
|
(3
|
)
|
|
—
|
|
|
(125
|
)
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(2
|
)
|
|
—
|
|
|
988
|
|
|
(12
|
)
|
|
—
|
|
|
974
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
17
|
|
|
—
|
|
|
173
|
|
|
82
|
|
|
—
|
|
|
272
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
15
|
|
|
—
|
|
|
1,161
|
|
|
70
|
|
|
—
|
|
|
1,246
|
|
Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Parent, LLC
|
|
Level 3 Financing, Inc.
|
|
Level 3 Communications, LLC
|
|
Other Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
|
|
(Dollars in millions)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
(49
|
)
|
|
—
|
|
|
1,420
|
|
|
256
|
|
|
—
|
|
|
1,627
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(392
|
)
|
|
(334
|
)
|
|
—
|
|
|
(726
|
)
|
|
Proceeds from sale of property, plant and equipment and other assets
|
68
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
119
|
|
|
Net cash provided by (used in) investing activities
|
68
|
|
|
—
|
|
|
(392
|
)
|
|
(283
|
)
|
|
—
|
|
|
(607
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
Distributions
|
(1,130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,130
|
)
|
|
Increase (decrease) due from/to affiliates, net
|
1,130
|
|
|
—
|
|
|
(1,130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net cash used in financing activities
|
—
|
|
|
—
|
|
|
(1,130
|
)
|
|
(5
|
)
|
|
—
|
|
|
(1,135
|
)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
19
|
|
|
—
|
|
|
(102
|
)
|
|
(32
|
)
|
|
—
|
|
|
(115
|
)
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
32
|
|
|
—
|
|
|
186
|
|
|
113
|
|
|
—
|
|
|
331
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
51
|
|
|
—
|
|
|
84
|
|
|
81
|
|
|
—
|
|
|
216
|
|
